We are inherently risk-takers. If we don't take risks, we don't make money. In my seven years reporting for the Wall Street Journal, countless traders and investors have brought up the game of poker, telling me that the game has actually taught them a lot about investing. One of the biggest and most successful trading firms out there, Susquehanna International Group, actually uses the game to train its traders. Yeah, I know. So this year, I decided to learn the game and invited Susquehanna executive Todd Simpkin. Thanks for having us, and Jeremy Ween, founder of Moot Point Capital Management and a long-time poker player, Jeremy Wein is your champion to the Wall Street Journal studios to play a game of no-limit Texas hold 'em. The only thing at stake was our pride. So let's get started. Susquehanna uses poker to train its traders. Tell me a little bit about that. There are a lot of parallels between poker and trading.

There's the difference between making the right decision and having the right outcome. So even if you made the right decision, sometimes you lose and sometimes you make the wrong decision and win. Both happen at the poker table and in trading; you have to get comfortable with the variance in your outcomes. Poker has helped you think about risk and how much risk to take in certain positions when you're trading. Absolutely. Absolutely. I mean, poker came first for me. It taught me patience because I was not a patient child and risk management. The very first hand of poker that I ever played in no limit in college. I had pocket twos, which is, I was like, oh my God, I got a pair. I thought that was so good. When we perceive ourselves as being in the losses, we are willing to do riskier things to get back to even. You'll see the same thing in the market where people will chase losses because they're in the

In the mindset of being in the losses and wanting to get back 100 more than 150, I will fold. And this is like a 32nd comment on this hand if that is. So this would be, in my view, the equivalent of buying a really inexpensive option. I was already in for 50. You raise it 100 more in the context of our stacks. That's not a lot. If I hit my set, if I hit another three, it's unlikely. But if I do, more than likely I'm going to win. Not just the pot, but probably a big pot, or at least something more than that. And if I don't, it's just very easy for me to fold. And so, you know, whether it's in an index or in a stock or a currency or whatever, you buy a really low delta, low premium option. Um, you know, again, spend a little premium, that's your max loss.

But if things go your way, you can really make a lot. I like how you put that and an inexpensive option. This is what I had. Yeah. So it was good. That was a good buff. I thought you were ahead of me. Raise a 375. I might have an exciting hand here for the first 375 check in the race six morning. So I have hock and kings there. And so my, that's the kind of hand I thought you had. So my thought process was that first of all, if you have a hand like pocket tens or jack or queens and we get a low flop, I'll get more from you. The flop is this which players use to gauge the strength of their hands? And also if I re-raise there and you have a hand like ace queen and you call and an ace comes on the flop, I probably have to fold. Maybe I pay one small bet. And so again, this is kind of a risk-reward perspective,

you know, kind of concept is let me keep this quick call, pot control. Let me keep the pot a little smaller and see what happens. Are there parallels between bet sizing and trade sizing? To me, this is like the two most important things, especially between tournament poker and, and, and, uh, and trading our patients and bet sizing. Right. And you know, if you've got pocket aces, you don't want to have your life savings at risk a 4 to 1 favor because one out of five times you're bankrupt. And the same thing goes in trading, you can, there could be a great trade, but I promise you can always go to a warps scene level. And so you want to make sure that, you know, that you're not in a position where if it moves against you more than you think that you are, you know, stopped out, you know, blowing up whatever you want to call it where,

you know, where you're done. If I were to join as a new trader tomorrow, fresh out of college, what would I go? One? We'd love to have you. We spend a lot of time talking about the basics of poker, but importantly, in a situation like this, we would get to a point where you might have a difficult decision and we'll stop and talk about all the things that would factor into that decision. But frequently what we have to do in trading and what we have to do in poker is put somebody on a hand or put them on a distribution of hands, try to figure out what they might be thinking what given the actions that they've taken. So, if you were to check here, um, and then I bet. What, what have you learned about what I have if you bet and I raise, you learn something very different about what I have. Um, and we talk about kind of the value of the information and the quality of the information that you get in a poker

hand and in trading. And there's certainly some things that are very different in trading and in poker. It's not a perfect model, but it's a very good model for making decisions with information. If someone's not a good poker player, are they fired? No. Um, being a good poker player is a constellation of skills, and what we wanna talk about are how to improve the skills where they're deficient and how to take advantage of the skills where they're strong to make sure that they continue to hone those checks. Uh, I'll bet 100 and 25 on call 225. What are the biggest mistakes? You see rookie investors making one of the dangerous things? And Jeremy alluded to this earlier is assuming that whatever the current state of the world is, is going to be the future state of the world that we're going to continue seeing. Well, what we've seen with every basis trade that has blown up in the history of the markets.

