The Foundations of Poker

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Chapter 8: Poker as a Business

Everyone can view poker differently, however one thing is certain, it operates like the restaurant business. There is a lot of competition, most players lose money, and many players trying to take on poker professionally quit within the 1st 2 years because they cannot support themselves with poker. It is important to figure out what poker means to one, whether that be an occasional social activity, hobby, passion, stream of income, or primary source of income. Before moving on to the next level in the five I just laid out, one must consider these 5 factors:

One’s skill including evaluating one’s best games and styles as well as one’s skill at adapting to games

Evaluating one’s income from poker in (money earned/time spent) and comparing that to one’s income from other sources in (money earned/time spent)

One’s utility from playing the game and comparing that to one’s utility from doing other things that make money

Evaluating the stress, variance in income, lifestyle, and hard work required to be successful in poker and comparing that to one’s current sources of income

Evaluating one’s cognitive ability and one’s self-control or ego

Make no mistake, to make serious money in poker, it is no joke. There are plenty of people in the industry; it is very saturated. To move up within the 5 categories of poker I laid out, one has to be better than most people in their current category as well as consider the list of 5 factors to determine whether or not it makes sense for that person. A person starts off playing poker by gathering with friends or family at someone’s home and they figure out the rules, ideally beforehand, but realistically during the game when they play. After some time, they will have another game except now everybody knows the rules so the game goes much smoother. Sometimes, when the group members’ skills improve, they play for a little bit of money though at this point do not have a regular game scheduled. They may play once a month or so, sometimes less as they do not immensely enjoy the game yet. Money should not be a huge issue at these elementary games, as even if they are played for much money, typically the cost of the pizza and drinks exceeds the money in play. These games are really designed for friends who want to try new things, in this case poker, while socializing with one another. What matters most for one’s poker development is whether or not a player enjoys participating in these games. If a player loves the games, they are much likelier to try to get more games going. A player who enjoys the game a lot should memorize all the rules and hand rankings and start to develop standard strategies for one’s game.

A player who wants to advance his or her game from an occasional social activity to a hobby, otherwise defined as regular social activity, will likely be able to do so with ease. Some of the friends and family playing in the elementary games are likely to also be having very good times in the games, particularly if the games consist of food, drinks, and social atmospheres; therefore, these players will look for excuses to play more games. When games run as social activities between friends, they typically are going to be played in a very fun manner and not for any significant amount of money. Over time, if one wishes to get better he or she should strive to play at least once a week, ideally with different groups, that way one can learn how to play with other players of varying playing styles and improve more than if one were playing with the same players all the time. When a player gets to the point of consistently winning, that player should look to increase the stakes at which he or she plays. The two main reasons for doing so are firstly to play against a better playing field and improve by doing so and secondly to start to develop a monetization method in playing poker. When someone plays in a $10 or $20 game, while the game is primarily for fun, if they make an average of 1 buy in for a 5-hour game which is very good, while it’s much better to make money than to lose money, one could never justify playing poker seriously from a financial perspective because they would only make $2-$4 per hour. However, if someone were to gradually increase the stakes at which they play to $50 or $100 games, $0.25/$0.50 or $0.50/$1.00 blinds, they are likely to initially lose money. Although one will likely start off losing, once one develops better standard strategies, I have full confidence that one can net a buy in on average at these games. This implies that poker could be start to become profitable for someone, at least enough to pay for date night once a week.

