6 Clever Investing & Life Lessons Via Playing Poker

6 Clever Investing & Life Lessons Via Playing Poker

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Disclaimer: Poker is something that you shouldn’t play unless you’re willing to lose money over the short term. Over the long-term, if you’re skilled and sitting at a table with players worse than you, perhaps you’ll come out ahead.

Poker is a lot like real life, only you need to learn poker lessons much quicker or else you’ll runt out of cash in a flash!

Last week I sat down to play in my first poker game with friends (second ever!). A $40 buy-in wasn’t terrible — I had written that all down to $0.

1). Luck = Hard Work + Skill

There were 10 players throughout the night. The only two people who made money were the players who played poker way more regularly than the rest of us. 8 other people lost money that night in about 6 hours of poker.

One played frequently in a casino in his home country and the other would visit Atlantic City (AC) on some weekends. So often that he apparently gets free rooms. I didn’t find that out until near the end of the game, and then laughed at how it all made sense as to who was winning.

People say gambling is luck, and poker is considered to be gambling. So, it should’ve been luck that decided who won that night right?

Hah, it was all skill that night.

At the end of the game, I asked the 2 best players which was easier — playing with friends or at the casino, they both responded immediately — “Friends.” They were both extremely kind people though.

But it made sense. Sharks roam the casino for newbies who go there to have fun and rake that money in.

Life lesson: The harder you work and the more skill you build up, the “luckier” you’ll get. Hard work + skill get you the win. Hard work is how I got to go to college for free.

Investing Lesson: The sharks are the financial advisors who charge you huge expense fees when you could be managing your own 3-fund portfolio. If that sounds too overwhelming, you can even put your money in robo-advisors for .25%.

2). Unlikely Things Happen A Lot – Black Swans?

The only hand I could’ve won big on ended up with an incredibly unlikely scenario.

I started out with a Queen and a Eight. It was my big blind so I stayed in the game, meaning I had to put down money and couldn’t just fold without putting in any money. Everyone else folded except for one other player. 3 cards were turned over and they were a two Queens and a Seven. I raised with a few more bucks.

The dealer turned over the next card. It was a seven. A full house?! I mean really, what are the odds the other player has a Queen as well? I went all in. The person who was coaching the other player made a comment,”Well, you should go all in and just split the pot. She can’t really have a better hand unless she has two Sevens. She raised on the first three cards so she probably has a Queen.”

Seriously?! What are the odds we’d have the exact same hand? Both full house?

I hoped she wouldn’t go all in, but she was a friend so I was kinda torn. She called, and we then split the pot since we both had a full house.

I did some quick math so it could be wrong, but it seems the odds are 1 in ~35,000 that this scenario happened.

Investing Lesson: Unlikely things happen way more often than the numbers say. That’s why you need to diversify when you invest. When you play the same game over and over, the expected value of the outcome becomes positive even with losses in the short term. There are just too many factors to count on when betting on a stock: management, competition, tech, etc. You just can’t understand them all with the amount of time you have. Better diversify and spend your time doing other things you enjoy.

3). Learn Expected Value and Probability

You need to understand the concept of expected value and probability if you want to play poker. I’d say the same for life in general.

Poker is a game of probabilities, and when I sat down to play I didn’t even remember which hand was better. I’d only played once the year before and didn’t quite remember the rules.

You should know the odds of someone having a better hand, which change with how many people are sitting at the table. The more people at the table, the more likely someone else is going to win the pot.

In real life, you should know the odds of winning that promotion over your co-worker. If it’s high, you should spend more hours on increasing your chances for that period. If it’s low, you should spend a little more time on side hustles this year to make money because promotions usually only happen once a year. If you’re trying to become FIRE, chances are you won’t have enough years left on your corporate ladder climbing to reach the highest salaries anyway.

Related: 150+ Genius Side Hustles and Ways To Make Money

If you know the odds are high you’ll get takeout if you’re tired after dinner, you should plan in advance and meal prep on the weekend so you spend way less on just food.

The higher the probability you will spend money due to certain events, the higher the expected value is in savings.

Life Lesson: Be more productive by figuring out the expected value of certain events in your life. Coffee at home or at Starbucks? Alcohol at the bar or brews from the grocery store? What is the expected value of those little purchases you make all the time?

