Csaba Konkoly is the Co-Founder and President of Capital, a company that tries to help founders make raising capital more transparent, fair and effective. In an interview with Forbes Magazine, Csaba talks about what similarities he has drawn between poker and running his own business.
To pass time during the lockdown, Csaba taught his children how to play poker. He says that he’s not an expert but has a decent understanding of the game and plays occasionally. As he walked them through the fundamentals, he started to think about the similarities between poker and running a startup. The skills you need and the mindset you have to develop are similar in both, and as a founder, that’s likely what drew me to poker in the first place. He believes that there are two major principles involved in poker: focusing on your hand and focusing on the process, not the outcome. Csaba believes that founders can take a page out of their playbooks.
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Focusing On Your Hand
In poker, you do not know what other people have until the end of the hand, and sometimes even then, they’re not always liable to show their hands. You only know your hand. You must make decisions based on limited information. Csaba says,
“In business, this is like having a wonderful idea you think could change the world. Is it unlikely that someone else is working on the exact same idea? Perhaps, but never impossible. You don’t know what others are developing behind closed doors, so you can’t assume you have all the time in the world to get to market.” You cannot afford to be passive all the time. If you’re going to sit and wait for the perfect hand, you’ll never make money. Those who take risks and bet will win more often, even if you do lose sometimes.
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“When building a startup, waiting to reach perfection means giving your competitors time to beat you at your own game. Companies like LinkedIn and Netflix launched early versions that still needed improvements, but the goal was likely to get a product out. If you wait for perfect, you’ll wait forever.” Taking advantage of opportunities. You might have the winning hand, but if you do not know how to leverage it for more value, you’ll lose. You need to understand odds and have a higher emotional quotient to read the table and your competitors if you want to make the most out of your hand.
“In the same way, founders need the skills to take advantage of good business opportunities. They should understand their odds of success and possibilities for failure, and be prepared with the financial cushion to manage these problems as they come. And when it’s time to act, founders need to know what action to take. When do you fundraise? How much do you raise? When do you launch? All of this requires skills beyond just spotting a good opportunity.”
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You cannot control your hand. Both, poker and startups are both games of skill with heavy elements of chance. You cannot control your hand or what other people have. You can only respond to what you’re given. In the case of startups, that means building more cushion than you need and having plans in place to deal with failure.
Focusing On The Process
Win or lose, the outcome of every single hand is not always important in poker. However, the process is essential. What decisions you took that led to a particular outcome and what can you do differently to influence the outcome. For any new player it’s the same, you will lose more than you win. But losing is essential so that in future, you’re able to remember where you made mistakes and try not to repeat the same.
“The goal is to build skills that result in more wins over time. You won’t win every game; even the best poker players don’t. But after every loss, you’ll hopefully learn how to make wiser decisions moving forward. This is true for startups, too. You won’t win every investor. You won’t always have award-winning ideas. You will lose money, lose staff and lose opportunities. Keep your eyes on the processes that led to those decisions, not on the result.”
Poker and startups are games of skill with a large dose of chance. Whether you get good cards or bad, you need to have the skills to take advantage of the hand you have. You have to learn how to balance the risks with the payoffs; both those who are too aggressive and too passive end up losing in the long run. Furthermore, above all, you need to recall that each misfortune isn’t significant. Everybody loses, from the greatest poker players to the most renowned business visionaries. The only thing that is in any way important is how you manage those misfortunes when they come. So do you pick up the cards and keep playing? Or fold?