Know when to fold ‘em

Prof C Explains
4 min readNov 18, 2008

by J Scott Christianson, Columbia Daily Tribune Columnist

There’s a reason I don’t play poker for real money: I can’t stand to fold on the first round. The optimist in me always wants to believe there’s a chance my hand will win, even if the odds are against it. Unfortunately, that is why odds are called odds and not hopes.

Of course, the more money one contributes to the pot, the more invested one is in continuing to play the hand, no matter how bad it is. It gets harder and harder to fold as the ante is increased. This holds true for any investment — throwing good money after bad isn’t an exercise limited to the poker table.

Right now, our government has placed a lot of bets on trickle-down economics: Bear Stearns, $30 billion credit line; Fannie Mae/Freddie Mac, $200 billion investment; IndyMac, $8.9 billion from FDIC insurance fund; AIG, $40 billion stock purchase plus a $110 billion loan; auto industry, $25 billion loan; companies invested in subprime mortgages, $700 billion via yet-to-be-finalized structure.

Of course, now that we have placed such huge bets on these companies and industries, there’s no way we can fold, right?

And like the casino “house,” the companies on whose tables we have laid our bets seem to know we’re in it for good. After receiving its first cash infusion from the public till, AIG thought its execs needed a little retreat from the stress of ruining the company, so they took a $250,000 trip to the spa. When questioned, they explained that…

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Prof C Explains
Prof C Explains

Written by Prof C Explains

J Scott Christianson: UM Teaching Prof, Technologist & Entrepreneur. Connect with me here: https://www.christiansonjs.com/

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