When to Hold ‘Em, When to Fold ‘Em

A well-written New York Review of Books article on two thoughtful books about poker personalities contains some good advice for entrepreneurs. The real subject of one book is Andy Beal, a wealthy Dallas banker who came to Las Vegas repeatedly in 2001-2004 looking for no-limit games — and won regularly, in part because of his smarts, but also because of his bankroll.

Eventually, however, he succumbed. Why? Two reasons, both of which entrepreneurs should remember:

No one had ever wanted to play so high before and, though the pros were sure they could beat him, Beal owned a bank and they were only able to take him on by pooling their resources and playing him as a
team, each in turn. That was how Beal wanted it but, with hindsight, it was a mistake. It is hard enough for an amateur to go up against the world’s best poker players, but to take them on in sequence, each of them starting fresh while he was tiring, was a reckless decision that gave them an extra edge.

He also played too long. One of the many talents that goes to make a professional poker player is the ability to concentrate for hours on end, then quit when his or her concentration begins to falter. Amateurs, even gifted amateurs like Beal, get too caught up in the game to know they are tired; they lose their focus, persuade themselves it is only a momentary lapse, then start throwing their money away. Beal was a formidably disciplined player, but Vegas was not his hometown and he never slept well there; that, too, gave the pros an extra edge.

So, the lessons:

  1. Taking on tough competitors serially isn’t always as rational as it seems.
  2. Quit before you’re too tired to make good decisions.