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1) Game Selection
The single most important decision to winning in poker is table selection.
If you are a great player, but playing against better players, you won't win in the long run. Similarly, you can be an average player, but if you sit in a table full of bad players, you'll make a killing.
In your personal career, you want to choose where (industry, location) you can have a long-term competitive edge.
In business, you want to be in a blue-ocean market as well as an industry where you can build up a natural barrier to entry or even an unfair advantage.
In a great market, even if you have an average product and team, the market will likely pull you along...conversely, in a terrible market, you can have an absolutely killer team and the best product, you are still going to fail. — Marc Andressen
2) Good vs Right Decision
In poker, great players focus on making good decisions rather than the right decisions.
- Good decision = given the incomplete information you have, this decision yields the highest Expected Value (EV) in the long run
- Right decision = decision that turns out to be correct in this particular instance
- E.g. if you blindly choose a stock to invest in, and the stock price rises the next day, you've made the right decision. But it is a bad decision.
- E.g. in poker, if you made a "good" bluff in theory, but the opponent called your bluff in this instance, you've made the wrong but good decision.
Poker is a game of variance, so a pro player needs to be not result-oriented, and instead be process-oriented, concerned about making good decisions regardless of how the cards fall.
In our daily life, making decision without certainty is a cause for anxiety for most people.
Sometimes our fear of making wrong decisions can cause us to make safer but bad decisions in the long run.
So a useful mental heurestic is to focus on the long-run EV of our decisions, instead of worrying about the outcome in this particular instance.
If we try to make good decisions, we will end up with more right decisions in the long term.
3) Probabilistic Thinking
In business and in life, there is a tendency to think in binary certainties - success or failure. E.g. if you close a sales, it is success; if a business venture fails, it is failure.
But we live in a world of probabilities, not certainties.
In this world, a helpful mental framework taught by poker is thinking in probabilities and odds.
Here's an extreme example.
Image a simple game of fair dice, where you win $1000 if you hit 6, but lose $100 otherwise. Majority of the times, we would lose $100, but that doesn't mean it is a bad decision to play the game.
If we fail to think in probability, we might think this is a scam and stop playing, even though it is clearly a positive EV game in the long run.
In business, a company should think of its decision making as making bets.
E.g. how much should a company invest in closing a big sales?
If the customer lifetime value (CLV) is 1 million dollars (profit, not revenue), and the probability of closing the sales is 0.1 (1 out of 10 times), then you should spend <100k (in team salary and others) in closing the sales.
If your team didn't win the sales, it doesn't mean it is a bad investment of resources. It just means this is the 9 out of 10 times that the sales doesn't work out.
Similarly, is it a good decision to spend 3 years of your life (assuming opportunity cost of 3x100k) in starting a new company? That depends on your assessment of the odd and risk, as well as the potential realistic pay-off.
If there is a 10% chance of you selling the company for $1 million at the end of 3 years, it is a bad decision, since your expected value (10% x 1mil = 100k) is lower than your 300k opportunity cost.
But if there is 1% chance of you becoming a billionaire — notwithstanding the realistic odd should be much much lower than 1% — then it is a good decision even if the odd of success is ten times lower than the previous case.
The above are overly simplified examples, but it should bring across the point that making a decision with a high rate of failure does not necessarily equate to making bad decisions. We need to think in probability and payoff.
One interesting caveat is we do have the constraint of our limited lifespan — we might not live long enough to make multiple high-risk bets to pay-off in the long run.
A good article on why business strategy is similar to poker.
4) Inner Game
I recently came across The Inner Game of Tennis by Timothy Galway and found striking similarities with poker.
Written in 1974, The Inner Game of Tennis was a revolutionary book that laid the foundation for mental coaching and sports psychology in the decades to come.
Peak performance — whether in sports, business, or poker — involves a mastery of both outer and inner game.
Outer game is the hard skill set and technique.
Inner game is what takes place in your mind and how you overcome self-doubt and self-sabotage and enable yourself to realize your potential. A strong inner game gives you the mental fortitude and self-confidence to have peak performance and high concentration even under high pressure.
I like to do positive and negative visualisation to mentally prepare before a big game or an important meeting.
By mentally mapping out all the scenarios and situations, I feel more confident and in control of what needs to happen to achieve my objective.
By also visualising negative scenarios, when things go wrong, I am able to feel more stoic and react without being crippled by negative thoughts.
Trust your body and subconscious
According to the book, for top tennis professionals before a big match, watching good shots is more effective than putting in more practice. It trains your subconscious self and imprints positive reinforcement to your mind.
Similarly in poker, right before a big game, I find studying too much and overthinking can be counter productive.
What works best is often doing some visualisation and relaxation, so that I can let my worrying and judging mind take a backseat, and allow my subconscious and performing self to shine during the game.
State of Flow
"When you are playing at your best, you are not thinking in a technical way about your shot; you are a fluid unity of mind, body, court, and racket."
We know what is a good shot; the problem is executing it on the spot.
For peak performance, the ideal mental state is to be in flow, practicing the art of effortless concentration.
That means our mind is not cluttered with words and instructions, and not disturbed by our own judging and worrying self.
When we deem a shot as bad in the moment, we get caught up in the emotion and fail to be fully present for the next shot. Instead, if we focus on the moment — the sound of the ball, the way racket moves — we free ourselves to play our best.
In poker, when we play in a state of flow, we trust our read and decision, and stop thinking about theories or fearing mistakes.
“Man is a thinking reed but his great works are done when he is not calculating and thinking." - D.T.Suzuki, Zen Buddhism master