Poker, business, and the optimal decision

When you reach a certain level of any topic, you realize how deep the rabbit hole goes. That's why the term professional, when used the right way, is so prestigious. When it comes to poker, the same is true. It's a deep game and most variants of pokers haven't achieved GTO (game theory optimal).

Sure, there's a generally agreed upon way to play most games of poker. Most often, aggression is the key to victory. But, most people think it's all about the numbers or the cards you're dealt; however, it couldn't be further from the truth.

Variables you must consider:

  • The number of chips you have (money in the bank)
  • The number of people still in the hand (people still in the game)
  • The person on your left
  • Your opponent's aggression
  • Your opponent's lack of aggression (most incumbents)
  • The number of chips in the pot
  • The number of chips on the table (the size of the market)
  • The person on your right
  • Your opponent's range of cards (their people)
  • Your cards (your people)
  • The list goes on and on...

You use all of these variables to make a decision. You should always ask yourself: What's the optimal decision? If you don't make the optimal decision, you might get lucky and still win. However, you're definitely more likely to lose.

If you do make the optimal decision, you're slightly more likely to win - but you could still lose. That's the catch.

Just like poker, business follows along. You can make all the right decisions, and you can still get unlucky. On the other hand, you can make a bad decision with luck on your side.

The best we can do is make optimal decisions. The optimal decision is the one which gives us the greatest chance to win.

And like business, poker is a long-term game. Over the short-term, any victory or loss is almost certainly due to a high amount of luck (variance). However, when you stretch your decisions over many years, the person making the most optimal decisions reduces the amount of luck effecting his results.

An example of this in business is the moat. Over many years, a company makes optimal decisions, creating many different mechanisms by which they keep their competitive advantage. Compare this to the company just starting out with one product. They need some luck to stay alive.

Even though we can try, it's impossible to always find the optimal decision. Your opponent may be great at altering his play to trick you into a less than optimal decision.

Sometimes the optimal decision is to just go with it. The same is true for business. Sometimes you just don't know what to do. That's ok. Make the decision and be ok with it. The important part is to reflect and study that decision. Knowing what you know after the fact, was it the optimal decision? If yes, you were lucky. If no, figure out why. Armed with that knowledge, you should be able to move toward more optimal decisions in the future.