We’re All Betting All The Time
How Poker taught me to think about Risk in Life and Business
Everyday Life
Every day, in everything we do - we make a choice to allocate resources.
Whether it’s time, money, reputation, energy or a combination of these things - there’s something at stake when we engage with the world around us.
Whether we consciously realize it or not, each interaction we pursue is an implicit claim that it’s going to be worth our while.
Any activity, really, is deemed to be worth the energy we put into it because of the tradeoffs we make in not pursuing something else.
A job or career is ideally pursued for its own sake because we enjoy it and also know it will support us.
A friendship or relationship is worth the sacrifice of time and energy relative to other things we could choose to do for the connection and emotional fulfillment we’re offered.
And that’s really what poker has shown me.
Every opportunity where we choose to make a bet by investing something we care about is necessarily deemed to be worthwhile when compared with alternative options.
Choosing to invest 10 hours a week grinding a new game, saying yes to build a startup, or deciding to have a child are all different bets. No matter which you choose, you’re trading one possible future for another.
I’d be remiss to not mention Mike Sexton’s book, “Life’s a Gamble”, as an influence in this perspective. I’ve heard the idea before and thought about it myself but have rarely seen it laid out as cleanly as Mike did in his account of personal experiences in gambling, life, and business.
An Operating System
Any successful endeavor is likely to be predicated upon a system one can use in order to clarify decision making - both before and after the choices are made.
In poker, like in business, this comes from understanding the underlying components, or first principles, for what really matters. The incentives and drivers in encouraging one choice over another.
Knowing how to think about betting is a natural precursor for figuring out how to size bets and when to bet. Determining how to calibrate risk and clarify the decision making process around it are what follow.
Some of this is pragmatic and transferable, while some of it is personal preference and contextual with respect to the domain you’re in.
Let’s explore some of the components for what goes into putting together an effective OS and circle back to this at the end.
Bankroll vs Ego
In poker it’s obvious that we should want to play in games where we have an edge, as it would be in business - operate in markets where we can provide value and be distinguished in our ability to offer value.
The ability to manage risk is largely contingent upon avoiding the ultimate risk, that of ruin. You can only make as many bets as you can absorb the losses for. Managing one’s bankroll takes a lot of humility at times - especially when it involves moving down in stakes.
That applied philosophy of humility is what allows you to stay alive and avoid crashing and burning. On the contrary, being too risk averse can lead to a failure to capitalize on a good opportunity and avoidance of capturing upside potential.
In exploring risk mitigation and exposure, I think the times when we trick ourselves into believing an opportunity is too good to be true are when we focus solely on the upside and avoid looking at the less pleasant possible reality of what happens if it fails?
When I was young(er) I let my ego take control in situations where I made bets outside of my known edge on things I wasn’t even all that interested in because the allure of possibly capturing upside was too attractive for me to turn down.
In hindsight, this was an obvious trap and simply the naivete or ignorance of inexperience.
Having done that, though, I can now realize when that same illusion of possible gain flickers in the back of my mind. I know that the juice is, in fact, sometimes not worth the squeeze.
Some things I realized along the way that help me avoid making the same mistakes in the future are:
Not having a cap on downside as probably the most blatant “letting the ego run the show” scenario. Naturally, it is fair to point out that some people bet everything on themselves to succeed and have gloriously positive outcomes - but there is a time and a place and a preference that they have which is not ubiquitous amongst everyone taking risk. Certainly, in poker, this same story exists but it’s an exception and not the rule, in my opinion.
Part of this is the ability to rebuild if things don’t go your way. Before Black Friday hit the poker world, I knew I had a great opportunity to earn, relatively speaking, easy money playing online cash games. As such I sort of viewed tournaments as a ticket which cash games bought me access to in order to pursue asymmetric upside. A skill based lottery, if you will.
And perhaps one of the most important questions which cuts right to the core of any situation: Why should this model actually work? If you can continuously steelman your position in your own mind, with friends, peers, or trusted advisors - then you likely have something tangible to work with. If not, it might be a case of “it sure would be nice if this did work out”.
Ultimately, these inquiries can become somewhat invasive or even uncomfortable but the reality I lived through is that if you never ask the question, you never gain the clarity - and you eventually need to answer it one way or another.
