In the first post of this series, I explained why every startup founder should play poker. That post focused on the unique power of poker to build strong and valuable relationships. In this post, I will explain how founders improve their startup skills as they improve their poker skills — i.e., how poker can make you a better founder and improve the chances of success for your startup.
Perhaps the most fascinating aspect of poker is how closely the strategy, tactics, decisions, and risk patterns follow those of building a startup company. And I don’t just mean clever observations about superficial similarities, e.g., poker is risky and startups are risky.
I believe I have a unique vantage point on this particular aspect of poker and startups — I have played poker with more venture-scale startup founders and investors than perhaps any other person on planet Earth. Ever. Assuming that the game of poker is unique to Earth, then it may even be true that no one else in the Universe has played more poker with startup founders and investors than yours truly.
This admittedly dubious honor comes from hosting Startup Poker 2.0 events for venture scale founders and investors every month for more than a dozen years in Seattle and (with the help of amazing chapter directors) instigating similar events in San Francisco, Silicon Valley, San Diego, Portland and Los Angeles — more than 350 events so far… and counting.
In doing so, I estimate I’ve played No Limit Texas Hold’em with no fewer than 1,500 individual startup founders and investors. I’ve had the additional privilege of having played with many of them many times over many years and have seen them progress both as poker players and as founders.
A frequent refrain from many of these founders is that they love poker because it has so much in common with building a startup and that it actually has helped them think about how they build their companies. I have long believed this to be true and it’s the single most important reason that I have kept this Startup Poker 2.0 passion project going for more than 15 years.
Arry Yu is a favorite example. When Arry began playing in Startup Poker 2.0 events in 2008 she was a first time tech founder and had barely touched a deck of cards before then. Fast forward nearly a decade and Arry is an experienced serial founder with serious startup chops — Arry is an alumni of both the 500 Startups and 9Mile Labs accelerators. She has been playing poker at Startup Haven events all along the way.
Arry wrote about the lessons she learned playing poker and how those lessons influenced her job as a founder. Arry is an example of a founder who honed her craft by playing poker while at the same time crushing the myth that poker is somehow a “guys’ thing.”Arry worked her way up to a first-place finish in January 2017; since there are only 12 of these per year among 500 poker seats taken, that’s a big deal.
Arry’s is not an isolated sentiment. It’s actually not difficult at all to find entrepreneurs and investors (well known and not so) touting the correlative principles, maxims and axioms common to both poker and startups and how each informs your potential for success in the other.
Over the past decade, there have been dozens of articles, blog posts and podcasts about poker-plus-startups, many proclaiming the virtues of startup founders playing poker — not just because it’s a great game and a lot of fun, but because it is a source of valuable insights, skills and relationships for startup founders.
A common variant is “The n Startup Lessons Founders Can Learn Playing Poker.” Another frequent theme is “How Startups are Like Poker.” Still others focus on the parallels between poker and investing in startups.
The upshot is a long list of characteristics shared by the game of poker, the ‘game’ of startups… and the people who do both. It’s not the purpose of this article to catalog or explain all of these lessons and insights, or even the best of them — there are too many! But here is a taste to make the point and to prepare you for the waxing on and off that is still to come.
Startups are, at their core, an exercise in decision making and risk management. In poker, as in startups, resources are limited. In poker, the principal resources are money and information. Playing too many poker hands introduces high levels of risk and will invariably lead to leaking away all of your chips, evaporating your bankroll and ending up a long-term loser. A good poker player must thoughtfully decide which hands to invest in, how to play them and when to fold. In a nutshell, poker players are in the business of making decisions and managing risk.
How many decisions and how much risk? In the course of a three hour session of poker, a player will need to decide whether and how to play more than 100 hands, each comprised of many individual decisions. If you’re playing well, i.e., making good decisions, you will likely fold 70–80 of those 100 hands — or more! It takes a lot of discipline, patience and focus to wait for potentially profitable situations. If your decision making sucks… so does your prospects for success at poker… and at startups.
In poker, “situations” means more than just the cards you hold. It includes the skill of the other players at the table, your knowledge of those other players, your position in the hand (i.e., how much information you have), the size of your chip stack relative to your opponents, your “table image” at the time, and more. Maintaining the focus necessary to take all that in while resisting all those tempting but ultimately unprofitable situations is a fundamental skill for good poker players. The core of that skill is decision making. And it’s equally fundamental for startup founders.
Beyond all the anecdotal story telling and self reporting of “The n startup lessons I learned form playing poker, the best confirmation of the thesis that playing poker can make you a better founder comes in the form of a brilliant and rigorous academic with serious WSOP credentials: Annie Duke.
Annie retired from poker to pursue her research, writing and consulting on the topic of decision making. Her book, Thinking in Bets, is a must-read for startup founders; we even offer to buy the book for all of the founders in our portfolio. You should read it too.
