“You got to know when to hold ’em,
Know when to fold ’em.
Know when to walk away,
And know when to run.”
– Don Schlitz
To the uninitiated, Poker seems like a game of chance. You are dealt a set of cards – some good, some bad. You have to figure out how best to play them. That’s a pretty good metaphor for life.
In poker, as in life, luck comes in streaks. Sometimes you get five winning hands in a row, and other times you don’t get anything. Luck tends to balance out in the end. If poker was all about luck, then there would be no real winners. Everyone would break even. And yet there are people who consistently walk away from the poker table with a nice win or a small loss. At the end of the year, they come out way ahead of the game. It’s all about knowing the odds and following through on them.
These professional players are subject to the same turns and runs of good and bad luck as the rest of us. Sometimes they go “card dead”. Sometimes they make an absolutely mathematically correct decision, but it doesn’t work. They may lose those confrontations, but somehow manage to come out ahead time and again. The winning players have a few simple rules, and it turns out they work pretty well in the game of life too.
Don’t Run Out of Chips
A famous poker saying is, “Poker isn’t a game of cards. It’s a game of money management resolved with cards.” Pro poker players know that their chips are their life blood, so they try to risk few chips when their hand is marginal and bet more when they’re pretty sure they’re winning. And they hate to go all-in unless they know they’re going to win. Where you might see an amateur player pushing all his chips into the pot hand after hand, the professionals prefer to play smaller pots where they can increase their stacks a few chips at a time.
If you run out of chips, you’re out of the tournament. If you use up the last of your health points, you’re out of this life. Those aren’t winning strategies. Look at Russian Roulette as an example. You have a pretty good 5 out of 6 chance of winning each time you spin the chamber and pull the trigger. But the payoff is tiny compared to the cost of your 1/6 chance of knocking yourself out of the game. Poker pros try to minimize their “all or nothing” decisions.
Of course, not every all-in decision is really “life or death”. A poker player who busts out of a tournament can always enter another one. If you go for broke at work and get fired, there are other jobs out there. As long as you keep a bankroll or find a way to raise a new one, you can get back in the game.
Chris Ferguson, the 2000 World Series of Poker champion, did an experiment on his Full Tilt Poker site a couple of years ago. Starting with literally zero investment, he went up to $10,000 in 18 months. He played in freeroll tournaments until he won a few dollars, then slowly built up that stake. It took him 9 months to get up to $100, and another 9 months to reach $10,000, never risking more than 5% of his bankroll (once he got up to $100) in a single game. His point was that careful cash management trumps luck.
Raising is Better than Calling
Poker pros would much rather raise than call someone else’s raise. In fact, when Chris won that World Championship, he had one firm rule. He never called a raise before the flop. He either raised or folded.
If your opponent raises and you call, you have to show a better hand to win. If you raise, you have two ways to win. If your opponent folds, you immediately win a small pot with no further risk. If he calls, you can still show down a better hand to win. Good poker players don’t mind if they bet with a great hand and everyone folds. Those are chips they didn’t have to fight to win.
In life, passively accepting what happens to you is a form of “calling”. You may be able to live this way, but it won’t be very exciting, and you’ll miss out on most of the really big opportunities. My son and his friends used to say, “You have to go big to win big.” Try raising your stakes occasionally. Ask for a raise at work. Challenge yourself to do something you have never done before. Make the first move, and you’ll be surprised how often you get an uncontested win. Those little wins can add up to a lot of extra “life chips” to use when things don’t go your way.
Make Positive Expected Value Choices
Poker pros use the terms EV, +EV, and -EV a lot. “EV” stands for “Expected Value”, and it’s the heart of using luck to your advantage. To calculate EV, you multiply your chance of winning by the amount you expect to win with a particular action, multiply your chance of losing by the amount you’re risking, and subtract the second number from the first. If the result is positive, that’s +EV and means it’s a reasonable play. If the result is negative, it’s a -EV action. Go minus too often and you’ll find yourself out of chips.
When I worked with Chris Ferguson down in L.A., I once asked him a question about a poker situation. A player raised all-in, and I wondered whether I should call or fold with my particular hand.
To my surprise, instead of giving me a “Yes” or “No” answer, he first asked me how many chips my opponent and I had at the start of the hand. Then he went to the white board and listed all the possible results, and my expected value from each one.
My actual hand turned out to be the least important factor in the calculation. The important part was the amount of money involved in the play. Chris pointed out that you can’t really tell what cards your opponent has, but you always know the size of the pot and your chip stacks.
Every decision you make has an Expected Value. Take the time to find the choices that maximize your potential wins or minimize your potential losses. You’ll find they add up to a nicely profitable life, whether you measure your Value in dollars, friends, health, or fun.
Let’s say you are dating and trying to figure out whether to “go steady” with one person or “play the field”. Estimate how much time and money you would spend each way; those are your costs. Then estimate the benefits of each choice – A possible long-term loving relationship versus the fun and excitement of always being with someone new. Subtract the costs from the benefits and you will have an EV for each choice. Go with the one that is more “profitable” in terms of a happier life.
But make sure you re-think your choices as you get more information – Maybe you’ll meet someone really special who changes the whole equation. Or maybe your One True Love turns out to be a frog; that too calls for a new EV calculation. Poker pros re-evaluate their decisions at every round of betting.
Don’t Let the Bad Beats Get You Down
Bad poker players like to tell “bad beat” stories to anyone who will listen. A bad beat in poker is when you have a much higher chance of winning, but the dealer turns over a miracle card that lets your opponent win. Bad players think that they have been somehow “wronged” when they lose a hand they “should have won”.
In the 1982 World Series of Poker, Jack Strauss pushed all of his chips into the middle, and lost the hand. But as he got up to leave, he found he actually had one last chip under a cocktail napkin. With that single $500 chip, he stayed alive, rebuilt his stack, and eventually won the tournament. He refused to give up, and to this day, poker players say, “All you need is a chip and a chair.”
Life is full of bad beats. It’s how you react to them that shows your quality. Complaining is usually a -EV action – It just makes you less happy, drives your friends away, and rarely accomplishes anything useful. Take your good luck and bad luck in stride. Learn what you can from your successes and failures. Then apply those lessons to improve your EV the next time you have a decision to make.
Live a +EV Life
Everything that happens in life is like the turn of a card at the poker table. It might bring you fortune, or it might bring you pain. Some gambles are thrust upon you, but you still have a lot of influence on the outcomes. Winning gamblers strive to keep the pot small on their close hands, and build it up when they expect to win. You can do that too – Bet big when you have positive EV, and pull back on the stakes when the risk is high. Make sure you survive the bad beats, so that you have time to prosper from the good ones. Place your bets wisely, stay in the game, and you will minimize the impact of luck on your life.
And do you know the really nice thing about real life? You only get judged on your successes, especially the big ones. Nobody cares about the hundred small – or even not so small – failures that may have come first. When your potential loss is small, almost every situation has the potential to be +EV. When you take positive action, it’s amazing how many barriers will just fold before your expression of strength.
Life is filled with small EV decisions that can add up to big wins or losses. You can hide from them and not accomplish much, or you can make the little investments of time or money that have a chance for big payoffs. That’s your best chance to really have an impact on the world around you. It’s also a lot more exciting than giving up.
Open yourself to the chances life offers, and live a positive expectation life. Play like the pros and make the odds work for you.