The game of poker and finance have often flirted with one another. After all, many financial executives have background in poker, and vice versa. Why is this? Some have argued that people who make a career in business or finance understand the value of money.
They also understand how investment works, and why certain outcomes are better, and why certain bad outcomes can still be good. Poker, though, is now touted for its ability to teach financial literacy.
As much is true for Peak6 Investments options trader and co-founder Jenny Just who has argued in a recent CNBC interview that teaching your daughters to play poker could have a very significant beneficial effect on their ability to manage money.
There are many benefits that the game of poker can convey even to the most unfamiliar person. Maria Konnikova, a PhD in Psychology, and one of the best women in poker turned a player only after researching the game for her thesis.
What have people been learning out of the game of poker, and has it anything to do with financial literacy?
1. Confidence and Strategic Thinking
The game of poker will undoubtedly teach you how to think about moves and cards strategically. This will also carry over to your finance, as you may see that certain investments make sense.
A basic example would be hiring someone to clean your home, if it will only make a small dent in your daily net income, for example, while you free your time for higher valued activities, or even leisure.
You may start a hobby project on the side of your well-paying job, but then decide that it makes more sense to hire someone and pay them while you focus fully on your main job, while supervising your side project.
This type of thinking, where money is no longer just something you risk but invest, is very typical of poker players and people of finance. Both the most successful poker players and financiers know that investment pays off, especially if there is intent.
But as Just says, it’s not just about having that strategic thinking. It’s about the journey – how you get to the table where some of the best poker players are, for example.
This all requires for you to show confidence and to build your understanding of the game methodically and without hesitation. Building confidence will allow you to focus on doing and ultimately achieving things rather than worrying if you were right all along.
2. The Value of Money – Immaterial in the Short Term?
There are many successful people who insist that money in the short-term is immaterial. Of course, they have the benefit of having succeeded, but they tend to credit their success to this particular mindset.
This is not to suggest profligacy of any sort, however. Jack Ma says that people who are afraid of trying new things are more likely to be poorer than those who try new things often. Kevin Desmond, a financier himself, argues that “the result of any one hand should not be material” when playing poker.
Rather, players ought to be focusing on the big picture, which is what poker tries to teach you. It’s not about losing a few hands. It’s about how you can use your money smartly so that you are going to produce the best possible results.
In this sense, poker is one of the best tools that people have at their disposal to learn about financial risk-taking and do so in a fairly safe and controlled environment. The “immateriality” of short-term losses or money invested is an interesting concept and one that is tested to its limits in a game of poker.
3. The Opportunity to Constantly Test Your Financial Knowledge
Given the previous examples of poker influencing your financial knowledge for the better, the fact that the game is so widely available has made it easier for players to continuously test their understanding.
You can take basic concepts from money management and put them to good use in the game of poker and see if they work. There are readily available online poker sites that will allow you to play at virtually any betting limit so that you continue increasing your financial literacy.
Of course, poker and real life are not exactly the same when it comes to finance, and you need to understand that as well. This small caveat though will definitely be helpful. You still get to test your financial knowledge, though.
As in, how much of your bankroll can you risk. Can you accept a higher bet this round or is it better to wait a bit longer. Your confidence will come into play here, but you need to pad it with an actual understanding of the game and what it has to offer.
In other words, no matter how sound your financial knowledge is, if you don’t know what to expect in a game of poker, you won’t be able to make the best decision. Don’t worry though, because for as long as you know when to take risks and when to fold, you will be learning about the game.
4. Poker Teaches Patience – In Finance and Beyond
Not least, poker is a game that will teach you how to be patient. Many players tend to be a little trigger-happy. As Desmond himself says, many people play poker as if it were a game of chance. It is not.
It requires you to come well-prepared to the tables and make sure that you are fully committed to playing the game. The game also tells you that you need to be patient, take your losses in stride, and pivot towards a bigger-picture strategy that could result in a net gain.
In a word, poker will teach you a lot about financial literacy, making it a good game to practice confidence and approaching money in a way that does not just seem them as an immediate loss or gain, but as part of a long-term strategy to be better off financially.
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I have always been a shopaholic. A lot of times my questions went unanswered when it came to retail questions, so I started Talk Radio News. - Caitlyn Johnson
