Is Playing Poker Gambling? (My Argument In Vegas)

A few weeks ago I was in Vegas and got into an argument with a blackjack player about poker. Without getting into the details, he said it was "gambling" and I said it wasn't.

Poker has exploded in popularity in recent decades and whether or not you’re a part of that trend, there are some lessons to be learned from those who have lasted in the game long enough to make real money, and to hold onto it.

The game of poker is often mistaken as gambling. Well, it isn’t; at least not in the long run. On any given day, of course even the best poker players can lose. But over time, the success rate of good poker players is astonishingly high… high enough to make it a legitimate and fruitful career choice of those select few that have the discipline. Read deeply into any poker guru’s philosophy and, before odds and probability and learning to read the “tells” of your opponents, they will talk about something that doesn’t sound especially exciting or glamorous: bankroll management. The long-term winner in poker knows when to cut his losses; is smart and patient enough to have the resources to maximize his gains, sometimes going all in when the right hand comes along; and understands that the winner is more often than not the one who makes the fewest mistakes.

As Matt Damon’s character in the poker film Rounders sums it up: “You don’t gamble, you grind it out.”

And so it goes with investing as well. Like poker, investing is in many ways a so-called “loser’s game”—you win mainly by avoiding big losses, and by capitalizing on the mistakes of others. In fact, it’s mathematical. In both investing and poker, it takes an 11% gain to break even on a prior 10% loss. The further you are in the hole, the harder it is to come out: a 25% loss requires a 33% gain to break even; a 50% loss a 100% gain. These similarities have caused Wall Street traders to sometimes refer to the investments of institutional players like hedge funds as “smart money” and that of the general public as “dumb money.” (Similarly, Vegas distinguishes between “public” money and “wise” money.)

The bottom line: you have to be smart about risk. But you also have to be comfortable with the idea of SOME risk. For some of you, that’s a critical hurdle to get over. As one financial analyst puts it: “The preference for cash and aversion to the stock market among young adults is very troubling considering this age group has the biggest retirement savings burden. They won’t get there without being willing to assume a little short-term risk in their long-term money.”