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PROFESSOR: Today, we're going
to be talking about something

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a little bit away from
the game of poker, per se,

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and more about looking at
poker as an investment.

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The conceit here is
that, to some extent,

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you're either a winning
poker player now,

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or eventually you'll get there.

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So this is looking at now that
you have these alpha streams,

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these streams of
positive EV that you

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00:00:39,810 --> 00:00:42,070
can pick which ones you
want to embrace, how do you

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00:00:42,070 --> 00:00:42,730
balance out?

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00:00:42,730 --> 00:00:45,440
How do you look at your
future, given that this is now

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an option you hold?

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Cash game here
just means anything

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that's not a tournament,
where tournament is a poker

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00:00:52,840 --> 00:00:55,700
structure where you buy
in, and with money, you

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00:00:55,700 --> 00:00:57,880
receive tournament
chips, and you only

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00:00:57,880 --> 00:01:01,997
get money to the extent
that you survive longer

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00:01:01,997 --> 00:01:03,830
than someone else, where
the person with all

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00:01:03,830 --> 00:01:06,280
the chips in the end
wins some set piece,

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00:01:06,280 --> 00:01:08,310
not necessarily all their chips.

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00:01:08,310 --> 00:01:12,290
Whereas a cash game is one
such that each chip has

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00:01:12,290 --> 00:01:15,080
a specific value, like you're
actually bedding real dollars,

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00:01:15,080 --> 00:01:18,540
and you can enter or
leave whenever you like.

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00:01:18,540 --> 00:01:22,630
So in cash games, chips are
effectively literal money,

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00:01:22,630 --> 00:01:26,077
so the more chips you win,
the more money you win.

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00:01:26,077 --> 00:01:28,410
Whereas in tournaments, all
that matters is the position

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00:01:28,410 --> 00:01:29,090
you finish.

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00:01:29,090 --> 00:01:31,090
When we talk about the
Independent Chip model,

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we'll talk about
when those diverge.

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00:01:33,290 --> 00:01:36,970
The second point is about that,
where Chip EV, like literally

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00:01:36,970 --> 00:01:39,260
having more chips,
in a cash game

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00:01:39,260 --> 00:01:41,670
is directly related to the
amount of money you make.

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00:01:41,670 --> 00:01:43,337
If you're making a
decision that results

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00:01:43,337 --> 00:01:45,211
in you having more chips,
you make more money

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00:01:45,211 --> 00:01:46,020
in the long run.

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00:01:46,020 --> 00:01:48,190
Whereas in a tournament, it's
a little bit more complicated.

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00:01:48,190 --> 00:01:49,760
They're congruent,
and they generally

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00:01:49,760 --> 00:01:51,520
trend in the same direction.

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00:01:51,520 --> 00:01:54,100
But in some particular
cases, what's

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00:01:54,100 --> 00:01:57,200
something that's
positive Chip Ev

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00:01:57,200 --> 00:02:00,600
may be either positive or
negative in terms of Dollar EV,

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00:02:00,600 --> 00:02:03,265
and we'll talk about
that in a little bit.

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00:02:03,265 --> 00:02:05,390
Cash games-- you can come
and go whenever you want.

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00:02:05,390 --> 00:02:06,770
That makes them very liquid.

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00:02:06,770 --> 00:02:08,880
If you're a big
cash game player,

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00:02:08,880 --> 00:02:12,310
you can generally grind
out your hourly win rate

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00:02:12,310 --> 00:02:13,894
whenever you want,
especially online.

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00:02:13,894 --> 00:02:16,060
There's a little bit of
overhead when you play live,

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00:02:16,060 --> 00:02:19,660
but cash games are much easier
to just come and go with regard

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00:02:19,660 --> 00:02:22,417
to kind of executing your skill.

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With tournaments.

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you get all your EV from
winning, from lasting long,

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so you're generally stuck.

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The better you are, the
longer these tournaments take,

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and you have to kind of
be there for the long run

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and generally plan
to last a long time.

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In cash games, you can buy
in as many times as you want.

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Like if you're in a cash game
with a lot of bad players

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and you get knocked out,
you can just buy back in.

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It's like it never happened.

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With a tournament, if
you're at a tournament

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with a lot of bad players,
and you get knocked out

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the first hand because
you get unlucky,

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you never get to redo
that for most tournaments.

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You always get kind of
a new field of players,

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00:03:00,634 --> 00:03:02,050
and you don't have
the opportunity

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to reenter a tournament.

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Your only choice is to enter
at the first time or not.

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Cash games have fixed blinds.

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The situation that
you're in when you start

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is generally the situation
you're always going to be in,

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so you don't need to factor in
having a different size stack.

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Presumably, you're
always going to have

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at least the maximum
buy-in or more.

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Whereas in tournament
situations,

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you're going to
be short-stacked.

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00:03:24,545 --> 00:03:26,180
People at your table
are going to have

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a widely different stack size.

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In cash games, you have
a single table selection,

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which is you get to see
the nine people that you're

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going to play against.

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00:03:34,590 --> 00:03:36,048
And you can watch
them, and you can

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see if eight people call
pre-flop in a cash game,

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you know that probably seven
of those people are bad,

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and you can just enter that game
and play against those eight

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or nine people-- totally fine.

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00:03:47,380 --> 00:03:50,060
Whereas for tournaments,
because you're only

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playing against nine other
people in the tournament

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00:03:52,620 --> 00:03:54,970
of a field of say,
like 100, you only

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00:03:54,970 --> 00:03:56,980
really get to target
groups of people.

