February 04, 2011

The Business of Poker

Bear in mind - this is an outsiders viewpoint and some of these are educated guesses.

Say we talked about a fictional site JokersFull.

How does the site make money?

(a) It is a fee per service website.

(i) Each time you get an eligible hand dealt at a cash table the site will charge a fee known as the rake.

(ii) MTTs and SNGs - they will charge a one off registration fee.

(b) The website - will accept deposits and then convert them to a common currency match edin your account - with cash on deposit in their financial institution. It is highly likely that the Jokersfull website would receive interest for a large % of the monies it holds on behalf of its customers.

e.g. if Jokerfull had 100000 clients with an average of $1000 in their accounts - Jokersfull would have $100 million of their customers money in their control. Some portion would always be in transit being withdrawn/deposited but say that portion is <20% - that would mean that $80million could be used by the site in an extremely low risk/short term money market account. Even if annual rate of return was 1% that would still be $800k worth of earning for Jokersfull.

* they probably do not make money on currency conversion and either bear part or all of that expense but certainly are not bearing any risk.

(c) Merchandise: There is probably a small profit in the sales generated on all Jokersfull merchandise.

(b) and (c) are completely dependent upon and dwarfed by (a) which is the principal business of JokersFull.

So there are two key drivers for Jokersfull Profitability

1) To increase the total amount of money held by Jokersfull

2) To increase the turnover and rate of turnover of monies held.

So the ideal world for JokersFull - is to have all available monies held by Jokersfull turnover at the highest rate.

It makes sense that JokersFull wants regulars who have a permanent amount (Bankroll) on site but its not just that. That want the regulars to be winning as a low a rate as possible whilst playing at the highest rate possible. For the very obvious reason, to increase the total amount of rake events for each $ earnt by the regular.

The inverse is true of a losing player for Jokersfull - they want the fish to lose at the slowest rate possible but with the highest volume possible. This increases the share of the losing player deposit that the Jokersfull keeps and reduces the % all regulars keep of that players money.

As you might have been able to deduce - that means there will tend to be an equilibrium point reached between the regular and Jokersfull - with the bounding factors being

(a) Total rate of non-winning players deposit

(b) Minimum amount of yearly earn for a regular to continue to play on the site

(c) Total surplus generated by the site

Now I am not a trained game-theory economist so I cannot prove the mathematical mechanics of the equilibria and the optimal payoff structure for each party - but my hunch is that it was inevitable that games have reached their parlous state.

Maybe this is/was very obvious to you....but I think it always worthwhile to breakdown what is actually going on in the 'poker economy' and if you want to change what is going on - you have to argue in a form that would be best for Jokersfull because they appear to have the dominant strategy.

This one is for tommy Angelo fans - well sort of

 

Posted By DiggerTheDog at 04:29 AM

2 Comments

February 03, 2011

Mull on this one

Assume that 10 grinders expect to earn 100k a year from poker on PS.

And the avg yearly wage of a recreational player is less ~50k USD a year of which 10k goes into PS.

And assume that the avg recreational player will lose all of the $10k to either the site or the regulars.

How many fish will it take to pay the way for the $1million the regulars expect?

Then consider the fact that if some portion of that 100k is rakeback generated the greater the % PS will take of each $10k........

hmmm

24 tabling rakeback pros all over the place and people think a small game structure change will greatly change the market equilibrium in the poker economy.......now thats optimism for you.

Sorry to be negative but you know its true.


40c+ here in sydney - how is the snow treating ya?


 

Posted By DiggerTheDog at 01:15 PM

0 Comments

February 02, 2011

Why are the games bad and getting worse?

This is a well discussed topic in the poker world. But lets just go back to the basics.

There is a certain amount of money in the poker economy at any given point. Money comes in and money goes out of the poker economy. And of course money gets distributed throughout the poker economy.

On the most fundamental level - the poker economy is bad because the rate at which money is coming in is slower than the rate money is coming out/or at a minimum not in play (accumulating in winners accounts).

Now it would appear - that the avenues for a great expansion in 'new' new money coming in is limited. Regulation in U.S. and the capacity for unexplored markets entering is limited particularly in making a meaningful impact on the total poker economy.

And against this background is the wider economy - where most parts of the world that plays poker - things arent so rosy. Which means regular recreational players will on average have less money to allocate to poker based entertainment.

