Apr 222012
 
 April 22, 2012  Posted by at 3:12 pm Finance

poker


William Cruikshank The Anxious Moment 1893
Poker game at Camp McKibbin, Marshall Hall, Maryland. With members of the 2nd, 3rd and 6th battalions of the District National Guard.

 

As someone who plays poker regularly, I'd like to think that I have a good understanding of why luck is important in our lives. It's NOT because the world is completely random and we have no influence over what outcomes will materialize for us – actually, it is the very fact that we do make meaningful decisions in the face of uncertainty that generates luck. Let me try to explain what I mean with an analogy to the game of poker.

Poker is a game of skill, which means those players with superior skills (patience, discipline, memory, critical/logical thinking, mathematical analysis) have a long-term edge over the less skillful among them. It is a very simple game with simple rules governing what each player can do (fold, call, bet, raise), what order they can do it in, how much they can bet at any given time, which hands rank higher than others, etc.

So those players who are the best at incorporating all sources of information and making the most profitable decisions at any given time have a clear advantage in the game and should make plenty of money in the long-run. But they will still lose A LOT of hands, regardless of how skilled they are, because they can never know exactly what cards will come out and they rarely ever know exactly which cards other players are holding (unless they are cheating).

Even the best poker players in the world are required to have losing hands and losing sessions. That is what luck really means – natural variance in a probabilistic setting. For example, a very good player will get his/her money in the middle with AA (the best starting hand in Hold Em') before the flop, have an 80% advantage over another player with a lower pair, and will still lose that hand – it is inevitable to occur, and most likely will happen many times.

 


Addendum

 

The following graph illustrates the concept of variance in poker. It shows the expected winrate of a certain poker player that has an edge over the players he is up against, and then graphs his actual winnings on top of that. We can assume that this player maintains a consistent style of play, always plays the same stakes against very similar opponents and never deviates from his basic strategy of maximizing value with his winning hands, and minimizing losses with his losing hands.

As you can see, the inherent variance (luck) involved led him outperform his expected winrate for almost 80,000 hands, and lost almost 50% of his max winnings accumulated over 60,000 hands after playing another 30,000 hands. Eventually, we can expect his actual winrate to converge near his expected rate, but there is no way to predict how it will take before that happens.

 

variance

 

 


 

Now, what happens when we stop talking about poker and start talking about life in general? The latter is obviously a much more complex "game" with many more rules, many more players and, therefore, many more combinations of "starting hands" and possibilities for how the action will unfold in the future. What that really means is that the variance (luck) involved in life is much higher, regardless of how talented or skilled a person happens to be.

This variance, which, in poker, is eventually smoothed out after enough hands are played, could last the better part of a person's entire lifetime, or even across multiple lifetimes (parents, children, grandchildren, etc.). That is especially true for those who are born into conditions of extreme poverty, since they are dealt hands that have very little chance of winning in the first place. While every player at a poker table has an equal chance of being dealt AA in any given hand, that is not true for the players in the game of life.

The potential hands a person can be dealt in life depend on where they were born, when they are born, who they were born to, what race they are and a multitude of other factors. They may learn certain specialized skills over the years, and become very good at utilizing those skills in various settings, but that still doesn't mean they are guaranteed to be long-run monetary winners. In fact, they still have to avoid an abundance of variance for those skills to ever shine through.

They must find a way for almost every single decision they make to work out favorably, such as decisions on where to live, how much official "education" to get, what jobs to apply for, what hours to work, what types of insurance to buy, what type of car to drive, etc., etc. Even if they make all of the most optimal decisions at the time, new circumstances could render those decisions completely worthless.

Rex Nutting of MarketWatch has a few thoughts of his own on this issue:

Are Poor People Lazy? Or Just Lucky?  

Somewhere along the line, everything got turned upside down. It used to be that we envied the rich for their wealth, but now we pity them.

 

For it seems that no one works harder than a millionaire (except perhaps a billionaire), which is why we must do everything in our power to help them keep every penny that comes their way.

 

At the same time, we envy the poor, those lazy lucky ducks who just sit around all day, collecting unemployment, avoiding taxes and living it up on food stamps. Read Ruben Bolling’s latest cartoon starring Lucky Duck.

