Tuesday, November 08, 2005

The first week in November has been a roller-coaster ride. Up-down-up-down, pretty severely in each direction. The end net result was a small win for the week which is smaller than any one of my individual wins for the week (or losses, in absolute terms).

Considering some of the brutal stretches I had during the week, I guess I can't complain too much--I still won, right?--but it'd still be nice to receive a little more confirmation from the all-important bottom line that moving up in limits was the right choice. I mean, if I can't earn any more money playing 80/160 live and 30/60 oniline than I could playing 30/60 live and 15/30 online, why should I deal with the stress and higher variance? Admittedly, I still have a long way to go before I should even attempt to estimate what my profitability is at this level, but early returns point to a pretty similar earn-rate.

Which all (kind-of) leads into the main topic for this post: utility of money. I have a proposition:

Poker players have the smallest utility for each dollar earned of any profession.

Okay, perhaps that applies to all gamblers, but let's stick to poker since that's all I can semi-intelligently write about.

Let's compare someone who plays poker for a living to someone who holds a more "typical" job. I'll throw a nice round number out there for earnings. Let's say $100,000 a year. So perhaps this guy with the "typical" job is a lawyer.

The lawyer who makes $100,000 a year brings in a little over $8000/month. Since he works at an actual firm 40 (or, ahem, 80) hours a week, he gets his regular paycheck for the same amount every couple of weeks to do with as he pleases. He can save up for a downpayment on a house, one for a car, save up for retirement and budget for all the normal expenses based on that paycheck. There are no surprises; the paycheck will be there every week.

Assuming he doesn't totally screw up his work, he can expect to make that much money year in and year out, heck even get regular raises! Next year his income might be $108,000, and in five years maybe he's all the way up to $150,000. Because of this knowledge he has about his future earnings, once he does have enough money to make that downpayment on a house he can go right ahead and buy that house with its accompanying monthly mortgage payment of $2000-3000 a month. He can even lease that fancy BMW for $400-500 a month. Put away $W into retirment, $X into other long-term investments/savings, $Y into food/clothing/etc and $Z into entertainment, and there's his paycheck all chopped up and accounted for.

The poker player who makes $100,000 is in an entirely different financial world, however. First, what does it mean to be a poker player who makes a specific dollar amount per year? Is that how much he's made in the last year? Averaged for the last five years? What? A poker player can't tell you how much he expects to make in a given time frame any more than a trader can tell you how much he expects to make in the stock market.

All this is to say that even if the poker player made $100,000 in the last year, it certainly doesn't mean he'll make that much this year. It could be more, heck a lot more, but it could be less, yes, even a lot less. But let's assume he can maintain that pace. What does his $8000/month get him?

First, he has to maintain a bankroll, which should be quite large for someone whose goal is to earn six figures on the year, especially for limit players, and especially for live players. So all that money that would be going towards that downpayment on a house or on a car is instead sitting around in various accounts (or casino chips) as the most basic tool of his trade.

The poker player will have dry runs. Sometimes for a week or two, but sometimes for much longer. I remember reading an article on Jennifer Harman where she said her longest losing streak was six months. On the far other end of the poker-playing spectrum, I just had a losing month in September, my second since poker became my main source of income in June, 2004. I also had one essentially break-even month. What these examples show is that in addition to a bankroll, the poker player needs to maintain a healthy living-expenses account that he can withdraw from those weeks or months where he simply isn't getting a paycheck from his bankroll.

So he sure as heck can't budget for all the 8000 theoretical dollars he expects to make in any given month and simply chop it all up the same way our lawyer friend can. If the poker player lives that close to the wire, he'll simply guarntee himself of having to either delve into his bankroll, perhaps drawing it down perilously low, or having to withdraw from long-term savings and investments. Neither option is particularly attractive, as both sources are vital to one's wellbeing--one for current profitability and the other for eventually being able to, say, retire. I don't want to be grinding out my weekly meds bill at the 4/8 table when I'm 80.