Most of these are known by regulars interested in the overarching poker economy.

Of the 'new' new money that does enter the economy - one of the most stable sources are players just coming of age....young players. Mainly risk-tolerant single males 18-25 - from an online perspective....it is reasonable to assume that they will have a higher than average education by the mere act of utilising an online vehicle for gambling/entertainment. It is also reasonable to assume that those of a young generation will be able to use the resources of the internet more effectively than the average poker player 10 years ago....so the aggregate % of new players that find out about poker training sites etc. is greater than before as well as given that they are young they will tend to be more flexible learners and will tend to learn more quickly.

As alot of these players are likely to have been immersed in the popular culture of video gaming - they will tend to have an inclination for the extra stimulation of playing more tables on average - and that will have the effect of shortening the learning curve - if only because its expensive to lose for too long. As well as increasing the more talented younger players with gaming skills across more of the total number of seats.

All of this against a background of the supplier of online products making money on turnover - thus providing the best incentives for the most volume.

Alongside this is the fact - generally most players improve with more play on average. Sometimes that can be hidden from the player because their results will go backwards despite improvement. A case of the rate of improvement of that player being slower than the average rate of his opponents.

All these factors actually work in favour of outflows out of the poker economy - increasing the total amount of outflows and the rate of outflows.

It could probably well be argued that it was inevitable that the games would reach this state - and that UIGEA just quickened the pace which we reached this point.


Obviously this is just touching the surface of the topic - as you could easily write a book on the poker economy and this is just a blog.......

Food for thought nonetheless...

Bit of retro to kick your session off


 

Posted By DiggerTheDog at 10:49 AM

0 Comments

February 02, 2011

Buyin Structure Changes at PS

As most of you who play cash games on PS are aware - PS has removed 20-50bb games from NLHE and are introducing CAP games across all limits.

My opinion is that having 40-100bb & 100-250bb as well as CAP game as the basic NLHE structure will not improve the game quality for regulars. There are many reasons why I think this will be borne out but basically I think there are a number of issues that inevitably work against improving game quality as of right now.

1) The relative maturity of the poker market in its major markets.

2) The poor macro-economic conditions in its major markets - 10% unemployment, little or no wage growth and a general malaise in optimism about the future is a poor background for discretionary expenditure like playing poker.

3) The inherent equilibrium that tends to favour price setters like PS and FTP in the current regulatory environment. Whilst PS and FTP cannot expand as they would like - with respect to regulars - the current environment provides them with effective monopoly power over its market. There is very little choice for most regulars and they have very little leverage over the big sites to have a greater say in the key elements that would improve their lot.

4) A fractured base - its not as if all regulars interests are the same. So advocates for change are rarely singing from the same songsheet.

I have a number of ideas that could mitigate the decline in the game quality that I might go into at a future date........but I do not see a big bump in game quality from these most recent changes...

Going back to do my teachers course in two weeks - which I am looking forward to. Will be moving into a new place closer to uni in the next week....

Hope the cards have been falling the right way for you......

speak to you soon...

oh yeah - here is a lil something something...


 

Posted By DiggerTheDog at 03:55 AM

3 Comments

January 13, 2011

Buyin Structure Wars Part 3

One thing that bemuses me about the arguments surrounding the ideal buyin structures for NLHE and PLO on Pokerstars - is that almost every advocate is in one form or another - pushing their own self interest. My summation of the general arguments would be as follows:

1) Full Stackers argument - the deeper the stack ratio - the more skill that is involved in the game. Having more skill involved is inherently a good thing. The 20bb stacks have an unfair mathematical edge over all other participants in the game - and this should be removed. In addition to this - is usually a rider along the lines of : fish dont like push/fold poker - so getting rid of 20-50bb poker will do 3 things - increase skill edge, remove an unfair edge and increase the happiness of fish.

2) Short Stackers argument: That the development of 100bb online poker was an arbitrary phenomenon and that poker exists in many different forms. That their should be no distinction in the aestetic appeal of one form over another - as all poker is essentially equal. That recreational poker players are actually choosing via number of players playing 20-50bb over other forms of poker and as such prefer shorterstack poker - so by removing shortstack poker you are actually doing the opposite of what the recreational player wants. The edge gained by SS poker is legitimate and that it is discounted by the effective cap on the maximum likely theoretical winrate.


