At the world series of poker in Las Vegas, the game was No-Limit Texas Hold’em.
At the European Poker Championship in London, the game was Seven Card Stud.
In both games, the results were the same: Dan Harrington, a 50-year-old former bankruptcy lawyer, won the 1995 championships and the right to claim the title of undisputed heavyweight poker champion of the world — along with a cool $1.25 million for the two tournaments. For Harrington, a big, ruddy Irishman with a no-nonsense Boston accent, the two titles represent the culmination of a lifetime of playing — and winning — at games that require confident character, sharp intellect, deft strategy, and relentless execution: in other words, the attributes of a successful business leader.
As a younger man, Harrington excelled first at chess — winning state championships in New Jersey and Massachusetts — and then at backgammon — quitting only after winning a $27,000 championship prize, half of which the organizer failed to pay. He joined forces with a small “Mission Impossible” team that relied on MIT-derived mathematical formulas to generate precise calculations for winning at roulette. They enjoyed a 40% edge on each spin — until the Sands Hotel Casino in Atlantic City caught them.
As an undergraduate at Boston’s Suffolk University, Harrington took up poker. He vaguely remembers playing in a friendly game with two young Harvard students: Bill Gates and Paul Allen. Six years ago he moved to Los Angeles, where legal card rooms had just been permitted to diversify from draw poker to fancier versions favored by serious gamblers, such as Texas Hold’em (a game where each player gets two cards down, and five cards go in the middle, and each player bets on the best five-card poker hand). Now Harrington has moved his legal residence to Las Vegas — not to be closer to the casinos, but to escape California’s state income tax that claims 11% of his winnings.
Fast Company visited the reigning world poker champ at his sprawling five-bedroom home, which seems to serve as an informal boarding house for Harrington’s itinerant gambling buddies. A chess board is set up next to the computer that Harrington uses to track his stock positions. The bookshelves are filled with business texts — these days, Harrington spends more time playing the stock market and investing in real estate than playing cards. Says Harrington, “I’m on a learning curve in real estate. But I know one thing: I’m very good at learning games and playing them. And real estate, the stock market — it’s all the same as far as I’m concerned. There’s hardly any difference.”
1. It’s All Character
It’s not a matter of being brilliant. It’s just a matter of character. That’s all it is. You have the discipline to draw back when you see that your strategy is incorrect. That’s the kernel of the idea in gambling: it’s the discipline to keep your losses down and not to let your losses affect you. It’s the same in business. It’s a percentage game. You don’t win 100% of the time. You do something adequate, you stay in the game, and you keep playing. You win a little bit more than you lose, and when you lose, you lose less. You’re going to win eventually. You may not win the whole world, you may not even be an extremely high producer. But you’re going to be a winner. It sounds simple. It is just so hard to execute. Execute extremely well and you’ll win. That’s why Vince Lombardi, the famous football coach, used to spend eight hours on one sweep, just one play. Do the simple blocking and tackling and the other stuff will take care of itself. It’s the same in gambling and in business. You get the basics and you’ll win. You don’t have to be some super-visionary.
2. Win When You Lose
When I’m losing my money, that’s when I’m really winning my money. That’s when I still keep my head together. It’s one thing to devise a strategy. It’s another thing to employ the strategy under the stress of making a monetary decision. Or making an incorrect decision and having to live with it, and not having it affect you for the next decision you have to make. I don’t get caught up in the throes of fear or greed. There’s a saying in poker, “You get mad at your money.” That’s literally the truth. You just lost a 10 to 1 proposition and you’re saying, “You think that was a bad bet? I’ll show you how bad I can beat myself this next game.” Then you do something crazy. Look, I have more control than 99.9% of the people and I feel those emotions. Can you imagine what someone else does? You just give in to them. It’s hard not to give in. It sounds simple: character makes the whole difference.
