Saturday, October 19, 2013

Poker Reality #1: Poker results are affected by both Luck and Skill

"Why do you think the same five guys make it to the final table of the World Series of Poker every year? What, are they the luckiest guys in Las Vegas?"
--Mike McDermott to his girlfriend in Rounders.

"Poker is a combination of luck and skill. People think mastering the skill part is hard, but they’re wrong. The trick to poker is mastering the luck."
-Jesse May, in Shut up and Deal

To begin mastering the six Emotional Control areas that I mentioned in my previous post on Tilt (here), I believe a new player has to first understand some basic truths about the nature of the game of poker. There are some hard realities that poker players must understand—and accept—or else this game will prove to be exceedingly frustrating to master. In much the same way that you have to learn and understand the basic rules of poker, such as hand rankings, order of play, etc., before being able to move on and learn specific tactics and techniques to outplay your opponents in a Texas Hold’em game, the same is true of the Emotional Control aspects of the game; you can’t learn how to avoid tilt or maintain discipline when all is going poorly in a session unless you accept some key, hard truths about the nature of card games like poker.

Mastery of the six Emotional Control aspects of the game are built upon a foundation of understanding--and acceptance--of certain poker "realities."
The way I see it, there are four or five of these truths, or "realities" to poker. In this post, I’m going to discuss the first of these:

Reality #1: Poker results are based on luck and skill.

In the effort to legalize online poker, there have been many serious, often heated, debates over whether poker is a game of luck (i.e., chance) or one of skill (i.e., relative expertise). The rationale on both sides of the issue have merit, but I believe the simple truth is this: poker has both luck and skill aspects to it, but which of these dominates is a function of the timescale in which you view the effect. Pay attention, folks, because this is a really, really important concept to understand and accept.

In the short term (i.e., on an individual hand-to-hand basis), chance, or the "luck of the draw," has a dominating effect on who wins and who loses any particular hand. In the long run, however, the skill and expertise of one player relative to another player has the largest effect on who ends up with all the money. Said another way, on a short-term basis, luck will have a significant effect on your results. But on a longer, session-to-session scale, the relative level of skill you possess, compared to that of your opponents, will have the largest effect.

Most of us understand the concept of luck or chance (i.e., we've all had our share of bad beats and suck-outs), but what do we mean by the word “skill?” In poker terms, "skill" just means the ability to make better, more consistent and logically thought-out decisions than our opponents. Yes, there’s more to it than this, but at the heart of playing good, “skillful” poker is the ability to make better decisions (and therefore make fewer mistakes) than our opponents.

In a 2011 National Bureau of Economic Research (NBER) paper, the economists Steven Levitt (of Freakanomics fame) and Thomas Miles analyzed the performance in the 2010 World Series of Poker (WSOP) of a group of players that were identified as “poker experts” prior to the start of the event. These players, identified a priori as “highly skilled,” achieved an average return on investment (ROI) on their collective buy-ins of positive 30 percent (+30%) in the tournament, compared to an average ROI of negative fifteen percent (-15%) for all other players. The researchers went on to show that the results of a long duration event like WSOP tournaments is dominated by these “skillful” players.

Other researchers have drawn similar conclusions using other, larger sample sized data. For example, in 2009, the Washington D.C. consultancy group, Cigital, examined more than 100 million hand histories from a popular online poker site. One of the key findings that Cigital showed was that fully three-quarters (75%) of all poker hands never go to showdown; i.e., someone caused someone else to fold. Further, only about twelve percent (12%) of all confrontations were won by a better hand at showdown. The experts went on to conclude that while poker has an element of chance (i.e., the cards that a player received, the flop, turn, and river deals, etc.), this effect played a vanishingly small role as more hands were dealt. Hell, even a U.S. district judge determined in 2012 that the game of poker is “predominated by [long-term] skill” and therefore should not be included in federal laws prohibiting gambling.

In the long run, skill crushes luck at the poker tables.

But this brings us back to a key aspect of this Reality #1—namely, in the short term, the luck of the draw has a very big effect. You can play perfectly, folding poor starting hands, waiting to have position on weaker opponents, make perfect reads on them, choose to enter pots only with dominating card against weaker card that your opponent holds, bet the perfect amount to entice them to make bad calls… and still lose. Aces get cracked by dominated trash hands more often then our psyches would like (something like 15% of the time, in fact). These "bad beat" and "suck-out" losses are not enough to affect the long term profitably of getting all your money in preflop with Aces, but it does take a measurable bite out of that profit. Said simply: bad beats happen.

And believe it or not, this is a good thing!

Yes, seriously, this is something we need to embrace. Short term luck is what brings the bad players back to the tables. If Joe Donkey never won with his favorite 10-4 suited trash hand, despite how pretty those cards looked to him, he’d eventually stop playing them. Or worse, he'd probably just stop playing poker altogether. The short term luck aspect of the game is effectively what keeps these fish who rely on luck returning to our tables; they win just enough to feel they have a shot. And so they come back to donate money to the game. Their short-term, luck-based results give them a kind of false hope.

This false hope behavior is why casinos rig their slot machines to pay out just enough to keep all those the chain-smoking blue-haired ladies pulling the one-armed bandit levers. It's literally something in how our brains  are wired that feeds on lucky, random results. Researchers have shown over and over that random "lucky" payouts of food morsels to lab rats that are pushing buttons in their cages results in those rodents continually coming back to push those buttons, over and over, despite the fact that most of the time they don't get paid off. They literally push the buttons more when the payout is random, vs. when it gives them a more regular supply of food. Chain-smoking blue-haired ladies are no different.

Luck is what feeds the game. Skill, however, is how you will make money at it, if you’re willing to play a disciplined and patient—and, yes, at times frustrating—game. Accept it now: You’re going to have your good hands cracked by worse ones. You will take bad beats. You will have straights and flushes lose to “two-outers.” You will get coolered. You will get sucked out on. You will lose to $%&#@ luck boxes and donkeys and fish.

Accept this Reality now, or give up on poker forever.

Poker can and will be frustrating. But if you stay the course and accept this key Luck v. Skill reality of poker, you will be far less prone to letting the frustrations affect your game. You will tilt less. You will be able to remain patient and disciplined and stay the course. You will be able to play focused and motivated. You will learn to be confident, but not overly so. And you will be able learn to play with heart.... oh, and you will also win. A lot. Why? Because skill crushes luck at the poker tables over time, that's why. You just have to learn to stay the course and weather the unlucky periods.

There’s an old life adage that says it’s better to be lucky than good. This is only partially true, especially when it comes to cards. I believe a better way to state this in poker is: It may be better to be lucky than good in the short-term, but it’s far better to be skilled over the long run.

All-in for now...

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