3) The sites - the sites overall goal is to increase the turnover on their site. They can do this by two main means - increase the total number of games/players playing on their site and to increase the volume of the existing players on the site. These two means do not necessarily work well together - sometimes by increasing the turnover of existing players because most players resources are finite then usually only winning players can consistently maintain or increase their volume over an extended period of time -----> which leads to proportionally a greater of % of players being winning players on the site which for any newcomer increases the likelihood of a shorter time of play or a decreasing likelihood that that new player will be successful. These things only work very well together when the influx of new players overwhelm the existing player base such that it does not really matter how much volume or how good the existing player base is the chances of a new player playing against players of = or less skill is a reasonable possibility combined with the variance allowing them to win.

So underlying this is the fact that the sites actually want/need the % edge of the expert player to the recreational player to be as a low as possible but not too low that the regular cannot make an income from it. This is because the site does not want the recreational player to bust too soon - so that it increase the proportion of total rake paid vs total money is in play is as high as possible. Now the sites do not operate in a vacuum - they have de facto competition with other entertainment, other forms of gambling and direct competition with each other ( although it is unclear whether the online market actually operates like a competitive market for many - given it could be argued that many price/incentives structures appear much like a cartel.)

4) The Fish: Whilst it is true that their is the possibility of making money. The reality is that most players are almost mathematically guaranteed to lose money given playing style and the current state of the expert player base. Now it is true they have the opportunity for improvement and that it is a free and informed choice to play the game in the first instance but lets be honest there is little hope for the average recreational to do anything other than lose. So the interest of the fish at least having a reasonable time to lose and to not do self-harm - alongside having a positive entertainment experience is paramount timportance to each of the other counterparties. It could be argued then - that game structure should actually be biased to reducing the edge of skill without removing it but at the same time offer the games which are most attractive to the recreational player.


5) The "Game" itself : There are probably only two methods of arguing for the interest of the game. (a) Would be the more people are playing the better. So increasing the popularity of the game no matter what the means and whomever benefits most from increasing the spread good luck to them but all else is subordinate to this end. (b) That the theoretical best game or highest skill involved/employed in the art of poker is most important. So preserving and promoting that which is the best = most skillful part of poker should be the goal of the poker community. So facillating the learning curve of all players and in particular seeking/nurturing the best players to push the edge of the game to its limits is the best for the game.

As you can appreciate all of these categories interests are not harmonious. I would argue that it is not necessarily true that the regulars whether FS or SS are necessarily those that should choose the direction of what the poker landscape should look like if their own self interest predominates their worldview. I certainly do not believe that the sites interests are always congruent with any let alone all other parties although often they can be the best proxy decider in many instances.

Just some more of my thoughts on c2011.


 

Posted By DiggerTheDog at 09:23 AM

0 Comments

January 11, 2011

The Buyin Structure Wars Part 2.

Before I add other more general thoughts - I have a couple of observations that might interest some of you.

1) There are obviously alot of players with a longer history in poker, generally, and online poker, more specifically, than me. But when Dusty pointed to the buyin changes and the general drop off in winrates - I am a perfect example of net winners going to breakeven then losing players. Now that is not to say that that is the sole reason for my severe downswing in 2010 but I will give you more of my backstory first.

I cam into online poker from a recommendation from a friend - who when I stayed over at his place for beers,bbq and a morning fishing - we played Pokerstars $20 180 came 2nd and split the prizemoney. I created the account and got the monies transferred - so I literally had never needed to deposit. That was late 2006- early 2007. I continued to play 180s and tournaments in general and only sporadically played cash games. I gradually got more and more into cash games and played alot of 25NL and then 50NL - and had won about $10k on 2007. I found 2+2 in late 2007 and then registered an account early the following year. I then proceeded to learn alot about cash game poker (albeit from a small base) and was winning heavily throughout 2007 masstabling on very high volume. Small winrate but there was not alot of players winning playing 50NL 24 fast tabling 1pt/bb - most better players moved up or were b/e. Now I made a tonne of money that year and thought hey why not get my on grindpad and try getting better whilst earning what was modest money but enough for my modest tastes in life. Now having played closed to 1.6 million hands that year - and having seen alot of players come thru 50NL I had noticed that some guys were good and moved up - some were very good who stayed and some were BE and doing even more volume than me. These were good games - now they are not 6 figure scores or 2005 partypoker 5/10 games but given I literally knew not much about the game other than bet/bet/shove value + baluga/zeebo theorem + 5/10 rule for set mining I scraped something like 20k of winrate and a stack of rakeback. This was enough money for me to have 4000+ BI for my regular game and allowed me to indulge my worst habits of going up and taking shots with a BI here or there in 5/10 games when feeling frisky/tilted or just whateverkindabored shots.