 

It wasn’t always this way. Once, not so very long ago, people saw the world as it really was. We all knew that the rich have it easy while the poor have hard times. Indeed, that’s the main reason people want to be rich instead of poor.

 

We knew why they called it “the working class.” We developed theories about the leisure class that explained why the rich spent so much time, energy and money making sure that no one would ever confuse them with someone who actually worked, with someone who got calluses or got sunburned. Read Thorstein Veblen’s book, ‘The Theory of the Leisure Class.’

 

 

Plowing fields is work. Caring for children is work. Building houses is work. Studying is work. Mopping floors is work. Brain surgery is work. Waiting for the bus that will take you and the kids to day care before catching the other bus that will take you to your job is work. Cashing your dividend check is not work.

 

We pretend to honor hard work, but our policies deny it. If we honored work, we’d remember that most of the hardest-working people in our society are also the lowest paid. Many of the hardest jobs come with no paycheck at all.

 

Conversely, some of the best-paid people hardly work at all. Most investors, for instance, don’t work hard (unless you count unproductive sleepless nights), because their money does the work for them. Many highly paid professionals — investment bankers, doctors, lawyers, athletes and corporate managers — do work hard, but do they work any harder than the people who pick the crops, or who work on the assembly line, or sit up with a sick kid all night?

 

Poor people — with few exceptions — are not lazy. Many of them have retired after a lifetime of hard work. Many of them are children, with a lifetime of hard work ahead of them, if they can learn the necessary skills and habits. Many of them work a job, or even two, but a minimum-wage paycheck isn’t enough to pull them out of poverty.

 

And many of them work hard in exactly the same sense that Ann Romney has worked hard her whole life. It’s not effort that separates them from Mrs. Romney; it’s luck.

 

There’s no doubt that success rarely comes without hard work. But there’s also no doubt that luck plays a large part in our successes and failures.

 

The most important factor in determining where you’ll end up economically is where your parents were. We do have some upward economic mobility, but not as much as the market moralists think we have, or as much as we had a generation or two ago.

 

The poor are indeed lucky ducks. It’s just that all their luck is bad.

Indeed, luck (variance) works both ways. A poker player who is getting his/her money in bad almost every hand will eventually go on a "hot streak" and win most of those hands. Poor people who are severely disadvantaged from the beginning will eventually be at the right place, at the right time and in the company of the right people who help launch them into material prosperity (or perhaps they will just hit the mega-million lotto numbers).

Those are exceptions to the rule, though, and, in the long-run, the system makes sure that a large majority of otherwise talented people are kept somewhere between a range of heavy losses and barely eking out a profit. The rules of the financial capitalist game make it so that only those players with a very narrow set of skills will be guaranteed success over and over again, which just so happens to be skills geared towards bending and breaking the rules whenever it is convenient, and escaping any punishment for doing so.

A person caught cheating in a poker game will be banned from the game, at best, and beaten into a bloody pulp, at worst. Not so much for the tiny group of elites who cheat the other players on a daily basis. They have privileged access to a wealth of information about other players, and many times they can even dictate exactly what cards will come out. Well, that last statement isn’t entirely true.

Our complex and evolutionary "game" that comprises the totality of human material experience is a system that is ultimately unpredictable, probabilistic and filled with imperfect information, just like any old poker game. Even the most powerful elite cannot predict exactly what outcomes will result from their decisions; exactly how others will think and react; exactly how lucky others will get.

There is a moment in time at which every poker player, and especially those who have been winning for so long that they scarcely remember how to lose, will confront the inevitably of bad luck. It is usually at this moment when they lose all psychological composure and are led down a winding path towards their eventual undoing.

 

Home Forums General Thoughts about Luck

This topic contains 0 replies, has 0 voices, and was last updated by  ashvin 7 years, 6 months ago.

