I do remember when I was learning poker strategy, and I learned about the idea of wanting to get your entire stack in the middle preflop if you can get paid off with AA—was a very fundamental lesson to young me! That said, there’s a key insight that goes along with the “pocket aces principle” that is missing here, and that’s bankroll management.
In poker, there is standard advice for how much money to have in your bankroll before you sit down at a table at all. E.g, for cash games, it’s at least 2000 big blinds (20x the largest stack you can buy). This is what allows you to bet all-in on pocket aces—if your entire bankroll is on the table, you should bet more conservatively. The point of bankroll management is to allow you to make the +EV play of putting your entire stack into the middle without caring about the variance when you lose 20% of the time.
To apply this metaphor to real life, you might say something like “Consider how much you’re willing to lose in the event things turn out badly (e.g, a year or two on a startup, six months on a relationship) and then, within that amount, bet the house.”
(To make slightly more explicit for folks less familiar with poker, there’s a distinction between what you’d consider your bankroll—your money allocated for poker across many sessions—and the amount you’d buy-in for in a particular session. You likely wouldn’t want to buy-in for your full bankroll in a single session (if you even could) because the risk of getting fully wiped out is too high. If your bankroll is lower, you should be playing at relatively lower stakes to reflect this.
These ideas are also related to the Kelly criterion of bet sizing / bankroll management in gambling more generally.)
I do remember when I was learning poker strategy, and I learned about the idea of wanting to get your entire stack in the middle preflop if you can get paid off with AA—was a very fundamental lesson to young me! That said, there’s a key insight that goes along with the “pocket aces principle” that is missing here, and that’s bankroll management.
In poker, there is standard advice for how much money to have in your bankroll before you sit down at a table at all. E.g, for cash games, it’s at least 2000 big blinds (20x the largest stack you can buy). This is what allows you to bet all-in on pocket aces—if your entire bankroll is on the table, you should bet more conservatively. The point of bankroll management is to allow you to make the +EV play of putting your entire stack into the middle without caring about the variance when you lose 20% of the time.
To apply this metaphor to real life, you might say something like “Consider how much you’re willing to lose in the event things turn out badly (e.g, a year or two on a startup, six months on a relationship) and then, within that amount, bet the house.”
(To make slightly more explicit for folks less familiar with poker, there’s a distinction between what you’d consider your bankroll—your money allocated for poker across many sessions—and the amount you’d buy-in for in a particular session. You likely wouldn’t want to buy-in for your full bankroll in a single session (if you even could) because the risk of getting fully wiped out is too high. If your bankroll is lower, you should be playing at relatively lower stakes to reflect this.
These ideas are also related to the Kelly criterion of bet sizing / bankroll management in gambling more generally.)