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You can identify an
audience of people

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00:04:00,777 --> 00:04:02,610
who would enter that
tournament and then get

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00:04:02,610 --> 00:04:04,900
an idea of what the average
person you'll play against

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00:04:04,900 --> 00:04:06,820
will be, but you
can enter tournament

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with 90 fish and 10 pros and be
at a table of 10 pros to start.

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So that adds a little
bit of variance.

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It also adds some
complexity in trying

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00:04:15,670 --> 00:04:19,620
to get a read at your
table and kind of make

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00:04:19,620 --> 00:04:22,360
that jive with your read of
what the average player should

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00:04:22,360 --> 00:04:23,740
be for that tournament.

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Like the World Series
of Poker is typically

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a tournament that has
like 60% fish, 40% percent

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00:04:29,550 --> 00:04:31,540
pros nowadays.

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But a lot of tables end up
like eight pros and two fish,

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00:04:34,420 --> 00:04:37,267
and that creates a
much different type

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00:04:37,267 --> 00:04:39,475
of situation for you than
if you were at a table that

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was primarily new players.

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As I said before, cash
games have higher liquidity.

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The best kind of career
you can make in poker

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is being really good at
a cash game, because you

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can go anywhere and play those.

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You can play as
long as you want.

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00:04:53,190 --> 00:04:56,030
Like if you only have two
hours and you're in Vegas,

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you can grind out
pretty confidently

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00:04:58,060 --> 00:05:00,670
like $150 in EV, no problem.

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00:05:00,670 --> 00:05:02,880
Whereas in a tournament,
it's much more uncertain

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00:05:02,880 --> 00:05:05,620
how long it'll take
you to capture that EV

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00:05:05,620 --> 00:05:08,020
and how long you might be
obligated to stick around.

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For what's considered
normal win rates,

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cash games are considered
lower variance.

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00:05:15,970 --> 00:05:17,874
Tournaments are considered
higher variance.

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If you're winning at cash
games, you're crushing it,

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but it's much, much harder to
win at cash games, at least

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at the medium high stakes.

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It's for this reason--
it's because anyone who's

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a loser at a cash game knows
it immediately and drops out

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really quickly.

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00:05:32,130 --> 00:05:34,634
Whereas in tournaments,
some of the big name pros

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are probably losers
at this point,

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00:05:36,050 --> 00:05:37,080
they just don't know it yet.

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00:05:37,080 --> 00:05:38,538
Because you can go
years before you

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00:05:38,538 --> 00:05:40,500
find out whether you're
actually a winner

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00:05:40,500 --> 00:05:42,170
or a loser at big tournaments.

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00:05:42,170 --> 00:05:44,850
Let's talk about the
tournament life cycle.

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The early game is going to be
everything before the bubble.

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00:05:49,390 --> 00:05:53,150
So it's going to be like the
first 90% of eliminations

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00:05:53,150 --> 00:05:55,010
in the tournament will
be in the early game,

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00:05:55,010 --> 00:05:56,718
although because of
how tournaments work,

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that ends up being like half
the tournament in terms of time.

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But you get the idea anyway.

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Play during the early game is
very similar to cash games.

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There's no ICM.

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00:06:06,250 --> 00:06:09,730
There's no difference
in the value of chips

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00:06:09,730 --> 00:06:12,310
early on, because when
you have 1,000 chips,

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00:06:12,310 --> 00:06:15,050
and you need 100,000
to win the tournament,

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00:06:15,050 --> 00:06:17,530
a difference of 50 chips
isn't that big of a deal.

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00:06:17,530 --> 00:06:20,730
The difference in value
of chips doesn't really

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00:06:20,730 --> 00:06:24,300
matter that much, which is why
I'm saying that Tournament Chip

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00:06:24,300 --> 00:06:28,910
EV is approximately
equal to real Dollar EV,

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00:06:28,910 --> 00:06:32,990
so make decisions as if it
were a normal cash game.

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In addition, your
playing style is

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going to be entirely
influenced by your stack size.

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Having the same
proportional stack size

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00:06:42,560 --> 00:06:44,560
later in the early
game, you'll make

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the same types of decisions.

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I'm defining different zones of
play based on your stack size.

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If your M is less
than 2, I'm calling

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that the dead zone,
Harrington called it that.

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00:06:55,140 --> 00:06:57,530
2 to 8 is the steal period.

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00:06:57,530 --> 00:06:59,830
8 to 12 is the steal
re-steal period,

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00:06:59,830 --> 00:07:01,890
and we'll explain
what that is later.

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00:07:01,890 --> 00:07:04,750
12 to 30 is the value-betting
zone, and then 30 or more

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00:07:04,750 --> 00:07:07,090
is a set-mining zone.

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00:07:07,090 --> 00:07:10,290
Let me talk about tempo before
we get into what exactly

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00:07:10,290 --> 00:07:12,890
those things are.

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00:07:12,890 --> 00:07:16,666
The most important
thing about tournaments

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00:07:16,666 --> 00:07:18,040
with regard to
how it's different

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00:07:18,040 --> 00:07:20,780
than a cash game is
getting the speed

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00:07:20,780 --> 00:07:23,960
right, like getting your
aggression at the right level.

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00:07:23,960 --> 00:07:27,990
Doyle Brunson used to
say "never get caught

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00:07:27,990 --> 00:07:29,910
speeding in a tournament."

