528: Investing Is More Like Poker Than Chess

Most people picture investing as a game of chess. Everything is visible on the board, the rules are clear, and if you’re sharp enough, you can see ten moves ahead. But markets don’t work like that. They shift in real time—rates change, policies flip, black swan events crash the party. That’s why I think investing looks a lot more like poker. In poker, you never know all the cards. You play with incomplete information, and even the best players lose hands. What separates them isn’t luck—it’s process. Over time, making slightly better decisions than everyone else compounds into big wins. That’s the same discipline great investors use. They don’t wait for certainty—it never comes. They weigh probabilities, manage risk, and swing hard when the odds line up. Risk isn’t the enemy. Fold every hand and you’ll bleed out. To win, you’ve got to put chips in the pot—wisely. Wealthy investors do the same. They protect the downside, but when they see an asymmetric bet—small risk, huge upside—they lean in. That’s what early Bitcoin adopters did. That’s what smart money did in real estate after 2008. And just like poker, investing is about knowing when to quit. Ego and sunk costs can trap you in bad hands, but the pros know when to fold and move their chips to a better table. In the end, both games reward patience, discipline, and emotional control. You don’t need to win every hand. You just need to stay in the game long enough for compounding to do its work. The amateurs play for excitement. The pros play for longevity. That’s the mindset you need as an investor and the reason I interviewed a former professional poker player on this week's Wealth Formula Podcast! Transcript Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at phil@wealthformula.com.   One of the things that we feel like when we decide to make a bet on a thesis and we're thinking about, well, wait, what, what if it's like this? Or what if it's like this or whatever, is that we, we do have this sense that we get caught in those decisions, right? That we start something and that, uh, it's very hard for us to get out of that position. Welcome everybody. This is Buck Joffrey with the Wealth Formula Podcast. Coming to you from Montecito, California. Before we begin today, I wanna remind you that there is a website associated with this podcast called wealth formula.com. Lots of resources there, including the ability to sign up for our accredited investor club. Now, of course, that is a, uh, also known as a investor club and, um, basically you sign up there. And, uh, you get onboarded and you get an opportunity to see private deal flow that you will not see anywhere else. So go check that out. Wealth formula.com. Topic of today's show's a little different. Um, it's, uh, a little bit more, uh, about the cognitive side of. Of, uh, investing. So, you know, most people picture investing as sort of a game of chess, right? Everything is visible on the board. The rules are clear, and if you're sharp enough, you can see 10 moves ahead. But in reality, the markets don't really work like that. They shift in real time. You know, you got rate changes, policy flips, black swan events, all these things can crash to party. Uh, and that's why I think investing actually looks a lot more like poker and poker. You know, you never know all the cards you play with incomplete information. And guess what? Even the best players lose hand, you do lose in investing. That's something you have to understand. Now, over time, making slightly better decisions than everyone else compounds into big wins. And that's what makes a, you know, difference between like professional investors and people who lose money in the market. That's the same discipline. Great investors use. They don't wait for certainty because the reality is it never comes. They weigh probabilities, manage risk, and they swing hard when the odds line up, right? So the thing to understand is that risk isn't the enemy, right? In poker, if you fold every hand, you're gonna, you're gonna bleed out. You know, you've gotta have ships in the pot, you know, wisely. Of course. Wealthy investors do the same. They protect their downside, but when they see an asymmetric be a small risk, huge upside, they lean into it and you know. That's what, for example, we, we've talked about it before, but you know, people who, uh, you know, bought Bitcoin early and had conviction and stuff, like that's what they did. And that's what the smart money did in, in real estate after 2008. They knew that they had a reset point, and even though things looked dim and grim, but all of a sudden they saw rates coming down. Um, they saw quantitative easing. They knew that a huge amount of liquidity was coming into. Space and they killed it for the next, you know, decade and a half. I mean, similarly, right now, like I think, um, I've been saying