You've got to know when to hold 'em, know when to fold 'em,
Know when to walk away, know when to run
You never count your money when you're sittin' at the table,
There'll be time enough for countin' when the dealin's done.
— The Gambler, Don Schlitz (made popular by Kenny Rogers)
Google “poker and business” and you will see hundreds of articles. The reasons are abundant; calculated risk-taking, cash flow management, riding the wave of luck — the list goes on and on. But few business articles are talking about the less glamorous aspect of poker: folding.
Just in case you aren’t familiar with the game of poker, here is a brief overview of the most popular variation, Texas Hold’em:
Successful poker players are able to calculate their hand strength against every possible hand, while at the same time understanding the changing table dynamics, as well as the nuanced betting tells of a bluffing opponent… and folding.
Interestingly, folding is the only thing you can do in the game that doesn’t cost you money. In poker — and in business — your success has much more to do about the hands you don’t play than the one(s) you do.
Beginner players will want to play every hand, even if they are essentially pocket turds as a starting hand; they fail to realize their hands lack a viable pathway to beating other hands. Therefore, the first way to improve as a player is to realize your standing relative key best practices and standards.
To layer this into the business analogy: you must understand your costs, margins, cash demands, and profits. At the beginner stage, businesses often chase unlikely opportunities and invest resources into ventures that don’t pencil into profit. While there are only a few strong starting hands, a novice thinks that every hand is a winner, and fails to fold when they should.
Expert players, on the other hand, fold a lot — 80% of starting hands are folded at the highest levels of the game. The development of this kind of judgment usually takes learning from mistakes, but it also requires the awareness of a few traps: opportunity cost and sunk cost fallacy.
As Warren Buffett says, “The difference between successful people and really successful people is that really successful people say no to almost everything.”
In your business, do you know what strategies and tactics you have said “yes” to that are eating your cash reserves with few returns? If you don’t, we might be able to help. Just think of us as your poker coach who can come alongside and show you when to fold a bad hand.