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00:07:29,910 --> 00:07:32,060
What that means is
don't get caught

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being way too aggressive way
too early on, and by early on,

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00:07:35,860 --> 00:07:38,840
I mean when you have
a big chip stack.

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00:07:38,840 --> 00:07:41,280
So you need to win
coin flips, like you

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00:07:41,280 --> 00:07:44,400
will have to win several
hands when you're behind

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00:07:44,400 --> 00:07:45,550
to win a tournament.

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00:07:45,550 --> 00:07:47,550
So what you should
do is make sure

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00:07:47,550 --> 00:07:50,230
that when you're
not in coin flips,

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00:07:50,230 --> 00:07:52,620
you slowly grow
your stack, and you

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00:07:52,620 --> 00:07:54,150
avoid flipping
when you don't have

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00:07:54,150 --> 00:07:56,380
to so that when you
actually do flip,

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00:07:56,380 --> 00:07:58,669
you end up with more chips.

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00:07:58,669 --> 00:08:00,460
Like those small
differences are the things

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00:08:00,460 --> 00:08:02,780
that are multiplied all
throughout the tournament

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00:08:02,780 --> 00:08:05,090
to make you-- instead of
like 1% chance of winning

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00:08:05,090 --> 00:08:07,560
a tournament, like 3% or 4%.

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00:08:07,560 --> 00:08:11,560
That's where your edge
really materializes.

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00:08:11,560 --> 00:08:14,680
The dead zone-- being in
the dead zone is terrible.

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00:08:14,680 --> 00:08:19,750
It's much worse than
half of having 4M.

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00:08:19,750 --> 00:08:21,950
You should only
ever be in the zone

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00:08:21,950 --> 00:08:26,350
because you lost the last hand,
and you had slightly more chips

200
00:08:26,350 --> 00:08:27,290
than that guy.

201
00:08:27,290 --> 00:08:29,120
Because this is a
really bad situation

202
00:08:29,120 --> 00:08:32,210
to be in, because you
have no fold equity.

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00:08:32,210 --> 00:08:33,635
So fold equity is
where your value

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00:08:33,635 --> 00:08:35,870
is going to come from,
because you're not

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00:08:35,870 --> 00:08:38,669
going to win a lot of
showdowns in a tournament,

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00:08:38,669 --> 00:08:41,450
and a lot of your EV
from the tournament

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00:08:41,450 --> 00:08:43,320
is going to come
from fold equity.

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00:08:43,320 --> 00:08:44,940
So if you have less
than 2M, you're

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00:08:44,940 --> 00:08:47,470
going to bet like
pre-flop, and the big blind

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00:08:47,470 --> 00:08:50,050
is going to call you without
even looking at his hand, which

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00:08:50,050 --> 00:08:53,120
means you have no fold
equity-- like you basically

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have to win a showdown
to get back into it,

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00:08:57,000 --> 00:08:59,450
and that's a really
bad situation.

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00:08:59,450 --> 00:09:00,950
You want to get out
of the dead zone

215
00:09:00,950 --> 00:09:02,436
before you have to
pay a big blind,

216
00:09:02,436 --> 00:09:03,810
and then you're
going to be stuck

217
00:09:03,810 --> 00:09:06,534
on whatever hand you get there.

218
00:09:06,534 --> 00:09:08,200
The reason is you
want to be able to get

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00:09:08,200 --> 00:09:10,490
your fold equity back.

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00:09:10,490 --> 00:09:14,720
If you're under 1M under
any circumstance-- so never,

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00:09:14,720 --> 00:09:15,570
never do that.

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00:09:15,570 --> 00:09:20,608
Call any two cards
before you get to 1M.

223
00:09:20,608 --> 00:09:21,720
Why?

224
00:09:21,720 --> 00:09:25,510
Because if you have 1M,
and then you double up,

225
00:09:25,510 --> 00:09:29,470
you still are in the dead
zone, like you're basically

226
00:09:29,470 --> 00:09:34,140
at least one coin flip behind
being in a terrible situation.

227
00:09:34,140 --> 00:09:40,680
So enter any sort of coin flip
to avoid getting below 1M.

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00:09:40,680 --> 00:09:43,560
So a lot of your value is going
to come from this steal period,

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00:09:43,560 --> 00:09:46,930
and by steal, I mean
stealing blinds.

230
00:09:46,930 --> 00:09:50,310
When you have between 2
an 8M, your only decision

231
00:09:50,310 --> 00:09:51,890
is to go all in or fold.

232
00:09:51,890 --> 00:09:53,876
Because every time
you steal the blinds,

233
00:09:53,876 --> 00:09:55,625
and the blinds are
really valuable to you,

234
00:09:55,625 --> 00:09:58,620
you increase your stack
by like 20% or 30%--

235
00:09:58,620 --> 00:09:59,700
like that's a big deal.

236
00:09:59,700 --> 00:10:01,241
That's probably more
than your equity

237
00:10:01,241 --> 00:10:04,910
from actually going to showdown.

238
00:10:04,910 --> 00:10:07,592
Unless you literally have
aces, that's probably

239
00:10:07,592 --> 00:10:09,050
better than any
sort of edge you're

240
00:10:09,050 --> 00:10:10,820
going to have by getting called.

241
00:10:10,820 --> 00:10:13,280
So find out who doesn't
protect their blinds

242
00:10:13,280 --> 00:10:14,440
and steal from them.

