How to take calculated risks in business and life

Balazs Fogoly - Decision Boot Camp using Poker for Business Skills

“My father taught me how to play poker when I was five years old.” So begins the journey of Balazs Fogoly, a modern Renaissance man originally from Hungary with an MBA from INSEAD and deep expertise in the banking industry. He takes his unique collection of business and gaming skills around the world to train people in the battle of wit, charisma, and strategy to achieve phenomenal corporate success.

His passion to bring two and two together (business and gaming skills) came from his career in the financial world. “Throughout the 15 to 20 years that I was working, I discovered how imperfectly we make decisions. You know, even sales is about decision-making— just that your counterpart is making the final decision.”

Balazs will not let you get away easily if you associate poker with gambling. Poker is not gambling! On the contrary, he says, poker is about strategy, calculated decision-making, and weighing your probabilities for the best possible outcome.

The process of making a decision is as important as the outcome

Poker is also about observing patterns— and using it to guide our decisions sensibly rather than simply following the same course. We have a tendency to assign more value to the outcome of a decision rather than to the merit of the decision. This distinction is critical.

Balazs explains what this means: “Just because the outcome is good, does not mean the decision was good. Take the example of the recent financial crisis. It resulted from a series of terrible decisions that seemed to produce positive results for a while. But, eventually, the fallacy of these poor decisions resulted in a major collapse.”

During his training sessions, Balazs uses poker to illustrate how bad decisions may seem like a winning strategy, and how they eventually reveal their cracks.

You have to adjust your strategy to the new reality

Yet, even with the best strategies and decisions, we tend to fall prey to the unpredictability of luck— such is life!

In poker, luck will seem to throw the game off course. Balazs notes that we should not dismiss the influence of luck, but manage it thoughtfully. “Luck – and how you adjust your strategy to luck – is crucial in decision-making. You cannot predict how something will play out, but you can create a strategy to handle it well.”

For example, you might start with a strong hand in the game, but the strength of your hand can change as the game progresses. If you insist that your hand is still strong and don’t fold it quickly, you risk losing to opponents who actually started with a weaker hand.

How does this make sense to a business person? You might have a strong product in the market, but the conditions are constantly changing because of competitors, regulators, and emerging trends. If you do not adjust your product to these new conditions, you risk falling out of the game.

This uncertainty can be painful—and taking risks is not comfortable for most people. Balazs artfully designs a high-intensity simulation at his poker table where the pressure is strong and the stakes are real.

This is not your typical training workshop: you are constantly applying a mix of timeless skills while trying to outsmart other players. “I will freeze the game and explain anything that is interesting on the table, and translate it into business: psychology, systems thinking, critical thinking, and risk management. Risk management is a critical part of decision-making.”

Typical pitfalls in decision making: confirmation bias, fallacy of sunk costs

A common behavioral trait that he observes at every poker table is confirmation bias—a symptom which is familiar in all arenas of life from business to romance. This is a handy evolutionary trait: it helps us make quick decisions under stress based on the trail of past patterns.

However, the downside is that we switch off our critical thinking and focus on clues that confirm our assumptions and patterns, thus blinding ourselves to the shifting textures of reality. Needless to say, this can lead to shallow decision-making. “In poker, this is all very visible.” In business, less so.

However, Balazs explicitly draws the connection between poker and business. For example, entrepreneurs can get emotionally attached to their products. (Speak to almost any founder and it is clear that they believe their innovation is the most brilliant thing that hit the planet.) So, when they go through the process of validating the product-market fit, they might design a survey that confirms why the product is amazing, rather than asking questions that unearth less palatable views.

Another fascinating trait that plays out on the poker table is the fallacy of sunk costs. When you invest so much in a hand, you start to feel increasingly resistant to folding your hand even when there is new information that changes the circumstances: we find it hard to let go. This is a serious problem in making decisions for business.

Balazs gives a couple of concrete examples to make his point: when you hire a candidate who turns out to be incompetent, rather than fire them, we tend to invest even more into them by sending them for training.

A bias commonly referred to as post-purchase rationalisation also kicks in where we think of the reasons why we hired them in the first place. When they still do not perform after their training, we feel compelled to train them more, because we have already invested so much into them. The cycle continues. The collapse awaits.

In another scenario, you might have launched a product in the market that does not perform as expected. Rather than letting it go (equivalent to folding your hand in poker), we tend to double down on marketing efforts since we already invested so much into it.

We have to take risks, but they need to be calculated risks

There are many business scenarios that can be related to poker. Balazs makes sure that every poker session is tailored to meet the exact needs of the players–whether they are entrepreneurs, bankers, managers, or C-suite executives. “I believe people learn tremendously when they are having serious fun!” He presents a potent mix of strategy and charisma on the basis that everything is teachable, and everything can be learned, in the same way that he learned to play poker at the inquisitive age of five years old and honed his skills carefully.

He leaves us with this piece of wisdom to chew on: “Taking too much risk is dangerous, but so is taking too little. Poker teaches you the right degree of risk to take in different circumstances. If you don’t take calculated risks, you can’t get ahead: whether it is your personal life or business.”

Feel free to hit up Balazs for a chat.  You can connect with him over email: balazs.fogoly@emberassociates.com

 

Author: Nazish Zafar is a PhD Sociologist who writes for INSEADERS VC.  If you want to be featured in this interview series with entrepreneurs, simply drop a note to hello@inseaders.vc or login and send a direct message!

By | 2017-06-13T22:45:33+00:00 June 5th, 2017|News|