Poker Face


Yes, this has to do with investing.  Just bear with me.

Phil Ivey moved out of his house at age 19, took a job as a telemarketer and drove to Atlantic City every weekend to play poker.  He would play eighteen hours a day and sleep under the boardwalk when he went broke. He aspired to be a professional poker player and has achieved his dream and much more.  He first won the World Series of Poker at age 23.  He is the youngest player to attain nine World Series of Poker bracelets and has a total of ten.  He has won tens of millions of dollars (he once won $16 million in three days). Phil is widely regarded as the best poker player on the planet.

I decided to study him in order to see if there was anything about his approach to poker that could improve my investment process.  I was particularly interested in three aspects of how he approached the game.  I wanted to know about his strategy, approach to risk management and his psychology.  Here is what I learned.


He says his strategy is based on probability.  He calculates his odds based upon the known possible outcomes of each hand combination.  What’s interesting is that he says that at the level he plays, this does not give him an advantage because all top players understand these odds.

Risk Management

Poker requires an initial investment (called an ante) in order to see your first cards.  He sees this as a cost of doing business and gladly pays this amount to see if his cards warrant additional risk of capital. He will gladly quit the game (fold) and lose this small amount in order to see if there is a potential for a larger gain.  Losing is part of his overall strategy, as long as the losses remain small (by folding early).  His goal is to win the majority of the big pots he decides to play.  His winning percentage does not determine his success, but rather the size of the pots won or lost.


As I suspected, psychology is what separates him from the top players in the world.  He has an uncanny ability to decipher his opponent’s cards by their physical signs, and what and how they say things during the game. Simply put, he can read people’s reactions and is masterful at hiding his excitement or disappointment.  That is his edge, and it is huge.

Here is what I’ve learned by studying him.

– He had a dream that was his primary focus.

– He put in thousands of hours into mastering poker and himself.

– He is fearless and aggressive when he perceives an advantage.

– He wins through skill over time, not luck on any given hand.

– He capitalizes on his opponent’s psychological weaknesses.

– He is not afraid to lose and embraces small losses.

– He is a master of personal psychology (both his and others).

Let’s apply these lessons to being an investor.

– Be committed to being a lifelong investor and do not waver.

– Put in the necessary time to understand markets.

– Be fearless in executing your strategy according to your plan.

– Investing is a probability-based venture that works over time.

– Poor investment behavior by the masses creates opportunity.

– Taking small losses is part of the game of being an investor.

– Execute your strategy flawlessly without emotion.

I apply these lessons as a way to gain an edge on the very sophisticated Wall Street competition.  Uncommon wisdom from strange places has been very profitable for me in the past, and I see these lessons as just another way to increase my chances of success.



The Parable of the Mexican Fisherman and the Investment Banker


Money is a necessary part of life in the modern world.  We trade our ideas, time and labor in exchange for money in the hopes of building a fulfilling life today and to build financial security for the future.  We must remember, however, that money is the means to an end, not the end itself. Many people have lost sight of this and pursue money as an idol and lose sight of its true purpose.

The parable below is a great reminder of this lesson.

An American investment banker was taking a much-needed vacation in a small coastal Mexican village when a small boat with just one fisherman docked. The boat had several large, fresh fish in it.

The investment banker was impressed by the quality of the fish and asked the Mexican how long it took to catch them. The Mexican replied, “Only a little while.” The banker then asked why he didn’t stay out longer and catch more fish?

The Mexican fisherman replied he had enough to support his family’s immediate needs.

The American then asked “But what do you do with the rest of your time?”

The Mexican fisherman replied, “I sleep late, fish a little, play with my children, take siesta with my wife, stroll into the village each evening where I sip wine and play guitar with my amigos: I have a full and busy life, senor.”

The investment banker scoffed, “I am an Ivy League MBA, and I could help you. You could spend more time fishing and with the proceeds buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats until eventually you would have a whole fleet of fishing boats. Instead of selling your catch to the middleman you could sell directly to the processor, eventually opening your own cannery. You could control the product, processing and distribution.”

Then he added, “Of course, you would need to leave this small coastal fishing village and move to Mexico City where you would run your growing enterprise.”

The Mexican fisherman asked, “But senor, how long will this all take?”

To which the American replied, “15-20 years.”

“But what then?” asked the Mexican.

The American laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich. You could make millions.”

“Millions, senor? Then what?”

To which the investment banker replied, “Then you would retire. You could move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”

The fisherman, still smiling, looked up and said, “Isn’t that what I’m doing right now?”

– Author Unknown