Investing Lesson: Expected value shows you the best choice to make. Apply that to your time. Always use your time in a way that can make you the most money. When you’re building up a nest egg, you should spend time figuring out how to make more money, save it, and then just invest passively. Once you have that nest egg, you should spend more time researching tax mitigation and investment strategies so you can increase your after-tax rate of return.

Start by getting a 1.75% risk-free return, then move your way up to long-term index funds, then figure out how to maximize your after-tax return.

Keep calm and carry on... meditating.
Keep calm and carry on… meditating.

4). Control Your Emotions & Learn How to Act

Decide what your stop-out is — how much money or time are you willing to lose to something? When do you get out? Think of this like a sunk cost.

If you made a bad decision, cut your losses. On the emotional side, I definitely didn’t feel the desperation to win more as I lost some money. I decided my stop-out before I played. $40. My rule is: buy-in once and that’s it.

We also need to talk about emotions within the game of poker. You never want to reveal too much information to your opponent. Never let your face tell what you’re thinking.

In poker, it’s important to know how to bluff. Take an improv class and get your emotions and actions in check.

In the office, talking about a promotion with your boss? If he throws out a number but you look excited, he’s not going to negotiate much further. Instead, act slightly disappointed. Make him go higher.

Life Lesson: Know how to keep your emotions in check and to yourself. Also know how to put on an act when needed.

Investing Lesson: Don’t let the market control you emotions and whether you are buying or selling. Be a long-term investor and retire incredibly early instead.

5). Learn To Read People & Charm Them

All the math in the world won’t help you if you can’t read people.

Are they lying or telling the truth? What are their tells?

There’s a reason you don’t show your cards when you fold, so you can’t figure out what other people’s tells are.

You have to read people. I’m not suggesting you try and figure out when they’re lying by seeing if they’re scratching their nose or tapping their foot, I’m suggesting a much easier way. Figure out if they’re not all talk. Look at their actions.

Life Lesson: Just like how you bluff in poker, sometimes in real life you need to tell people what they want to hear and be quiet on what you actually want to say. If you’re gunning for a promotion, perhaps feed an idea to your boss. Add value.

A good book to read on this topic is Dale Carnegie’s How To Win Friends & Influence People.

You should also know your own personality traits and emotions.

Investing Lesson: Know yourself psychologically. Are you the kind of person who gets freaked out easily? Stop watching the market and just be a long-term investor in index funds. Do you get bored easily and feel antsy when you’re not taking on risk? Carve out a small portion of your portfolio where you can invest in riskier assets so you won’t day-trade your less-risky index funds. Know yourself and create an investment plan tailored to your personality traits.

6). Find Someone To Learn From

In life, you always want to figure out who the smartest and most experienced people in the room are and ask for their advice. You’ll want to sanity check their advice too, so try and know at least a little about the topic at hand. Figure out which of people you can trust who can advise you and understand which people have your best interests at heart.

At the poker table, I sat next to FireBear and the Atlantic City guy, who we’ll call Kyle. I knew both were miles better than me, so for any round that they would fold and I was still in, I’d show my cards to them and ask for advice. Good thing they can whisper quietly.

If you’re in a workplace, you should find a mentor who can advise you on getting your next promotion and tell you a little bit about all your bosses and co-workers. Promotions and being hired into a job aren’t based on who is the smartest. There’s a base level of intelligence you need, and then it’s all about how charismatic you can be. People would rather have someone they can watch the game with and drink a beer, even if they’re not as skilled (just by a little bit).

Life/Investing Lesson:  You don’t have to know everything in investing or life. All you have to do is be educated to a basic level for that topic so you can figure out who is BS’ing and who knows what they’re talking about. It’s a good idea to follow bloggers who have already retired so I can learn from them. Here’s 30 of them — find one who you feel is similar to you! It’s also a good idea to find a bunch of trustworthy mentors.


Should You Play Poker?

Poker is a fun game that has a negative expected value for most people, but if you’re willing to learn the skills necessary, it’s a rewarding game. It’d let you focus keeping emotions in check better and have your mind be even more in tune with analyzing risk. It’d give me a good excuse to continue meditating + keep my mind sharp.

