Lessons from the poker table

Back to playing live poker for the first time in years!??Poker has always been an intriguing pastime for me, not as a game of chance, but because it offers a unique combination of strategy, calculation, human interaction, and human ambiguity. ?It has shaped my approach to business, innovation, and even engineering management. It offers lessons that are strikingly parallel to the decisions we make in business every day. ??To kill time in between hands, I’d like to share a few of those:

Play your opponent - In business terms they aren’t opponents, but stakeholders and customers. Remember Matt Damon's character in "Rounders"? ?There is a great scene where Mike McDermott was observing the judges’ poker game and was able to successfully guide his mentor into a winning bluff because he understood the relative position of the opponents’ hands he was playing. ?The misconception about poker is that great players are able stare into their opponent's soul to sniff out a huge bluff.??In reality, it’s about understanding the player on the other side of the table. Are they tight or do they play loose? Are they aggressive or passive? How do they play certain made hands and certain draws.?It’s collecting various pieces of information and making the best decision relative to the opponent.

Similarly, in business, we must understand our stakeholders' and our customer’s goals, risk tolerance, and behavior. ?Are we trying to aggressively push a development timeline or milestone with a functional stakeholder that is risk averse??Do we understand the goal motivations of a functional peer??Do we understand what matters most with a customer who is a key decision maker? ?Adapting our vision, messaging, and strategy to the needs of these stakeholders is critical to maximizing performance and value.?

Make decisions to maximize expected value - Poker teaches us to make decisions based on maximizing expected value and not to sweat the individual losses. ?You will almost always have to make decisions with imperfect information, just like in business. ?Each positive expectation decision contributes to your long-term success, even if it may not seem like a win in the immediate term.

Play the odds - Understanding the probabilities. Our internal biases can skew our perception, leading us to overestimate or underestimate the likelihood of certain outcomes. ?In poker, sometimes it makes sense to chase a long-shot because there is a large payoff in the pot or because there are large implied odds if the hand is made. Sometimes the correct play is to fold a hand that you might be sure is currently the best hand. ??In both poker and business, a measured approach to probability can save from costly mistakes. ?We tend to dramatically underestimate risk probabilities which leads to inefficient risk management or risk allocation.?

Be in it for the long game -?Don't let a single loss throw you off your game. Learn from it, improve, and keep moving forward. ?In poker there is an element of chance in any hand.??You will sometimes lose as a heavy favorite, but if you play hands and place bets that are positive in expectation, in the long run, you'll see a positive return.?In business, any new product development or commercial offering has several risks involving imperfect information.?Market risk, customer risk, competition, technology and pricing risk, to name a few. ??Any of these factors can ruin a good business case.??Managing at a portfolio level and being willing to tolerate some amount of loss, is critical to managing risk and maximizing investment returns.??Studies have shown this across investment fields in venture capital as well as corporate R&D investments.?

Adapt to Changing Circumstances - Just as a good poker player adjusts their strategy based on the cards dealt, the other players' behavior, and their own stack size, successful businesses need to adapt to market trends, competitor activities, and their own capabilities.

Patience and Timing - In poker, knowing when to fold is just as important as knowing when to bet. In business, understanding when to cut losses or when to make a significant investment requires similar patience and timing. Both situations require knowing how to wait for the right opportunity and not get attached to sunk costs.

Bluffing - Bluffing isn't just a poker strategy—it's also a business strategy. Companies often bluff when launching a product, entering a new market, or negotiating a deal. They project confidence and strength, even when unsure of the outcome, to influence the decisions of competitors, customers, or partners.

Risk Assessment - In poker, one wrong move can wipe out your stack, while one bold move can double it. This constant risk assessment parallels business decisions around investments, launches, and expansions.

Emotional Intelligence - Keeping a poker face isn't just about hiding the strength or weakness of your hand, it's about managing your emotions to make rational decisions. In business, leaders must also make strategic decisions without letting emotions cloud their judgment.

When you have a big hand, bring people along for the ride - Lastly, when you're onto a big thing, bring the team and stakeholders along. In poker, when you have a high-value hand (a hand with high pot equity), you want to keep everyone in the game, thus increasing the pot and potential payoff. In business, if you have a groundbreaking initiative, it may be tempting to push for a quick win. However, genuine alignment takes time. To get stakeholders to fully buy in and support a game-changing project, they need to feel involved and invested. And that doesn't happen with quick wins or convincing data, but with time, trust, and engagement.

Each of these comparisons shows how the skills and strategies honed at the poker table can translate to success in the business world.??So, here I am, playing poker (albeit very rusty…) and taking notes for my next hand at the business table.?

#Poker #Business #Strategy #RiskManagement #StakeholderEngagement