Over the last two years, I've been realizing how similar poker, business, and life are. Here are 5 nuggets of wisdom I've been noodling on:
1. Don't operate from a position of fear
Fear is a natural reaction to the unknown. Fear of failure, fear of the unknown, fear of disappointing people, the fear that you might go broke -- these are all pretty normal things to be afraid of. But when you start making decisions out of fear, your judgement gets tainted by that fear. When you get to a tough decision, ask yourself, "how is the fear of X affecting this?"
2. Don't risk everything at once (aka: "always leave yourself an out")
Closely related to #1 above and #3 below. Accept the fact that you're not going to be successful 100% of the time, and plan for that eventuality. Risking everything you have seems like a brave, entrepreneurial thing to do but you always have to leave yourself an out -- even if it's waiting tables.
3. Decisions are good or bad -- regardless of the outcome
Possibly the hardest truth to accept, yet the most obvious when you think about it. You can do everything right and still come out broke; conversely you can do everything wrong and still be a winner. It's true that good decisions will most often produce good results, but because this chance isn't 100%, you have to separate the quality of the decision from the outcome or else you'll start extrapolating the wrong things from your failures. Your goal is to make good decisions.
4. Let go of results-oriented thinking
When you analyze past decisions, you should be focused on determining whether or not the decision -- not the result -- was good or bad. You're trying to see what made a good decision good (or a bad one bad) and results have little to do with it. Poker example: let's say on the turn I hold the nut full house, and my opponent is holding an open-ended straight flush draw. With one card to come, no bet and the action on me, what do I do? First I take stock of the situation: my opponent has about a 4% chance (2 cards in a possible 45 unseen cards) to win. If I'm driven by fear, I might just check, losing the profit I could gain from betting; if I'm playing with all I own, I might not be comfortable even with a 96% chance of winning, again losing profit; or I could bet it all, which is the mathematically correct decision. Let's say the villain spikes one of the 2 cards he needs and cleans me out -- what did I do wrong? The answer is nothing. I got my money in when I had the best of it and lost. The results-oriented thinker will see that he's broke and start coming up with a million reasons he thinks betting it all was the wrong move there. The next time he's in that situation, he'll cut his profit way down because he learned the wrong thing. The lesson: letting go of results-oriented thinking lets you maximize every opportunity you have. That's important because truly incredible opportunities don't come along often, and you need to be prepared to squeeze everything you can out of it when they do show up at your door.
5. Talk yourself out of spending money
Interestingly, it's human nature to spend. I see this in poker all the time. People will literally talk themselves into calling for next to no reason at all. Their internal monologue will run wild and they'll convince themselves the other guy is bluffing (when he hasn't shown a bluff yet) or that he's a n00b (when he's been showing down solid hands all night) or that "this time is different" because of some imagined tell they think they saw because they're so eager to spend. It's really surprising. We do the same thing when we shop; we talk ourselves into buying something we know we really shouldn't, or spending more than we should, we even talk ourselves into taking horrible deals simply because we don't fight our nature. Fact is, if you can talk yourself out of spending, you should. We live in a marketing-driven society that says you must buy this and you must buy it right now. You'll even convince yourself that you're losing money if you don't take advantage of that "great sale" at the mall! Fact is, as Matt Damon said in Rounders, "you can't lose what you don't put in the pot." Save your capital for a better decision.
Tony H., CEO of Zappos, wrote a blog post last year called Everything I Know About Business I Learned From Poker making the same connection as I did -- he touches on some other points and I recommend you read them.