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MarketFlick Insights
At a glance
- •Risk calibration taking the right risk at the right time with incomplete information is more useful than blanket risk aversion.
- •Investing and poker both require probabilistic thinking: decisions should be based on expected value rather than guaranteed outcomes.
- •Behavioural biases like overconfidence and decision fatigue distort investment choices and can reduce returns.
- •Research suggests women trade less and have slightly higher average returns, reflecting selectivity rather than mere caution.
- •Training tools like poker can help traders separate emotion from decision and focus on disciplined conviction.
- •The industry should reward the quality of decision-making over the appearance of decisiveness; minimising losses is as important as capturing gains.
Judgment under uncertainty
Investing still speaks the language of risk: who is bold, who is cautious, who is risk averse. But that framing is blunt. A more useful distinction is between risk aversion and risk calibration the skill of taking the right risk at the right time even when information is incomplete.
Most consequential investment choices are made without perfect clarity. Decisions come under pressure, with partial evidence, shifting signals and the constant possibility of being wrong. In that respect, investing resembles poker more than many in the industry will admit.
Poker is a game of statistics, not certainty. Strong players do not wait until they know the outcome; they act on probabilities, position, momentum and the behaviour of others. They recognise when a weak hand should be folded, when a strong hand should be pushed, and when table dynamics matter more than the cards. Investing works the same way. The best outcomes rarely come from eliminating uncertainty; they come from disciplined choices made despite it.
Biases, conviction and the costs of misreading risk
Behavioural finance helps explain why investors so often misread risk. Under pressure, people fall back on shortcuts: decision fatigue, limited attention and overconfidence distort judgment. Research from Berkeley found that overconfident investors trade more frequently and earn lower returns. NBER studies of analysts and investors show that these cognitive biases shape real-world decisions, altering how people process information and how quickly they react to it.
Gender-based studies add nuance. Research led by Neil Stewart found that women traded less frequently and achieved returns about 1.2 percentage points higher than men on average. The findings suggest not simple caution but selectivity: a higher threshold for conviction, clearer criteria for when a risk is worth taking, and less inclination to confuse activity with progress. Other work argues that the belief in large gender differences in risk attitudes may outstrip the evidence, but the performance gap attributable to trading behaviour is notable.
The costs of misreading risk are obvious in both poker and markets. Overcommitting to marginal positions is expensive, as is failing to act when the odds favour you. Investors often hold weak positions to avoid admitting mistakes, or they add to mediocre ideas to avoid the discomfort of changing course. Conversely, fear of being wrong can prevent action on clear opportunities.
Practical lessons for investment teams
Pokers value to investors is that it makes these errors visible and practiceable. Firms such as Susquehanna International Group (SIG) use poker in training programmes to help traders learn to separate emotion from decision, manage ego, and focus on expected value rather than outcome. New hires at SIG spend substantial time playing poker as part of trader development; the exercise is a safe simulation for recalibrating risk, learning when to walk away, and distilling strategy from emotion.
Conviction, in this framework, becomes a discipline rather than a personality trait. In poker, conviction is a function of expected value; in investing it should be the same. Conviction is not a licence to ignore risk but the willingness to commit when the evidence even if incomplete supports the move. That disciplined conviction also requires humility: recognising when to cut losses and when to let winners run.
The industry would benefit from rewarding the quality of decision-making rather than the appearance of decisiveness. A noisy, high-profile bet is not inherently superior to a patient, well-timed one; often the reverse is true. Poker teaches that the most costly mistakes are not failing to convert strong hands but failing to minimise losses staying in the wrong hand for too long because of emotional attachment or ego.
Investing is not a test of who feels least afraid. It is a test of who can separate signal from noise, act with discipline and calibrate risk intelligently. That is the practical, enduring lesson poker offers to wealth managers and traders alike: better judgement not more data or louder conviction is your true edge.
Jo Living is founder of Aces High.