Right. You know, you don't have to go back terribly far to get to the financial meltdown in the late aughts to see the trades between credit default swaps and underlying bond prices, which would normally move within maybe two basis points. You would fade the move if it got to five basis points, and then it blew out to 30, 40, 105, 100 basis points. It was like, This is not a normal situation, and it is entirely because too many people thought that the tie between these two assets could not be broken. About 50. And what about in poker? Because there is so much noise in poker, it's really easy to walk away and say that I don't have enough skills to be able to evaluate how well I played when I won. I must be really good. I should keep doing what I was doing. And when I lose, it's because I got unlucky. Like, you know,

I can't believe, you know, if that club hadn't come, I wouldn't have lost all my chips. Like, well, you didn't have to lose all your chips. You only lost it because you put in the call after that club game, right? So the combination of the self-serving bias and Dunning-Kruger effect, I think leads people to not do a good job of critically evaluating their skills. The best players in the world spend the most time, you know, analyzing their hands, and not just because that's how they're improving, but they're predisposed to know that they might be doing things wrong and want to improve that and think about that, where it's like the person who just plays casually and they're sitting at the end of the bar telling about their bad beat, they're just less likely to, as I said, you know, less likely to think that that was the reason. I love being at a table with people who are talking about their bad beats.

That's, it's such a great indication that they are not going to take the feedback appropriately from the table. What do you mean by that? So if they're talking about their bad beats, they're saying here's how unlucky I got as opposed to, you know, maybe I made a mistake. They don't have the humility and for the introspection to say, you know, uh I'll bet 500 to say here, here's the feedback from the marketplace that, that I was not playing as well as I could have been playing. It's not a good use of time because even if they, they probably did get a bad beat, they probably did get unlucky. It happens, it happens every single time you sit on a table. Uh it's just not gonna, it's not gonna benefit you in any way 2000. Do you want to hear about my bad beat? How do you think about ego at the poker table? If someone lacks humility,

they are going to miss important information. I love playing with the big ego player. They are going to undervalue you and like, and, and I want to be undervalued. So I really like it when someone thinks that they can push you around because thinking that they can push you around is going to expose themselves at times when you want to get more chips in. But you also have to be careful because someone, you know, that person may be less likely to fold, even if you, you know, think that they're bluffing or you have a, you know, a pretty good hand, you may not wanna, you know, re-raise them because they may go all in. And so just to be careful with those people and, and again, if you're taking that information and you're making use of it, you're doing, you know, you're doing the right thing and making use of it doesn't necessarily mean that, that you'll be able to take advantage of it right away or,

or, or that you have to, that you'll be more aggressive, one more path of it. It just depends on right. It does mean that you have an opportunity to change the way you play against that person. And anytime I have an opportunity to play differently, it's because there's an advantage to playing differently. And I like that. Turn over a bluff, please recheck your cards and throw on a bet. Let's just say a bluff. You're bluffing with the best hand. It comes from some sort of cultural underpinnings of the firm, which is that we are inherently risk-takers at the end of the day. If we don't take risks, we don't make money. It is really easy to play poker in a game without a rake, in a game without blinds. It's really easy to play poker and never lose, which is that you never play a hand, right? But that is not a really good way to win at playing poker.

So we are inherently risk-takers, and importantly, in order for us to take risks, we have to take risks at the appropriate price. Whether we're long or short, we have to be buying it under its fair value, its expected value, or selling it over its expected value. And the other thing that really comes out of poker is that in any single session, and certainly in any single hand, it is not going to necessarily be the best player that won that hand, right? It is entirely, almost entirely down to the quality of the cards that you have on a single hand. There's a little bit that's not in the quality of the cards, but for the most part, it's the cards. So then over the length of a session, the cards kind of even out over time. But even then, it's the variance that comes from the randomness of the way the cards turn out over the course of a lifetime, a career of playing. It is certainly the case that good players come out ahead, and bad players have lots of

excuses about bad beats that they've had lots of stories about why it's not their fault, but they ended up not winning. Our philosophy is to get our traders to make positive expectancy decisions where they're putting capital at risk and getting inappropriate return on it. And if we are good at doing the evaluation, which is an important part, and then good at managing the bank role on when there are big opportunities to put capital at risk, then we're going to come out ahead. And are you using that framework in all the different markets that you guys are at? I know you are providing odds to sports books and applying for sports gambling licenses. Um. We've talked about how you entered the event contract market. Is that the same framework for every market or does it vary? It is absolutely that framework, and sometimes there are um exogenous factors to that we have to consider. You know, we can lose, you know, X million dollars, and that would have an impact on your solvency and your ability to support the markets that you

support. So we want to make sure that you limit that. Susquehanna has gotten into. Yes or no bets. And you know, I think the most popular example is like yes or no. Will Taylor Swift be the top artist on Spotify this year? Yeah, that's on, on Calci. We are providing liquidity on, on Calci event contract, binary event contract. Well, it's so interesting because we talk about poker, and the reason some of these skills are transferable is that it's a game where you have to navigate having incomplete information. And that's a scenario where it seems like to me, there's even more incomplete information than there typically is. So how, how do you navigate that? So there is a lot of incomplete information, but then just like in poker, there's also a lot of common information. It is not that hard to see how many concerts she has had and how many, yeah, back out how many unique visitors you think there are to her concerts.

