Dan Smith on Poker Players Making Investments

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Dan Smith’s reputation as a poker player with a charitable heart is second to none, and he is a keen investor too.

In an age where the perception of poker players has changed markedly, how players look at their own future is changing. There was a time when poker players would have a bankroll and a ‘life-roll’ and would plot out a course of action tailored to improving both. From tournaments to cash games, bricks and mortar to buy-ins, poker players had a much more linear method of reinvesting their hard-earned money.

In the modern age, however, poker players who reach a certain level are now far more aware of investment being key to improving their bankroll and improving their lives. One player who has taken it to the next level and improved countless others lives is Dan Smith. His charity initiative, Double Up Drive, has raised over $24.7 million for highly effective charities since 2014.

Sitting Down with Smith

“If I ever needed it, I’d be able to have it within a couple weeks.”

We began our conversation with him by asking about how a poker player who has achieved in the game goes about investing their money outside poker.

“I don’t think that it works in such a way where once you get to ‘x’ amount of dollars, you can start investing,” he says. “I think you want as much of your capital working all the time as you can. Money that’s just sitting there in a checking account or in a box is going down in valuation. As time goes on, I would put more and more money aside. I try not to cash it out unless I have a very good reason to.”

Smith is mindful of the fact that losing years in gambling don’t carry over and you can’t write off expenses, so ‘ensuring that you unlikely have a losing year is your first concern’. That automatically affects what each player can gamble and then, as a consequence, invest.

“Specific financial situations dictate how you manage your bankroll quite a bit,” says the man currently in 7th place on The Hendon Mob’s All Time Money List. “If you were still at $5/$10, the way you should manage your bankroll is very different to being pretty wealthy and trying to grow your wealth further. I have mostly tried to have as much of my money working as possible in liquid [investments]. If I ever needed it, I’d be able to have it within a couple weeks.”

As Smith says, no player ever wants to be in a situation where they’re short of money. It can take a psychological toll.

“It depends on the games you play, but if you’re a $10/$20 regular, you don’t ever want to think about having enough to be playing if you have a losing day. Generally, if the game in your casino is $10/$20 then gets kicked up to 25/50 on any given day it may well be because the game has got better than usual. Gambling on yourself in a good cash game is likely going to outperform any investments you can make.”

Dan Smith praying
Smith is a former WPT champion and sits in the top 10 of the all-time money list for tournament winnings.

A Fantasy Made Real

“At this moment in time, I don’t think the state of the poker game is stable.”

Smith doesn’t see his charity endeavours and the growth of wealth as conflicting things. He apportions so of his money to charitable donations just as does in investments and spending money. The first time he ever made a large charitable donation, it was down to a very different kind of gamble.

“I was playing high stakes Daily Fantasy Sports (DFS) and in this week I was wagering $120k,” he describes. “The big question that week was whether or not to play Jack Doyle, the back-up Tight End of the Colts. The starting Tight End was ruled out, so he was going to get a lot of looks for bargain pricing. I just decided I didn’t see much of a reason to hedge [with another player] and played him in the whole $120,000. I reflected that I could lose the whole $120k which would and objectively nothing would change. That inspired my $175,000 charity donation. If I donated that, I got some degree of tax break, so it got me to that $120k number.”

As Smith says, everyone’s situation is going to be quite different and others will have a myriad of alternate paths to both wealth and investment, as well as donating to charity. Smith admits that he bases some of his calculations on tax adjustments, something which is going to be different for poker players around the world given gambling’s nature in some countries as a method of earnings and others, where it is viewed as gambled money which cannot be taxed.

“Having an idea of where you are changes based on a lot of factors,” he admits. “For me, one of the bigger things was how big I perceive my edge to be in poker games and how optimistic I was about it going forward. At this moment in time, I don’t think the state of the poker game is stable, reliable income so I’d, in theory, adjust my investments accordingly.”

Finance and Variance

“It’s easy to make a number of dollars in a month or year and extrapolate that you will continue to make that sort of money.”

Smith adds that anyone thinking of investing or donating to charity should be ‘mindful of the distribution of resolutions’ and while some investments will reliably tick over at 8% for example, others with multiply your money wildly or go bust. Variance in investments is not dissimilar to that experienced at the poker table, and that synergy between accruing chips through risk and looking at how to maximise your money has obvious similarities for many.

“I think it’s easy to make a number of dollars in a month or year and extrapolate that you will continue to make that sort of money. That’s very dangerous; games are constantly changing and variance is a bitch!”

Dan Smith looks at investment as an area of skill and says while some will succeed playing it safe, others are naturally better at taking big risks.

“Some people will just do their best mostly just buying index funds and not doing anything clever,” he says. “Some people are very skilled gamblers and investors. They should manage their money very differently.”

When a poker player decides to invest their money, it is often because they believe themselves to be ready to take that next step in acquiring wealth upon that which they have won in the game. In finance as well as in poker, however, nothing is ever guaranteed.