243
00:10:14,440 --> 00:10:17,010
You should've been reading
people early in the tournament

244
00:10:17,010 --> 00:10:19,160
to find out who's a
pushover-- like they're

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00:10:19,160 --> 00:10:21,243
going to be your best
friend, because you're going

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00:10:21,243 --> 00:10:22,800
to steal blinds from them.

247
00:10:22,800 --> 00:10:26,190
On the converse,
pretend like you're

248
00:10:26,190 --> 00:10:28,650
someone who defends their
blind, because if you get

249
00:10:28,650 --> 00:10:31,600
walked-- if everyone folds
to your big blind-- you

250
00:10:31,600 --> 00:10:34,120
just get one
additional M for free.

251
00:10:34,120 --> 00:10:36,282
But don't actually
do it, because you

252
00:10:36,282 --> 00:10:37,490
don't want to see a showdown.

253
00:10:37,490 --> 00:10:42,300
It's a bit of a game of chicken,
and I will actively pretend,

254
00:10:42,300 --> 00:10:44,290
like I will tell a
person I will actively

255
00:10:44,290 --> 00:10:46,250
defend my blinds--
because it's not binding,

256
00:10:46,250 --> 00:10:50,130
and you can do that-- and then
just think about whatever hand

257
00:10:50,130 --> 00:10:51,420
I have and then fold.

258
00:10:51,420 --> 00:10:54,480
You should still be calling
at a very tight range,

259
00:10:54,480 --> 00:10:57,130
but to the extent that
you can convince them not

260
00:10:57,130 --> 00:11:02,190
to push into you, it's almost as
good as the stealing yourself.

261
00:11:02,190 --> 00:11:04,440
So avoid showdowns
if at all possible.

262
00:11:04,440 --> 00:11:07,760
A lot of your hands are going
to be played in this period,

263
00:11:07,760 --> 00:11:09,850
and the most important
thing you can do

264
00:11:09,850 --> 00:11:11,860
is find opportunities to steal.

265
00:11:11,860 --> 00:11:13,170
Don't get into showdowns.

266
00:11:13,170 --> 00:11:15,962
Don't call unless you think
you're like a 70% favorite.

267
00:11:15,962 --> 00:11:17,670
And it's related to
the Gap Theory, which

268
00:11:17,670 --> 00:11:22,760
is by Sklansky, which says to
call a hand, to call it all in,

269
00:11:22,760 --> 00:11:24,870
you need a much stronger
hand than to push.

270
00:11:24,870 --> 00:11:25,370
Why?

271
00:11:25,370 --> 00:11:29,070
Because when you push, when
you bet, you have full equity,

272
00:11:29,070 --> 00:11:30,367
and when you call, you don't.

273
00:11:30,367 --> 00:11:31,450
And that's the difference.

274
00:11:31,450 --> 00:11:36,010
Like you can push with any two
cards in a lot of situations,

275
00:11:36,010 --> 00:11:38,610
but you need to have
a good hand to call.

276
00:11:38,610 --> 00:11:41,290
So you're here your goal here is
to keep your head above water.

277
00:11:41,290 --> 00:11:43,370
Don't fall below
2, and preferably

278
00:11:43,370 --> 00:11:50,260
get into like the 10M
period, either by doubling up

279
00:11:50,260 --> 00:11:51,840
or by stealing.

280
00:11:51,840 --> 00:11:53,930
So if you steal
three hands in a row,

281
00:11:53,930 --> 00:11:56,164
you have 11M, if you're at 8.

282
00:11:56,164 --> 00:11:57,080
That's the idea, here.

283
00:11:57,080 --> 00:11:58,540
And then once you're
at 11M, you're

284
00:11:58,540 --> 00:12:00,600
in a much more
interesting situation.

285
00:12:00,600 --> 00:12:02,270
So this steal,
re-steal period is

286
00:12:02,270 --> 00:12:05,190
when everyone is
trying to steal blinds,

287
00:12:05,190 --> 00:12:10,060
except you have the equity
such that if you get re-raised,

288
00:12:10,060 --> 00:12:11,310
you can fold.

289
00:12:11,310 --> 00:12:13,400
What will happen is
people bet into you,

290
00:12:13,400 --> 00:12:15,400
and you have to
re-pop them sometimes.

291
00:12:15,400 --> 00:12:17,620
And then like you have
to identify who's going

292
00:12:17,620 --> 00:12:20,750
to re-pop you and avoid them.

293
00:12:20,750 --> 00:12:21,570
Here's the idea.

294
00:12:21,570 --> 00:12:26,090
If you steal a bet with like
2M, and if he re-raises you

295
00:12:26,090 --> 00:12:30,350
with 6M, you're like marginally
to call any two cards.

296
00:12:30,350 --> 00:12:36,330
Then if you have an M of 5,
for example, you fall below.

297
00:12:36,330 --> 00:12:39,320
If you have a 27%
equity, it's a good call,

298
00:12:39,320 --> 00:12:42,540
meaning any two cards, because
you're at least 70%-30%

299
00:12:42,540 --> 00:12:43,980
basically all the time.

300
00:12:43,980 --> 00:12:46,290
Whereas if you have an
M of 12 and he pushes,

301
00:12:46,290 --> 00:12:48,259
you have to have a
40% chance of calling,

302
00:12:48,259 --> 00:12:50,300
like you can actually fold
this, and that's good,

303
00:12:50,300 --> 00:12:52,500
it gives you more optionality.

304
00:12:52,500 --> 00:12:56,080
The Value Betting Zone is
where you might actually

305
00:12:56,080 --> 00:12:58,320
get to see a flop, and
you have to plan for that.

