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The game of “Texas Hold ‘em” poker can be compared to investing in the stock market, and I argue that if an individual views the game as such then they can dramatically improve the return on their “investments”. In the game of “Texas hold ‘em”, every single hand begins with each player getting dealt two cards face down from the deck. There are one thousand three hundred twenty six different pair combinations in a deck of fifty two cards. These pairs of cards are not just cards, in the eyes of a player who has an investor’s mentality, but each pair of cards represents a business for that player to make a possible investment in. In order for this concept to make an individual profitable gains they only need to alter their perspective on the game in two ways.
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Fundamental Analysis of the Business
The first step an investor takes before putting any of their hard earned capital on the line is to perform their due diligence on the prospective investment. Due diligence in this case as it pertains to the game of poker, begins with analyzing the fundamentals of your hand. Just like a stock investor analyzes the fundamentals of a company to gauge its strength and potential to retain or gain value, poker player analyzes their starting hand in a similar fashion. Although there are over a thousand different starting two card combos that a player can be dealt, we can simplify this fundamental analysis by eliminating arbitrary considerations like specific suits of cards. If we take specific suits out of consideration when analyzing our hand strength, then there are only one hundred sixty nine different two card combinations to consider.
The first step an investor takes before putting any of their hard earned capital on the line is to perform their due diligence on the prospective investment. Due diligence in this case as it pertains to the game of poker, begins with analyzing the fundamentals of your hand. Just like a stock investor analyzes the fundamentals of a company to gauge its strength and potential to retain or gain value, poker player analyzes their starting hand in a similar fashion. Although there are over a thousand different starting two card combos that a player can be dealt, we can simplify this fundamental analysis by eliminating arbitrary considerations like specific suits of cards. If we take specific suits out of consideration when analyzing our hand strength, then there are only one hundred sixty nine different two card combinations to consider.
- 13 “Pocket” Pairs
- 78 Suited Combos
- 78 Off-Suit Combos
In the photo you can see the analogy between the starting one hundred sixty nine starting hands in poker and investing in a company on the stock exchange. You have your top business juggernauts that are all but sure fire gainers, then everything from your “blue chip” hands all the way to your stinky pink sheet high risk gambles. The higher the rank the greater the odds the cards have to retain or gain a return on investment throughout the hand. This is only the first step of the investor, because even big businesses can have poor performance. The investor must also consider timing the market.
The Business Cycle
When you “buy” into the stock market that is called “taking a position”, and just like in the stock market the game of poker you can take a position. The positions shift in a clockwise direction around the table, once after every hand. In “Texas Hold ‘Em” poker there are four main positions the investor must consider that define where their hand (business) stands in the “business cycle”, and those positions are:
The Business Cycle
When you “buy” into the stock market that is called “taking a position”, and just like in the stock market the game of poker you can take a position. The positions shift in a clockwise direction around the table, once after every hand. In “Texas Hold ‘Em” poker there are four main positions the investor must consider that define where their hand (business) stands in the “business cycle”, and those positions are:
- Early Position(s)
- Dealer Position (or the button)
- Small Blind
- Big Blind
In the first stage of betting, where players are deciding whether or not to “buy” or invest in their hand, where you take your position may greatly affect the outcome of your investment. The early positions are the first to act in the “business cycle” at the poker table, and the blinds (left to the dealer) are last. Every round after that may proceed, the blinds are first to act, starting with the player in the small blind position (if they’re still in the hand), and the dealer is the last to act. This “business cycle” matters because it can influence the strength of your hand by leveraging your position within the cycle. In other words, if other businesses are showing weak strength by simply holding (calling) or selling out (folding) of their position, then you may be more inclined to make a strong investment in your position in order to show strength in your business (hand). Leveraging your position may increase the strength of your business (hand) regardless of its intrinsic value (rank).