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  • #8555

    ashvin
    Participant

    William Cruikshank The Anxious Moment 1893 Poker game at Camp McKibbin, Marshall Hall, Maryland. With members of the 2nd, 3rd and 6th battalions of th
    [See the full post at: General Thoughts about Luck]

    #2744

    There is no luck involved when you run the Casino and set the odds on the Slots to always favor the House. Over the long term, the House will always win. Occassionally they have to make a payout to a Player who is depending on Luck, but they’ll always get more Suckers Paying In than Lucky Ones they have to pay out to.

    If you control the central hub of all currency trade in the world, there is no luck involved here for who stays rich in perpetuity. The monetary system is a completely rigged game which a very few people are in control of. Until the system of Money is destroyed in its entirety, nobody’s luck will change here. The same folks who got lucky early on stay lucky, the ones not lucky to whom they were born will stay unlucky. Because it is not luck at all that is running this show. It is Evil running the Money show. Money is the ROOTof all Evil.

    RE
    https://www.doomsteaddiner.com

    #2745

    Golden Oxen
    Participant

    Shooter (Karl Malden) talking to The Cincinnati Kid Steve ( Steve McQueen) “Kid, before I met up with Lancey Howard, like you, I thought I was the the best poker player in the whole world. Let me tell you something kid, he “Gutted Me, he Gutted Me real bad.” Lancey Howard ( Edward G Robinson after Gutting The Kid. ” Your good kid, your real good; but as long as Lancey Howard is alive you can never be better than second best, so just get used to living with it.” Just wanted to share a fond memory of one of my favorite movies. Remember, don’t sit down at a poker table with Lancey Howard!

    #2746

    ashvin
    Participant

    Note the Addendum that has been inserted into the article, with a graph illustrating variance (luck) in poker.

    RE,

    While the stock market or other “regulated” markets make for good analogies to table games in a casino, where the house always has an edge, I don’t think it’s a great analogy for individuals attempting to be “successful” in our economic system as a whole. I like to use the poker analogy instead, because a good (skilled) poker player can theoretically beat the house’s rake and earn a healthy profit rate against other players in the long-run. Practically, though, many of them end up falling victim to the short/medium-term variance and implode spectacularly into a pit of despair.

    #2748

    JoeP
    Member

    Ash,

    Sounds like you get some satisfaction seeing your fellow players “implode spectacularly into a pit of despair”…or am I dramatizing this?

    #2751

    ashvin post=2354 wrote: Note the Addendum that has been inserted into the article, with a graph illustrating variance (luck) in poker.

    RE,

    While the stock market or other “regulated” markets make for good analogies to table games in a casino, where the house always has an edge, I don’t think it’s a great analogy for individuals attempting to be “successful” in our economic system as a whole. I like to use the poker analogy instead, because a good (skilled) poker player can theoretically beat the house’s rake and earn a healthy profit rate against other players in the long-run. Practically, though, many of them end up falling victim to the short/medium-term variance and implode spectacularly into a pit of despair.

    Its an Individual vs. Aggregate problem Ash. At the Poker Table, in theory most of the time you sit down against other folks of similar means and the Best Poker Player Wins, in the long term of course.

    This is the same meme used in Capitalism, which posits that you will be successful if you are a smart mathematical sort who plays in a fair game against other players. This isn’t how it works at all though.

    In the real world, you sit down at the table with 7 other “normal” players, and one player who has access to Infinite Credit. He can keep doubling down on his losses until one of his bets wins, and then he bankrupts the rest of the players who do not have access to infinite credit.

    Similarly, whoever has access to Infinite Credit can price everyone els out of the marketplace at any time. If I start a Bizness making Widgets, I can possibly out compete everyone else making the Widgets if I have to fund the Biz on Profits from the Widget making Biz. I CANNOT out-compete somebody with access to infinite credit who can run the Widget Making Biz at a loss until I go Outta Biz.

    There is no “Luck” involved here Ash. The system is designed so that some folks have access to nearly infinite credit while MOST of the players in the game have access to no credit at all, or credit only in very limited amounts. You could invent the best Widget of all time, produce it as effciently as possible, and you STILL will get pushed out of the market by the person with Infinite Credit access.

    Like the Poker Table, the Capitalist sytem provides a Window Dressing which makes 7 or the players BELIEVE they are in a fair competition based on merit, but they really are not, there is always one fo the Illuminati sitting at the table who can CRUSH all the rest of them at any time. He can Bluff you out with a bet so big you will fold your Aces. Long as the Game is proceeding along to his benefit, he doesn’t do that, but when push comes to shove he does.