306
00:12:58,320 --> 00:13:02,150
Your hand, pre-flop, is
actually valuable to the extent

307
00:13:02,150 --> 00:13:05,744
it hits the flop, not like it
is when you have lower M, where

308
00:13:05,744 --> 00:13:07,660
your hand's going to be
valuable to the extent

309
00:13:07,660 --> 00:13:10,000
that you're likely to
be winning pre-flop.

310
00:13:10,000 --> 00:13:13,900
So this play in 15M to 30M
is very similar to what

311
00:13:13,900 --> 00:13:15,440
a cash game play is like.

312
00:13:15,440 --> 00:13:17,481
So you're probably going
to see a bunch of flops,

313
00:13:17,481 --> 00:13:19,630
and we're going to
plan accordingly.

314
00:13:19,630 --> 00:13:21,935
You still don't want
to flat call pre-flop.

315
00:13:21,935 --> 00:13:24,060
When you play a hand, you
want to be the aggressor.

316
00:13:24,060 --> 00:13:26,150
You want to raise when
you have a good hand.

317
00:13:26,150 --> 00:13:28,060
You want to fold when
you have a bad hand.

318
00:13:28,060 --> 00:13:30,018
I'm going to call this
Flop, Turn, River, Play,

319
00:13:30,018 --> 00:13:33,090
but I really mean it's play
when you have enough ships

320
00:13:33,090 --> 00:13:34,850
to actually see the flop.

321
00:13:34,850 --> 00:13:37,410
What you should do is
not play that many hands,

322
00:13:37,410 --> 00:13:40,780
but when you play hands,
play them aggressively.

323
00:13:40,780 --> 00:13:42,320
So the standard
bet here is going

324
00:13:42,320 --> 00:13:45,560
to be 3 big blinds,
plus one big blind

325
00:13:45,560 --> 00:13:47,290
for every caller before you.

326
00:13:47,290 --> 00:13:49,910
So if everyone folded
before you, you bet 3.

327
00:13:49,910 --> 00:13:54,220
If two people call before you,
you bet 5, 5 times a big blind.

328
00:13:54,220 --> 00:13:55,810
All your bets should be big.

329
00:13:55,810 --> 00:13:57,970
They should be big, big
portions of the pot.

330
00:13:57,970 --> 00:13:59,420
2/3 is an OK number.

331
00:13:59,420 --> 00:14:01,400
If you think the person
is particularly weak,

332
00:14:01,400 --> 00:14:03,486
you can bet the pot.

333
00:14:03,486 --> 00:14:05,110
First, we're going
talk about pre-flop.

334
00:14:05,110 --> 00:14:07,390
When your M is high,
your value comes

335
00:14:07,390 --> 00:14:10,480
from having a good
hand on the flop.

336
00:14:10,480 --> 00:14:13,010
I still don't care
about the river.

337
00:14:13,010 --> 00:14:14,840
If you do this right,
you're probably

338
00:14:14,840 --> 00:14:16,214
not even going to
reach the river

339
00:14:16,214 --> 00:14:17,780
by the time someone is all in.

340
00:14:17,780 --> 00:14:19,770
We're only worried
about the extent

341
00:14:19,770 --> 00:14:22,590
that your hand is
valuable on the flop.

342
00:14:22,590 --> 00:14:24,330
Depending on your
position, this is

343
00:14:24,330 --> 00:14:26,270
what I'm recommending
your opening range is,

344
00:14:26,270 --> 00:14:32,200
where I'm saying you're opening
by raising to three big blinds.

345
00:14:32,200 --> 00:14:34,860
So I'm saying that if
you're an early position,

346
00:14:34,860 --> 00:14:37,840
you should really only do this
with like the top 5% of hands,

347
00:14:37,840 --> 00:14:42,340
which is 10s or Ace-Queen,
suited, or Ace-King.

348
00:14:42,340 --> 00:14:45,090
The difference in suitedness
actually matters there.

349
00:14:45,090 --> 00:14:47,630
If you're first to
act, any other hand,

350
00:14:47,630 --> 00:14:50,020
you should fold,
which is obviously

351
00:14:50,020 --> 00:14:52,370
the majority of
hands, because you

352
00:14:52,370 --> 00:14:53,870
have the least
amount of information

353
00:14:53,870 --> 00:14:56,210
now-- like you might
be up against someone

354
00:14:56,210 --> 00:14:58,120
with another strong hand, now.

355
00:14:58,120 --> 00:15:02,860
And then on like
every card hereafter,

356
00:15:02,860 --> 00:15:05,180
you're going to be in
the worst position.

357
00:15:05,180 --> 00:15:11,740
So to win in that position, to
be profitable in that position,

358
00:15:11,740 --> 00:15:14,140
you need to already
have a really good hand.

359
00:15:14,140 --> 00:15:16,977
To the extent that you have the
option to just not play a hand,

360
00:15:16,977 --> 00:15:19,560
it seems to make sense that you
would prefer not playing hands

361
00:15:19,560 --> 00:15:21,010
when you're in a bad position.

362
00:15:21,010 --> 00:15:23,456
So that's why that's
a really tight range.

363
00:15:23,456 --> 00:15:24,830
When you get to
middle position--

364
00:15:24,830 --> 00:15:27,930
so maybe like four
people to act after you--

365
00:15:27,930 --> 00:15:31,390
you could widen up a little bit,
which a lot of you might think

366
00:15:31,390 --> 00:15:34,000
is still very tight
range-- and it is.

