The Illusion of Certainty: How Partial Information Distorts Power and Invites Force

Poker and Investing: Two Games of Incomplete Information

Poker and Investing: Two Games of Incomplete Information

By Ed Reif

Poker and investing share a key similarity: both are games of incomplete information. Success in each relies on managing luck, skill, and behavioral discipline.

Luck vs. Skill: A Long-Term Perspective

On any single hand, poker is about 85% luck and 15% skill. Over thousands of hands, however, the dynamic flips—15% luck, 85% skill. Recognizing this shift is crucial for mastering the game.

The Real Challenge: Knowing vs. Doing

More money is lost by players who know the correct move but fail to execute it. Behavioral finance sheds light on these missteps, revealing how emotions often override logic.

Managing Uncertainty

Every poker hand begins with uncertainty. It’s not always a 50/50 coin flip—it could be 60/40 or worse. Poker isn't rocket science; it’s brain surgery. To succeed, you need to train your brain to act rationally, even when emotions run high.

Behavioral Finance and Poker

Behavioral finance teaches that success isn’t just about reducing chance but also recognizing and seizing opportunities. Great poker players excel at letting their analytical left brain guide their impulsive right brain.

Skill Over Chance

No Limit Hold’em is too unpredictable to rely solely on luck. Treat it as a game of skill. The risk of ruin in games with negative expectations is 100%. To avoid this, only play when you have a competitive edge:

  • Bet when the odds are in your favor.
  • Fold when they aren’t.

The Invisible Victory: Folding

The average player enters too many hands, chasing action rather than making smart decisions. Folding is the invisible way to win. Yet most players can’t accept folding as a winning strategy—it feels counterintuitive. If you have a bad hand, chances are somebody else doesn't.

Avoiding Common Pitfalls

  • Chasing Losses: Staying in a pot with poor odds is a losing game.
  • Overplaying Hands: Play fewer, better hands. Win chips, not pots.
  • Multiway Pots: Avoid dangerous flops when holding premium hands like pocket aces.

Great Players Embrace the Right Mistakes

Great players experience more bad beats than good players because they consistently put their money in with the best hand. They rarely deliver bad beats themselves, avoiding situations where they’re drawing slim.

Raise or Fold

A strong hand is worth raising. If it’s not worth raising, it’s likely not worth playing. This principle applies equally to poker and investing. Knowing when to say goodbye can save you from unnecessary losses. Infinite patience brings immediate results.

Final Takeaway

Poker and investing require the same mindset: maximize wins when you have an edge and minimize losses when you don’t. The key is discipline, patience, and the ability to recognize when to hold ’em and when to fold ’em. Instantly gratification takes too long.