Before I got into startups, I used to play poker professionally. I had a successful career, peaking at #2 in the world for tournament play in 2015. Great decision-making requires constructing a defined strategy, usually built on rationality, rules, and mental models. What poker taught me is that sometimes you have to be willing to break those rules and rely on your intuition. As I began to study the craft of venture capital, I realized I would once again be playing with that tension: for myself, as I made investment decisions, and for others, by helping founders when they faced those multi-million or billion dollar decisions themselves.
Let’s rewind a bit and go back to the worst moment of my life.
“I’m all-in.” (At least I think that’s what Jake said. Maybe he just put the chips out. I can’t remember. To this day, it’s still too painful for me to go back and watch the footage.)The last four hours had gone perfectly, culminating with me taking the chiplead in the most prestigious tournament of the year with seven players left. There’s six million dollars on the line for first place. My gut has been screaming at me to fold since the flop (the first community cards everyone shares) came out. Even my decision to give up aggression makes no sense in hindsight other than this uncanny intuition that I was already beat. I don’t know how to explain it to this day, but I knew he had a better hand immediately. By the time we got to the last card and Jake was going all-in, I had the biggest decision of my life in front of me.I had aces and there were only two realistic hands Jake could have that beat me. After the tournament, a few people argued that it was an obvious fold (a lot easier to say in hindsight or with the cards revealed on a livestream!) On the other hand, almost every player who had a similar playing style to me, focused on mathematics and reason, said it was a clear call.My entire body reverberated with pain for minutes as I desperately tried to come up with logical reasons to fold. I couldn’t come up with anything.I said something like “I can’t fold” and put the chips in reluctantly.Jake had one of the two hands that beat me. My dreams of being the Super High Roller Bowl champion evaporated, along with the chance to win six million dollars.
I always tried to play poker rationally. No matter what my instinct was in a situation, I would overrule it for logic and attempt to play perfectly according to theory. The ultimate example of that was in the hand vs Jake where my gut said to fold, but everything about the way I viewed the world ensured that I would not.
“Learn the rules as an amateur so you can break them as a professional.”-Picasso
In poker, the way we used to delineate players who relied on their intuition was to call them “feel players.” This could range from amateurs who knew nothing about strategy to highly decorated players like Phil Hellmuth. Most players start out with some basic strategy combined with gut instinct. As they move up the ranks, their strategy continues to improve and they tend to rely less on feel. They have default hands they specifically open from each position. They develop strategies for certain board textures and learn how to categorize hands that need to be played a certain way. Eventually, at the highest stakes, they may even develop a strategy derived from running millions of simulations on a computer. This process is vital and necessary to becoming a top poker player.
But if everyone is using the same tools, what separates the best from the fifth best? Or twentieth best? Is it superior reasoning ability? Is it a better handle on their emotions? Is it just running more simulations or ‘working harder?’ Amongst the ultra-elite, what makes the difference?
Fedor Holz was the best tournament poker player I’ve ever played with. I have no doubt he would’ve continued to dominate the high-stakes scene had he retired to pursue entrepreneurial ventures. What made Fedor special was how he lived at the boundary of reason and revelation.1
Fedor had an uncanny knack for knowing when to deviate from what was “objectively” the correct play. More important than just the intuition was the willingness to follow through with his instincts. He’d make crazy bluffs, absurd folds, and surprising calls in some of the highest-leverage spots of the tournament. However, he wasn’t a pure “feel player” by any means, grounding his default play in solid theory.
What made him different from the amateur who “knows the guy has it?” The difference was Fedor had honed this intuition over millions of hands. He’d played in repeated high-pressure situations. The first time anyone is put in one of these spots, I wouldn’t trust their instincts. Too many other factors are involved: fear, anxiety, hope, and the surreal stakes of millions of dollars on the line. However, when someone’s been in situations like that over and over and they can tune out the nerves, the gut becomes more reliable.
It’s an extremely risky game. When you rely on reason and execute the ‘standard play,’ no one can ever really fault you. It’s safe. It’s logical. You have 101 reasons why you should do what you did. The dichotomy lies in this: unless you’re truly world-class, you actually should stick with what the rules tell you. As a corollary, if you always stick to the standard play or what your peers think is ‘obviously correct,’ you will never be world-class.
