The game of poker brings out some interesting characteristics in players, and if you pay attention you get an illustrative demonstration of the subconscious money managing habits of those players (except money is represented by chips in this context). Of course this is certainly a bold statement when taking into consideration the boundaries in which these “financial” decisions are made, in regard to the rules of Poker, but there’s empirical evidence to support this risk reward theory. I believe what you get a glimpse of at the tables, is a reflection of an individual’s subconscious process of managing risk and reward. You get a firsthand look at the monetary emotional consciousness (m.e.c.) and financial thinking cap, in action. There are essentially two types of financial personalities battling it out in the game of poker. There are the gamblers ranging from degenerates to casual/social, and then there are the various levels of investor/business minds at the table.
That Lucky Pot of Gold
The gamblers are the loose players who aggressively focus on winning pots, with little to seemingly no account for their level of risk involved with the hand. They are the bluffers, the chasers, or the sharp tongue charlatans of the poker table. They are the folks who like to “fake it ‘til they make it”. They allow themselves to base decisions they make on their emotions (research poker term “tilt”). The best way to tell which players are the primary gamblers at the table is to pay mind to their chip stack; the quantity tends to fluctuate in larger swings (up or down), more than the investor’s.
Think and Grow Rich
The investors at the table, who tend to treat their chips as “investment capital”, are the conservative players who play tight until the odds are right. They are the table logic, mathematicians, or analysts who are typically “waiting for good cards”, or at least that’s what they want you to believe (by investing time). They are the folks who don’t like playing out of position unless their hand warrants (or forced into play due to game rules), and will wait for opportunities to present themselves while they study “tells” from the competition. Investors may seem to shift from aggressive to conservative “modes” of play, but the truth is that these players are not one way or the other by choice. A seasoned investor’s decisions are based on situational speculation backed by calculated risk/reward ratios.
Analyze This
The reality here is that this idea of subconscious risk and reward management translating through the game of poker is just a theory. Average poker players do not consistently fall into one category or another, all nice and neat. For instance, if someone is a good poker player in terms of managing risk to reward within the game, does not automatically define that the individual is equally as efficient in managing their personal finances. By the same token, this risk reward theory does not force an equal stereotype on the risky gambler, but in both cases there is no denying that the speculation exists. I see the risk reward theory as a kind of exercise to measure your own values and financial intelligence, and see how it fairs against “the market” (the other players at the table).
In order to beat “the market”:
1. Players will become more knowledgeable of the rules and regulations (duh), but more importantly how to best leverage those rules for the opportunity to position themselves to create success.
2. Players will become less susceptible to taking risks based on their emotions, and more willing to take action on informed judgment.
3. Players will learn how to make do with the cards they’re dealt.
4. Players will not hesitate to utilize their bargaining chips when the risk to reward ratio implies a solid return on investment.
5. Players will learn how to recognize opportunities to capitalize.
6. Players will become familiar with the standards of the competition (industry standards), and raise the bar to gain a competitive edge.
7. Players will understand that there will always be a degree of risk when making plays, but refuse to let the fear of chance muck logic.
In this list you can substitute the word players for investors, and see what the game of poker can teach individuals about risk reward theory, and how it can apply to the decisions they make with their personal finances. Again, I don’t assume that people who win at poker are good at managing their finances nor do I believe that learning how to play poker will make you a better investor. I do know that in order to “beat the market” and sustain success at the game, you must learn to emulate behavior that is typical of such activities.
Empirical Pros
The majority if not virtually all professional poker players, are in fact entrepreneurs/businessmen. Now some may argue that the reason why they are pros in the first place is because of all the disposable income from their businesses/investments that allow them to consistently compete in tournaments. This may be true for many players, even those who haven’t gotten sponsored yet, but this argument would still prove that they had the business/investor mindset before they became a professional poker player. They still had to have that understanding of risk/reward theory, but that doesn’t mean that’s all it takes to become a pro player either. In the case of learning about risk and reward theory, poker is certainly a speculators sport!
The gamblers are the loose players who aggressively focus on winning pots, with little to seemingly no account for their level of risk involved with the hand. They are the bluffers, the chasers, or the sharp tongue charlatans of the poker table. They are the folks who like to “fake it ‘til they make it”. They allow themselves to base decisions they make on their emotions (research poker term “tilt”). The best way to tell which players are the primary gamblers at the table is to pay mind to their chip stack; the quantity tends to fluctuate in larger swings (up or down), more than the investor’s.
Think and Grow Rich
The investors at the table, who tend to treat their chips as “investment capital”, are the conservative players who play tight until the odds are right. They are the table logic, mathematicians, or analysts who are typically “waiting for good cards”, or at least that’s what they want you to believe (by investing time). They are the folks who don’t like playing out of position unless their hand warrants (or forced into play due to game rules), and will wait for opportunities to present themselves while they study “tells” from the competition. Investors may seem to shift from aggressive to conservative “modes” of play, but the truth is that these players are not one way or the other by choice. A seasoned investor’s decisions are based on situational speculation backed by calculated risk/reward ratios.
Analyze This
The reality here is that this idea of subconscious risk and reward management translating through the game of poker is just a theory. Average poker players do not consistently fall into one category or another, all nice and neat. For instance, if someone is a good poker player in terms of managing risk to reward within the game, does not automatically define that the individual is equally as efficient in managing their personal finances. By the same token, this risk reward theory does not force an equal stereotype on the risky gambler, but in both cases there is no denying that the speculation exists. I see the risk reward theory as a kind of exercise to measure your own values and financial intelligence, and see how it fairs against “the market” (the other players at the table).
In order to beat “the market”:
1. Players will become more knowledgeable of the rules and regulations (duh), but more importantly how to best leverage those rules for the opportunity to position themselves to create success.
2. Players will become less susceptible to taking risks based on their emotions, and more willing to take action on informed judgment.
3. Players will learn how to make do with the cards they’re dealt.
4. Players will not hesitate to utilize their bargaining chips when the risk to reward ratio implies a solid return on investment.
5. Players will learn how to recognize opportunities to capitalize.
6. Players will become familiar with the standards of the competition (industry standards), and raise the bar to gain a competitive edge.
7. Players will understand that there will always be a degree of risk when making plays, but refuse to let the fear of chance muck logic.
In this list you can substitute the word players for investors, and see what the game of poker can teach individuals about risk reward theory, and how it can apply to the decisions they make with their personal finances. Again, I don’t assume that people who win at poker are good at managing their finances nor do I believe that learning how to play poker will make you a better investor. I do know that in order to “beat the market” and sustain success at the game, you must learn to emulate behavior that is typical of such activities.
Empirical Pros
The majority if not virtually all professional poker players, are in fact entrepreneurs/businessmen. Now some may argue that the reason why they are pros in the first place is because of all the disposable income from their businesses/investments that allow them to consistently compete in tournaments. This may be true for many players, even those who haven’t gotten sponsored yet, but this argument would still prove that they had the business/investor mindset before they became a professional poker player. They still had to have that understanding of risk/reward theory, but that doesn’t mean that’s all it takes to become a pro player either. In the case of learning about risk and reward theory, poker is certainly a speculators sport!
