Spot the Fish: Poker Lessons for Winning in Venture Investing
Originally a thread on X/Twitter:
1/11: I was on a panel last week and was asked about a topic I knew very little about. My response seemed to get laughs and likes at the same time. It’s an old poker saying: “If you can’t spot the fish at the table then you’re the fish.” I live by this adage…let me explain
2/11: Poker isn’t a single game. It’s a class of card games that revolve around incomplete information, wagering, some luck and plenty of skill. I love many forms of poker and was a high stakes PLO specialist at one point. To me, the game is truly amazing.
3/11: But while luck does play a factor in any single hand, skilled players will emerge as winners over time. Being better than your opponents pays dividends over stretches of thousands of hands. A little edge compounds over time. A big edge can compound quickly.
4/11: One fun fact is that poker players have developed a common lexicon to describe their opponents. A player can be loose-passive or tight-aggressive. They can be a nit. They can be a river rat. They can be a calling station. They can be a shark. And they can be a fish.
5/11: A fish is a term used to describe a weak poker player at the table. A fish is an inexperienced or unskilled player who makes the wrong moves at the wrong times. A fish telegraphs their actions and the strength of their hands. A fish loses lots of pots.
6/11: So in poker, one of the first things you do when you sit down to play is size up your opponents. Who do you want to avoid? Who’s always holding the goods? Who splashes chips around like water? And most importantly, who’s the fish at the table?
7/11: While there are times that everyone at the table is equally skilled, this is rarely the case. “Passing dollars in a circle” is what poker players try to avoid at all costs. Playing in games where you have an edge is how you consistently win.
8/11: VC investing is no different because the asset class produces many more losing investments than winning investments. Only top quartile VC investors produce amazing returns. Finding and investing in the “right hand tail” companies isn’t just important. It’s everything.
9/11: So when I say I live by the adage “If you can’t spot the fish at the table then you’re the fish”, I mean that I only invest where I have an edge. I step away from companies that I don’t understand as well as or better than the top investors in the world.
10/11: By no means am I saying that generalists can’t produce top quartile returns. I can only speak for myself. Being selectively ignorant is my superpower. I know very little but what I know I know very deep. That’s my edge. That’s how I drive returns.
11/11: TL;DR: Feel free to choose your own adventure when it comes to “generating edge”. If you can be a pantomath – great. Being a “Jack of All Trades” might work as long as you avoid being “Master of None”. I’ve found “selective ignorance” to be my winning strategy!