And if the poker player wants to, say, get a raise, then he has to sock even more away into his bankroll so he can properly play the higher limits. And it isn't a linear growth--bigger limits bring with them better players and a smaller edge which means higher variance. If I want to increase my limits by 50%, I'd sure as heck want to increase my bankroll by at least 75%, or maybe even double it (note: if you're going from 4/8 to 6/12, this probably doesn't apply to you--a 50-60% increase should be sufficient).

The poker player also has more threats to his long-term prospects. As is common knowledge, poker is booming right now, perhaps bubbling. Like all crazes, it will die down, and with its wane in popularity will come tougher games and less profitability for everyone. The guy making $100,000 this year and $150,000 next year might be making $50,000 five years from now (or looking for one of those "typical" jobs).

Suffice to say, even if he does save enough above and beyond his bankroll to put in a nice downpayment on a house or car, he certainly shouldn't be locking himself into the same high payment that our lawyer friend can. Do you really want to be making monthly $3000 mortage payments when you're only pulling in $4000 a month in a few years? The end result is that the utility of the poker player's money is not only lower, but drastically lower. Perhaps by as much as 50% or more, although putting a number on it is like playing pin the tail on the donkey.

Personally, because of the all the future uncertainty inherent in poker, I feel the utility of the money I earn is nearly zero. I am a fairly cautious and frugal person as it is, in large part from how I was raised, so perhaps I'm more extreme than most, but I keep my monthly expenses to a (relative) bare minimum. I rent a one-bedroom apartment, drive a Sentra, spend almost nothing on clothing, eat as many comped meals as I can, and in general am watchful over just about every dollar I spend. I'm living just like I was when I was a graduate student living on a meager graduate student stipend.

I live this way in part because of my nature, but also because I don't feel like I can live like someone who earns much more than that. Yes I could drive a nicer car, live in a fancier place, have clothes that actually cost me money and eat at fancier restaurants, but with the large bankroll I feel I have to maintain respective to the limits I play and the completely uncertain future inherent in earning money from poker, I'm hoarding most of my earnings because I can never be sure--have I just been running well? Can I really make $X every single month? So the bottom line is that although I get added financial security, I'm really getting very little additional enjoyment out of my earnings.

Anyways, those were just a few thoughts for those aspiring pros.

And, as if this post weren't long enough, I think I'll end it by posting a hand. In my wild yo-yo-like ride of the past week, the hand that I found most debateable seems on the surface to be rather boring (no massive pots or huge bluffs here) but I felt that my play on every street but one is wide-open debateable. I certainly don't know the best way to play it.

My very first hand at the table. Live 80/160. I'm in the BB with KTo. I've watched the table for a few hands and I recognize a tough spot or two, but for the most part the lineup seems rather weak--too loose and rather passive, at least for an 80 game.

UTG+1 open raises, and the next two players both cold-call. It folds around to me. I call.

Flop (4 players, 8.5 SB): Q 9 7, rainbow. I check, UTG+1 bets, UTG+2 calls, MP calls, I call.

Turn (4 players, 6.25 BB): (Q 9 7) K, completing the rainbow. I check, it checks around.

River (4 players, 6.25 BB): (Q 9 7 K) Q. I check, it checks around.

See, what'd I say? Boring. But I think there's a little more to it than first meets the eye. And to be honest, it's decisions in more common hands like these that make the difference between winning and losing, not between folding, calling, or raising with a mediocre hand in 30BB pots.

17 Comments:

Anonymous Peter B said...

Hi Eric,

Working back from the end, the "boring" hand.

I hate KT off. It was a hand that cost me a lot of money in the blinds in lower limits where I got in for nothing on the BB or just by completing in the SB. Like A2o, it seems to be nothing but trouble. So, I fold.

However, assuming I do as you did and call, then I would do as you did and call with the gutshot/overcard on the flop. And I can see doom approaching.

And yes, there it is on the turn. The dreaded King. I bet out. I just have to do it.

However, assuming I check as you did, then I bet for value on the river and fold to a raise from a weak player, but I would call a strong player.

