Tony Hsieh is the CEO of Zappos, one of the largest online shoe stores in the world. He is as famous for being frugal (he lives in a trailer park, despite being worth about US$820 million), as he is for his radical management philosophies. I won’t go into detail here – but he’s basically built a billion dollar company on some unconventional strategies.
In his 2010 bestselling book, “Delivering Happiness”, Hsieh talks about a time in his life where he seriously dabbled into playing poker – and the business lessons he learned from that experience.
Personally, I’ve lost every single dollar I’ve ever put into a poker game. But for a guy who’s always trying to optimise like me — poker is really fascinating. And I actually see similarities between it and investing. Before you flame me, saying that investing and gambling are totally different — do you realise that the way many people “invest” is just like gambling? It may not be the right way to invest, but many investors are guilty of it.
This article is an extension of what Hsieh said he learned from poker. And what it can teach us about investing.
1. You can always switch tables
Unlike other games in the casino – poker is a game where you play against other players. It’s way more unpredictable. For example, if you’re playing Big Small or Roulette — you already know what the probability is for every situation.
And you know that the house (casino) always wins in the end. It’s math.
But in poker — how much you win or lose depends a lot on your abilities, and the abilities of the people at your table. If you’re a great player playing against newbies, you’ll likely win their money. On the contrary, there’s a saying in poker:
Look around the table. If you don’t see a sucker, get up. Because you’re the sucker.
~ Amarillo Slim
The lesson here is simple: if you’re sitting at a table with much stronger opponents — you’re going to lose. In investing, this means you shouldn’t play in areas which you’re not skilled at. Unless you’re a pro, leave that for the pros.
I’m not saying that you should always give up whenever there’s strong opposition; or that you should expect to win all the time. And yes – to improve your skills, you need to struggle and try new things.
But understand that in investing, there are places where you have no business being in. Where if you stay – you’re going to lose money. Get out, and get out fast.
This of course applies to business, career and your relationships too.
2. Take care of your emotional (and physical) state
…an experienced player can make ten times as much money sitting at a table with nine mediocre players who are tired and have a lot of chips; compared with sitting at a table with nine really good players who are focused and don’t have that many chips in front of them.
~ Tony Hsieh
There’s a lot to learn from Hsieh’s words here. He speaks about choosing where you play, which we’ve talked about above. And he speaks about chips, which represent how much money you can potentially make.
But what I find most interesting is how he talks about state; whether his opponents are tired or focused. And you’ll know this to be true if you’ve ever lost money gambling:
Tired, emotional people make bad decisions.
The good news is that when you and I are making investment decisions, we have time to think about it, instead of being under pressure.
And similar to how you should never send an email when you’re angry, or text your ex when you’re drunk — never make an investment decision when you’re emotional.
It’s what leads gamblers to suicide.
3. Always be learning
When I was younger, I used to think that people can “master” things. That once they reach a certain level — they know everything about something.
But you know the truth is very different. Knowledge increases, things improve and humans evolve.
Twenty years ago, you spoke to a remisier for hot tips before he made a trade for you on the Kuala Lumpur Stock Exchange. Today, you watch Bloomberg on your smartphone and make trades yourself via CIMB Clicks. Come to think about it, when was the last time you heard the word “remisier”?
If you’re not always learning — you’ll be left behind as the world continues to change.
How does one learn? Read everything you can, get advice from people who are smarter than you, and try things out for yourself. (Just remember Point 1 above and limit your losses).
In poker, a beginner should study historical games and strategies of legendary players. Then practice them with players who are better. With investing, you can start by reading the classics by Robert Kiyosaki, Benjamin Graham and Warren Buffett. Then compare their principles to modern investment ideas you see online, while trying them out for yourself.
There are always new things to learn, new things to try, and more room for improvement. And perhaps best of all — there’s always more money to be made.
While I would never suggest anyone to start gambling, I think that everyone can learn something from anyone. Maybe you disagree with the concept of gambling; it is after all a haram activity. But I do hope you build the analytical skills, decision-making abilities, and emotional control of a top poker player.
Then your investments will become less and less like gambles, and more and more like winnings.