This rule came from a three-day poker camp I went to seven years ago. One of the pros got up to the front of the room and asked the question, “What’s the goal of poker?” Of course, someone put their hand up and fell into the trap. “To make money” they said. Wrong. “The goal is to make good decisions, not to make money,” countered the instructor. If you make good decisions — better, more consistent decisions than the other guy — then you will end up making money.
In poker, if you approach the game to make money as opposed to making good decisions, you can fall prey to things like going on ’tilt’ after a bad beat, feeling ‘lucky’, continuing to fire bluffs at an opponent who’s clearly shown you he’s willing to call you all the way down, or playing in games that you can’t afford. When you hunger only to make money *now*, then you end up making bad, mostly emotional, decisions.
It seems to me that many people tend to “armchair quarterback” other investors’ thesis. (After all, if it seems crazy, it must be crazy – right?) Unfortunately, there’s no crystal ball when you’re dealing with early stage internet startups.
Here’s the analogy I like to use: if you’re going to walk into a casino, you already know that the odds are in favor of the house. Always. So, you’ve got two choices on how to approach the games:
- The first option is to wander around the gaming floor while you try to “feel” a good table. In the process, you’ll likely spread a few bets around while you try to get a sense for the momentum on the table. If you win, you’ll pat yourself on the back. If you lose, you’ll likely move on to the next table. If you’re investing for fun, altruism or any other non-monetary reason, this approach is probably OK as long as you recognize what you’re doing.
- The second option is to have a plan before you enter the gaming floor. Pick a thesis (eg, a game and a plan: “I’m playing blackjack, hitting on any 17 or lower.”) and play the hell out of that thesis until you’ve either uncovered new information that suggests you should change the thesis or you win.
To put it more bluntly, would you rather try your luck at the roulette wheel or do you try counting cards on the blackjack table? If you’re an angel, you’ve got the option to choose either path. If you’re a VC (eg, investing other people’s money), I believe the second option is the only option.