Lessons from a poker player

Tina Haapala |

Written by Gary Silverman, CFP®

Recently I attended the Investment Management Consultants Association’s (IMCA) national conference. It was held in Las Vegas, so they brought in Annie Duke as one of the keynote speakers. I’ve been a fan of Annie’s for many years. For those of you who don’t know her, she is one of the best poker players, and especially one of the top couple female poker players of all time—hence fitting for Vegas.

Little known to most, prior to her poker career she was awarded a National Science Foundation Fellowship to study Cognitive Psychology at the University of Pennsylvania. She graduated in the first co-ed class at Columbia University with a double major in English and Psychology. Little known to most, I also graduated with a Psychology degree, but the National Science Foundation never heard of me and you never heard of my college.

Annie has had to stare down opponents in poker games with thousands of dollars on the line, and she did this for 20 years. For the last 20 years or so, I have given advice to clients that could affect thousands of their dollars. Over time, Annie and I have both learned a thing or two.

One thing she learned in school and witnessed in poker rooms around the world: humans often think wrong. For instance, if a human does something and good comes from it, they think it was because of their effort or smarts. If a bad outcome occurs (a “bad beat” in poker lingo), then they think it was due to bad luck or uncontrollable circumstances stacked against them.

Now, that might be true. The good outcome might be due to hard work and studied smarts; the bad outcome might just be luck. But humans tend to think both regardless of the facts. Facts just spoil self-esteem, so we might as well ignore them, right?

An interesting thing happens when we look at our peers, however. With them, if good comes their way we tend to attribute that to luck. If something goes wrong, we figure they were just being stupid. So much for giving others the benefit of the doubt.

In investing, I see the same thing happen. If someone’s stock or fund does well over time (even if that time is only a day or two) it is because of their excellent investing skills. If the investment crashes, then it is because of the stupid manager, bad luck, a black swan economic event, or government malfeasance.

Why is any of this a problem? Why can’t I just leave y’all alone in your self-delusional heaven? Because by doing this you are missing out on the kind of learning that will make you better than what you are now. There’s a saying that good decision-making ability comes from experience, and experience comes from bad decisions-making.

If every time things go bad you attribute it to bad luck, then you won’t see the learning opportunity.  Instead, see how you can use knowledge to turn that “luck” around, and create a better outcome for yourself the next time around.

This article was published under the title "Lessons from a poker player" in the Wichita Falls Times Record News on June 28, 2015.