When a player is frequently playing in home games where buy ins are more significant than when they started playing with friends and family, they very much enjoy the game. As one starts to beat the home games in which he or she plays, one should go to casinos, even if only on occasion, to learn how to play games in a drastically different atmosphere. Games run in different styles everywhere. In home games the players’ main goal is to have a good time with each other and are very friendly towards one another, whereas in casinos the players’ main goal is to make money off each other and are very curt towards one another. The players in casinos tend to have much more degenerate tendencies and are not as friendly or cordial as players in home games. While there are sometimes kind people in casinos, if one is looking for a pleasant ambience, one should go to a home game over a casino. However, if a player wants to improve their game, they will have to play at casinos at least a few times to get a sense of how poker operates differently in different places, which will help that player learn to better adjust his or her skills. Adaptivity in one’s game turns one into a great player, and casinos are certainly a great place to improve one’s ability to change. In addition, casinos are a great place to meet players from various home games as one will always find some people with whom they would enjoy playing and socializing, as there are some nice people at casinos. When a player is regularly going to casinos or non-trivial stakes home games, they have made poker a hobby of theirs. It is important at this point for a plyer to consider the 5 points I raised in regards to what they gain out of poker in comparison with other things. Poker is a game that everyone can enjoy, though everyone can maximize their utility from the game at different stages, that is for some poker can be maximally enjoyed by playing irregularly whereas for others it should be played daily. Someone who tries to take the game further than they are ready for will lose money, develop stress problems, and the worsen their life. It is important as one advances in the stages to both enjoy the game and profit from doing so. If someone enjoys the game a lot but does not find it profitable, one should play at small stakes home games with friends until one can beat those games, then move on to the next stage or higher stakes. At the level where one is a seasoned hobbyist and plays all the time, one starts to develop a true passion for the game. When someone establishes poker as one of their passions in life, they have to keep everything else in check. That person, at the point when they develop a passion, cannot support themselves off poker. Therefore, one should focus his or her time during the workweek on other sources of income, such as one’s job and one’s investments and only play cards during evenings or weekends, making sure to avoid staying up too late. One needs to make sure to make time for family and friends. One should hang out with players who come to home games outside of cards as well to ensure pre-existing relationships do not revolve around cards. Too many people ruin relationships and lifestyles over cards, and it is important to enjoy playing cards in a balanced environment where they do not overtake one’s life. When one establishes cards as a passion, one should play the way someone with a passion for golf, who is an amateur, plays golf and incorporates it into his or her life. As a passionate player, one should learn various poker games such as Pot Limit Omaha, or PLO, and PLO8, or Pot Limit Omaha Hi-Low. In addition, one should try out cash games, SNG’s, and MTT’s. One need to make sure to be able to profit in all sorts of games. A passionate player should be playing with advanced strategies discussed in the later parts of this book which are designed to approach GTO by adjusting one’s playing strategies based on the players and game dynamics. Standard poker works very well until one plays with professionals and semi-professionals, at which point GTO is mandatory to ensure profits.

If one becomes a passionate player whose ego is low enough to recognize and critically evaluate mistakes playing cards and one incorporates new techniques into one’s game, large profits will ensue. As someone continues to reach GTO in game of choice, they should try to develop their games across different poker games at a high level in both cash game and tournament formats. By doing this, one is always prepared to find a great game and capitalize on it when one’s preferred game is not available or it does not make sense to play in one’s preferred game due to either no action tables or high skill of all the players at a game. At this point, a player is turning to poker as a source of income as their goal is to make money before it is to have fun. This does not mean having fun is impossible, it just means that one would rather make more money at a table that is less fun than play at a table with people one likes a lot which is more fun but one would have lower profits. If one can play various games at a high level, one can choose a game in which to play in and maximize profits in doing so. Even if a player is better at Texas Hold’em than PLO, if a PLO table at a casino has awful players and a Texas Hold’em table has solid players, one’s relative advantage is at the PLO table and thus one maximizes profits by playing at the PLO table. The more distinct games and formats a player can grasp, the more that player is able to take advantage of opportunities to profit. As a follow up point, if someone almost never plays tournaments but a grand opportunity to play in a tournament with bad players presents itself, one has to be ready to exploit this opportunity by playing in the tournament.

