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NEW YORK (MONEY Magazine) -
F. Scott Fitzgerald said, "The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function." For poker players and investors, maybe we should make it three ideas.
Puggy's principles don't exactly contradict one another, but there's sometimes a little friction. ("Money management" alone requires a balancing act.) And none of them are hard and fast rules.
Ultimately, they're most valuable as conceptual touchstones for testing ideas or options as they pop up. Neglect any of them at your risk.
Miller, for one, learned this the hard way. Poor money management proved his downfall two hours into the 3 and 1/2-hour game. (Gross, by this time, had already gone bust.) With $1,950 in chips left, Miller went all in with ace-nine. Gabelli, holding ace-jack, called the bet and went on to win.
"I figured you'd fold on that one," Miller said as his last chips were swept from the table. "I almost did," responded Gabelli, "but not with an ace."
Gabelli says Puggy's precept misses one big aspect of the game: Not only do you need to know yourself, you also need to know your opponents. If a Rock raises, you know it's time to fold. But if a Maniac raises, and you have a strong hand, there's a good chance you'll take the pot.
A similar notion informs Gabelli's investing. In the market, you can't know the person with whom you're trading. What you can learn to interpret is the behavior of certain companies, which is why he's always focused on a handful of industries, including media and telecom.
In 2000, Gabelli bought a substantial stake in Pulitzer shortly after it was spun off as a stand-alone newspaper company. At the time, much of the world saw newspapers as a dying industry, and the stock, which began trading at $43, soon fell to $34.
Experience told Gabelli otherwise. He knew that large newspapers were still very profitable and believed they could offset competition from upstart Internet companies by launching their own Web sites. Gabelli was right. In January, Lee Enterprises announced it was buying Pulitzer for $1.46 billion, or $64 a share, giving Gabelli a nearly 100 percent return.
His wait-and-see approach paid dividends at the poker table as well. One by one, Gabelli picked off the field (or watched as others did it for him) until only he, Rogers and Haris remained. But Gabelli held most of the chips.
With few chips left, Rogers went all in, bluffing with a seven and a nine. He lost when two twos dealt in the middle gave Gabelli, with a two in his hand, three of a kind.
Haris followed soon after, going all in with a king and a two. Gabelli had an ace and a five. Two more fives hit the table, and the MONEY Poker Challenge was over.
With his $2,400 prize, Gabelli paid tribute to the aspect of successful poker -- and investing -- that no amount of strategy, skill or smarts can always beat. Some call it luck. Gabelli sees a higher power.
"Dear Father," he wrote in the letter that accompanied the donation of his winnings to a Catholic grade school in the South Bronx. "God provides in strange ways."
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