How to Approach Business as a Poker Game

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Have you ever considered poker as a business strategy? Are you struggling to focus on your long-term goals, rather than your short-term ones?

Former CEO of Zappos Tony Hsieh claims that starting a business is like playing a game of poker. As a business manager, you must focus on the long-term planning for your company’s success, just as you would pre-plan how you’re going to bet or switch tables in poker.

Learn how looking at poker as a business may aid you in improving your business strategies and planning.

Playing Poker as a Business

Hsieh learned the importance of long-term planning while playing poker. In poker, there’s a difference between making a long-term decision that can win you the game and making a short-term decision that wins you the hand, he explains. Winning a hand feels good, just like having high profits does in a business context, but it can’t predict your future success. On the other hand, playing poker with a long-term goal means you might lose the hand but win the overall game, just as Zappos lost money when it stopped drop-shipping but eventually became more successful by doing so.

Pre-plan for the Short Term to Focus on the Long Term

The best way to focus on long-term goals—in poker as a business (or vice versa)—is to pre-plan a strong short-term strategy. If you already have a concrete, repeatable plan for your short-term decisions, you can spend more time and energy focusing on the long-term situation, rather than having to continually make short-term decisions. 

In addition, having a plan stops you from panicking if you have short-term bad luck. Rather than repeatedly changing your strategy to overcome that bad luck, overreacting, and later regretting it, you can maintain your strategy and trust that it will eventually lead to long-term success. Or, if you suspect your short-term strategy will no longer have the best possible results, you can devote your time to adjusting your long-term plan while your pre-planned strategy continues in the background. 

For example, in poker, you might pre-plan how you’re going to bet, and in business, you might pre-plan your daily operations (scheduled marketing, a consistent rate of new hires, and so on). Then, if you have several bad hands or something disrupts the market, you can devote time to adjusting your long-term plan while your original strategy takes care of your short-term actions—betting aggressively to scout out your opponent’s tells, or temporarily slowing marketing and staff expansion until the market stabilizes.

Changing Tables in Poker and Business

Poker illustrates another way you can become trapped by short-term goals, Hsieh adds. Sometimes when playing poker as a business, you need to change tables and opponents to make a profit. If you only focus on what’s happening at your table, you won’t realize if other tables become more profitable than your table. Instead, you need to pay attention to the whole room, looking for signs it’s time to change tables.

This concept applies to business as well, Hsieh says. Sometimes, you need to change markets to make a profit. If you only focus on the day-to-day minutiae of your company and succeeding in your current market, you won’t have the whole-picture view needed to see that your market is losing profitability or that other markets are gaining profitability. You need to take a step back and recognize when changing markets is the best option.

Continuing our example, Zappos’s “table” or market was drop-shipping. If Zappos hadn’t paid attention to its market’s shifting profitability, it might have remained a drop-ship company and gone out of business. However, Hsieh paid attention to the whole market. He realized that drop-shipping was less profitable than his competitors’ practice of direct distribution. Thus, he moved to the “direct distribution” table, increasing Zappos’s sales by over 500%. This is where Hsieh playing poker as a business strategy helped him become successful.

Changing Tables and Markets in Poker and Business

Hsieh says leaving an unprofitable table is an important part of poker. As a business, much more hangs on the line if you think your “table” is unprofitable. But how can you tell that your table is unprofitable? One sign of an unprofitable table in poker is that your table has aggressive players. These players constantly raise their bets, meaning you must risk a lot of money before getting to see how profitable your hand might be.

In business, this is like entering a market that’s dominated by a monopoly. Monopolies can afford to sell their goods at a loss because they dominate the market. While this risks monopolies’ money—as aggressive poker players risk theirs—it drives other companies, who can’t afford to sell their goods for such low prices, out of business. In this situation, it’s better to change to a more competitive market.

But how can you change markets? The most important step in this process is researching the new market you’re thinking about entering in three main areas:

1. Market demographics. This includes things like how many competitors your company would have in the new market and how profitable those competitors are. This tells you whether there’s enough business available in the market to make the change worth the effort.

2. Customer demographics. This includes the age, gender, and spending habits of your potential customer base. This information helps you plan your marketing approach and adjust your product so it appeals to your new base.

3. Political and regulatory landscape. This influences the market’s development and can warn you of any upcoming shifts that would affect your company. It can also warn you of any problems with joining that market. For example, if your potential product doesn’t fit a certain state’s regulatory laws, that location isn’t a good fit for your headquarters.

Once you’ve researched all these areas, you’ll have a solid understanding of the new market and how your company would fit into it. Weigh whether the new market would be better for your company in the long term. If so, take a risk and make the change.

How to Approach Business as a Poker Game

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  • Former Zappos CEO Tony Hsieh's guide to workplace happiness
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  • An exploration of the psychology behind happiness and why it leads to success

Katie Doll

Somehow, Katie was able to pull off her childhood dream of creating a career around books after graduating with a degree in English and a concentration in Creative Writing. Her preferred genre of books has changed drastically over the years, from fantasy/dystopian young-adult to moving novels and non-fiction books on the human experience. Katie especially enjoys reading and writing about all things television, good and bad.

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