367
00:15:34,000 --> 00:15:37,110
This might be close
to like 15%, where

368
00:15:37,110 --> 00:15:41,200
you have 8s or Ace-Jack,
and maybe, King-Queen.

369
00:15:41,200 --> 00:15:43,280
Every other hand, you
should be folding.

370
00:15:43,280 --> 00:15:45,040
Like that's your
range for raising out

371
00:15:45,040 --> 00:15:46,967
of any sort of middle position.

372
00:15:46,967 --> 00:15:48,550
And then it makes
it easy, because you

373
00:15:48,550 --> 00:15:51,060
can imagine what type
of flop you either hit

374
00:15:51,060 --> 00:15:53,270
or don't hit, here.

375
00:15:53,270 --> 00:15:55,380
So if you're facing a
raise, what I recommend

376
00:15:55,380 --> 00:15:57,590
is you just move
everything up one.

377
00:15:57,590 --> 00:16:00,880
So if you're facing a raise
in early or middle position,

378
00:16:00,880 --> 00:16:04,430
then you can play 10s,
Ace-Queen, Ace-King,

379
00:16:04,430 --> 00:16:08,080
and if you're late, then you
can start playing like Ace-Jack.

380
00:16:08,080 --> 00:16:10,390
So when it comes to
a flop, by this time,

381
00:16:10,390 --> 00:16:13,690
you will have raised
pre-flop, and you are now

382
00:16:13,690 --> 00:16:15,800
the aggressor in the hand.

383
00:16:15,800 --> 00:16:19,060
So if you were the aggressor,
you should bet 2/3 of the pot.

384
00:16:19,060 --> 00:16:20,890
That works a lot
more often than you

385
00:16:20,890 --> 00:16:24,680
would think, even among people
who know what a seed bet is.

386
00:16:24,680 --> 00:16:26,430
Then the break-even,
based on our formula,

387
00:16:26,430 --> 00:16:31,230
is going to be 2/3
divided by 5/3, or 40%.

388
00:16:31,230 --> 00:16:33,690
This is what I'm recommending
in terms of tiers.

389
00:16:33,690 --> 00:16:36,850
This Tier 1 is a
King-high flush,

390
00:16:36,850 --> 00:16:39,312
like I'm giving you a
little bit of leeway,

391
00:16:39,312 --> 00:16:40,770
there, where you
don't need to have

392
00:16:40,770 --> 00:16:42,470
literally the Ace-high flush.

393
00:16:42,470 --> 00:16:44,050
But if you have the
King-high flush,

394
00:16:44,050 --> 00:16:46,310
you can go broke for 30M.

395
00:16:46,310 --> 00:16:48,740
In addition, the
literal top straight.

396
00:16:48,740 --> 00:16:52,010
So if the board is 4,
5, 6, and you have 7, 8,

397
00:16:52,010 --> 00:16:53,790
you can consider that Tier 1.

398
00:16:53,790 --> 00:16:56,260
And this is only going to be
relevant on an unpaired board.

399
00:16:56,260 --> 00:16:56,760
Why?

400
00:16:56,760 --> 00:16:59,452
Like, what does a
paired board mean?

401
00:16:59,452 --> 00:17:01,102
STUDENT: Somebody's got a flush.

402
00:17:01,102 --> 00:17:02,310
STUDENT: Somebody [INAUDIBLE]

403
00:17:02,310 --> 00:17:04,510
PROFESSOR: It means a
full house is possible.

404
00:17:04,510 --> 00:17:07,420
So if a full house is
possible, it basically

405
00:17:07,420 --> 00:17:11,619
makes your hand worse than six
more hands that are possible.

406
00:17:11,619 --> 00:17:13,650
Like a flush or a
straight on a paired

407
00:17:13,650 --> 00:17:16,150
board would be
considered Tier 2.

408
00:17:16,150 --> 00:17:18,066
Like if they're betting
aggressively into you,

409
00:17:18,066 --> 00:17:20,740
and you have an Ace-high
flush, you might be ahead.

410
00:17:20,740 --> 00:17:23,020
But then if they're
raising you, then I

411
00:17:23,020 --> 00:17:25,710
would be very worried about you
being up against a full house.

412
00:17:25,710 --> 00:17:28,099
So I would bet those
much less aggressively,

413
00:17:28,099 --> 00:17:30,780
and then I would only bet
the Ace-high flush, here.

414
00:17:30,780 --> 00:17:33,010
Like if you have a King-high
flush on that board,

415
00:17:33,010 --> 00:17:36,580
there are all sorts of
hand that can beat you.

416
00:17:36,580 --> 00:17:39,310
In addition, I'm saying
if you have what--

417
00:17:39,310 --> 00:17:42,130
like the fourth best flush,
here, you can bet it,

418
00:17:42,130 --> 00:17:45,131
but you can't raise it, really.

419
00:17:45,131 --> 00:17:48,390
You can't raise it if they raise
into you, because that just

420
00:17:48,390 --> 00:17:50,400
gives them too
many opportunities

421
00:17:50,400 --> 00:17:52,570
to have a hand that
would actually beat you.

422
00:17:52,570 --> 00:17:53,940
So a 10-high flush isn't bad.

423
00:17:53,940 --> 00:17:55,220
You shouldn't fold it.

424
00:17:55,220 --> 00:17:57,496
And you're not really
drawing, but you

425
00:17:57,496 --> 00:17:58,870
should understand
that it doesn't

426
00:17:58,870 --> 00:18:00,290
have four bets of value.

