I play poker monthly with a great group of guys. We are a motley bunch who get together and enjoy a lot of great laughs, some drinks, and some pretty mediocre poker play. Actually, our monthly games are almost always won by the same chap: my brother in law. He’s a great guy, a good friend, and I have no problem contributing to his kids’ college savings funds. But I’m also a competitive guy and have recently started getting a little tired of losing to him time and again. So I endeavored to stop the seemingly endless streak of losses. What follows is exemplary of human nature and how people tend to operate in business- as well as in poker and other such endeavors. I’ve realized there are an incredible amount of correlations between our poker group and the world of business.
About a month ago I asked myself, “How can I get better at poker?” I could start practicing online- but poker in person is not like poker on a computer. Not good enough. I could talk to someone who is good at poker. But they probably wouldn’t have their thoughts very well organized. Not good enough. Hey- how about reading a book on it. Great idea. I’ll look for a short one- my attention span won’t be long enough to get through something long. So, I found a great little book on the subject of becoming an above average poker player. (Note the book was not called “Become a Poker Champion” or something along those lines- if it were I wouldn’t have read it. I have no interest in that. I just want to be better than most people at it so I can beat most people.) So I read a short e-book on the basics of playing Texas Hold Em.
Now, our group has been playing Texas Hold Em Poker for about two years, and I believe I’m likely the first in our group to put eyes on anything about how to be a better poker player. It took me about an hour to read it. About six months ago I decided to start brushing up on my poker play in between our monthly outings, so I recruited my kids to play and taught them the basics. I’ve got eight kids (yes 8, not a typo), and the older six are over 10 yrs old and can all play. It’s been really fun. And because I had a couple of years of playing experience on them, I admit I did win every game with the exception of one (I’m not the type of parent to throw games to build my kids’ self esteem- when they beat me I want them to know they really beat me- and they’ll be all the prouder for it, as well as build real self esteem). However, after reading this short little e-book, I practiced my new-learned techniques and realized a few simple changes to my play allowed me to be so much better than them I could sort of toy with them and try different things, so much so that it made it a little more boring. I got two of my sons to read the e-book. They now are the last two playing with me every game. The principles are simple, and they work.
So here’s a question: what the heck took me so long to take an hour to study up on this? Answer: I’m human. We tend to just go through the motions in so many areas of our lives,hoping that we get better results over time, when they could be made so much easier with just a little study. How many areas of your professional life could be made easier with a little study?
Big Lesson: We All Play but We Don’t Study
I know a silly number of business owners who don’t read. They don’t really read much of anything. I’ve had small business owners tell me “I don’t read books.” That came from an owner who was struggling to make ends meet. Surprising? And I would argue that over 50% of ALL small business owners don’t read one single book on any subject pertaining to business in any given year. It’s insanity. If you want to play to win in business, YOU BETTER READ!
Here are the simple principles this little e-book taught me that will help you run and grow a better company, too, if you follow them:
#1: Be Tight
What the author means this is: create rules for what and how you’ll play and ONLY play according to those rules. In Hold Em he recommends only entering a game (pre-flop) if you’ve got a decent hand- and a very simple formula to figure that out quickly. Basically he says if the odds are against you at the outset, and you consistently enter the games when that’s the case, you may win sometimes but over a long enough period you will lose. So the first one is PLAY ONLY WHEN THE ODDS ARE IN YOUR FAVOR.
In business how many times do owners gamble unnecessarily? It’s common. They know the odds of something working out might not be great, but they go for it anyway. Bad idea. If you do it enough, you’ll lose in the long-run. I always tell people that the great thing about entrepreneurs is that we are a renegade bunch. It’s also the downfall of many owners- being too risky. Be tight. Play only when the odds are in your favor.
#2: Be Aggressive
I found this second rule to be interesting following the first. Rule #1 (Be tight) could easily be misunderstood as “be conservative”. It doesn’t mean that. It means play only when the odds are in your favor. By “be aggressive” he means that, when the odds are in your favor, play aggressively. Go for it. If you follow rule #1 well it means you’ll be folding a lot in poker. An annoying amount at first, until you get used to it.
