The Strategy of Poker and Business

Poker and Business

I enjoy playing poker occasionally. What do business and poker have in common?

Here are some of the lessons from poker that I think can be applied to business.

Poker is all about stacking the odds in your favour through analytical thinking, risk management, and psychology to get a read on the strength of your opponents’ hand versus your own.  As the round progresses and more cards are revealed (the flop, turn and finally the river), players aim to capitalise on the value of their own hands.  Weak hands tend to fold early on, and stronger hands make bets to increase the value of the pot in the hopes of winning more.  Players who bluff may win if everyone else folds, but get caught out at the end if they are forced to reveal their cards because other players did not fold.

The cards you are dealt are similar to your value proposition.  You aim to build and grow value so that you can capture it eventually with an optimal pricing strategy.  Your opponents are like your competitors, who are also trying to showcase the strength of their products or services, though some will be bluffing and over time lose customers and market share due to a weak proposition, being out of touch with customer needs, failing to adapt to changing market conditions, and providing a subpar customer experience. Never chase losses!

In poker, sometimes you might have a strong hand to begin with (like pocket aces), but as the round progresses, this hand may get weaker based on other cards on the board, so you are forced to fold them.  Similarly in business, sometimes you will need to pivot your business strategy, products, and sales channels to respond to external factors.  As a business owner, staying tied to a proposition that no longer has product-market fit will eventually lead to failure. 

When I play poker, it helps to know my opponents, their tells and their playing styles.  Likewise in business, know both your competitors and your customers.  Business strategy is about setting the direction in order to achieve your vision, goals, and competitive advantage, but also anticipating your competitors next move.  Like a game of chess, it’s important to think a few moves ahead.  Poker is unpredictable and so is business.  Consider the worst case scenario, and then act accordingly.

Bet sizing is of critical importance in poker, as is cashflow management in business.  When you make over-sized bets without managing your risk, it is likely that, if you lose that hand, you no longer have enough chips left to play the next hand.  You need to exercise financial discipline, even when the temptation to play the hand is overwhelming.  Similarly in business, you need sufficient cashflow to continue to fund growth.  Without a sustainable growth strategy and healthy financials, eventually you run out of cash.

Disclaimer: this article does in no way endorse playing poker as a way to succeed in business.  It is simply some of my observations of the parallels between the two.


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