    If you are a real good Poker Player, you can go out and over time take away the wealth of the other small fry in the game. You will NEVER take away the marbles from the Illuminati with access to Infinite Credit though. All you are doing in this Poker Game is taking away stuff form the lesser players, the 3rd World countries in the grand game. You are not TOUCHING the wealth of those running the monetary system, who create the very Chips you bet in this game.

    Luck plays no part in the monetary system as it actually functions. It is thoroughly rigged to benefit those who create the money to begin with. They do it through a coordinated system of Central Banking which has its etiology in systems built up long ago, the only real difference today from Babylon are the Computers and the fact the system is completely Global. The only difference in the result this time from Babylon is that it will be much bigger and much worse than what was written in the Book of Revelation.

    Its Coming Soon to a Theatre Near You.

    RE

    #2761

    EverNewEcoN
    Member

    Without the broken poker, which is
    put up or shut up for you, but not for me, and
    not simply because of empty creditors
    (Henry Hu / Univ. of Texas,)
    or even just because of shorting your own
    original hand, but potentially even packing
    your own hand as a loser, getting others to
    buy into it, and then shorting it (I’m not alleging
    any particular entity has done that,)
    then (where it’s NOT broken poker) the other
    people in the game would by implication have
    real oversight in the maintenance of fair rules.

    The purpose of that would be rightful goals.

    If we analogize the above to sectors and nations,
    we wouldn’t have heads I win, tails you lose
    policy-making, and the nations’ goals would
    be strong currencies and
    high wages, the two reflecting the high
    worth of their citizens.

    #2762

    ashvin
    Participant

    In a probabilistic system with imperfect information, there is always luck (or variance).

    I will posit to you that TPTB have access to “infinite credit” at the table of life and therefore can always extract value from every other player in the long-run, no matter what cards they are dealt. I am positing that even though we have some difference of opinion on this matter, because I don’t think it’s necessary to bring all of that back up for our purposes here.

    Even still, I think you would agree that TPTB do not actually care whether you or I, as specific human beings, are able to use our skills to accumulate wealth and have “upwards economic mobility”. As long as they are taking an ever-increasing share off the top, and keeping rough percentages of the population in their roles as indentured servants, middle class consumers, etc., than the system is kept alive and the specifics of what we can accomplish is irrelevant.

    For us, though, it is very relevant, and that’s where luck (variance) comes in. We spend years developing and applying these skills to the game of life, and sometimes we will greatly overshoot our expectations (or expected value), and other times we will greatly undershoot them. We usually cannot even tell which one because it’s near impossible to calculate the expected value of our skills in the first place, but we can be sure that the variance is happening. Which is part of the reason why some of the hardest working, most skilled people can remain in poverty for their whole lives and the lives of their children while much less-skilled people can live like Kings.

    You will NEVER take away the marbles from the Illuminati with access to Infinite Credit though. All you are doing in this Poker Game is taking away stuff form the lesser players, the 3rd World countries in the grand game. You are not TOUCHING the wealth of those running the monetary system, who create the very Chips you bet in this game.

    In a strict poker analogy that is true, but the game of life is bigger than anything they have total control of. I think we are in agreement on this, because I have seen you say multiple times that the elite will eventually lose control due to the collapse of net energy/resource flows. In a probabilistic system with imperfect information (and, I should say, finite resources), eventually everyone will run into a streak of bad luck.

    #2763

    ashvin
    Participant

    JoeP post=2356 wrote: Ash,

    Sounds like you get some satisfaction seeing your fellow players “implode spectacularly into a pit of despair”…or am I dramatizing this?

    Depends. If my “fellow” player is a cocky, arrogant, mean-spirited A-hole, then I do get some satisfaction seeing this happen, yes. Plenty of those people at the tables. Although, I never rub salt into wounds or kick a man when he’s down. Plenty of those people at the tables, too. Mostly, though, I try to stay unemotional/objective and don’t care one way or another what happens to the stacks of the other players (who I don’t know well).

