Raiding the Lost Ark: Poker, Business, and Greed

Poker exemplifies the worst aspects of capitalism that have made our country so great~Walter Matthau

In theory, poker players should be the best investors in the world. They are, after all, among the most practiced at the craft. With every single hand a poker player is making an investment: an investment based on probability, game theory, the dynamic at the table, the value of the cards held, the perceived value of the opponent’s holding; the psychological disposition of the table, current expected return on the situation and potential future returns based on one’s image at the table. Every hand is a cool, calculated investment.

One made by a professional poker player thousands of times every day.

Yet, away from the table, poker players are notoriously bad investors. Pick a big-name, successful poker player – just about any – and you’ll name someone with a history of wild money making schemes and imprudent investments.

Let’s start with the godfather of poker, Doyle Brunson. He ruled poker world for decades, yet his decisions off the felt often took him to the brink – and beyond – of being broke.  

Over the decades, Doyle Brunson was – to name but a few examples – variously persuaded into investing in chewing gum that brushed your teeth while you chewed it; in finding the Titanic (he didn’t – though it was discovered many years later), and in finding Noah’s Ark. He lost big on all of these.

Though the expedition failed to find Noah’s Ark (strange that) – Doyle claims that the people he invested in brought him back a piece of the boat.

Imagine that conversation: “thanks for all that money Doyle, look, um, we didn’t find Noah’s Ark as such. But look, here’s a piece of wood that is definitely from the boat that this old book said HELD TWO OF EVERY ANIMAL ON EARTH – THERE’S ABOUT TEN MILLION SPECIES BY THE WAY, JUST AS AN ASIDE”.

“Why, thanks pardner, much obliged” (takes piece of wood).

Doyle Brunson is a smart guy – both academically and in life. He rode the white line, criss-crossing the US when poker was still illegal, and managed to stay alive and earn a good living. He has a Master’s degree.  Yet his off-the-felt investments are a catalogue ranging from the foolish to the bizarre.

Then there is Full Tilt Poker. Some of the smartest people in the game – Chris Ferguson and Howard Lederer in particular – were involved in this business (for the record, Chris Ferguson probably is one of the smartest in the game. Lederer is merely a supercilious windbag who pretends to know what he is talking about). Here was a business that was printing money – up to half a billion a year according to some estimates. All the owners had to do was play it smart, make some contingencies for the long term, and watch the money roll in. But these scumbags couldn’t help themselves. They spent the player’s money on bonuses and on the operational costs of the company. They had a lock on the second-biggest poker site in the world, and decided to strap a stick of dynamite to it and blow it to smithereens.

Beyond these high-profile examples, the penchant for train-wreck investments by poker players is a cliché. Table games in a casino, investing in other poker players, purchasing the Sydney Harbour Bridge, buying Greek bonds – you make an outrageous business offer to a poker player, and they’ll throw money at it.

Well, I have a theory about why we’re so bad at business: the very nature of poker – in particular cash games – rewards the shock and awe short term approach to investment.  

Here’s why: a professional grinder in Vegas or Melbourne or Macau might eke out a winning return for much of the year, if variation is on their side. If luck balances out, they will make their nut. But the professional also knows there will be those nights, those rare and heady nights, when a whale sits down at the table. When a cashed up amateur with a lot of gamble decides to to hit the poker table and play a big session.

There may be a handful of these opportunities the whole year. These nights, if the cards run right, will net the professional player a week, or month, or several months’ earnings.

This then feeds into the mythology of poker: the great white whales; the gamblers of legend.  The three biggest in the history of poker were arguably Jimmy Chagra, Andy Beal and Archie Karas. The tales of these three loom large in the mind of the player: Andy Beal, the banker and billionaire who lost close to 20 million dollars dollars to ‘the corporation’ (an alliance of 6 or 7 of the top professional players). Or Jimmy Chagra, a cocaine king-pin in the late 70s who knew he was going to jail, so decided to blow tens of millions in Vegas over a period of a few months, mainly in high-stakes poker game. Or the legendary Nick ‘the Greek’ Dandalos, who lost between 2 and 4 million heads-up against poker great Jonny Moss (it’s worth noting that Doyle Brunson won large amounts from both Beal and Chagra).

Whales can provide a lifetime’s winning in a single night. So poker comes with it the ingrained mythology of getting rich quickly, accompanied by those infrequent occasions where this is reinforced. It is this rare and tantalising possibility that crosses the mind of the professional every time she or he sits down.  

With the huge variation in income experienced by the professional, opportunities like this simply must be taken – the only rational thing to do when faced with the opportunity of taking down a whale is to sharpen the harpoon and heave.  

Thus, the greedy, gorging no-holds-barred take down of a mark is hard-wired into the poker brain. And this is the hard-wiring that can cause the poker player to extrapolate what happens at the table to the rest of the world. Players don’t expect a grind their investments, they expect the gold rush. They expect to find Noah’s Ark. Players – the ones that don’t have a business background – can’t adjust their thinking.  

Sure, this is not the only reason. There are a dozen other factors at play. But it helps explain why poker players can’t be trusted to run a poker site. With a poker mind looking for ways to beat variance, smashing the piggy bank and taking the funds in the here and now would seem mighty appealing.

In the immortal words of Amarillo Slim Preston, “you can shear a sheep many times, but only skin it once.”

Rational decisions matter in poker as in life. Greed is not rational. Being rational means knowing when to shear the sheep, when to skin it, and when to leave the money in the bank to earn some interest.