What a Professional Poker Player is teaching business about risk
5 December 2011
As a young man I never took drugs, bungee-jumped or even placed a bet. Activities associated with risk just never appealed to me. Then, aged 26, - quite out of the blue - I quit my job as a reasonably successful writer for film and television to become a professional poker player.
This was long before poker became the multi-billion dollar industry that it is today. In 1999 poker was the preserve of a few eccentrics and iconoclasts who had either never known any other "career" or who had dropped out of one because it wasn't offering them the thrills they dreamed of as a child. I guess I fell into the latter category.
With hindsight, it was the best career move I ever made. I learnt more from three years in Las Vegas than any other single formative experience. Playing poker for 10 hours a day 6 days a week for three years certainly taught me a thing or two about risk and just how little most people understand it.
In business there is a misconception that risk is something to be minimised. Or that a manager should be more like an entrepreneur but without a license to take risks - some of which will end up in failure. The crucial question is: are your managers gambling? Or are they taking a series of calculated risks with a long-term positive expectation and do they know how to tell the difference?
Most people assume that - as a professional poker player - I was a gambler but that people with regular jobs are not. Now lets just calibrate our terms here: I accept that playing roulette is gambling because in the long run the player will make a loss at that game as "the house always wins." This is because a casino offers a betting proposition in roulette that ensures that the casino always has an edge in exactly the same way as Direct Line has an edge when it sells you car insurance.
The fact that Direct Line's long-term profits are effectively guaranteed despite not being able to predict whether any individual policy will make a profit or a loss. This mirrors the strategy of a poker player who is looking for exactly the same edge every time a decision is made to play a hand or not - without knowing for sure whether or not that particular hand will win or lose. There is no "gambling" involved I assure you.
The fact is that "gambling" is the act of placing a bet where you have the worst of it. In the long term, if you "gamble" you will lose money. Playing poker professionally is not about gambling but taking a series of "calculated risks" with the aim of making a healthy long-term profit at the end of the day. Playing against other players not the house makes this outcome possible. Isn't that the aim in business too? What poker players call "bets" business people call "investments" but the uncertainty is still there. We live in an increasingly uncertain business world where it is impossible to guarantee the outcome of anything.
In my seminars I demonstrate how to bet on the roll of a die and make money - even though you lose five times out of six - and explain why professional sports bettors aren't looking for the horse most likely to win. The implications of that will change the way you view risk forever.
Operating a business in the knowledge that you will be profitable in the long run, even though some of your investments will fail, is something that the best companies in the world have known for many years: companies like 3M, HP and Intel have created cultures that encourage risk taking and accept failure as a necessary part of their calculations. They don't sweat any more than a casino manager sweats when someone wins a lot bets on roulette in one evening: they know that the house will bust them in the end.
After three years in Vegas I came home to England and effectively became an entrepreneur. I know that I could not possibly have done this without the knowledge and skills that poker gave me and it is a pleasure for me to pass that on to other people now.