    #2764

    holygenes
    Member

    I’ve proposed Blaise Pascal associated a
    supposed Nostradamus Code with the simple
    triangle formed by the fanning out of
    concomitant choices, as described earlier
    by Yang Hui.

    Prior to formulating what we call
    Pascal’s Triangle, which I think resulted
    from Pascal’s conclusion that choices made
    along event streams demonstrate that
    morality, which is simply choices made along
    event streams, and math, are one and the same.

    Comparing choices along parallel streams,
    thus, imparts an experiment, complete with
    control.

    In the course of this work Pascal proposed a math
    experiment with a mathematician correspondent,
    wherein they would unwind a poker game such that
    their actual hands and comparative likelihoods
    of winning, and comparative abilities to
    carry on, would be fairly accounted for.

    Since the above, by the way, I’ve speculated
    telomeres are a genetic manner of defining
    our own triangular “gate array,” or “informationalism”

    It’s a long shot, but I’ve speculated the pyramids
    represent a confirmation of the triangularity (it
    ultimately becomes spherical) probabilities and relativity,
    or, the conceptual structure of event streams,
    choice-making, and emergence.

    Since, this, as freakasauris as it must sound, is
    partly based on curiosity as to Nostradamus, and
    as he theoretically saw personalities through
    time “in realtime,” this actually has large technological
    implications, should so much as one-half of one
    percent of it be validly based.

    I have to go to the dentist this morning.
    Lack of my response to any reply(ies) thus
    does not imply disinterest on my part.

    #2766

    waffe7
    Member

    Reverse Engineer post=2359 wrote:
    In the real world, you sit down at the table with 7 other “normal” players, and one player who has access to Infinite Credit. He can keep doubling down on his losses until one of his bets wins, and then he bankrupts the rest of the players who do not have access to infinite credit.

    Like the Poker Table, the Capitalist sytem provides a Window Dressing which makes 7 or the players BELIEVE they are in a fair competition based on merit, but they really are not, there is always one fo the Illuminati sitting at the table who can CRUSH all the rest of them at any time. He can Bluff you out with a bet so big you will fold your Aces. Long as the Game is proceeding along to his benefit, he doesn’t do that, but when push comes to shove he does.

    RE

    Two poker nitpicks here. You cannot have “infinite credit” at the poker table because there is a limit to how much you can buy in for in a real game. There is not way to “double down” because the maximum bet will remain the max buy-in size. Of course this is real casino poker games, not the movies where you can like pull your house deed or more money out of your pocket if you have the nuts.

    Secondly, “He can Bluff you out with a bet so big you will fold your Aces.” makes no sense either in the context of a maximum buy-in size. In strict cash-game holdem poker it is never correct to fold AA preflop, although in a tournament is correct sometimes. However in that case it is not because you are “afraid of a bluff”.

    I get your points I just had to throw that out there since I play a decent amount.

    #2767

    waffe7 post=2374 wrote:
    Two poker nitpicks here. You cannot have “infinite credit” at the poker table because there is a limit to how much you can buy in for in a real game. There is not way to “double down” because the maximum bet will remain the max buy-in size. Of course this is real casino poker games, not the movies where you can like pull your house deed or more money out of your pocket if you have the nuts.

    Secondly, “He can Bluff you out with a bet so big you will fold your Aces.” makes no sense either in the context of a maximum buy-in size. In strict cash-game holdem poker it is never correct to fold AA preflop, although in a tournament is correct sometimes. However in that case it is not because you are “afraid of a bluff”.

    I get your points I just had to throw that out there since I play a decent amount.

    You are talking Casino Rules. I am talking the rules we played by in my dorm lounge, where you could bet as much as you wanted to and you could keep pulling money out of your wallet until it was empty.

    RE

    #2769

    ashvin post=2370 wrote:
    In a strict poker analogy that is true, but the game of life is bigger than anything they have total control of. I think we are in agreement on this, because I have seen you say multiple times that the elite will eventually lose control due to the collapse of net energy/resource flows. In a probabilistic system with imperfect information (and, I should say, finite resources), eventually everyone will run into a streak of bad luck.

