When playing poker, on mere chance, simply invest

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Polonius’ advice to his son, Laertes: “This above all: to thine own self be true.” – William Shakespeare.

Surely, there are substantial – perhaps profound – differences between investing and gambling.

Not that there is anything immoral about gambling, as long as you do not cheat. Nor should any form of gambling be declared illegal, providing you do not harm another person. Furthermore, too often we ascribe the noble mantle of “investing” to activities that are really forms of “gambling.” As Laertes said, “to thine own self be true.”

Gambling vs. Investing

Gambling is speculating, taking a chance with the hope of gaining money or something of value. It’s wagering on an event – like tossing dice in the alley or in a casino. You could lose your money. You might also win. It’s a matter of pure chance. At the poker table, we often refer to loose playing as “gambling,” in contrast to tight playing or “investing.”

On the other hand, investing, according to my Merriam-Webster Dictionary, is “to commit money in order to earn a financial reward.” Investment is intended as a means for gaining income or profit. Put your money in the bank and, over time, you gain income by virtue of the interest the bank pays you.

 On the other hand, is buying stock in a company an investment or a gamble? Can you truly expect the company to prosper and the value of its stock to rise? If not, then, it’s really a gamble – not skill. Let’s be honest; don’t delude yourself – “to thine own self be true.”

Investing in poker

When playing poker, it is far wiser to “invest” rather than to gamble on mere chance. When you invest, you have a degree of control that is lacking when you play craps or roulette, which are truly forms of outright gambling.

When you bet preflop in a hold’em poker game, are you investing or gambling? At this point, I will only say, “It depends.” What do you think? How about when you call a bet on the flop; are you investing or gambling? Do you have a choice – invest vs. gamble?

Allow me to offer my perspective on this question: Whenever the probability (or the odds) favors you, you are investing rather than gambling. It’s as simple as that! Let’s examine this question in the case where you are deciding whether to call a bet on the flop:

Refer to the pot odds and the card odds. Pot odds: How much you must bet relative to the amount of money (chips) already in the pot. Card odds: The chance (odds) against catching the card that gives you the winning hand.

So long as the pot odds are higher than the card odds, you have a Positive Expectation, PE. (Some poker experts prefer to use the Expected Value, EV, based on probability times value for each possible situation. I believe the PE estimation is much easier than figuring the EV in the “heat of battle,” and hence preferable.)

The higher the PE (or EV), the more sound your investment – and the more money you can expect to win in the long run. Indeed, you are “investing” in every sense of the word. But, when you buy shares in a company in the form of stock because you have a good feeling about it, or a hunch that its products will sell well, are you investing or gambling?

Unlike calling a bet in poker with a Positive Expectation (PE), your plunge into the stock market is strictly a gamble on your part. Be honest with yourself: Weren’t you really gambling when you bought that stock? Understand the difference between gambling and investing…And, as Polonius advised, “To thine own self be true.”

“The Engineer,” noted author and poker teacher in greater Los Angeles, is a member of the Seniors Poker Hall of Fame. Contact George at [email protected].

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About the Author

George Epstein

A retired engineer, George Epstein is the author of “The Greatest Book of Poker for Winners!” and “Hold’em or Fold’em? – An Algorithm for Making the Key Decision.” He teaches poker courses and conducts a unique Poker Lab at the Claude Pepper Senior Center under the auspices of the City of Los Angeles Dept. of Recreation and Parks and at West Los Angeles College.

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