+++++

On the utility of money, well, we could have been separated at birth. The reason that I keep my job and play poker as a hobby is that if I were playing for a living then I would always be worried about the size of my bankroll, and so I would be scared to spend anything.

This worry would be perfectly justified. Good players go broke, all the time. I might not be a good player, but I don't go broke. I have been conservative in moving up the limits (probably too conservative) and I am now in the fortunate position of not really having to worry about money. My "poker" bankroll is big enough to play 15-30 or even 30-60, while my personal wealth would take me higher than that. And yet I remain at the lower levels, because I have no need to play at levels where I feel uncomfortable. The only reason I would move to these levels would be a personal challenge, to see if I was good enough. I know this is a mad thing to say, but I don't see that an extra 200K in my bank account would be a life-changing event for me. I am a fairly ascetic person these days. And, if I were playing for a living, then it definitely wouldn't be a life-changing event. I'd be petrified of what I shall henceforth call "the Harman Run".

Yes, why SHOULD you deal with the extra stress and variance? You obviously have the most important skill when it comes to professional cash poker play -- the very un-Hellmuth-like ability to play egoless poker. Earn rate is everything, preferably with the lowest possible volatility.

In addition, you may find (as I did), that your earn rate will go up as you move back down to a lower level, because the game suddenly seems so much simpler. In this sense, that is the great gain from moving up in levels; it makes the game when you shift back down so much easier.

How about splitting your time 80:20 between 30-60 and 80-160?

The important thing is, if you are beginning to dread playing, you have to make a change before it gets worse. If it's just a temporary streak caused by the poker gods kicking you in the balls once too often, then perhaps you should stick at it for a month or more, and wait for things to get better.

I suffer horrible mood swings from good and bad cards (although this never shows when I am playing at the table). Try treating yourself to a good meal after a bad night. Just $100 can make you appreciate the value of what you have won already. Once when I had had a bad weekend I went out and bought a new TV. Cheered me up no end.

Pete

12:31 PM  
Blogger DuggleBogey said...

I would consider the "Bankroll" and the "Law School" to be equvalent terms in your comparison. The Lawyer had to work hard to get where he is, and he has built up knowledge and experience that allows him to do the job he does. The same thing goes with the bankroll. He can't sell off his background anymore than a poker player can spend his bankroll and continue to play at the current level.

1:46 PM  
Blogger Stacy said...

I don't think Eric can move back down to 30/60, even if he finds it to be just as profitable as 80/160, for reasons outlined in this blog earlier.

Eric has indicated that he plays best when he's challenged. He no longer finds 30/60 to be a challenge, and his play there would be sub optimal, at best. I believe that if Eric attempted to move down to 30/60 at this time he would actually find his hourly rate to fall from where it was.

About the hand...

I'm debating on a turn donk bet, and folding to a raise, but I'm not sure that's appropriate. It seems he's often holding something like JJ and TT, and you don't want those hands taking a free card toward thier set/gutshot themselves.

As it was played, I think you should value bet the river and fold to a raise. I don't think anyone with a Q is that passive on the flop or turn, since the other two players are acting after the pf raisor, and I don't think the pf raisor checks through the turn with a bigger K.

3:03 PM  
Anonymous Evan said...

I mean, if I can't earn any more money playing 80/160 live and 30/60 oniline than I could playing 30/60 live and 15/30 online, why should I deal with the stress and higher variance?
Well, you are a gambler.

[I haven't read the rest of the post yet.]

3:25 PM  
Blogger eric said...

Yeah, I hate KTo, too. I fold that in the BB about 9:1 over calling. However, the fairly straight-forward nature of the PF raiser and the fishy nature of the two CCers convinced me to make a reluctant call. Folding would have been perfectly fine, too, perhaps preferred.

The flop play is standard. 11.5:1 + implied odds + closing action on a clean gutshot draw to the nuts = clear call.

I probably messed up the turn. I didn't hit the card I wanted to hit (probably quite unlikely since there were likely two of them in the PF raiser's hand). I did hit top pair but I have the kicker of death.

