It’s easy to fall in love with your cards or bad business ideas. Don’t do it.
Falling in love with your cards is common mistake among poker players, especially beginners. They get excited by any two cards of the same suit; even though something like a king of hearts and a 4 of hearts look nice together statistically, they are a poor hand. Or, they are so thrilled with their pair of kings – the second best starting hand you can have in poker – that they ignore the fact that the odds are now against them if an ace is dealt on the ﬂop.
When your good-looking cards, deals or opportunities no longer seem viable you have to revise your strategy. Don’t get so emotionally attached that you ignore all the signs telling you they’re not the winning hand.
Know when to cut your losses
People fall in love with their metaphorical cards in business and in life. They hold onto a stock they thought was a sure winner after it’s clear their choice is sell now for a small loss or later for a big one. They put in a high bid on the “perfect” house, and then, when research shows it’s overpriced and the schools are less than promised, they have trouble letting go. They stay in a job year after year as those around them get promoted and management keeps dangling a promotion with a growing list of demands but never delivers.
Too many players stay in a hand for too long. They stay in because they’re stubborn, their ego is on the line, they’ve invested time and emotion or they think they can outplay their opponents. They stay in because they’re gamblers and they just won’t get out just to show how tough they are. But recognizing when you’re beaten is a critical life skill.
Know the price you’re willing to pay
Often in poker, you know the price you’re willing to pay to play your hand. You’re willing to raise $25 on a pair of 10s, but if someone else re-raises to $200, the many possible combinations that can beat you makes the cost too high. You should know at what point you need to walk away.
Similarly, if you’re in the middle of a business negotiation, or you’re trying to put together a deal, determine your “walk-away” point before you spend an extraordinary amount of time, resources, emotion and capital getting it done. Don’t wait until the negotiation implodes to decide. If the other side is being so unreasonable that you can’t agree, weigh the cost you placed on the deal. If you feel there’s not much hope for a decision that benefits both parties, move on.
Be passionate but practical
Falling in love in business and life is a good thing. We should approach life with passion and conviction. But we should also be able to recognize when our enthusiasm is keeping us blind to a bad situation. In other words, fall in love . . . but be smart.The longer you stay in something that you know has poor odds of success the harder it is fold and get out. Don’t wait until you are short stacked and in a desperate situation.
However, there are situations where it’s worth it to take the risk and go “all-in” with your cards. I’ll talk about when to take that chance in my next post.