Poker is entrepreneurship-lite

Like many cities, our local startup community has a monthly poker game (6:30pm on the first Wednesday of every month at Aeona, everyone’s welcome!), and every now and again we talk about why poker is disproportionately popular amongst entrepreneurs.

Image courtesy of Alegri

My contention is that it’s because the game — Hold’em variants specifically — is essentially a small, contained analogue to being an entrepreneur. You aren’t doing the same things, but you’re using the same skills, and so it feels like a good way to develop them without the same stakes you have in your day job.

On the surface, playing poker and being an entrepreneur look very different.

Poker:

• is a small system with limited scope,
• has clearly defined rules,
• is a zero sum game, i.e. for you to win, someone else must lose (actually, it’s a negative sum game if you’re playing anywhere that charges a rake).

Whereas entrepreneurs operate:

• in a very, very large system with a practically infinite scope,
• with unclear rules,
• in a positive sum game, i.e. when one person wins, it doesn’t necessarily come at the expense of someone else losing.

These differences are what makes poker a practice ground. The similarities are what makes it a good one.

Both poker and being an entrepreneur:

• Require making important decisions with limited information. The more information you have, the better your decisions can be, to the point where strategies that emphasize gaining information (e.g. split testing copy, or playing a wider range of hands in late position) can be highly positive long-term.
• Have short-term outcomes that are only loosely correlated with making the right (i.e. highest expected value) decisions. This happens because the outcomes of any particular action are largely determined by factors you cannot know in advance, and are not entirely within your control. In almost all situations, as a poker player and an entrepreneur, there is no way to guarantee that a particular decision leads to a particular outcome. In poker, you can’t control the cards that come out, while as an entrepreneur, there are thousands of factors that impact the outcome of things, most of which you don’t have control over, and many which you aren’t even aware of. The corollary to this is, chance has to go your way for you to be successful, so the long-term strategy most likely to result in success is to put yourself in a position to get lucky over and over again.
• For that matter, both are activities where the best decision can be determined through a Bayesian expected valuation calculation. Most decisions in both poker and as an entrepreneur have multiple outcomes, each with a different likelihood of occurring, and each of which are a different level of good or bad. Figuring out the right decision requires quantifying both the outcome and its likelihood of occurring, and there is likely to be more than one “good” or “bad” outcome. Further, your understanding of those numbers changes as more information is obtained (callback to the point about emphasizing information-gathering).
• Have feedback loops that take a long time to become clear. The loose correlation between decisions and results means that it requires many iterations to figure out what decisions are good or bad. In poker, you can’t tell if calling a bet is good just because you won the hand. Next time, in the same situation, the person might be bluffing. They might even be bluffing most times, and your first win was just the one in ten that they weren’t. You have to track the outcomes over a long period to see what the actual odds are in any given situation involving people. Similarly, it’s hard to tell whether your new ads are converting better because the messaging is clearer, or because your targeting is better, or because your new signup process has less friction.
• This means that you must be brutally honest with yourself about why a particular outcome occurred. If you think you’re making good decisions, when you’ve actually just let a random positive outcome trick you into thinking that success was all down to you, then you’re going to do the things that led to this outcome again, and it’s not likely that chance will go your way again. Everyone likes to feel good about themselves, so it’s easy to fall into the trap of believing that success comes from your decisions, and failure comes from the environment or other people. Unless you’re able to think clearly about why things happen, you aren’t going to be able to produce results over the long term.
• Benefit greatly from understanding the participants rather than the mechanical interactions of the system. In poker, you’re likely to win more often if you focus on your opponents than the cards, and as an entrepreneur you’re likely to be more successful if you focus on your customers than your code.
• Reward being able to synthesize many different sources of information into a coherent whole. In poker, you have to pay attention to your cards, to the potential actions of each of your opponents, their body language, the previous actions in this hand, and the previous actions in earlier hands, and make a judgement call. You can see why pattern matching is a key skill, but individual insight can still have a large impact on the outcome. Entrepreneurs have even more inputs — customers, metrics, the market, investors, and employees, each potentially with multiple subgroups, and each often suggesting different directions. Pattern matching is just as valuable as a shortcut, and specific insight is just as key.
• Require that you, as a player or an entrepreneur, have sufficient resilience to withstand the emotional toll resulting from frequently making the right decisions and still not having things go your way. Poker has been called a hard way to make an easy living, and being an entrepreneur is no different.

I couldn’t make a better practice ground if I designed it from the ground up. Perhaps you could though… if so, you know where to find me — Aeona, 6:30pm, first Wednesday of each month!