In Tony Hsieh’s Delivering Happiness, he discusses life after being bought out of LinkExchange for $265 million, of which his share was around $20 million.  While searching for what he was going to do next, he became intensely focused on poker.  As he got better, he realized how much poker resembled business.

Evaluating market opportunities: table selection is the most important decision you can make.  It’s okay to switch tables if you discover it’s too hard to win at your table.  If there are too many competitors, some irrational or inexperienced, even if you’re the best, it’s a lot harder to win.

Marketing and branding: act weak when strong, act strong when weak.  Know when to bluff.  Your brand is important.  Help shape the stories that people are telling about you.

Financials: Always be prepared for the worst possible scenarios.  the guy who wins the most hands is not the guy who makes the most money in the long run.  The guy who never loses a hand is not the guy who makes the most money in the long run.  Go for positive expected value, not what’s least risky.  Make sure your bnakroll is large enough for the game you’re playing and the risks your taking.  Play only with what you can afford to lose.  Remember, it’s a long term game: you will win or lose individual hands or sessions, but it’s what happens in the long term that matters.

Strategy: Don’t play games you don’t understand, even if you see lots of other people making money from them.  Figure out the game when the stakes aren’t high.  Don’t Cheat.  Cheaters never win in the long run.  Stick to your principles.  You need to adjust your style of play throughout the night as the dynamics of the game change.  Be flexible, be patient, and think long-term.  The players with the most stamina and focus usually win.  Differentiate yourself: do the opposite of what the rest of the table is doing.  Hope is not a good plan.  Don’t let yourself go on tilt.  It’s much more cost effective to take a break, walk around, or leave the game for the night.

Continual learning: Educate yourself.  Read books and learn from others who have done it before.  Learn by doing: theory is nice, but nothing replaces actual experience.  Learn by surrounding yourself with talented players.  Just because you win a hand doesn’t mean you’re good and you don’t have any more learning to do.  You might have just gotten lucky.  Don’t be afraid to ask for advice.

Culture: You’ve gotta love the game.  To become really good, you’ve got to live it and sleep it.  Don’t be cocky.  Don’t be flashy.  There’s always someone better than you.  Be nice and make friends; it’s a small community.  Share what you’ve learned with others.  Look for opportunities beyond just the game you sat down to play.  You never know who you’re going to meet, including new friends for life or new business contacts.  Have fun.  The game is a lot more enjoyable when you’re trying to do more than just make money.

Aside from remembering to focus on what’s best for the long term, I think the biggest business lesson I learned from poker concerned the most important decision you can make in the game.  Although it seems obvious in retrospect, it took me six months before I finally figured it out.  Through reading poker books and practicing while playing, I spent a lot of time learning about hte best strategy to play once I was sitting down at a table.  My big “A-ha!” moment came when I finally learned that the game started even before I sat down in a seat.  In a poker room at a casino, there are usually many different choices of tables.  Each table has different stakes, different players and different dynamics as the players come and go, and as players get excited, upset, or tired.  I learned that the most important decision I could make was which table to sit at.  This included knowing when to change tables.  I learned from a book that an experienced player can make ten times as much money sitting at a table with nine mediocre players who are tired and have a lot of chips compared with sitting at a table with nine really good players who are focused nad don’t have that many chips in front of them.

In business, one of the most important decisions for an entrepreneur or a CEO to make is what business to be in.  It doesn’t matter how flawlessly a business is executed if its the wrong business or if it’s in too small a market.  Imagine if you were the most efficient manufacturer of seven-fingered gloves.  You offer the best selection, the best service, the best prices for seven-fingered gloves.  But if there isn’t a big enough market for what you sell, you won’t get very far.  Or, if you decide to start a business that competes directly against really experienced competitors such as Wal-Mart, by playing the same game they play, for example, trying to sell the same goods at a lower price, then chances are, you will go out of business.

In a poker room, I could only choose which table I wanted to sit at, but in business I realized that I didn’t have to sit at an existing table.  I could define my own, or make the one I was already at even bigger, or, just like in a poker room, I could always choose to change tables.  I realized that, whatever the vision was for any business, there was always a bigger vision that could make the table bigger.  When Southwest Airlines first started, they didn’t see their target market as limited to just existing airline travelers, which was what all the other airlines did.  Instead, they imagined their service as something that could potentially serve all the people who traveled by Greyhound bus or by train, and they designed their business around that.  They offered short flights at cheap prices, instead of going with the more prevalent hub-and-spoke model that other airlines were using.  They made it easy for customers to change their flights, without paying huge penalties.  And, they turned their planes around at airports as fast as possible.  They succeeded because they decided to play at a different table than all the other airlines were playing at.

[transcribed from the audiobook of Delivering Happiness]

This is great insight.  Hsieh doesn’t hit on the ways poker is different from business though.  To make a living, or get rich, at poker, you’ve got to be right over and over and over.  Even being right more often than not isn’t enough: you’ve got to make the right play often enough to make up for the big misses.  In business, as Mark Cuban has famously said, you only need to be right once.

Overall, I really enjoyed Delivering Happiness.  Tony Hsieh reads it himself, and delivers a few other useful insights like this one.  I would recommend reading it.