Building Wealth By Design

Investment Wisdom From the World’s Best Poker Player

Investment wisdom can come from the strangest of places, including poker. I have proven over and over at my neighborhood men’s poker club that I am the guy you want to play against to supplement your income. Therefore, we will turn our attention to the person many have claimed is the best poker player in the world.

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. Ivey took the game seriously and kept a journal on players, hands, and situations to fine-tune his game. 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 won the World Series of Poker at the young age of 23 and has since won nine more world titles along with tens of millions of dollars in live tournaments. Today, he has a net worth of over one hundred million dollars.

I have spent time learning what makes Ivey so successful in a game that involves many of the elements of successful investing – strategy, risk management, and psychology. It is reasonable to assume that the best poker player employs the best strategy to separate him from the pack. But that is not his secret. He says that he plays much like his competitors by calculating the probabilities based on the cards on the table. This is not his edge because all of the players at his level know the odds of different hand combinations.

Risk management is important to him as he will gladly lose lots of small hands (by folding early) as long as he wins most of the big pots he decides to play. The size of the pots won or lost determines his success, not his winning percentage. But once again, this approach is not unique to Ivey. Even I throw away my cards early when they are not good. So what is it that separates him from the multitude of players that he regularly beats at this game of chance?

Poker is a unique game in that the winning hand is not always the best hand played at the table. Psychology plays a critical role in determining the winner. Ivey has an uncanny ability to decipher his opponent’s cards by their physical signs, and what and how they say things during the game. He also sees their intentions by how they bet and their demeanor from previous hands. Simply put, he can read people’s reactions and hide his excitement or disappointment.  That is his edge, and it is huge.

Here is a list of the attributes that make him the best poker player in the world.

  • He is a student of the game.
  • He wins through skill over time, not luck on any given hand.
  • He is very aggressive when he perceives he has the advantage.
  • He is a master of both his psychology and those of his opponents.
  • He is not afraid to lose.

There are many lessons an investor can learn from studying Ivey’s approach to the game of poker. My takeaways from this time studying Ivey are below.

  • Investing is a complex endeavor that requires putting in the time to understand all of its facets.
  • The fundamentals (economy, company) mean much less than understanding the psychology of the other investors and traders that collectively create the “market.”
  • Be bold and invest a larger amount when an edge is identified.
  • Keep losses small and let your winning positions grow.
  • Understand why most investors lose money and develop strategies to exploit these psychological weaknesses.
  • Master your own emotions to reduce mistakes in executing your investment plan.

Uncommon lessons from strange places can prove valuable to an investor. Thank you to Phil Ivey for helping us all become better investors.