It's not that hard to see video clips from the concert and see how many people are singing along. In order to sing along, you have to have heard the song before. In order to have heard it before, you must have streamed this couple 100 times, right? So it's like, okay, we can start figuring out that given when she's released her albums or, you know, whatever it might be, how many people have listened to it up to now, which is again a publicly available figure. And then we can look at who's expected to release albums over the course of the rest of the year, how popular they've been historically, how, you know, if they are touring, you know, kind of what their tours look like. So there's a lot of common information that's available as well. One thing that doesn't happen in the event space with Taylor Swift being number one on the charts that does happen in poker is that somebody else

has really relevant nonpublic information, and I'm not saying this in like an insider trading way, but Taylor, no, no, I'm saying there's not, that doesn't happen in that market. In that market, it's not like somebody is sitting there saying, I know that Ariana Grande is about to drop a banger of an album that is guaranteed to be better than Taylor Swift. That's so interesting. Hadn't thought of that actually being an advantage rather than a disadvantage. They are making the best decision that they can with the information that's available, and they are doing it in a way that is going to be efficient with their time. So it could be that even though this is a fun contract to talk about, that the amount of money on either side of it on CCI is, you know, $8, and we don't want to invest in having somebody, you know, read through the lyrics to see if there's something in there that's gonna,

you know, really give its staying power. Love it, Jeremy. When you're in tournaments, do you do the sunglasses? The hat? I, I don't think sunglasses do anything. Uh, I don't want to be constant, like reading someone's eyes. I'm not a big fan of, I, I do wear a hoodie that I, I pull up, and at this point, it is totally useless. You probably haven't noticed this because you've been looking down at your cards, but every time I've been in a hand with you, I have not looked at the flop. The flop will still be there after it comes. I've watched you watch the flop. I think that I'm going to get less information from Jeremy watching the flop because he's seen more of them, like he's just, you know, but I think that I'm going to see, and this isn't, this isn't an assault, right? Like this, like I should be paying attention to the,

the idiosyncratic aspects of the people I'm playing with. I think that you're more likely to give up information about how you feel about the flop physically. When you see it, then Jeremy will. So if the two of you were in a hand with me, I'm gonna watch you, and when I'm watching you, I'm watching you watch the flop, I get to see your reaction. So like there are things that you end up being good at without knowing why you're good at them. Um, so like it could be that I pick up on something in the eyes, and I don't even realize that it's in the eyes. But if I don't have that pathway, then I can't, I can't have made that decision. To me. It's, it's not as much about, kind of like quote unquote reading people when you think of that as physical tells as it is about psychology and, you know, some things and for yourself,

I mean, for me, the biggest tournament strategy I have is building up a certain image for myself. And then trying to capitalize on that. Playing 10 to 20 big blind poker is so important. You're almost never going to be able to win a tournament without at some point, I, you're almost never going to be able to, to, to it without being down to 15 or 20 blinds at some point. And if you panic, uh that's not good, but you still have to be taking risks. You're going to have to pick some spots to, to, to go all in and knowing that if you get called, you will be behind. Um, you just have no choice when you, when you're short of ST and, and knowing how to do that and when to do that is its own skill. And I can say personally, that was a big step function up for me in, in results. When I really learned that right around 2017,

I was, I think, a decent poker player before that. But my live tournament results just got a lot better after I really got better at that aspect of tournament poker. Um, ok. It's called, ok, ch, and you can use that to your advantage too. You think that the person with the bigger stack always has the advantage? But they don't want to be there. No, we would have chopped, we would have chopped. We're both of a king. Uh, 10, 9. Uh, but, uh, but I folded the all-in on your, uh, on the last one was, uh, I was, I want to know what you had a, I had a queen jack suited around a big, yeah, I know. But it really good. Now, if you wake up with a big hand and do it, you're more to get called and, yeah, exactly. Right. Like, like here, here's where you're really hoping for pocket kings toward the end of the game.

I started picking up chips and feeling bold. There are a lot of amateur players against whom I won't bluff because the bluff isn't going to do what I wanted to do. The sooner you realize that, the better. You are cool. Oh, there's the kings though. Yeah. But my bold bet didn't pay off. Ok. I bet all of my chips and ended up losing to Todd, who had a full house. That left me with nothing. But what I learned, of course,

I Played Poker With Top Wall Street Traders. Here’s What I Learned. | WSJ

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