1. Motivation of Bet
In poker, we are looking for players to exploit, for patterns to profit from. Analyzing their weaknesses, position, playing patterns & mathematical odds (e.g. implied odds, pot odds, etc.) – in order to bet against. In investing its the opposite; we are looking for things that we feel will be successful, to bet for. We think Steem will be a success that is why we are investing our time here. Time = Money.
To win, you need to exploit inefficiencies!
2. The Economic Loop
A poker tournament is a closed economic loop. The pool of money is generally divided amongst the top %10 of winners. Therefore, the expected payoff isn't known until the number of players is official.
Investing takes place in an open economic loop. Money flows in and out of the capital markets & from one market to another (Bitcoin to Steem, Stocks to Bonds). The expected return is influenced by the performance of the invested company and the money that flows in and out of the market and stocks. Supply and demand is the true determinants of price and could drive the stock price in any direction, "even if you correctly forecast a company’s earnings performance, the price of its stock might not reflect that performance." Plus on top of that, the number of investing “players” is neither steady nor known.
If everyone started to sell their Steem today, we would see it lower in value as we race to the bottom and if everyone was buying it, the value would increase. There is a direct correlation between traders of Steem and its value.
3. Volatility = stock market / Variance = poker
Anyone who has played poker knows that luck is part of the game. In the poker world, we call this variance. Higher the variance, more the result can be far from the expectation; lower the variance, more accurate it will be to the mean or expectation. In poker, you can make the correct decision and still lose due to bad luck or vis versa. For example, you get all your chips in when you are a %90 favorite with only one card to show, but the idiot hits his 10% card and wins. "But in all honestly, if you repeat this good decision hundreds or even thousands of times, in the end luck will almost completely be out of the equation."
In the stock market we talk about volatility. In finance, volatility represents the degree of variation of a trading price/financial asset. Just like in poker you can make a good or bad investment decision, and something completely unexpected happens. For example, I know people who made the decision to cash out their Steem when it was at around 1, now its around 4. Talk about Heartbroken. How does that effect you wanting to hold onto it?
In both cases, a series of good decisions in the long run will always make you a winner in the end, regardless of the short term results.
Gill losing a 93% chance in the biggest poker tournament in the world, come back next year!
4. Emotional IQ - Control Those Damn Emotions
When a poker player goes through an unfortunate stretch of bad luck he may enter the dangerous world of tilt. Which is state of mental or emotional frustration in which a player becomes over-aggressive, making impulsive poor decisions. When this happens, get your ass up, go for a walk and come back clear headed ready to do damage.
In the market, the daily shifts of stock prices are mostly based on investors’ emotions. In fact, the chart of a stock is actually a graphical model of investors’ emotions over the course of time. Their emotions can change the price of stock, to where it’s significantly different from its intrinsic value. When an investor does the analysis and takes the decision to buy it, he must be aware of his emotions and not let them influence him when the price fluctuates. This is all something we are noticing now with Steem, hypothetically during the cyberhack yesterday everyone could of got scared and started to sell, acting on fear - this would lower the value of Steem.
When a "novice" investor listens to their emotions they end up buying a stock at its peak after a long run up, just to see it crash in spectacular fashion a few days or weeks after, or sell Steem (or another stock) at a loss to see it make a miraculous come-back right after. In essence, stick to your guns, create a strategy and determine what kind of style you want to play.
Wish me luck, I will be playing in the CPT Main Event tonight. A week long poker tournament with a prize pool of 1,500,000 crowns!
