Look Around the Poker Table; if you can’t see the Sucker, You’re it
Warren Buffett, February 29, 1988
This quote is widely credited to professional poker player Amarillo Slim, however Slim himself credited Buffett for the saying in a remake of his book in 2005. The truth of the matter is, no matter who said it, it’s a saying that was developed over time by investors and adapted to the poker world not to mention the saying can apply to almost anything that requires skill in a competitive arena.
The Simple Message
If you do not have the skill to compete at something, it is best you realize it. Many take this as reason to give up or stop trying however, it’s anything but.
Confident or Crazy?
There is something to say about people who jump into the fire and learn by doing. There are many professional poker players and investors who have never read book or studied the field they are in. This is not the recommended path to learning something as many of the people had inherent talent and obviously a tendency to learn things quickly. In the case of poker, it can cost a lot of money.
Knowledge & Experience = Money
Buffett’s reasoning for using the quote is to focus attention on knowledge and experience. Knowing that you do not know something is critical to opening the pathway to learning about it. By not recognizing this, one opens the door to a false sense of confidence.
This goes without saying how getting lucky or having short-term success can reinforce one’s own ignorance on a subject and lead to disastrous results. Many poker players and investors lay in ruins due to not acknowledging this. It is no wonder successful player in investment markets, including poker, highlights these aspects when given the opportunity.
The other aspect which goes hand-in-hand with the first one is, know your game. Know what you know and do not know so you can effectively value your skills. In poker this applies to game selection. Ego does not belong in the investment world nor the poker table.
To demonstrate this I’ provide an example:
Phil walks into a poker room and see’s two games going. One game he sees all the best poker players and the other a bunch of “fish” (poker slang for unskilled players).
The X Factor, Your Ego
If Phil was driven by ego, he’d sit with the card sharks and try to prove he was good. What would make Phil a great player is knowing where his skills were and what edge or advantage he has in each game.
If you are Phil Ivey (arguable best poker player in the world), you have an edge any game you sit at, but for this Phil, the best choice is to sit where he can make the money as nothing tangible comes from proving himself. The bottom line is awareness what you know and don’t know as it does have an impact on success and failure.