427
00:18:00,290 --> 00:18:02,280
It only really has
two bets of value,

428
00:18:02,280 --> 00:18:04,640
either a bet and their
raise, which you'll call.

429
00:18:04,640 --> 00:18:09,030
Or if they bet, you can raise
them, and that's generally it.

430
00:18:09,030 --> 00:18:11,060
And that's obviously
on an unpaired board.

431
00:18:11,060 --> 00:18:13,330
This also counts a second
straight-- so a straight

432
00:18:13,330 --> 00:18:15,744
where you don't have
the top two cards,

433
00:18:15,744 --> 00:18:17,910
but you have two cards that
give you a straight that

434
00:18:17,910 --> 00:18:19,540
are slightly lower.

435
00:18:19,540 --> 00:18:22,460
In addition, bottom
set-- I would put here

436
00:18:22,460 --> 00:18:24,360
in addition to any two pair.

437
00:18:24,360 --> 00:18:28,700
So two pair is crushed by
a set, and then bottom set

438
00:18:28,700 --> 00:18:30,590
is also crushed by any set.

439
00:18:30,590 --> 00:18:32,400
It has the same problem.

440
00:18:32,400 --> 00:18:34,150
So I'm calling this
Tier 2, and I'm saying

441
00:18:34,150 --> 00:18:35,750
that's good for like two bets.

442
00:18:35,750 --> 00:18:38,060
Tier 3 is an Overpair.

443
00:18:38,060 --> 00:18:41,797
So if you have a pair of Jacks,
and the flop comes 2, 3, 4,

444
00:18:41,797 --> 00:18:43,880
or something that is a
little bit less correlated,

445
00:18:43,880 --> 00:18:45,320
like 2, 3, 10.

446
00:18:45,320 --> 00:18:46,700
Like an Overpair is good.

447
00:18:46,700 --> 00:18:51,080
It's slightly better
than Top-Pair Top-Kicker,

448
00:18:51,080 --> 00:18:54,380
because you beat
Top-Pair Top-Kicker.

449
00:18:54,380 --> 00:18:56,390
And then Top-Pair
Good-Kicker, I'm saying

450
00:18:56,390 --> 00:19:00,020
is also Tier 3, where you
might be able to take it down.

451
00:19:00,020 --> 00:19:02,650
Like if you bet, and they
call, you might still

452
00:19:02,650 --> 00:19:03,890
be ahead if they're drawing.

453
00:19:03,890 --> 00:19:05,910
But if you bet, and
they raise, you're

454
00:19:05,910 --> 00:19:07,460
probably behind,
and should treat it

455
00:19:07,460 --> 00:19:09,450
like you're drawing thereafter.

456
00:19:09,450 --> 00:19:10,950
Then all these
hands, which you guys

457
00:19:10,950 --> 00:19:13,490
might have previously thought
were good hands, are not.

458
00:19:13,490 --> 00:19:15,910
They're just going to be
called drawing hands-- so

459
00:19:15,910 --> 00:19:18,640
Top-Pair Bad-Kicker,
Mid or Bottom Pair,

460
00:19:18,640 --> 00:19:20,700
or a Pocket Pair
that's not an Overpair.

461
00:19:20,700 --> 00:19:23,730
So if you have 5s, when
the board is 2, 6, 7.

462
00:19:23,730 --> 00:19:25,180
So by the Turn
and the River, all

463
00:19:25,180 --> 00:19:28,084
your turns, like they're
already going to be big pots.

464
00:19:28,084 --> 00:19:29,750
You don't need to
worry about extracting

465
00:19:29,750 --> 00:19:31,580
additional bets on the Turn.

466
00:19:31,580 --> 00:19:33,340
So in general,
try to figure out,

467
00:19:33,340 --> 00:19:36,410
based on his action, what are
the possible groups of hands

468
00:19:36,410 --> 00:19:37,550
that he could have here.

469
00:19:37,550 --> 00:19:39,020
And in general, like that's it.

470
00:19:39,020 --> 00:19:41,170
By the time you're
on the Turn, there

471
00:19:41,170 --> 00:19:43,450
aren't like going to
be that many more bets.

472
00:19:43,450 --> 00:19:47,011
So usually on the Turn, it's
either like go all in or fold.

473
00:19:47,011 --> 00:19:49,010
Then hopefully you're
going to be in a situation

474
00:19:49,010 --> 00:19:51,296
where you played it
right previously, where

475
00:19:51,296 --> 00:19:53,670
you're going to have a better
idea of whether to do that.

476
00:19:53,670 --> 00:20:00,840
Bubble play is going
to be around 20% to 10%

477
00:20:00,840 --> 00:20:01,620
of the field left.

478
00:20:01,620 --> 00:20:04,020
If we're saying that 10%
of the field makes money,

479
00:20:04,020 --> 00:20:06,470
we're saying that
around 10% more

480
00:20:06,470 --> 00:20:10,370
is when like everyone at every
table thinks that oh, like they

481
00:20:10,370 --> 00:20:13,790
have a pretty good chance of
making money at some point.

482
00:20:13,790 --> 00:20:15,500
So they change
around a little bit.

483
00:20:15,500 --> 00:20:17,110
This is when ICM
starts mattering.

484
00:20:17,110 --> 00:20:20,070
This is when your
decisions to win more chips

485
00:20:20,070 --> 00:20:23,150
may not necessarily be the
maximal decision with regard

486
00:20:23,150 --> 00:20:25,250
to winning money.