So, How Did It Turn Out?

So, how did I turn out at the end of the night? I lost $15 out of the $40 I put in. Technically I only lost $4.75, but due to the fact that everyone put in $20 denominations we put money in excess of multiples of $20’s into the pot and drew a high card.

Have you guys ever played poker or any other probability-based games? What did you learn?

Author: Olivia

Olivia worked in finance and wants you to learn the secrets of financial independence. She believes there are so many ways to monetize your life and make money doing the things you're already doing because so many companies offer free money.

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20 thoughts on “6 Clever Investing & Life Lessons Via Playing Poker

  1. I love poker. There’s enough chance to make the game interesting, and enough skill potential to swing the odds in your favor!

    Most people like playing no limit in Vegas, but for me I like smaller games like 2-6 at old-school casinos like Excaliber! It’s relatively easy to cash in $100 and play for hours on in playing tight. Then when someone comes in playing a bit tipsy or without care, it’s easy to get more aggressive and steal some pots. 😉

    1. You must be really good then! I’m not sure I could make that much last that long lol.

      Would love to see a post by you rating the Vegas casinos and some good tips!

  2. This is great Olivia, especially from somebody new to the game. I’ve had a poker/FI post in mind for a while and have not gotten around to it yet. I started playing in college and probably learned more from it than I did in class. There are so many wonderful life lessons built into such a simple game. I disagree with your conclusion a bit. I think everybody should play on the condition that the stakes are well within their “entertainment” budget. I don’t think there’s a better way to learn about concepts like probabilities, discipline, variance, reading people, bankroll management, pushing an edge and so many more that I’m not thinking of. Thanks for sharing your story!

    1. You should still post it! I’m sure everyone takes away different things from the game and a different perspective is always great :).

      True, I guess I should phrase it more as “don’t play unless you’re willing to lose all your money” even if you don’t plan to learn anything.

      I do think it’s a great game to learn those concepts, but from being at that game, not everyone was open to learning.

  3. My friend Soapy lovesssssssssssssss Poker. That child has spent hundreds and thousands of hours playing it. I’ve played once and was OK. I’m always surprised (and yet not surprised) when someone pulls out a full house or flush. It takes more skill than meets the eye. The pros make it look easy!

  4. Hello, Olivia. Great post! I hope we would get a woman winner soon at the WSOP Main Event. We came close one year, but I think she ended up being the final table bubble.

  5. I think the last time I played poker was in school, when it was used to teach probability 😉 I tend to let my emotions show on my face, so I’m not sure if I could ever be a great poker player even with a lot of practice. Now applying it to life like you run down in this post? Yeah, I can do that 😉

    1. You seem to happy to be able to have a poker face haha! I’m sure you’re great at all the probability and everything else. Maybe wear a mask during poker? I kid.

  6. Funny how everyone thinks poker is a game of chance. It is a game of people and you play it with cards. Skill is a big factor.

    I wanted to learn to play poker so I started with an app and I kept losing the tournament on the first table. Then I read 5 books on how to play poker (got an education and raised my skill level) I was now making it to the final table almost every time and winning some of the tournaments.

    I thought I was ready for the big time so went to Vegas and played in a tournament and came home with a Championship Jacket.

    Whatever game you are playing, learn the rules and become a master. It’s not all chance. You summed it up nicely. On my last cruise I played 4 times, walked out with $275 at a $2 table game. If you don’t see the sucker, it’s you.

    Dr. Cory S. Fawcett
    Prescription for Financial Success

  7. Online poker (Texas Hold’em) was one of my college side hustles. 🙂

    You make a lot of great points. Poker, like investing, is a long game. If you put your chips in at the right time with the odds in your favor, you’ll win in the end. Even if you take a bad beat every once in a while.

  8. the 2 players who played regularly how they’ve done over a lifetime at the game. i am a horse handicapper and have a certain amount of skill at that. even the years where i’ve cashed in for thousands i was down for the year (full disclosure). i did buy a new stove and a fridge after a nice win just so i didn’t give it back to the house. as long as you’re playing with what you can afford to lose then it’s all great fun.

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