In 2018, Annie Duke, a professional poker player, published her bestselling book “Thinking in Bets”, as a guide to decision making amidst uncertainty from her experiences of playing poker. She and her book became popular among investors and business-people alike, both of whom face the task of making decisions amidst inherent uncertainty about the future. She went on to earn her PhD in cognitive psychology. Turns out much like poker, investing and business, life in general is full of uncertainties and her lessons are as much applicable. In this article, Robin Guo takes that further by contrasting it with chess, a game some of us might have mistaken to be analogous to life.
“… in chess, the “correct” move is correct regardless of outcome. In poker you can play perfectly and still lose, or play like an absolute donkey and stack everyone at the table.
…For finance jobs like VC, poker is directly applicable. You’re literally betting on incomplete information. But the real value comes from applying poker thinking to life itself. Chess assumes a controlled environment: perfect information, one opponent, predictable outcomes. Life is much messier. Life is multiple players with hidden cards, changing rules, and luck that can absolutely demolish skill in any given hand. Once you start seeing life through the poker lens, you realize most people are playing chess in a poker world. No wonder they’re frustrated when the “right” moves don’t pay off.”
It is this aspect of uncertainties in life which he likens poker to and lays out a few lessons. We feature a couple of them here but it is worth reading the piece in its entirety. First, focus on process over outcomes: “This is the most important lesson from poker: thinking in terms of probabilities rather than outcomes. Many systems are stochastic, not deterministic. You can do everything right and still get crushed by variance.
This is the shit happens law. Even with pocket Aces, you’ll lose 15% of the time against random cards. But once I internalized this, I stopped torturing myself over “failed” decisions that were actually correct. This was the biggest mental shift I had to make in “real life” because up until college, you’re basically playing chess. There’s a fairly well-trodden path laid out where the route to victory is clear. Study hard, get good grades, go to a target school, land the prestigious job. Checkmate. Then what?
It also helps you make peace with the past. You stop playing results-oriented games (“I should have bought Bitcoin in 2013!”) and start playing process games (“What’s my framework for evaluating asymmetric bets?”). You stop letting bad outcomes invalidate good decisions. Focus on the process by which you made each decision. The outcome is just one sample from a distribution of possibilities.”
The need to exercise emotional control in the face of adverse outcomes:
“Some of your best decisions will come right after your worst beats. Can you maintain process-focused thinking when you’re down 50% of your bankroll? When you just got fired? When a relationship implodes? Most people can’t. They revenge-trade, rebound-date, panic-accept the next offer that comes along.
Reading Marcus Aurelius helped me develop a framework: when I feel the tilt coming, I stop playing. Not forever, just until I can evaluate decisions based on expected value rather than emotional recovery. The best players know when they’re not playing their A-game.
Counterintuitively, your worst beats often create your best opportunities. Everyone else is on tilt too. Markets overcorrect. People overreact. If you can stay rational when others are emotional, you have an enormous edge. The goal is to recognize when emotion is driving your decisions and have the discipline to step away from the table until it isn’t.”
Robin talks about some more poker concepts such as table selection, bet sizing, dealing with imperfect information, bluffing, position and timing in the context of life, investing and business before concluding:
“…once you see life as poker, not chess, you realize something. Chess has a correct answer. There’s always an objectively best move. Poker doesn’t. Poker is about playing your hand optimally given your bankroll, your position, and your read on the table.
This means there’s no universal playbook for life. The optimal strategy for you might be terrible for me. And that’s liberating. Stop playing chess, searching for the “right” move. Start playing poker. Make the best decision you can with incomplete information, size your bets appropriately, and trust the process over enough hands.
Because in the end, life rewards those who understand the game they’re actually playing.
And it’s not chess.”
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Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
