Everywhere you turn these days, you see poker. There are poker tournaments throughout the world, poker on ESPN, poker online, poker books galore, and poker articles in numerous major publications.
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And there are great stories from the World Series of Poker. In the 2005 main event, a former chiropractor from Australia beat out 5,619 people and won $7.5 million. In the 2004 tournament, Greg Raymer, an amateur and lawyer, won the event and $5 million. In 2003, a total unknown who had never played in a live tournament won the tournament and $2.5 million (the best part was his name — Chris Moneymaker, which is his real name).
No other sport (and, yes, I know some people would scoff at the idea of poker being a “sport”) allows an amateur to participate and have a meaningful chance of winning. Could you beat Tiger Woods at golf? LeBron James at basketball? No way. But in poker any amateur with some experience has a legitimate shot at winning a big tournament.
I find that poker can provide a number of lessons to entrepreneurs and startup businesses. Poker players have an abundance of catchy phrases, so let me set forth some of those phrases or principles and apply them to the startup world.
“Trust Everyone, But Cut the Cards.” This is a poker adage that says there is nothing wrong with trusting other people, but make sure you protect yourself by cutting the cards. In business, there is nothing wrong with being cordial and trusting, but make sure that you are protected by appropriate contracts and deal terms.
“If You Can’t Spot the Sucker at the Poker Table, Then It’s You.” An important element of being a great poker player is being able to read other people. Are they constant bluffers? Do they have some kind of “tell” that tips off other players whether they have a strong hand or not? As Chris Moneymaker said, “The beautiful thing about poker is that everybody thinks they can play.”
In business, you should constantly observe the people with whom you do business. Know what is important to the other side. Listen more than talk. And don’t ever underestimate the opposition.
“You’ve Got to Know When to Hold ’Em, Know When to Fold ’Em.” This phrase is often said either by a Kenny Rogers fan or a poker player who has no clue as to whether he should continue playing his hand or fold. In negotiations, you have to know when to keep pushing on a point, and when to give up and move on. Fighting every point won’t get you to a final deal unless you have tremendous leverage. Knowing what leverage you indeed have is crucial, but constantly assess how important any particular point is if it threatens closing the deal.
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“I’d Rather be Lucky Than Good.” This phrase is typically uttered by someone who is neither lucky nor good. In the long run, when all the luck is bled out of the equation, it’s skill that separates winning players from losing players. In business, you have to know what you are doing; you have to provide real value and you have to be reasonably priced — and then luck may follow.
I’d like to share a few of my favorite “luck” quotes.
“Poker is a combination of luck and skill. People think mastering the skill part is hard but they’re wrong. The trick to poker is mastering the luck.” (Jesse May)
“In the long run, there is no luck in poker, but the short run is longer than most people know.” (Rick Bennet)
“People would be surprised to know how much I learned about prayer from playing poker.” (Mary Austin)
“I’m All In.” This refers to a player betting all of the money in front of him on his current hand. Many times, the bettor does not have the best hand; he may be bluffing, he may be on a good draw, or he may be only second-best. In the business world, you should bet all of your chips only when you are objectively supremely favored to win the bet. After all, losing an all-in bet in business can have devastating consequences.
Make sure to recognize whether a particular decision you are making is in essence an “all in” bet. Analyze the decision in that way and then determine if you really want to take the risk.
“Never Count Your Money in the Middle of a Hand.” Actually, there is nothing wrong with counting your money in the middle of a hand. You need to constantly assess how you are doing, whether in business or poker, and from that make meaningful bets or decisions on how to move forward.
“Rocks and Grinders Don’t Get Big Paydays.” There is a class of poker players known as “rocks.” They play super safe. They only play hands that are very strong and they don’t take many risks. “Grinders” are players who sit patiently hour after hour waiting for the perfect opportunity. What they don’t realize is that if you keep your nose to the grindstone, you’re only bound to get a flat nose. Similarly, to be successful in business you must take chance s– playing it safe is not for innovators.
“Know When to Change Up Your Play.” A poker player has to adapt and change, depending on the game. If he recognizes that there are multiple “rocks” at the table, he might loosen up and raise more, knowing that those rocks will generally fold unless they have a very strong hand. If he has players that are loose and will often call raises, he might have to tighten up and bluff less. Some tactics and strategy will work, but like startups, the player has to adapt and pivot depending on the circumstances. If a startup is not getting traction on its original plan, it may be best to pivot the business quickly before its funding runs out.
A startup is hard work. It takes intense dedication and long hours. To be successful at poker, it also takes time to learn the game, read the books on strategy, and get enough experience to recognize when to bluff, raise, or fold and change up your play.
Good poker players often ask other poker player friends how they should have played a hand (e.g., Should I have raised? Should I have folded? Should I have moved all in?).
“Don’t Go on Tilt.” Poker players will go on “tilt” when things don’t go their way in a particular hand. They start playing looser and with much greater risk. This often leads to yet more losses. Recognize when you are going on tilt so as to not increase your losses. While startups have to be bold and innovative and quick to act, don’t do so without some thought as to the consequences. Discuss major strategic changes with your startup team, your Board of Directors, and your advisors.
And you have to manage risk. As noted poker author Lou Krieger said, “In poker, as in business, the secret is in knowing how to manage risk and capitalize on opportunity.”
“Fold and Live to Fold Again.” This phrase comes from Stu Ungar, the World Series of Poker champion. Good poker players know when to fold and not lose all their money. They seriously ponder whether to go all in or call an all in. Similarly, don’t let your startup run out of money by pursuing an all-in strategy constantly.
“Table Selection Is an Important Decision.” Before you sit down to play poker, you need to analyze what stakes are best for you and the quality of the competitors (knowing that you will usually have incomplete information). Likewise, startups have to make similar calls. What business should I be in? How strong are the competitors? How big is the market opportunity?
Tony Hsieh (CEO of Zappos) once said, “I learned that the most importance decision I could make was which table to sit at. This included knowing when to change tables.” He also said, “It doesn’t matter how flawlessly a business is executed if it’s the wrong business or if it’s too small a market.”
If you want to learn more about poker, check out Kazillion Dollar Poker and Poker for Dummies at Amazon or Barnes & Noble.
Richard Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a large venture capital fund in the San Francisco area. His focus is on investing in Internet and Digital Media companies.