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In the ongoing quest to spread the gospel of Texas Holdem Investing the Masked Financier is always looking for external validation from respected commentators.
I recently discovered some great material for validation from the famed Fred Wilson of the AVC blog. Fred is a well known venture capital (VC) investor who runs Union Square Ventures in New York. Fred has developed a significant following through his honest and insightful writing about the VC world on his blog.
Fred wrote about poker first a long time back in 2004 in “The Poker Analogy” where he gave a detailed description of the similarities between poker and the VC investing process. Although I think he may have missed some points on the analogy it is an excellent discussion by an experienced VC practitioner with a successful track record. Fred states that once the cards are dealt, since they are beyond your control you can’t improve your situation, whereas in VC investing you can through altering management, strategic, and tactics. However, you can alter your situation in a game of poker even in the face of the cards through your betting tactics. Consider Microsoft’s tactics in getting into the OS business and destroying the competition despite being dealt a poor OS technology. Betting correctly can actually improve your situation, even in the face of superior competition based on cards alone. And bluffing is possible in the VC world, although probably not in as blatant form. Bluffing can be likened to creating the best impression of a company that is for sale, and it depends not only on your bluffing ability (ability to present and tell an investing story well) but also on your reputation (past record). Let’s face it, if someone from Sequoia Capital tells another investor that a portfolio company is good, they’ll get more traction than someone from “StartUp VC LLP” who set up 6 months back!
Fred then seemed to take some time off on the poker-investment train of thought but has come back recently (the last few weeks!) with a vengeance.
Firstly he wrote “Double Down, But Only On The Right Hand” where he discusses the current Google Vs Yahoo “search wars” using some poker metaphors. Fred’s commentary is based on Jason Calcanis’ “Yahoo Committed Seppuku Today” article. From what Fred says, it looks like while Yahoo had the better hole cards (a big head start and huge audience), the flop favoured Google (the web got really big) and Google bet well (invested sweat and money on better search technology). However, the turn and the river are yet to come between these two, and let’s not forget the other player at the table, who came along with a gigantic stack and hasn’t played too well so far but hasn’t mucked its cards yet… – Microsoft. We should keep watching this game!
And finally just a couple of days ago Fred posted “Sports and Card Analogies“, where he states that he prefers the card analogies in the context of business (and gives Casino Royale a mention too!). Fred talks about how Texas Hold’em Poker can be great for teaching investing and business skills. It sharpens the mind and can help explain concepts to a wider team without the need for jargon or complex theories. And then he gives a poker-based insight to venture capital decisions regarding how and when to represent your capabilities using the example of how to bet with your hole cards. One of his most important points is about how decisions get very hard when there is money on the line. And this is one of the most important elements of being a good investor – being actually able to make decisions when money is on the line. This skill is something that you can learn quite inexpensively through poker in preparation for entry to the real investing world where not having this skill can cause big problems.
So thanks to Fred for drawing (much more) attention (than the Masked Financier currently can) to Texas Holdem Investing the theme of Texas Hold’em Poker as a tool and environment for learning about investing.
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