“I’ve never seen a fold like that…(that was) the craziest hand I’ve ever seen.”
Those words were uttered by three-time World Series of Poker (WSOP) winner Phil Galfond in 2012. Where? During the “Big One for One Drop” $1,000,000 buy-in WSOP tournament. The event became the highest buy-in poker tournament in history.
Galfond had just witnessed the unthinkable. Something you’d expect to see in a movie, but not in real life.
Two table mates were duking it out during the fourth blind level. Mikhail Smirnov - Russian businessman and part-time poker player - sat in Seat 2. Seated next to him in Seat 3 was then CEO of Winmark Corporation John Morgan.
Smirnov had been on a role; he had about 3.5 million dollars in his chip stack, slightly above average. Then, Smirnov was dealt an eight of hearts and eight of diamonds. The dealer revealed a seven of spades, jack of spades and eight of clubs. Smirnov, now with three eights, bet $50,000. Morgan immediately called (matched) the bet.
The turn showed an eight of spades, Smirnov’s fourth, creating a potential straight flush. For those unfamiliar with poker a four of a kind, which Smirnov had, is the third highest ranking hand one can have in poker. The odds of getting a four of a kind is 0.024%. It’s rare.
Smirnov went ahead and bet $200,000. John Morgan five seconds later called. After the final card, the river, was dealt Smirnov bet another $700,000. Morgan thought for a moment and announced “all in” for about 3.4 million in chips.
Mikhail Smirnov stalled for a few minutes. He contemplated whether John Morgan had a ten and nine of spades, making him the proud holder of a straight flush. A straight flush beats a four of a kind. The odds of getting a straight flush in a game is 0.0014%. But a seven and eight of spades were already showing. And Morgan was going all in. So there was a good chance Morgan had it.
Or did he?
Smirnov didn’t want to find out. Turning the show into a farce, Smirnov folded his powerful hand boldly, face up for the world to see. The table of other opponents and the audience were in awe, in disbelief. Such a powerful hand is rarely ever folded.
Whether John Morgan had a straight flush or bluffed, he demonstrated his integrity and class with the whole situation. When pressed for an answer as to what he had, Morgan smiled at first. Then, he paused. Then, he said, “I’m not going to tell anyone, and the reason I am not going to reveal it is totally out of respect for my opponent.”
John Morgan’s legendary poker move wasn’t pure luck. Morgan had been a successful poker player since his teenage years. Moreover, he’s been winning in business and investing for decades. He led two businesses, in different industries and from different stages, to extraordinary success.
The first, a startup, was Northrup Resources Inc. founded in 1982 with partners Kirk MacKenzie and Jack Norqual. With an initial $105,000 investment (each partner contributing $35,000) the three built Northrup into one of the top computer leasing firms in the United States. The company was sold to TCF Financial in 1997 for $340 million in TCF stock. The partners had significant skin in the game; by then Morgan and his partners each owned approximately 15% of Northrup.
The second, a turnaround, was Grow Biz International (known today as Winmark Corporation). The company was floundering and Morgan stepped in as CEO in 2000. The market capitalization of the company then was $30 million, a nanocap. When Morgan stepped down as CEO in 2016 the company was valued at $410 million. Morgan at that time owned 22%, a majority of which was purchased on the open market.
How has John Morgan succeeded in business and poker all these years? A healthy dose of shrewdness coupled with a win-win mentality.
“Why is one good at chess? You’re trying to ana- lyze how things are going to happen in advance. I’m good at strategy - the same kind of skill that serves one well in playing poker or chess.”
And a bit of luck helped too. Morgan emphasized that “you don’t have to be that smart to make money in business. I was born a white male and I had opportunity. I’ve been lucky to be surrounded by smart, talented people. So, I’ve made a lot of money.”
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