To those who are willing to listen (not that many, mind you
), I often make the comparison between a professional poker player and a hedge fund manager-- both take calculated risks based upon their knowledge and estimation of the underlying mathematical probabilities of the particular transaction (whether that's your chance of making a hand and the pot odds to justify it, or something like the likelihood of spreads widenening on credit default swaps of sovereign debt, with FX derivatives to magnify profit potential based on your view of the appreciation prospects of an underlying currency), as well as an assessment of other external influences (be that the psychology of the other players or the psychology of the market).
Here are the key differences I see:
A professional poker player probably gambles in the tens of thousands, perhaps up into the millions of dollars; a hedge fund manager gambles in the tens of millions, perhaps up into the billions of dollars.
A professional poker player typically must fund his stake from his own resources; a hedge fund manager raises equity money from others, then typically leverages that stake 10X or more with additional debt.
If a professional poker player bets wrong, or the result is not as was predicted by the odds, he loses his stake, but hopefully his losses are limited to himself; if a hedge fund manager bets wrong, the market recoils, and little old ladies can lose their retirement (i.e., some of the biggest hedge fund investors are state pension funds).
Now I don't climb on this soap box to say hedge fund managers = bad/evil (despite the market turmoil and crippling losses of the last few weeks because of how so many of them bet the wrong way on sub-prime mortgages), but to illustrate that the two professions are not that fundamentally different.
Nonetheless, the same people who would look at me with scorn and derision if I were a professional poker player would probably gaze at me with wonderment and awe if I were a hedge fund manager. The barriers to entry might be vastly different, but IMHO the underlying mechanics of the position aren't so much. Success in both are based predominantly on skill, but can be significantly impacted based on the luck of the gamble that you happen to be placing at the time.
[/rant]
bjjensen
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