This is a guest post from Texas Holdem Investing.
Steven Begleiter is the latest (ex-)investment professional to hit the headlines for exceptional performance at the Texas Holdem Main Event at the World Series of Poker which starts on November 7th at the Rio Hotel in Las Vegas.
However, there is a twist with Begleiter because his investment background is quite different to past investor participants in the WSOP who have been successful.
The “Texas Holdem Investors” who achieved success (and money) at previous WSOP event finals were typically from backgrounds in trading, fund management, or hedge funds. Here are some examples:
- David Einhorn – Einhorn runs Greenlight Capital and is one of the most successful hedge fund managers of recent times. Einhorn came 18th in the 2006 WSOP and won $659,000 which he donated to charity. The amazing part of the story is that Einhorn had only taken up playing poker a few years previously.
- Bill Chen – Chen is a serious mathematician who works in the statistical arbitrage department of Susquehanna, the poker-friendly options trading firm. Chen won $785,000 in two events at the 2006 WSOP but even with that level of winnings still decided to keep the day job.
- Robert Varkonyi – Varkonyi won the last World Series of Poker Main Event before television coverage of the event became widespread. He studied Electrical Engineering at MIT and then went into investment banking in options trading. Varkonyi now trades options for Gargoyle Strategic Investments which is a hedge fund.
The common theme is that these players usually work in an environment where they are risking at least some of their own capital in a fund where trades are generally made over shorter time frames ranging from days to months, but seldom years. It is easy to make the connection between this type of investment process and poker. Ari Kiev, a respected trading coach, describes the similarity based on the necessity in both fields to make “high probability bets in an instant with insufficient information”.
There is now hope when it comes to poker for the current poor relatives in the financial world – the investment bankers (like the Masked Financier). Many years ago the investment bankers were the heavy hitters of Wall Street, mastering massive merger and acquisition transactions with no capital at risk, until over the last 20 years the traders took over the reins of profit (and capital). And the traders were cleaning up at the World Series of Poker too, even though they didn’t do so well at the banks trading CDOs and similar instruments.
But now along comes Begleiter who worked in corporate strategy at Bear Stearns before he was shunted aside after the forced takeover by JP Morgan. And Begleiter now works for a private equity firm – Flexpoint Ford, where he may well be using the skills that he gained in investment banking (and perhaps poker). As with trading, there are a number of parallels between the process of private equity (and venture capital) investing and poker. Begleiter himself compares the all-in showdowns of Texas Holdem poker to the high stakes bidding wars that often take place during merger and acquisition transactions in investment banking.
The Masked Financier, and all the other investment bankers out there perhaps including The Epicurean Dealmaker, will be rooting for Steve Begleiter at the Rio Hotel this Saturday.
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