before, I, I think rates are coming down because of the Trump takeover of the Fed, because of, uh, job market that's weakening because of ai, all these things. But you know, just like poker investing is about knowing when to quit as well. Ego sunk cost and. Trap you in bad hands. But the pros know, uh, when to fold, move their chips onto a better table, right? Uh, in the end, chess, you know, or poker, they, they both are gonna do one thing. They're gonna reward patient's discipline and emotional control and understand you don't need to win every hand. And if you do, you don't panic and stop playing. You just need to stay in the game long enough for compounding to do its work. Um, you know, the amateurs, they do it for excitement. The pros, they play for longevity and obviously investors were trying to make, uh, make some money. So that's the mindset you need to have as an investor. And the reason I interview a former professional poker player on this week's. Wealth Formula Podcast. Hope you enjoy it. We'll have that interview right after these messages. Wealth Formula banking is an ingenious concept powered by whole life insurance, but instead of acting just as a safety net, the strategy supercharges your investments. First, you create a personal financial reservoir that grows at a compounding interest rate. Much higher than any bank savings account. As your money accumulates, you borrow from your own bank to invest in other cash flowing investments. Here's the key. Even though you've borrowed money at a simple interest rate, your insurance company keeps paying. You compound interest on that money even though you've borrowed it. Net result, you make money in two places at the same time. That's why your investments get supercharged. This isn't a new technique. It's a refined strategy used by some of the wealthiest families in history, and it uses century old rock solid insurance companies as its backbone. Turbocharge your investments. Visit Wealth formula banking.com. Again, that's wealth formula banking.com. Welcome back to the show we went today. My guest on Wealth Formula podcast is Annie Duke. She's a world-class professional poker player, winning millions at the table by mastering strategy, risk and human behavior. Since retiring from poker, she's become one of the foremost experts on decision science. Uh, she's the bestselling author of Thinking and Bets and Quit, as she now advises investors, founders, and executives on how to make smarter decisions when the stakes are high and the information is imperfect. Annie, welcome to the show. Thank you for having me. So you, um, uh, obvious a very interesting, uh, background. You went from a professional, uh. Poker champion to a decision strategist, essentially. So tell us, I mean, yeah, what parallels do you see between high stakes poker and the decisions, say every day investors face in in today's markets? Yeah, so first of all, I actually went from cognitive science to poker, back to cognitive science. Oh, okay. Well, a loopy loop. Um, okay, got it. All good. So here's actually the interesting thing. So, um. Particularly when you're thinking about things like investing, there's, part of economics is a field called game theory. And game theory is the study of decision making under uncertainty. Um, and the uncertainty derives for over time is the other thing. So, uh, so we can think about it as making decisions to invest limited resources, right, in situations where, uh, luck can affect the outcome. Um, and where, uh, you don't know all there is to be known and know, you know, very little in comparison to all there is to be known for most of the decisions that you're making. And then, and then the over time piece has to do with, um, for most types of decisions, and this is particularly true in, uh, investing. The decision we you make now could affect de de decisions to come. So you could think about like in negotiations, right? Like when I'm negotiating with someone, it's really different. If it's a one-off, it's the only time I'm ever gonna negotiate. Against them versus if it's gonna be a repeated negotiation. Right. Okay. So a guy named John von Norman, along with Oscar Morgan Stern, wrote a book long time ago called The Theory of Games, which was really kind of defining this as a field, um, and something that we ought to be thinking about and studying. He was actually the mentor of John Nash, very famous economist, schizophrenia, um, who was the subject of a beautiful mind. And John Nash's, um, uh, Nobel Laureate Nobel Prize was actually in game theory. That's what he was studying. Um, okay. So what does that all have to do with the question that you asked, which is what are the parallels with poker? Jon Van Neuman was actually thinking about game theory and trying to figure out sort of like the mathematic, how you would mathematically model this problem. He actually used poker as. That he,