Similar to poker, venture investing is centered around decision-making. It’s not a coincidence that many VCs analogize the business to poker and often play the game too.
In the early-stage venture game, players like to describe themselves as “contrarian” with differentiated thinking from the herd. They are looking to be “non-consensus and right to deliver excess returns.”
It’s interesting what people will claim as their ‘edge’ or ‘superpowers.’ Some will talk about how smart they are, how hard-working they are, or how persistent they are. Some will cite the podcasts they listen to or newsletters/books they read. Reading Stratechery is not an edge. Reading Stratechery, just like being smart or hard-working, is table stakes. Valuable resources or traits to be sure, but the bare minimum you need to enter the playing field. And what counts as table stakes is an ever-expanding circle: today’s edge is tomorrow’s common knowledge. The whitespace for independent thinking always lies beyond the edge. If you rest on your laurels, you will be passed.
If the goal of being a great early-stage investor is to be “non-consensus and right,” what separates the best from the merely good or great has to be something beyond pure reasoning ability. If one can merely reason through the decision to deduce that a company is a great investment, someone else will also figure that out. In fact, most ‘obviously’ good deals are hot for a reason. At that point, making the investment is simply about access and brand.
The opportunity for some of the best, and most outsized, venture outcomes comes from being able to rely on intuition in spots where the logical mind can’t make sense of it. When Fred Wilson met Coinbase at YC office hours, Paul Graham told him every other investor hated it. Instead of this scaring him off, Fred trusted his instinct that the founders were onto something special. When Snap was pre-revenue in the nascent/non-existent market of ephemeral messaging, Peter Fenton relied predominantly on his intuition about the quality of Evan Spiegel as an entrepreneur. Sometimes what can make something contrarian is the price: everyone knew Facebook was a monster, but few wanted to pay the price.
At the early stages, no rational analysis or financial model can effectively capture “what could go right.” If you sat in on a pitch meeting for UberCab, a black car business in San Francisco, you may have calculated a rather small market size. What the investor instead needed to be attuned for was Travis Kalanick’s clarity of vision and the limitless possibility of the company he could build.
This is hard to hear for some of us who love rationality and the false precision that can come from it. I’m sure many who read this piece will strongly disagree with me. What I’m arguing is that at a certain level of excellence, you can trust your intuition in the biggest moments, precisely when your logical brain is telling you something else. I believe this the key to being absolutely world-class and separating yourself from your competitors.
This is a lesson I learned the hard way in poker, but I’m excited to apply it to my journey as a venture capitalist.
The interesting thing is that in venture, this is totally not relevant to me yet. My ‘instincts’ are probably bad! I don’t know what a world-class founder really sounds like other than a few exciting meetings and YouTube videos. Paul Graham can meet an entrepreneur today and decide within seven minutes if this is a type of founder he would like to back. If I used the same ‘heuristic,’ I’d likely have a high rate of misses. This intuition can only be honed over thousands and thousands of reps. This remains true even though I have an extremely good understanding of human psychology and makeup from my years of playing poker at the highest stakes. I may be starting off from a good place, but there’s years of apprenticeship and learning ahead.
I’m excited to bring my knowledge about decision-making and strategy frameworks to help the founders who are building some of the most important companies of the future. Founders are faced with monumental decisions on a recurring basis that can change the trajectories of their companies and lives. And unlike VCs, they don’t have the same portfolio of outcomes to spread their risk. Working with founders closely, helping them to be the absolute best decision-makers they can be is a humbling and invigorating opportunity.
This is why I’m thrilled to announce I’m joining Susa Ventures as Leo Polovets’ Chief of Staff. Susa was a seed investor in extraordinary companies like Robinhood and Flexport. Leo is an amazing investor, but even more importantly, a kind and thoughtful person. Joining the Susa Family is a dream come true and I feel incredibly blessed.
As I look to the coming years, it’s clear to me that this is one of the ripest opportunities in decades to create massive economic growth.
The Soaring Twenties beckons.
If you’re one of the founders who’s similarly excited about the future and the promise of technological innovation, reach out to me at pratyush [at] susaventures.com Susa looks forward to partnering with you to build the future.