    In Poker, the end result of the Winner Take All Tournaments leaves with all the Chips and they can be converted into Cash which still buys something outside the Casino doors.

    In the Big Game here, the Winners get a bunch of promissory notes that will never be redeemed because the Oil isn’t there to repo. Its all CO2 now floating around the atmosphere. The “assets” built with that Oil aren’t assets at all anymore, they are liabilities.

    The only question that remains is how long the Wile E. Coyote Moment can last here.

    RE

    #2773

    ashvin
    Participant

    Reverse Engineer post=2377 wrote: In Poker, the end result of the Winner Take All Tournaments leaves with all the Chips and they can be converted into Cash which still buys something outside the Casino doors.
    RE

    I don’t mess around with tournaments too much, strictly cash! Although, most tournaments pay out about 10% of the entrants (but the top 1% make all the real money).

    I am of the opinion that our broad economic/financial systems contain a decent amount of variance in its own right, for everyone involved. If we are talking strictly about the debt-based monetary system in isolation, then it is true that it will aggregate all the chips in one place over the long-run. But nothing exists in isolation. There are economic, social, cultural and political dimensions to the monetary system. It’s hard to look at Europe right now and think that everything there is going according to plan for the elites. There are many unintended consequences to their actions (another way of saying luck or variance). Some are relatively unimportant in the large scheme of things, but others, such as the growing sociopolitical unrest, have the potential to be much more disruptive. OTOH, it could end up being a gift in disguise for TPTB. It’s also possible that it is ALL a part of their plan, but that is only a possibility, not a certainty. They certainly need disasters/upheaval to completely change the “order” of things, but they can never be certain exactly what kind of upheaval they will get. That’s what luck is all about.

    #2776

    ashvin post=2382 wrote: They certainly need disasters/upheaval to completely change the “order” of things, but they can never be certain exactly what kind of upheaval they will get. That’s what luck is all about.

    A few of my fellow Diners would dispute that point. Some are of the opinion that the Illuminati have been through this so many times that they can steer a collapse however they choose, utilizing Bernay’s style propaganda to move the masses in the right general direction (for them), then using Agents Provacateur, Assassination, False Flags et al to tweak the nature of the upheaval. I also tend to agree that this was true for most of the prior collapses, I just see this one as different because its an Energy/Resources/Population collapse and the same techniques won’t work this go round. Its not simply a Credit Event, there are underlying ties between the Credit and Energy which are being severed. When they are severed completely, then the Conduits will fail in cascade fashion, and just about all of what we think is true will not be true anymore.

    Anyhow, that is my theory on it, and I grant the very SLIM possibility that I could be wrong. I wouldn’t bet on it though 😉

    RE
    https://www.doomsteaddiner.com

    #2784

    ashvin
    Participant

    Reverse Engineer post=2385 wrote: A few of my fellow Diners would dispute that point. Some are of the opinion that the Illuminati have been through this so many times that they can steer a collapse however they choose, utilizing Bernay’s style propaganda to move the masses in the right general direction (for them), then using Agents Provacateur, Assassination, False Flags et al to tweak the nature of the upheaval.

    Doesn’t matter. They could be practicing and honing those techniques since the dawn of mankind, and would still not be able to achieve certainty over how the system responds. It’s really a physical impossibility.

    Anyhow, that is my theory on it, and I grant the very SLIM possibility that I could be wrong.

    My theory is similar, except I view their loss of control as a compounding effect from multiple systems collapse (financial, economic, energy, ecological), rather than only due to the collapse of net energy/resource flows. My view is partially outlined in the series, “The Math is Different at the Top”:

    Part I – The Math is Different at the Top
    Part II – Financial Threats to Power
    Part III – Will Water Set the World on Fire?
    Part IV – When the Lights Go Out

    I should emphasize, though, that their loss of control is a distinct possibility for me, not a certainty. Nothing is certain.

    #2788

    I did grant the possibility I could be wrong. 😛

    RE

    #2898

    Anonymous

    Fortune is the carriage or effect of that which is without order; the Idol of operation, a lying fantasie or opinion.

    All things that are computable, only that which is not is incomputable.

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