Why Bad Outcomes Don't Always Mean Bad Decisions (The Poker Principle)

One of the most lucrative sponsorships that April and I ever landed was with a pharmaceutical brand for $50,000.

We forged the deal via the brand's advertising agency and developed a great relationship with them throughout the partnership.

So, when that agency returned to us six months later with a new opportunity for a different pharmaceutical brand, we ensured that our proposal included options around $50,000.

Unfortunately, the agency informed us that this campaign's maximum budget was $7,000, so we politely declined.

It'd be easy to kick ourselves for overbidding so drastically, but given the Statement of Work and previous price precedent, it was the right decision to anchor our packages around $50,000.

Annie Duke, former professional poker player and author of Thinking in Bets, defines this tendency to evaluate the quality of our decisions based on the outcomes as "Resulting."

It's common to have a great outcome and laud yourself for making a great decision. However, how much of it was good luck or good timing?

Similarly, bad outcomes don't necessarily stem from bad decision-making.

To be clear, walking away from $7,000 sucked, but we didn't lose sleep over it since it was the right call (and we maintained our future pricing power).

Duke also posits that life is much more like poker than chess.

In chess, all information is accessible (you know the positions of your opponent's pieces at all times) and there's very little luck involved (other than your opponent's errors).

However, in poker you're dealing with incomplete information (your opponents' cards) and quite a bit of luck (the cards still in the dealer's deck).

When a sponsorship negotiation fails, remember that a brand rarely turns over their poker hand and tells you why they're passing.

While you should still be introspective and analyze how you can improve on the next negotiation, don't abandon a good strategy if you conclude your approach was sound.