So when I say I have played a shit ton of stars - I mean sure I am a micro grinder but I have played across all level of stars up to 5/10. And the point of that side story is - I have seen or played against alot of the midstakes/small stakes guys on stars - who rightly viewed me as a fish but I get to look at the lobby every now and then and see how many 5/10 games run - 2/4 games run - and I can tell from 2008 to now - how very few comparatively games run but also who has moved up and who has moved down. I have seen and know of only three guys who have managed to climb the whole mountain during this period who have stayed all the time at stars. i.e. who have moved through 50NL and made it all the way to 1000NL. Now sure some like newmanni - switched to FTP but he like the 3 others have made but from how many guys I have seen at 2+2 and on stars actually make it all the way vs the amount of guys I here say ok I am the next big thing I am taking my $2k and you wont see the back of me cause of the dust I will create - I mean the ratio is fark small - although a good portion get to 100NL or 200NL.

But say mid last year as I was bleeding out my arse with money spewing across the tables with me taking silly 400NL shots and PLO madness and all sorts of stupidity from my new basecamp grindhouse. I noticed an almost unabated trend - that very few people had been playing higher now than they had been a year ago. This with all of the improvement from experience, the improvement from possible coaching, from all the training sites - that on average the mass-tabling regulars - post the buyin changes were stepping down in stakes or maintaining their stakes rather than going up. I saw guys who when I used go up and play 3-6 were grinding 1-2 and saw guys who were regulars at 1-2 and now playing 50NL.

Now - for those that have read this blog know - I now know that I dont have the temperament or discipline to be a professional poker player and thats fine with me. But I mean there are alot of players who played as much as me prolly as smart or better and certainly more disciplined o- ok that might be a guess but who are declining in their stakes.

They are just the ancedotal observations of a mass-tabling micro/fish/tilt junky - but I think you can be rest assured that when Dusty a long time 5/10 masstabler on the one hand viewing from the top of the food chain is saying the games are harder and worse - and you have poor ole me at the very bottom of what is the level you could possibly go pro at level 50NL(mass-high volume) playing is seeing all kinda guys who were 2pt winners at 100 or 1-2 moving down and winning less that this happened - not as much at UIGEA but with the split in the structure. That there is/was a devastating effect on the pokerstars regulars economy by this change.

Alongside all of this was the vpp changes in 2010 which for the masstabling fullring grinder was a 25% haricut in rakeback - it is not suprising that alot of the guys who would use every $ earnt to try and step up - are now complaining how hard it is to move up. + The wider recognition of how brutal and what the actual variance is on b/e to 1ptbb/100 poker is and what the no risk of ruin bankroll requirements actually are.


Not sure how much that was on topic but I got more to kinda say on my views on the state of PS c2011


 

Posted By DiggerTheDog at 10:59 AM

0 Comments

January 11, 2011

The Buyin Structure Wars.

I was listening to Bart Hansen's Leatherass interview. I actually enjoyed the interview and one thing mentioned in the thread was the change in the game since the introduction of Pokerstars changes to buyin structures circa April 2009. Although UIGEA is often cited as a marker point in the decline of the softness of the game - it was interesting to see Dusty also note this time period as a clear point from which games became harder. About 9 months ago also PS changed its rakeback system which also had a decline in the quality of the games.

Obviously on 2+2 this is a widely discussed topic - mainly divided along the lines of Fullstackers vs Shortstackers. But it is my opinion that - it is the division of the player pool via offering alot of different buyin structures that has toughened the games.  I can only really talk about Pokerstars - but a number of things have occurred as a result of these change.

What occurred was there was mainly one structure 20-100bb NLHE games. Now there are 3 main structures 20-50bb, 40-100bb 100bb-250bb games with the first two having the two largest % of tables played. Now of those two 20-50bb games across most BI levels have the most tables. 