What you’ll learn (among many other things) is that decisions making most often requires probabilistic thinking because in most cases we have access to only limited information… and often very scarce information. In order to decide, a critical thinker must assess the likelihood of various outcomes based on their knowledge, experience and the information available to them. This is what poker players and startup founders do… all day long.
Having assess the situation and determined that a poker hand has a high EV (expected value) then the good poker player plays that hand forcefully, i.e., betting and raising aggressively but while continuing to consider new information. In this way, a good poker player puts her resources to work when the odds are in her favor — playing fewer hands overall but with better results because each hand played was a relatively strong hand for the situation. Contrast this with the alternative of playing weak hands or hands of unknown strength because they were not properly assessed. This leads inevitably to poor results and ultimately going broke.
In startups, “bankroll” is synonymous with “bank account” and “hands” are all the decisions a founder needs to make. Often, these decisions amount to choices to pursue the numerous opportunities to do all that stuff that present itself to startup founders with the regularity of bad pharmaceutical commercials — opportunities to build stuff, rebuild stuff, hire people, fire people, pursue a big partnership, launch a new market, launch a new product, launch a new feature, raise more money and on and on and on.
There are always many things your startup could be doing but far fewer things your startup actually should be doing. If a founder chases too many of those shiny but improbable, distracting and costly opportunities that come incessantly from all directions or fails to thoughtfully assess the EV of the decisions and opportunities in front of them, the company’s resources (monetary, human and temporal) get spread too thin, execution suffers, the bank account dwindles and the startup exhausts its runway.
Having (or developing) the discipline, patience and focus required to competently assess and ultimately to say “no” to all of the costly distractions is fundamental to task of risk management and a key to purposeful success in both poker and startups.
You’ve probably heard all this before, of course. Perhaps a keynote speaker, a TechCrunch article or a founder’s blog post. While it’s fascinating to read or listen to folks talking about discipline, patience and focus, I daresay you don’t actually learn much by doing so. For example, reading that patience and selective aggression are fundamental to both poker and startups doesn’t make you more patient nor does it improve your proclivity to assess situations and opportunities with the goal of deciding which to pursue aggressively. You learn these things by putting in the time to practice them.
A very favorite quote:
I hear and I forget.
I see and I remember.
I do and I understand.
Translation: In order to get the benefit of the lessons of poker you actually have to play poker.
As you play poker you engage in many of the strategic thought processes, tactical decision patterns and interpersonal interactions that every founder faces over and over again in the course of building a company.
In this way, poker is ”wax on, wax off” for startup founders. If you don’t recognize this important cultural reference then you should watch the classic 1985 movie, “Karate Kid.” In the movie, a bullied teen, Daniel, seeks the martial arts tutelage of humble and mysterious Karate master, Mr. Miyagi.
Rather than teaching the boy the traditional Karate moves he’s expecting, Miyagi puts the boy straight to work painting his house, sanding his deck and, iconically, waxing his car… for days. Miyagi insists that the arm and wrist motions of painting, sanding and waxing be performed precisely as he has shown them to Daniel.
Night comes on the fourth day. From Daniel’s view, he has not yet learned one bit of Karate. Daniel is angry. Frustrated, aching from days of manual labor and feeling like he has become Miyagi’s servant boy, Daniel turns insolent and confronts his master.
Daniel: We made a deal here!
Daniel: “So”?! You’re supposed to teach and I’m supposed to learn. Four days I’ve been busting my ass, I haven’t learned a thing!
Miyagi: You learn plenty. (Unphased and dismissive.)
Daniel: I learn plenty, yeah. I’ve learned to sand your decks. I’ve waxed your car, I paint your house, paint your fence.
Miyagi: Not everything is as seems.
Cursing his master, Daniel storms off. Miyagi calls him back and begins showing Daniel how the motions of waxing and painting and sanding that he’s been ‘practicing’ are actually the fundamental defensive movements of Karate. In the course of less than two minutes Daniel is blocking every punch and kick Miyagi throws at him with the aplomb of an orange belt. Daniel didn’t realize it but he was learning Karate all along — not every bit of Karate, but some of the important fundamentals.
To complete the thesis: while a startup founder plays poker, s/he is developing, practicing and/or reinforcing some of the fundamental principles and skills of building a startup company.
So, yeah, we’re playing a game in which wagers are made, but as I hope you have seen, we don’t do so as gamblers… we do so as colleagues helping each other improve our outcomes as founders. If your opinion of poker was that it must necessarily be a degenerate gambling activity, I hope that you now have a broader view of how valuable poker can be as a network-building and learning activity.
If you’re ready to startup your startup poker adventure but you’re not sure where to start, the final post in this series will provide a founders’ roadmap to poker.