But how many times in business is there a new idea or a new distraction that we could pursue? They’re all over the place: new products/services we could offer, new products/services others want to sell us, technologies, starting other companies, being offered to buy into this or that company, etc. etc. To be good at #1 we have to say “No” to most of these things unless we clearly see the odds are in our favor. But with #2 we get the green light to give in to our hankering for adventure- when it makes sense, that is: when the odds are in our favor! I love this combination. #1 Be tight. #2 Be aggressive. So when you have a great opportunity, don’t dip your toe in the water, jump in. Go for it. Really go for it when the odds are in your favor in order to see if you’ll win at it. If the odds are good that you’ll win with this new product offering, this new service, this technology upgrade, etc., go for it. Be aggressive.
#3: Play Your Position
In poker someone always deals and your turn is determined by who is dealing. Hang with me for a moment to run quickly through a couple poker basics, so you’ll understand the analogy. So the person to the left of the dealer always bids first when cards are laid. The dealer is last. For example, when the “flop” is laid down (the three cards that are laid face up on the table that are public cards- anyone can play them), the first person to go after they’re laid down is the person to the left of the dealer. They can raise, check (pass), or fold. And it goes around clockwise until it’s back to the dealer. But before the flop is laid down, everyone gets two cards that are only their cards. Nobody else can play them. When you get these two cards dealt to you, it’s time to decide- either to enter this game or fold. To force play to happen more often, it’s common for the person to the left of the dealer to be the “small blind” and the next person to be the “big blind”. If you’re playing “two-four” that means four chips is the “buy in” to play this hand. Small blind has to put in two chips first, big blind puts in four chips, and in order from there players decide if they’ll play that hand or not.
This means that the person with the least amount of information to base their decision on is the person following the “big blind”. They have to decide if they want to go in for the full amount, but they have nothing to base their decision on other than the two cards they’ve been dealt. This position is referred to as “Under the Gun”. In other words, they don’t have the advantage of waiting to see who is going to play this hand and try to read their faces as to if they have good cards or not. They have to make the decision to play or not based on very little information (just their cards).
So, “Play Your Position” means that, the closer you are to being “under the gun” the more conservative you want to be. Or, if you’re dealer (“on the button”- poker players love nicknames don’t they), you should be the most aggressive if you have playable cards. In two years of playing poker I would say this one was the one that I didn’t really pick up on very much at all. I played pretty much the same regardless of where I was at the table, not realizing that my odds diminished as I got closer to being under the gun. The basic idea here is this: base your level of aggressiveness on the amount of intelligence you have.
How often in business do we play things irregardless of our position? How many businesses have been started without doing a good market analysis to determine if the demand was there and the customer base to support it? How many times do business owners add lines of product or service without first gaining all the intelligence they need to make a good decision? How many companies are purchased without enough due diligence done on them (I painfully regret that I’ve been the culprit of this mistake). How many employees are hired without enough intelligence on whether or not this person really is a good fit for our team in the key areas: attitude, skills, experience, drive, ability to work well with others, etc.? Too many times as owners decisions are made without remembering to “play our position”. That is, basing our level of aggressiveness on the intelligence we have pertaining to any particular opportunity or decision.
Side note: all these principles apply to investing in the stock market just the same. VERY good advice to follow:
1: Be tight: create investing rules for yourself and don’t break them- take the emotion out of it.
2: Be aggressive: famous investor Peter Lynch talks about individual investors owning up to about 10 stocks. That’s not many. That means that when you think you’ve found a good one, be aggressive with it (his reasoning is that that’s about the most any normal person investing on the side can pay attention to).
3: Play Your Position: base your decisions on the amount of intelligence you have. Don’t play a loser’s game of investing in stocks that other people have a big advantage over you in information. Buy stocks where you have some kind of advantage: knowledge of the industry, a “feel” for the superior product (think of being a Chipotle customer the first time or using the Trip Advisor app or using Uber for the first time), paying attention to something important that others are missing (Peter Lynch would sit in malls and watch how busy a particular store was that he was looking into). It doesn’t need to be much, but “play your position”. Base your stock decisions on the level of information you have and your advantages and/or disadvantages in that regard.
I really love the game of poker. I’ll never play for big money because I hate losing money more than I like winning at poker. But I love all the parallels that can be drawn from studying the game of poker. And I find it good practice to work at improving both my business skills and, simultaneously, the skills that will eventually lead me to defeating my evil brother in law.