I‘ve spent a lot of time getting to know various people in our FBA Master Facebook group. In a lot of ways they are competitors, but they’re also partners. In some cases, they become acquaintances or even friends. Jason Wilkey, Chris’ dad, talks about about the value of networking with small groups of like-minded people. I agree. With those conversations, though, you often exchange more than just business information. You learn a lot about people. One of the things that some people have learned about me was that I spent considerable time as a professional poker player. Many have asked that I write about this, so I ‘m going to try to do so in a way that isn’t just autobiographical, but actually useful for your business.
First, a note for anyone who actually plays poker (skip this if you don’t): This is not a poker post. If you want to hear about me 5-bet shoving 100bb against a nit with an Ace-blocker, then we’ll have to cover that some other time.
Poker is broken down into a few stages: Pre-Moneymaker Era, Moneymaker Era, and Post-Black Friday.
In 2003 an amateur poker player, Chris Moneymaker (yes, his real name) managed to turn $39 into $2.5 million in a series of tournaments. It had the fortunate timing of happening when the technology for internet gaming was maturing, ESPN was broadcasting the World Series of Poker with the cards exposed for the viewer to see, and the economy had rebounded and was thriving. Nearly overnight, poker exploded.
I was part of this boom. The idea of being able to make money playing a game just because you could think slightly better than your opponents intrigued me — always the consummate nerd. The combination of a lot of college classes and a lot of laziness meant that I didn’t have a normal job. Still, though, I wanted some money and I was just getting good enough at poker where I could do better than breaking even. I wasn’t making an income yet, but I was making enough to make life a little more comfortable. Ultimately, I graduated and went and got a real job like I was supposed to (Restaurant Management). However, my fun hobby started to make me more money than work. Nothing like making a four month’s salary by doing well in one 10 hour online tournament. Combine this with the growing distaste for working nights/weekends/holidays and doing everything I could to make my boss more money, I ultimately left.
Poker treated me well until Black Friday. In poker communities, Black Friday refers to April 15, 2011 (yes, tax day), the day the Department of Justice froze the accounts of the two largest poker sites. Not only was the means for making money gone, but any money that we had on the site (thousands and thousands of dollars, most of the time) was locked up for years. I was fortunate enough to live in Southern California, probably the best area for poker in America, so I was able to start playing at casinos. I did well, supporting myself only by Poker for a long time, but it wasn’t a great long term option. 1) Online, I could play 800 hands/hr, while in casinos you might get 30. The two just aren’t comparable. 2) Since poker is a recreational game, the amount of money is often determined by the economy. The economy has not been great in years and this hurts the poker ecosystem. 3) It doesn’t come with benefits/retirement/etc. 4) A casino is really not a place you want to be 2000 hours a year. 5) Try explaining what you do for a living! 6) The fluctuations are dramatic. In nerdy terms, the Standard Deviation is so much greater than the expected winrate, that a solid winning player could easily go an entire year without making money.
For these reasons and more, I started to look at alternative options. My girlfriend introduced me to FBA and I immediately told her what a dumb idea it was. Nobody in their right mind was going to pay $15 for an item, when they could buy it from WalMart for $4.97. Further, even if someone was doing that successfully, they’d surely never tell anyone else about it. As it turns out, I may have been wrong (please don’t tell her).
I think there are a lot of skills that I learned from Poker that translate well to FBA and want to share a few with you:
- Bankroll Management. All gambling has Expected Winrates or Lossrates. We call this Expected Value. If you play Roulette, you are going to lose $5.30 every $100 you play. In the short run, you’ll probably either win $100 or lose $100, but over a long enough sample, you will lose $5.30 for every $100. In poker, you can have a winrate. A good player might be at $60/hr. However, just like Roulette, you don’t just get a check for $60 every hour (nor do you just give the Casino $5.30 every time you spin the wheel). You have massive ups and downs that ultimately equal $60/hr. In order to withstand these fluctuations, you have to manage your money. A professional poker player, for example, will rarely put more than 2% of his “roll” in any one game, regardless of how attractive the game appears.
FBA is very similar. I often advise people — especially beginners — to go Wide rather than Deep. The idea is simple: You need to be able to absorb the risk of being wrong. We’ve all bought products where the price tanked and either sat on the shelf for months, we broke even, or perhaps even lost money. If this was ALL of the money you had, it would be a disaster. You could bankrupt yourself with one poor decision. So, what we generally want to do is spread out our risk. We know that in the long run, FBA is profitable, even if any one item does terribly. People always want to know how much of an item to buy. I can’t answer that. But the factors you have to consider are how much money do you have available and how much tolerance do you have for risk.