3. Look Bored, Take Notes
One player described poker as “hours of boredom punctuated with seconds of outright terror.” Those hours of boredom are the most important part of the game. Most of the time, if you’re playing correctly, you’re just throwing your hands away. But you’re supposed to spend your time paying attention to what the other players are doing when they’re playing their hands. You’re making mental notes of the strategies they use, and when they use them. For instance, on a simple level: as you’re beginning to make a bet, from your mental notes you know that a player is ready to put his money in the pot. Among some players, that tells you you’d better have a good hand when you bet. Among other players, you know that the person’s not going to put the money in the pot; he’s trying to stop you from betting. If you notice these tendencies in people, you gain a big edge when you get to play a hand with them.
4. Invest, Don’t Gamble
In gambling there’s a formula called the Kelly Criteria. You figure out what your edge is — say it’s 1% — then you can bet 1% of your bankroll on the next bet. If you do that, you have a very low chance of ever going broke. A lot of players are better than I am, or at least as good. But they always seem to have no money. Why? They overbet their bankroll. Greed takes over. They’ve won some money, assume that it was totally due to their superior play, and that it will continue. Of course, that’s not the case. If you see studies of blackjack or any gambling where there’s volatility involved, like the stock market, it doesn’t go up in a straight line. It fluctuates. If you have an insufficient bankroll for the stakes that you’re playing, then all it takes is one of the fluctuations and you’re out of the game. It’s OK to invest in a risky venture. But it has to be a relatively low portion of your capital. And if you’re going to do it, it probably pays to invest in 10 or 15 different ventures at the same time so that if one comes through, it pays off for all the others.
5. Looks Can Lie, Trust the Numbers
Psychological studies show that people latch on to adjectives; they don’t latch on to statistics. You get a hand that’s visually appealing, you know it has won so many pots for you in the past, you have to call. Under normal circumstances you know the hand cannot win. You’re supposed to say, it’s no good, these guys have my hand beat, I’ve got to throw it away. But you get caught up in it. You look at the hand and you’re attracted by the adjective that you see in that hand. It happens in business all the time. Take Apple Computer. Their profit margin was so appealing they couldn’t give it up, despite the need to cut their high prices and increase market share. Even though they knew it was detrimental to their survival, they couldn’t give it up.
6. Take Money over Glory
Arguably the greatest mathematician of this century was John Von Neumann. He extended the theory of Marginal Utility to game theory: the more you have, the less you should gamble. People like Ted Turner or Rupert Murdoch have other considerations. There’s ego involved. They’ve gone beyond just wanting to win the money; they want recognition. They take risks I would never consider taking. At the final table of the World Series, it was heads up between me and Howard Goldfarb, a real estate developer from Canada. Afterward, the tournament director said, “I knew you were going to win. Because when we brought out the $1 million and we brought out the gold bracelet, your opponent went up and looked at the gold bracelet and you fondled the $1 million.” A lot of people are there for the glory. I’m there for the money. You can keep the glory.
7. Focus on the Problem, Not on the Consequences
A famous tennis player was practicing with his inferior opponent. In the middle of the point, a train went by behind them. His opponent lost the point and asked him, “How could you play with that train going on behind you?” He said, “What train?” When I was at the final table of the World Championship, when there were six places left, I knew that in the space of three-and-a-half hours the difference between sixth place and first place was $914,000. That’s a lot of money to be decided in three-and-a-half hours. I told myself — it was my chess training — don’t focus on the surrounding circumstances. Focus on the problems that you face when you’re sitting at the table. Pay close attention to the technical details. Because if you focus on the right thing to do, the other things will take care of themselves. At the final table, I focused on, “Am I making the right play in this situation?” I didn’t focus on, “God, if this play loses, it’s going to cost me $500,000.” You could find yourself fairly stressed out at that. That’s your mantra: focus on the problem at hand, not the consequences of the problem.
Alan Deutschman (firstname.lastname@example.org), a former writer for “Fortune,” is now gambling on a career as a novelist and freelance writer in San Francisco.