Do You Gamble?

Hi,

Often when chatting with friends who don’t invest and usually have zero interest in it I get confronted with the topic that investing is just gambling.

A new member of one of my courses, when asked how she envisions integrating investing with their ideal lifestyle, mentioned “I connect my love and passion for games such as poker to my approach to investment and enjoy it as much as I do the game without going into gambling (which poker is not, by the way!)”.

The mention of gambling reminded me of this topic.

It can seem that investing is a form of gambling, especially to people who have little knowledge about how to invest, or maybe tried, failed and gave up. Just classifying it as gambling is an easy excuse to not have to try to do the hard work of learning to invest properly. (Not that it is hard to learn since I’m teaching it in a 30 day course just one hour a day).

But what is the truth? Are we gambling when we invest? Let’s find out so that you also know what to answer.

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Gambling is a game of odds. In particular odds where we don’t have control over them. The rules are set, the odds are presented, if we want to play, we place a bet, pull the trigger and hope to get lucky.

No turning back. You either win or you lose. Simple and fun if you like to play with risk.

What is the opposite of gambling?

The opposite of gambling would be a situation with a certain outcome. Likely why standard math is boring to most people. 2 + 2 = 4 no matter how many times you ask yourself the question.

This sounds too simple.

As almost everything in our universe we cannot lump it into an either or situation. There is always nuance.

Treating issues as pure black and white shows that we aren’t thinking properly about something and likely it’s our emotional side taking the steering wheel in our brain.

Let’s switch on our rational thinking and ask what is in between a pure game of luck and a 100% certain outcome?

If we look at casinos as businesses, we will soon realize that most games there have skewed odds. Odds skewed in the favor of the house, not you or me. To win we have to be truly lucky. Worse, the more we play, the lower the chance of us winning again. Of course there is always a slight chance, which is why people keep coming back. The casino just needs to make sure enough games are being played.

I don’t like not having the odds in my favour, so I don’t play at casinos.

Let’s put the casino to the gambling left on our spectrum between gambling and not.

Poker is often considered a form of gambling but it is not, as my student pointed out. It has one key difference. You are not playing against a fixed set of rules and odds. You are playing against other humans in a setting where bluffing is allowed.

If you are very good at reading other humans and have good memory and probability thinking, you are shifting the odds in your favor. Provided that you are better than the others sitting at the table.

Because you can learn to improve your skills that give you an edge at poker, it is not a pure gambling situation anymore.

It becomes gambling if you refuse to learn and keep playing based on trying to get lucky.

Back to investing.

To answer whether investing is gambling, similar to poker, it depends on how you approach it.

If you are picking random stocks and crypto and hoping to get lucky, then yes, you are gambling.

If instead you have found your personal edge and know how to apply it, you are not gambling anymore. You are shifting the odds towards your favor, and you are investing.

Investing and gambling are only related because both deal with odds. The difference lies in your personal approach to it.

You get to decide if you are gambling or investing your savings.

There are many variables affecting the price path of assets over time and many ways to increase the chance of us predicting correctly.

Make sure you understand the odds and all the ways to stack them in your favor and thus avoid gambling in the markets.

Now what games will you be playing this weekend?

Have a good one,

Chris

P.S.: I wouldn’t define poker as investing because we cannot play poker and win more money than we put in while sleeping. Poker is poker.

Originally posted 27th October 2023 on ElliottSays.com

Thank you for reading! :)

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