- Black Friday.(when the poker sites were shut down and our money was frozen) isn’t altogether different than a recent event with Amazon. As many of you know, we try our best to provide a ton of free content, whether here, facebook, youtube, etc. However, this takes time and work. One of the ways we were compensated was by Amazon providing affiliate income when we recommended products. Very recently, Amazon shut down all of our accounts and seized the income we had made over the previous two months. Black Friday taught me a valuable lesson: Never put all of your eggs in one basket. Amazon’s ‘Affiliategate’ was rough, but it wasn’t insurmountable, primarily because I learned this lesson. Like any good business, you need to create a threat assessment. That is, look at all the possible threats, consider how likely they might be, and what you would do if they happened. Many DVD sellers were really hurt when Amazon restricted the category. Do you have plans in place if something similar should happen to you? If a spineless competitor claimed that you sold counterfeit items and Amazon froze your account for an undisclosed time, what would you do? Nobody likes to think about these things, but I’d be doing you a disservice if I only talked about the positives of FBA.
- Computer HUDs. If you player poker seriously on the computer, you have something called a HUD or HeadsUp Display. It is a chart, of sorts, that at a glance tells you all of the relevant statistics about the person you are playing against. You use it to estimate a likely range of cards your opponent would play in this way, try to counter a strategy for it, and anticipate what your opponent will do as a result. In the same way that most recreational players don’t have any idea what all of this means, the recreational shopper has no idea about charts like Keepa or how to read them. By finding, learning, and utilizing tools, you can give yourself an advantage that many of your competitors don’t have.
- Table Selection. In poker, you can be the 9th worst player in the whole world and still make money, so long as you find a table that has the 8 other players who are worse. Perhaps one of the most important, and underrated, skills for a poker player is table selection. At any one time, there are literally thousands of games going. The difference between choosing a tough game and choosing an easy game is the difference between making money and losing money. For Amazon, there are some similarities. Are you choosing products with a ton of competitors? Are you choosing categories that everyone sells in? Are you only buying BOLOs that everyone else will buy? Or, are you seeking out the better “tables”? Are you willing to do the work of bundling? Will you multi-pack and unpack items? Will you send oversized items? Will you go back 3 weeks and look at those BOLOs? If so, then you’re going to have a much easier time than a person who chooses to compete against strong competition.
- It’s a game. One of the biggest similarities is that they are both just games. I love the thrill of finding where Amazon has incorrectly priced their items. I love trying to figure out how to be slightly better at something that thousands of people are doing. Don’t get me wrong, Amazon is a lot of work, but I hope that you’re able to find enjoyment in the competition. Do you get mad at someone when they undercut your prices? Don’t get mad. Just play the game better than them. Are you checking their inventory? Maybe they can inadvertently point you in the direction of some profitable products you haven’t seen before. Can you figure out how to price so you’ll steal the buy box? Is everybody selling on Amazon.com, driving the price down, but ignoring Amazon.uk where the price is high? At it’s core, arbitrage is very much a game. We’re here to teach you to play it better.
- The Grind. Poker is definitely a grind. You sit with a bunch of men, many of whom have forgotten basic grooming behaviors and want to talk about inane things for hours. The best poker players will make people HAPPY to lose money to them and that means dealing pleasantly with undesirable people all of the time. Further, it is hard work. A good poker player will be observing hundreds of things, making hundreds of snap calculations, all the while trying to make it appear like he isn’t doing any of that. Sometimes you’ll go for weeks where you make the right decisions and yet things do not work out. Sometimes you’ll make the wrong decision and it will cost your a mortgage payment. It’s brutal. However, the best are able to thrive off of this grind and implement strategies to keep from being worn down. FBA has some similarities. It’s a game, but it can also be a grind. How many times have you scanned 100 items and not found a single profitable thing? How many times have you drove an extra 20 miles to check out a hot store, only to find nothing? How many times do products and boxes pile up because you just can’t stand to peel one more price tag or tape one more box? That’s all part of the grind and if you don’t handle it successfully, you’ll be costing yourself money. Poker players don’t make money when they sleep through their “shift” and FBA-ers don’t make money when inventory sits in their living room.
- Self-Employed. This is the same, although it is ever so slightly easier to explain to people. You still have more work for your taxes. You still have to figure out insurance and retirement for yourself. You still don’t have anyone forcing you to be productive. That said, I love it. I love that all of my hard work directly benefits me, not some absentee owner. I love that I can set my own schedule. If I need to be off Wednesday at 1pm, I’m off Wednesday at 1pm. It isn’t for everybody, but if this is something you aspire to have, FBA can definitely be one of the tools to get you there.