Poker & Investing.

Lessons from Phil Ivey

Poker and investing are a lot alike.

I’ve never been that great of a poker player, but I enjoy playing because of the mental aspect of it all.

Plus, I don’t like to gamble unless there’s some asymmetric game/situation and sometimes, pending the hand, poker provides that.

Most of poker is bluffing - at least how I see it.

Now if you asked my younger brother (also a finance guy) this he might disagree, he spent a few years exclusively playing and is really good. He can tell you the percentage odds, knows how to bet accordingly and just dedicated hours upon hours to learning.

The past 3/4 months I’ve been playing weekly back in Phoenix with a group that goes to my cigar lounge. Most are regular players paying 2-3 times a week and I can tell as I’ve played with them who the gamblers are, the bullshitters and who know what they’re doing. That part of the game to me is interesting: reading others and putting scenarios together is fun.

I don’t know the percentage of winning hands or how to bet accordingly (at a basic level sure) but I know how I play and how that relates to my personality.

Sure bets are the way for me. Trips, potential flushes, full house - those plays I prefer and usually wait to play.

It’s interesting because when you get an A/K or A/Q hand, in my experience, it rarely pans out. You might nail the AA but there is always some other better hand lurking.

Sometimes I feel like that can happen in investing as well - say everyone look at Apple or Amazon as “the sure bet” but sometimes here are better ideas.

So, when I have a hand that I know cannot be beat, or rather has low odds of being beat, I’ll bet it big and try to extract as much out of it as I can.

This is the same for investing. Whenever there is an A+ setup or scenario where the odds are in my favor, I size the position appropriately.

I’m a fan of Phil Ivey - the guys poker skills and reads are sick.

On the way to Puerto Rico a few weeks back I watched his Masterclass.

It was everything I expected and there were a lot takeaways from it to help me think about my investing better but here are two that I actually took scratch-pad notes on.

Extract the most out of your hands when you have it.

Double check your hand so you read it right.

The first I agree with as stated above. Poker is a grind and investing at times can be slow and a grind. So, when situations present themselves, I want to extract the most out of them.

What I’ve noticed in both poker and investing is that there are 1-2 big hands/ideas that really build your chips/bankroll. The rest from there becomes small wins/losses until the next big hand/idea comes along.

So, when I say I’m not a ‘bluffer’ like others I’ve played against I mean it. Same with investing - it’s rare for me to throw money at an idea “just to see” if there is no edge.

And I notice that it translates into my investing as well because there are situations where the framework just comes together perfectly, and you can swing at it.

Sure, they might be rare, but those situations are where the bankroll is built.

And yea, just like poker sometimes I bluff/speculate to see a hand playout. There are times where I speculative positions, but the risk is nominal.

Sometimes you just “have to see the turn” and paying that fee is worth it, if small.

Double checking your hand so you read it right.

He was explaining in his Masterclass (and showed the game film of it) where he had won this hand. It came to the river-card, the other guy showed, Phil looks, and mucks/folds his hand - he actually had THE WINNING hand but he mentally thought he had something else.

That instantly made me think of investing. There have been times where something seems so obvious in a situation that I’ll go back and check it 5x’s - just to see if I missed it or if I need to see it differently.

There are times where I’ve been a complete bozo and NOT done this.

In 2014 I was a PM at this L/S fund and it was a bit of a slow year, so I had an index futures book so as to generate P&L for the fund. Well, at that time I had also had a huge, short thesis on Neflix and took a sizeable, short - about $2mm notional.

That week ES futures we’re moving, and I was so occupied with that when I was checking the book for other positions glanced at my NFLX short - it was up sizeable, so I cut bait on 75% or so of it. But completely forgetting earnings were after the close.

That above is what happened to the stock: one of their biggest misses ever.

I left near $1.7mm-$2.1mm on the table.

So when he talked about leaving ( I think it was close to an $500K+ hand) on the table I related instantly.

Always check your work and then check it again, and again.

Not only did the partner at the firm tear into me on that one but so did the size (lack of) bonus at the end of the year.

Conclusion

So, yea, there are a lot of similarities between both and if you get a chance sign up to watch his Masterclass (Its’ $15/mo) or something, in fact, if I could pay to sit and listen to him for a few hours I would. (if any of you can hook that up, ping me!)

Thanks for reading.

Dan

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