Prior to the change - most who wanted a change in the 20-100bb game were arguing that the spread of SSing and the nature of 20bb poker was killing the quality of the games for everyone else. What was tending to happen was you would have is something like 4-5 SSers 2 FS regulars and some recreational players. It was felt that if you removed the SSer from the game - the games would be alot better. As Pokerstars does not mind SSers ( some would say they prefer SSers as the proportion that rake vs winning players winrate is greater ss vs fs) - the compromise was to up the BI required from 20 to 40 or the 40bb-100bb structure and create a new structure for SSers of 20bb-50bb poker.

Most PS regulars are not aware of the reasons why PS accepted the argument that 20-100bb poker needed to be fixed but they chose to accept the proposition that the pre'09 situation was not ideal.

However - the result was be that the games are now even worse than they were prior to the changes. Here are the reasons why I think it is as it is:

1) Whether it is SSers start more tables or that 20-50bb break at a slower rate OR perhaps most likely that fish actually prefer this structure - more 20-50bb tables are played than 40-100bb tables. Does it make sense that fish prefer 20-50bb poker? I have heard the argument that fish just click on the first available table - I dont buy that argument because although they might not be good at poker that are not all frothing at the mouth monkeys. I think that they tend to have very limited amounts of money available in their account and they like to have more than one shot in the locker. So to buyin in for somewhere between 20 and 50bb with another buyin as back up - is much more preferable than buying in for twice that much at a 40-100bb table. Another argument that is used to supplement the non-discrimination by fish on table selection - is that surely they would not voluntarily sitdown with SSers with push fold strategies?? no they argue because these guys like seeing flops. Well that is true in part but I believe they like showdowns far more they like to see flops - and they might actually misinterpret the maths/ranges of ssing and see all these bet/call vs 3bet shove strats with AJ or TT and think there is alot more action going on at the table with these AIPF stuff.

2) If it is true that 40-100bb poker has more skill edge - it is not unreasonable for some recreationally players to use a rational based upon their previous experience. So if the skill edge is greater at 40-100bb poker - that it means on average more fish would have lost on the those tables and it is not unreasonable that some of them draw the connection between those tables as being tougher or at least that they have not won as often ot gotten as lucky on those tables vs the 20-50bb tables. So if on average those that still play on 40-100bb stay there money will last a shorter period given that we believe the skill edge is greater thus we should expect that they will lose all their money or the drop out rate or migration rate is going to be higher. Which in turn would make the tables less good on average in any case would would make it even harder for fish to last longer, given that they at least have a decent shot of winning money vs each other and the less of each other the less chance they have of surviving longer.

3) SSer regulars are more likely to be 24 tablers than FS regulars - so even if actual unique number of regulars between SS and FS was equal - more tables will have sser as they are on average playing more tables per person than the FS. And even if this was not true - the ratholing policy insures that more SS tables will exist because they need to replace that table so they either join more waitlists or they create more 20-50bb tables to make sure their table count is up. Whereas the only need for FS to start tables - is to get better tables or because they are starting a session and not enough tables exist. So there is an additional 'incentive' or reason for SSer to get more tables going than for FS. This is an unintended consequence of the hang over from 20-100bb poker where FS argued for an exclusion time from a rathole and return of 60mins. Now most FS dont deal with SSer anymore but they indirectly compete for the fish who may or may not discriminate in table selection but either way having more 20-50bb tables are going there anyway.

4) The compression effect - as the games have gotten tougher a secondary effect is that dedicated professionals move down if they can no longer beat the games. So as games deteriorate they aggravate the toughening effect by moving down which in turns effects those a BI down and the worse of those regulars do likewise eventually pushing out players like me who were doing ok at 50NL for years and now cannot play fulltime despite having improved alot. Or they cut down on their number of tables - so that they can beat their games or they game select even more which has the effect of reducing the number of tables and of course decreasing the % of FS tables as a total %. Which even in the best case scenario of fish indiscriminatly choosing tables make it less likely the fish will arrive in these FS tables and when they arrive they will tend to last a small amount of time given the games are likely toughening at a faster rate than the 20-50bb tables.