I hated betting because I figured I could only really get raised. But then at least I'd charge people drawing. These weren't tricky players, these were straight-forward players. If I bet and they can't beat a K they either fold or call with whatever random draw they had. UTG+1 would be folding what I presume was JJ, but the fish might call with their random gutshots and smaller pairs. At least I'd charge them.

Having checked the turn I really couldn't bet the river at all. Obviously I could bet-fold, but I think that's giving away money. I can't really place people on a hand--AQ? Qx? What? People aren't drawing any more and that's a scary bet coming from the first person to act. So either no one has a K or a Q and everyone folds, or someone has a Q and raises. Another K would have bet that turn almost certainly. So betting nets me zero except when I'm beat in which I lose 1BB. Ugh.

My plan if someone else had bet would be to figure out what the hell to do then. It would depend on the player and on how they bet. Yet another example of why being out of position sucks.

So yeah, bet turn, probably folding to a raise (almost definitely to a raise from UTG+1), and then had I done that I would have defined my opponents' hands more and could have bet/checked the river accordingly (probably check for much the same reasons, though).

10:57 PM  
Blogger Stacy said...

Woohoo I got it right. Kinda. You going to stake me in the 80 game now?

1:39 AM  
Anonymous bil said...

I don't have much to add here, other than to say that I didn't find the post boring--I enjoy the writing, whether it's about specific hands or not, as long as it's well written and thoughful. So as long as you don't degenerate into movie reviews and complaints about air travel, I'll keep reading.

Regarding the hand, can I assume YHWG?

12:14 PM  
Anonymous Evan said...

Our hero's hand is always good.

3:03 PM  
Blogger eric said...

Yeah, it was good. I didn't get to see the others' hands, but UTG+1 gave me the exasperated look that only those who have JJ get.

Evan, you must have missed my AA hand I posted a little while ago, ya know, the one I folded on the turn?

4:10 PM  
Anonymous Evan said...

I know, but it was too good a shot to take.

It's like how Mason posted something like 12 in a row "Hands To Talk About" where he won.

This is a pretty tough spot. The flop is the only thing that plays itself. I probably don't call preflop.

7:20 PM  
Blogger eric said...

Anyways, as far as moving down goes, that really isn't in the plans right now. My live win rate has actually increased since moving up to the 80 game. It's the online win rate that hasn't gone anywhere. Combined with my increasing my live:online play ratio (online win rate > live win rate), my overall win rate hasn't gone anywhere.

Obviously the sample size is way too small to draw any conclusions. The amount of variance in limit holdem is just plain sick. But if anything I'd move back to 15/30 and 20/40 online before moving back down to 30/60 and 40/80 live.

I'm not sure I could handle playing 30/60 live any more. I'm just that sick of the game. At this point, if it's not kept interesting through playing high enough stakes than I just don't want anyting to do with it. If I can't handle the 80 game long-term then I'll just stop playing live limit holdem, and stick to live NL and other games.

2:14 AM  
Anonymous Evan said...

Those baby live NL games are excellent.

I've never played in a bad one, although I've almost always played on weekend nights.

Have you really played the 30 game that much? Obviously, no reason to move down if you're winning more in the 80 game, since you can handle the swings.

1:16 PM  
Blogger eric said...

I started playing the 30 game in March, and played 40 for the first time in June. When I moved here in July I played one or the other pretty much every night for 2 1/2 months.

So in total hands #s, that might not be a lot, perhaps 10,000 hands. But I've also played the equivalent skill level online, 10/20 and 15/30 for nearly 100K hands.

Baby NL games are great. I've only played NL on Tues and Wed nights and they've been fantastic. I can only imagine what they're like on the weekends.

4:03 PM  
Blogger EstonB said...

That's why smart poker players should invest all their extra money in other things, because the cap on our profession is very, very low compared to other high-paying professional jobs (long live Hellmuth, he's got the right idea...). Think Bill Gates vs. Barry Greenstein...

10:37 AM  
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