I started playing poker about 8 years ago, and while it never became more than a sporadic hobby, I began to see parallels to the business world that I have found very interesting, and even perhaps useful! An appreciation of precisely how the game works isn’t really required – all you need to know is that in the most popular version of the game (Texas Hold’Em) each player gets dealt two cards, and has to make the best five-card hand possible out of their two cards and five community cards that are placed on the table. With that out of the way, let’s get onto some of what I like to call business-poker parallels (BPPs).
Perfect vs. Imperfect Information
There are some things we know for 100% certainty – perfect information – and other things where information is incomplete or entirely missing, and we have to make informed guesses. In poker, I know for sure what my two cards are, and by inference what cards are left in the remaining 50 cards. As the hand progresses and the community cards are placed on the table, the amount of perfect information I have increases. However, the information I need to work out whether my hand is better or worse than my opponent is imperfect – I can see how they react to various bets, and the better a player I become and the more I study my opponents, the more I’m able to interpret their motives, infer their hand, adapt my play and stand a greater chance of winning.
It’s the same in business. Let’s say I’m developing a new product, and having designed it, I know it back to front. However, there are competitors in the marketplace, and both my competitors and marketplace will change over time. As such, I need to continually keep informed on how these two factors are developing, for without that knowledge, my product may become obsolete. The more information I have, despite it being imperfect, the stronger I can position myself for a win. BPP: keep a constant eye out on the market and your competitors – you won’t know exactly what’s going on, but it’s a lot better than knowing nothing!
Poker, unlikely most other forms of (legal) gambling, is not played against the house. You’re not winning or losing your money to a faceless casino – you’re competing directly against the people across the table from you. They are 100% out to beat you and take the opportunity of winning away from you, even if they do have a smile on their faces.
Business is the same. No matter how unique your product is, there will always be someone trying to tempt your customers away from you and towards them. Think of the most innovative and unique companies around – Apple, Tesla, Facebook, Google – every single one of them had some sort of competition out there trying to drive their business towards them. BPP: even if it feels like you’re on the cutting edge with a unique product, there is always someone out there trying to beat you, and another way for your customer to spend their money!
Even the best poker players in the world get what’s called a “bad beat”, where the odds of someone coming along with a better hand may be millions to one, and yet it still happens. Conversely, someone that knows nothing about poker can miraculously walk through a minefield of competitors and come out on top. Summarising Murphy’s law, anything that can happen will happen.
In the business world, luck plays a big part and there’s not a great deal we can do about it. We can seize on the times luck favours us, and move quickly when it conspires against us, but in the end we are all buffeted by forces we can’t control – just think of a sunny summer for the ice cream industry, or the recent collapse in oil prices for the oil and gas sector. BPP: Rather than dwelling on that incredibly lucky/unlucky hand, do the best you can and crack on to the next one!
By Alexander Schey, co-founder, Vantage Power