Financial Clarity for Entrepreneurs

Question Failure

In a previous post I linked to an article by Dan and Chip Heath that cautioned against assuming you’ve made correct decisions just because they resulted in success. Now I’ll encourage you not to assume you’ve made bad decisions just because they don’t result in success. Here’s a little story I’ll call “As in Poker. As in life.”

During one of my infrequent trips to Atlantic City to play poker I was playing a little small stakes No-Limit Holdem. This was a game with $2 and $5 blinds and a $500 maximum buy-in. Earlier in the game I had doubled up through another player and was on top of my game – reading players accurately and playing the odds correctly.

About half an hour before the hand in question a new player joined the game. I could tell he was a competent, but straight-forward, player and I’d have to watch out for him. I was in the big blind and was dealt pocket Aces – the best possible hand pre-flop.

My opponent was in early position and raised to $30 – an unusually large raise of a $5 big blind. I knew what he had. It had to be a good pocket pair – possibly Jacks, but most likely Queens or Kings and I was quickly running all the possibilities through my head of how to make the most of this situation. Another player, a not very good one, called the raise and there was now $67 dollars in the pot. Since I would be first to act after the flop (a disadvantageous position) I really wanted to get all-in with one of these guys right now.

I quickly decided that if I went all in, the good opponent would think I was trying to steal the pot and would likely call me. This is exactly what I wanted as pocket Aces against another pocket pair would be a 4-1/2 to 1 favorite. Sure enough, he called, the other guy folded and we showed our cards – my Aces to his Queens. What made it sweeter was that the other guy said he folded a Queen.

That meant that the only decent chance my opponent had to beat me was to catch the last remaining Queen in the deck. Instead of being a 4-1/2 to 1 favorite I was actually a 9 to 1 favorite. In the 10 seconds or so before the flop I was counting my winnings and dreaming of the big juicy steak and fine bottle of wine I’d be treating myself. But wouldn’t you know it…

BAM! The last Queen came on the flop. And instead of a big win and a juicy steak I was back to even for the session – it was snack bar food for dinner that evening. Poker players call this a Bad Beat Story and we all have a thousand of them.

So, here’s the question. Did I do the right thing? I knew my opponent, knew the odds and manipulated my opponent into doing what I wanted him to do. And still lost the hand. Of course I made the right decision. After all, if we were to play the same hand the same way a 1,000 times I’d expect to win 900. I’ll take those odds anytime.

What’s the lesson? Sometimes you do all the right things and still have a bad result. This is the flip side to what Chip and Dan said about doing the wrong things and getting a good result. The trick is to concentrate on making good decisions with good data and sound logic – and not worry so much about one result.

However, if you think you’re making good decisions but keep getting bad results time after time you need to check your assumptions. Somewhere in the decision-making process you’re getting off track.

There’s another lesson here as well. Just as I wasn’t sitting in a poker game with all of my money on the table, you should avoid betting the farm on any single decision. After all, you can’t predict when the favorable odds still don’t come through for you.

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