Playing at this level of poker allows one to make poker a stream of income, which by definition makes one a semi-professional, which is the category of player into which I fall. At this level, a player has to think seriously about the role of poker in his or her financial life. If a player has a highly paying job, it is unlikely that it will be feasible in replacing that job it in any capacity, and therefore one should prioritize one’s job and play poker either at night or on weekends to make supplementary money from it as well enjoy it while still maximizing the earnings for one’s job. If someone has other sources of income and poker reliably makes that person more money than their other sources of income, they should consider increasing the role of poker in their lives. Before someone lets poker consume them, they have to carefully consider all 5 of the 5 factors. One should never move past the level of semi-professional if a single one of the 5 factors does not check out well. In my case, I am a businessman and entrepreneur first and foremost, and thus it does not make sense for me to play poker professionally. I very much enjoy playing as well as teaching others how to play at a high level; however, for me there is much more upside in business for the time being. As much as I like poker, innovation in business is a far greater passion of mine.

When all 5 of the factors check out for a player, they can consider advancing to a full-time professional. However, when someone does this, they are putting a lot of the line. It would be wise for someone living in the United States to have a net worth of $250,000 before converting into a full-time professional, with $150,000 of that in liquid assets. In other countries, numbers may vary based on one’s cost of the lifestyle one wishes to have. In going professional, one is evolving poker from a source of income to the primary source of income; if one is unable to succeed in poker as a professional then on is risking jeopardizing one’s lifestyle. It is pivotal that professional poker players allocate money to poker games very carefully. A player needs to have a poker fund, which grows overtime that distributes some of the growth of the fund to living and lifestyle as well as savings and investments. The fund will continue to grow after the distributions, but the distributions ensure that someone can maintain their lifestyle and still have a fallback plan, including other income streams through investments, should poker end up not working out. Professional players must never distribute savings or investments to their poker funds to ensure a quality lifestyle.

When a player shows up to a game, he or she should have at least 100 buy in’s available in their poker fund. If a player does not, he or she must get investors to stake him or her for a portion of the buy in such that the amount the player personally fronts is less than or equal to 1% of that player’s poker fund, also known as his or her bankroll. This condition does not by any means imply that a player has to use the full 1% of their fund to buy into a game, rather, this is a maximum amount. In addition, a player should never lose more than the lesser of 2% of their bankroll or 3 buy in’s during 1 game. For instance, if a player has $100,000 in their poker fund and a game has a buy in of $1,000, a player should lose no more than $2,000 before leaving the game as $2,000 is 2% of that player’s bankroll. However, if a different game has a buy in of $500, that player should lose no more than $1,500 at that game before leaving as this is 3 buy ins. After losing 3 buy ins, even the best players incur too many tendencies to try to recover chips and thus play atrociously and should therefore leave the game. A professional should have the goal of putting 1% of their bankroll into investments or savings every month as well as 1% of their bankroll into lifestyle while growing their bankroll. This implies that every month a professional has to, after taxes, grow their bankroll by at least the 2% it is being offset by each month in order to sustainably maintain a successful poker career. Initially, I would advise an aspiring professional with $250,000 in net worth to allocate $100,000 to bankroll, $100,000 to savings and investments, and $50,000 to lifestyle which includes housing. A poker player should never use savings and investments funds or lifestyle funds for poker purposes, however in emergency situations, one should take out from one’s poker fund. By building funds in savings and investments, a player is able to hedge them self against any risk in losing money from poker. If one were to lose most of his or her bankroll, he or she would still have savings and investments. Many small time professionals, also known as grinders, make the mistake of trying to start being professionals with net worths as low at $25,000 instead of $250,000 or more. In doing so, they live miserable lives and any profits they secure go to their lifestyles, which are not even glamorous in the slightest. Starting as a full time pro too early hinders one’s chances at success. When a player has a net worth of $25,000, they should keep their primary sources of income and play poker at a level no higher than semi-professional. If one wishes to be successful as a professional poker player, one must to do it correctly and while it takes much longer to come up with $250,000 than $25,000, it ensures that one has a proper chance at being a successful professional poker player.

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