Fold Quickly, Commit Slowly
Inspired by a recent tweet, I take a look at how poker can provide a simple framework to help us make better decisions.
I read a tweet by @Haralabob which really hit home.
“We usually act too quickly when we are trying to make money and too slowly when we are trying to protect our money.”
Although “protect first, accumulate second” is actually a common strategy in tournament poker and therefore something I’m familiar with, I’ve sometimes failed to apply this heuristic to everyday living.
I’m a firm believer that poker is one of life’s greatest teachers. Many of the principles that apply to poker directly translate to the real world too.
Today, I’m both connecting the dots between this concept in poker and life and reflecting on my personal experiences in applying (or failing to apply) this framework.
Acting Too Quick
I tend to get captivated by opportunities and pursue them ferociously, with speed and haste. While there’s power in moving quickly to save time, it’s crucial to reflect before committing. The latter is where I struggle.
The reason pause is warranted is because committing to a money making endeavor is more akin to marriage than dating. Whether it’s taking a new job, starting a new career, launching a company or making an investment, these are all long term commitments. For example, most people who start a business will stick with it for at least for several years, even if it ends up failing.
Some will succeed, which may be worse than failing, as they are so entrenched in the work that they rarely reevaluate whether they are going in the right direction, or if should have been there in the first place.
We’ve all come across people who spend their entire lives in a career they dislike. Is it possible it’s partly due to “acting too quickly when trying to make money?”
As it often happens at the poker table, by the time someone realizes what they’ve gotten themselves into, they’re already too committed to let go.
Being pot committed means you’ve invested too much of your stack to fold. The mind plays vicious tricks here. Players will shove in the rest of their chips with a clear loser simply because they can’t bear to let go of the pot.
They know it’s a losing play, but consciously folding after investing so much feels worse than throwing good money after bad. The emotional pain of admitting they never should’ve been in the hand outweighs the financial hit of continuing.
Economists call this the “sunk cost fallacy.” While this mechanism can be costly at the poker table, it’s only one hand—you can always win it back. In life, it’s not so easy. You don’t get to run it twice. Like a freezeout tournament, you only get one shot. We have to play our hand wisely.
We can also think of this through a regret minimization lens. For example, I’ve frequently made the mistake of acting too quickly to pursue money making opportunities, but have rarely, if ever, made the mistake of letting one go too soon.
In other words, I’ve never acted too slow regarding an opportunity such that it passed me by. I’ve also never regretted saying “no” to one that wasn’t a fit. However, I’ve often regretted acting too quickly or saying “yes” when I should have said “no”.
In poker, we have a saying that if you never get caught bluffing, you aren’t bluffing enough. Since I recall many instances where “I’ve moved too fast” but perhaps none where “I’ve moved too slow”, it’s clear my leak is the former. It would be prudent to slow down.
I’ve been applying this recently to a new venture I’m pursuing, and it’s very empowering.
Sometimes it’s a challenge. I wrestle with thoughts of delaying progress and idling time. In return, I’ve gained clarity and more importantly, an increased likelihood that I make the right decision and the venture is successful.
A higher rate of cashing in poker tournaments or a higher win percent in cash games is often more important than playing more sessions.
Most people also observe that losing money is more painful than gaining money is joyful. Acting slower increases the likelihood of success and reduces the painful scenario of incurring losses.
Acting Too Slow
Acting fast when protecting wealth is the appropriate counterbalance to acting slow when accumulating, since it may take longer to generate new wealth. Unfortunately, I’ve blundered this many times.
When you’re deep in a poker tournament, protecting your chips is more important than gaining additional ones.
Unlike a cash game, where each chip is worth the dollar value it represents, in a tourney, winning more chips doesn’t immediately net you more profit.
Since a chip gained is worth less than a chip lost, the correct strategy is to preserve your stack first and accumulate more chips second.
When I work with clients and review their hands, their most costly mistakes stem from not understanding this principle.
Despite both studying and coaching this framework for the past 20 years on the felt, I’ve sometimes failed to apply it to my life, sticking with things long past they were serving me.
In my experience, people are too slow to cut losses. Just how in poker most players chase the action long after they should have folded, people are more likely to hold on too long than throw in the towel too early.
For example, most stay in relationships long past the obvious expiration rather than leaving before they gave it a fair shot. They linger in a dead end job long after they knew it wasn’t for them. They are slow to pivot on a business idea that isn’t working.
The main exception to this is when people give up on something that requires more time than they anticipated or want results too quickly. This seems to be increasingly common in today’s world, where people expect things to happen immediately.
Again, let’s consider regret minimization as a framework for decision making. How often have I regretted “cutting my losses” or “folding my hand” in some facet of life or business. Very rarely.
Should I have folded sooner? Almost always.
This simple thought experiment leads me to the realization that I should act slower before pursuing new ventures and act faster when cutting my losses.
Finally, just like a poker tournament where each chip is worth less than the previous one, money in the real world has diminishing marginal utility.
The first $100K is massive and can change someone’s life. But going from $10M to $10.1M won’t make any noticeable difference.
There comes a point when preserving existing capital is more important than gaining new capital, so acting quickly to defend is the correct strategy.
Just like in poker, most are too slow to cut losses and too quick to chase gains.
Like so many things, this is one of life’s great lessons than can be learned on the felt.
Hope you enjoyed this.
Alec