5) Because of the cultural bias or negative attitude to the 20-50bb tables - regulars are not migrating to 20-50bb tables as much as they are choosing to move down. Now there are swings in roundabouts in this phenomenon - on the one hand it prolly reduces the total potential amount of 20-50bb tables. Which would be good for a random fish table select scenario but on the other hand means that the difference in the quality between the two table types means that the 20-50bb tends to have better tables for those regulars. Which means more regulars can sustain themselves for longer - so the same compression effect on 20-50bb tables is not going to be as bad.

6) The rate of improvement in the SS game has been at a faster rate than the average improvement in FS poker. The effect of this is that more SS are getting better and thus they can survive and maintain more tables - thus keeping a wider net for whatever fish are available. Which means that SSers are not necessarily dropping down and compressing or toughening the games as much as the compression effect for fullstackers. + With the cap on their total possible winrate being lower - then even the best shortstackers are not taking out so much money out of the poker economy than the best fullstackers. This means fish will tend to last longer do better vs shortstackers even if the best they can do is to lose slower.


More to say - but thats enough for now.

Cheers


 

Posted By DiggerTheDog at 07:23 AM

1 Comments

January 07, 2011

Resolved to what exactly?

Yeah that new years resolution of not playing many tables and blah blah lasted about two seconds. I like playing alot of tables - guess I am an action junkie. Anyhow I am playing an absolute tonne and going nowhere other than collecting vpps. At the rate I am going I will be SN by the end of January.

Not much else happening in my pokers. Went out to the Ashes day 2 Sydney - which was a great day of sun, cricket - fast food beers and bourbons. Fortnuately I had been given a ticket into the members area where spirits and full strength beer is still served. It was a good day out for it - it was overcast and quite cool at 25c - which was good cause they have a dress code for the members and I would have been broiled if the sun had have come out. We got smashed up in the cricket but it was entertaining days play with 9 wickets falling an aussie tail wag and at least 4 pommy wickets fell. 

Oh yeah - kinda sucks that prahlad signed with UB - I kinda liked his I dont care what other people think of me attitude - which hold on makes sense that he might not worry about his rep but I kinda thought he was carefree in a non-scumbag way. oh well - money talks and the rest can look after themselves is humanities way I guess.

I think you will like this one.


Peace



 

Posted By DiggerTheDog at 12:05 PM

1 Comments

January 04, 2011

The Great Flood of '10-11

Water, water and more water.

The great state of Queensland is carrying a heavy burden this past week or so. And whilst epic weather events appear across our consiousness alot more often with 24 hour news coverage across the globe - the sheer scale of water flooding the driest continent on earth is breathtaking. To highlight the magnitude of these floods for those unaware - the flood has covered ~ the size of France and Germany combined or greater than the size of Texas.

And this is no flash flood - the 9.4m water levels will not retreat for upwards of 2 weeks - as a Sydney Harbour worth of water or ~ 1 million mega litres pour forth thru the Fitzroy river every 2 days.

The old poetic saying that Australia is " a land of drought and flooding rain" is no more evident that in the past decade in rural Australia - after a decade of drought broken last year - now Australian river systems are being washed thru with biblical scales of water. Given the immense scale of water - it gives some credence to the Noah account of the Great Flood. Not that I buy the fact that the "whole world flooded" - but if you consider thousands of years ago the 'whole world' for a local might have been the size of Texas or half of Queensland - then a flood like this might have appeared to cover the world.

Fortunately - the response from locals and the emergency services have greatly limited the death toll but nothing can stop the economic impact - estimated at around 0.5% of national income. Sugar prices globally have reacted as well as wheat prices and with 65% of global coking coal coming out of the region - the huge queues out of Australian resources ports will continue to grow.

Water, water and more water........

 

Posted By DiggerTheDog at 09:45 PM

0 Comments

December 31, 2010

Sand Castles

Status 01/01/11

BR: $2000USD

Poker Goals:

Study CAP PLO - run alot of equity simulations with ProPokerTools

No shottaking.

No masstabling.

Life goals: Complete post Graduate Degree in Education in top 10% of class.

Simple goals.

Update: Got the 300k milestone couple of days ago cashed everything in excess of $1500 out have had a nice upswing 4 tabling 50NL FR and some HUNL. Not much I can say other than poker is easier with 250 hands an hour than 1000+.

Have a good new years eve.




 

Posted By DiggerTheDog at 09:08 AM

1 Comments


About Me

Chuck

DiggerTheDog