Gamblers' secret of success: Managing Risk Planning, not luck, crucial to winning

By JUDY DeHAVEN
Newhouse Service

Nearly three years ago, after Kirk Kerkorian's MGM Grand bought Mirage Resorts, Bobby Baldwin, then Mirage's chief financial officer, found himself across the table from the reclusive billionaire businessman.
Kerkorian wanted to know: Was Baldwin, a former professional poker player who won the World Series of Poker in 1978, more apt to take chances than an executive who has never had to risk his own money?
" I said, 'Playing high-stakes poker isn't about taking risks,' " recalled Baldwin, now president of the Mirage Resorts division of MGM Mirage. "It's about managing risk. The risks are unavoidable. You either confront them or avoid them.
" In a poker game, you have to have an excellent understanding of the statistics and the return on investments, just as you would a business," he said. "A business is not one giant investment. It's millions of small investments. Each one of them has their own associated cost benefit."
Baldwin, who still plays poker several times a month and has won and lost millions of dollars at a time, said Kerkorian understood.
" He likes to bet on a few things from time to time, not to mention his famous acquisitions of various companies," Baldwin said.
Indeed, gamblers say they have learned a thing or two at the casino about how to be successful in business. Winning, after all, isn't just about having Lady Luck on your side. People who regularly wager substantial cash or who have made a living playing poker, backgammon, blackjack or sports betting have had to learn to manage their money, ride through losing streaks, calculate risks and change strategies.
And most approach everything they do outside the casino as if it were a game. "Life itself is a gamble," said porn magazine mogul Larry Flynt, a high-stakes poker and blackjack player who owns his own card room -- the Hustler casino -- in California. "I'm a no-nonsense sort of businessman," Flynt said. "I'll play cards the same way. I take it very seriously. I'm not there to lose, and I want to win in business as well."
Here is how gamblers have applied their skills in the business world:
· Calculating risks. Anthony Curtis, a professional gambler-turned-publisher, said he carefully assesses the risk of every move his Las Vegas company, Huntington Press, has made since he started it six years ago.
" You can almost always put a probability on a result -- that's what players do," Curtis said. "I do that in business. I do it in life.
" I literally put a number on my chance of success every time we make a move," he said.
" I rarely will hire a new person without concocting a gigantic spreadsheet of costs and probabilities and what it will do for us. Everything is based on a mathematical model."
· Taking risks.
Once gamblers assess their chances of success, Curtis said, they are more aggressive in pursuing what they want in business than non-gamblers are. "You're not afraid of (risk) and you don't back off," he said.
Richard Munchkin, an author who interviewed eight gambling pros for his book, Gambling Wizards, said it is not just that gamblers don't fear risk the way others do. They also seem to bounce back from a loss more quickly than the average person, he said.
" They are willing to go out and stick their neck out and try, and if they go broke, they dust themselves off and start over again," Munchkin said. "They're not afraid of that. They've all experienced it. Even the most successful gamblers have losing days.
" If a sports bettor can win 55 percent of his games, he can make a lot of money," he said. "But he's still losing 45 percent."
· Changing strategies.
When gamblers start to lose, they are more apt to dump their strategies and try something new. They are also more willing to change tactics to seize new opportunities, Curtis said. "Early on, when a company is in a dynamic position, it has to be very guerrilla-like," Curtis said. "It has to be willing to stop, change directions and seize an opportunity. I think gamblers who go into business are very, very adept at maximizing situations as they appear."
Baldwin said the key is to have a well-thought-out plan.
" Professional players don't go into a card game without a game plan," he said. "The plan is strategic, but you have to respond tactically. Decisions change. People, when they are winning, play differently than when they're losing."
· Money as a tool.
Curtis said gamblers see money as a "means to an end," whereas non-gamblers see money as a way to get perks.
" A lot of businesspeople will see money in a traditional sense," Curtis said. "I think gamblers and game players look at an influx of money as a bigger hammer and a better tool."
Munchkin gave this analogy: "If you were an auto mechanic and someone said, `Can I borrow a wrench?,' you'd give it to them and expect them to return it.
" For gamblers, that wrench could be $25,000," he said. But they think of it as a tool. It's just chips. They're not thinking, `Well, if I had $25,000, I could put a down payment on a house.'
" The real end-all is not the money."
· Money management.
This is the mantra of pro and high-stakes gamblers -- learn to manage your bankroll. Flynt said he used to wager millions at a time: His biggest win was $4 million at blackjack and largest loss was $2.5 million. Now he puts a $500,000 limit on his wins and losses.
" It took me a long time to realize that money management is as important as your ability to play cards," he said. "When I go to Vegas, if I lose a half-million, I quit. If I win a half-million, I quit."
Baldwin said the same philosophy should be applied to the business world. "Just like a business, you don't want to be undercapitalized or too highly leveraged," he said.
· Playing the stock market.
When longtime professional gambler John Patrick plays blackjack, he uses what he calls his "regression system." His theory is you need to win only one hand to be in a no-lose situation.
When he bets, he always starts with a wager that is higher than the table minimum. When he wins, he takes half of his profit off the table, plus his original bet. For example, if he is playing blackjack at a $5 table, his initial bet will be $10. That way, if he wins, he'll take $15 and leave $5 on the table.
" I go up and pull, up and pull," Patrick said. "If I lose, I'm still ahead and I start all over again."
The key, Patrick said, is not to win big, but to protect yourself from losing. The same could be said in playing the stock market.
" People don't have the guts to sell their stock," he said. "The key is to take back the investment when you have no risk. People leave their money at risk. They want so bad to win.
" It doesn't matter how much you win -- it matters how much you lose," Patrick said. "I tell them, `Stop losing.' "