Pop-up Markets and When to Fire Big
In general I think one should bet big on themselves. You can choose what you do and can only advise others as to what they should do. If you bet big on yourself, you can use your agency to your advantage. I didn’t explicitly understand this when I got into poker but I’m so very glad I made that choice because of the opportunities it has offered me.
And of course, knowing when you have an edge is the main reason to do so. I think people are generally capable of seeing things for what they are and if you make the effort to introspect and self-reflect then you can honestly tell yourself if there is an opportunity or not. And, if you’re wrong, at least you’ll learn from it.
Besides knowing your edge and betting on yourself, another compelling time to bet is during a “pop-up market”.
One example of a pop-up market is that of a poker tournament, which could be otherwise stated as a market opportunity which has a timeline attached to it. This could be, in more traditional business terms, a holiday season when people are shopping for your product. Or something like a summer/winter season for a swim, surf-wear company, ski or snowboard brand.
The idea is that if you take, proportionally, outsized risk at certain times you may capture upside that is otherwise not available. As they say, time is of the essence.
In tournaments this has been a long debated aspect of the format in terms of how to quantify it - but safe to say there are times when if you take the right amount of risk in the right scenario and it goes your way, you end up in a situation which is extremely advantageous for your eventual success.
Naturally, this can’t be forced or the opportunity is anything but - it’s as good as a trap.
Typically I’ve found that these spots come up at inflection points in the event, nearing the bubble, before the final table, or sometimes at the final table when shorthanded before an eventual HU match ensues.
Ideally the criteria that are met in taking these types of “timed risks” look somewhat similar to the previously outlined ideas.
A real edge, not one made up or desired from pride or ego.
A real, ideally quantifiable, upside.
And the ability to bounce back if it doesn’t go your way.
Naturally, sometimes in poker tournaments you are risking it all - so it could be appropriate to consider this idea in the sense of a high value tournament and the risk one incurs in playing it if it’s somewhat outside of one’s generally average buy-in range.
When and Where to Play
Along the lines of betting where your known edges exist, it’s sensible to take it a step further and bet when and where your known edges are most prominently featured - and by virtue of that, avoid or at least be aware of where they may be curbed.
Poker tournaments present a unique situation whereby once you enter, you can’t quit and find a better opportunity until you’ve either won or been eliminated. I’ve always quite enjoyed this aspect of tournaments as it simplifies the process of the game - you enter and play until a winner.
All of that being said, sometimes it’s wise to recognize where edges have dissolved due to players having gotten better. It doesn’t always necessitate leaving but it’s always worth being aware of.
Many people obsess about how to play the hand in front of them but might never ask if they should even be in the game they’re in.
My experience in business taught me that recognizing where providing unique things that are not already offered, or offering existing things in a unique way with a more compelling spin, are what make successful companies. Essentially, one needs to have a clear value proposition in order to succeed.
How Khemset fits into this Equation
Khemset is how I tie all of this together into an effective strategy for performance and execution. After all, no matter how much knowledge one has, it always requires implementation in order to achieve success.
Since I prefer to think about systems holistically, Khemset is the means by which I tie together the betting strategies(sizing, timing, etc), risk calibration, decision-making analysis, review, and performance.
It’s a catch all for taking what you already know to be true and blending it together so that you get the most out of your knowledge. The willingness to bridge that gap and solidify the relationship between “knowing” and “doing” - and that’s done by being in a state of coherence.
Coherence, as a way of life, is something I use at the table, in my relationships, rock climbing, when I’m coaching, at the grocery store, and any other time I am engaged with the world around me.
I believe it’s something I came to understand first hand, in a way by osmosis, from spending time around people who were excelling in poker or other areas of life. It’s that feeling that someone is just on. It’s when you’re in flow and not fighting against life but working with it, allowing it to guide you.
And I think, in a way, that’s what I am able to offer by sharing my experiences with others.
I eventually realized that the way I do things is different than the way most other people do - and that’s a strength. It took some time for me to really internalize this, because being different isn’t always the easiest thing to process in a world that can compel or reward collectivism.
Delivering value and results to people is one way that really helps clarify and validate unique ways of doing things, though - and I’m grateful that I’ve grown into the person who I am.
For all my usual and unusual traits - at the end of the day I’m just another guy doing his best to make better bets with incomplete information, which I’m fortunate to have solid success doing in a game I love.
If you’re interested in more information on my poker coaching services check out my info page here and if you’re intrigued by my keynote on poker-grade decisions under uncertainty you can check that out here.