487
00:20:25,250 --> 00:20:29,400
And it's when players
who are probably not

488
00:20:29,400 --> 00:20:31,150
very comfortable with
the amount of stakes

489
00:20:31,150 --> 00:20:34,620
that they're playing for start
to make really big mistakes.

490
00:20:34,620 --> 00:20:37,910
Typically, the bad
players around the bubble

491
00:20:37,910 --> 00:20:39,852
will be a little bit too
tight, like if you're

492
00:20:39,852 --> 00:20:41,310
playing in the
World Series, you'll

493
00:20:41,310 --> 00:20:45,820
see that like there
are 250 people left,

494
00:20:45,820 --> 00:20:50,200
and 240 people get $12,000,
and everyone else gets zero.

495
00:20:50,200 --> 00:20:52,110
And they're going
to say like OK,

496
00:20:52,110 --> 00:20:53,960
maybe I don't need to
worry about increasing

497
00:20:53,960 --> 00:20:56,872
my chances of getting first
place by half a percent

498
00:20:56,872 --> 00:20:58,330
if it means that
I'm putting myself

499
00:20:58,330 --> 00:21:00,280
at risk of getting zero now.

500
00:21:00,280 --> 00:21:03,180
Like they weigh that little
jump in money quite a bit,

501
00:21:03,180 --> 00:21:07,540
and as a result, they play
a little bit too tight.

502
00:21:07,540 --> 00:21:10,310
Then the general-- at
least as of a couple years

503
00:21:10,310 --> 00:21:13,469
ago-- the consensus was that
how you do during this bubble

504
00:21:13,469 --> 00:21:15,260
period basically
determines how deep you're

505
00:21:15,260 --> 00:21:16,650
going to go during
the tournament,

506
00:21:16,650 --> 00:21:18,733
because this is when the
amateurs make the biggest

507
00:21:18,733 --> 00:21:20,450
mistakes.

508
00:21:20,450 --> 00:21:23,750
So if you're a player who likes
to exploit those mistakes,

509
00:21:23,750 --> 00:21:26,990
this is when you're going to--
a good player can just crush it.

510
00:21:26,990 --> 00:21:30,670
Like he can be
much more than 50%

511
00:21:30,670 --> 00:21:34,610
to double up during this
period by just identifying

512
00:21:34,610 --> 00:21:37,920
weaker players who don't want to
get knocked out for any reason

513
00:21:37,920 --> 00:21:40,080
and just bullying them around.

514
00:21:40,080 --> 00:21:42,630
So there are two types of
meta-game going on now,

515
00:21:42,630 --> 00:21:43,510
just so you know.

516
00:21:43,510 --> 00:21:46,010
This was a conventional belief--
"the average amateur player

517
00:21:46,010 --> 00:21:47,390
is way too tight."

518
00:21:47,390 --> 00:21:49,420
But then once everyone
realized that,

519
00:21:49,420 --> 00:21:53,320
it became the opposite, where
the average amateur player

520
00:21:53,320 --> 00:21:56,550
was way too aggressive.

521
00:21:56,550 --> 00:22:00,550
Because once the first
one gets priced in,

522
00:22:00,550 --> 00:22:03,390
then everyone starts
to be too aggressive,

523
00:22:03,390 --> 00:22:05,050
because everyone
wants to do what

524
00:22:05,050 --> 00:22:06,782
good players do on the bubble.

525
00:22:06,782 --> 00:22:08,990
You could probably identify
your table pretty quickly

526
00:22:08,990 --> 00:22:10,810
around this time,
whether you see

527
00:22:10,810 --> 00:22:15,470
weaker players making really
bad calls or really bad folds.

528
00:22:15,470 --> 00:22:17,450
That will kind of
give you an idea

529
00:22:17,450 --> 00:22:18,840
of what situation you're in.

530
00:22:18,840 --> 00:22:20,710
To the extent you can
bully people around,

531
00:22:20,710 --> 00:22:23,590
but to the extent that other
people are bullying you,

532
00:22:23,590 --> 00:22:27,120
you don't need to
necessarily push them back.

533
00:22:27,120 --> 00:22:28,060
Let's talk about ICM.

534
00:22:28,060 --> 00:22:30,950
The Independent Chip
Model is highlighting

535
00:22:30,950 --> 00:22:36,320
when the chip value
diverges from your dollar

536
00:22:36,320 --> 00:22:37,410
value in the tournament.

537
00:22:37,410 --> 00:22:39,510
So Chip-EV, which
is a C, here-- how

538
00:22:39,510 --> 00:22:41,930
it's different than
Dollar-EV in tournaments.

539
00:22:41,930 --> 00:22:44,680
It's related to the
chance of you ending up

540
00:22:44,680 --> 00:22:46,670
in certain payout spots.

541
00:22:46,670 --> 00:22:48,660
That's why it's
particularly nonlinear.

542
00:22:48,660 --> 00:22:51,815
Rather, when the first
place gets everything,

543
00:22:51,815 --> 00:22:53,940
Chip-EV goes Dollar-EV,
because you eventually just

544
00:22:53,940 --> 00:22:54,950
have to win all the chips.

545
00:22:54,950 --> 00:22:56,533
And to the extent
it brings you closer

546
00:22:56,533 --> 00:22:59,690
to winning all the chips, your
expectation for the tournament

547
00:22:59,690 --> 00:23:01,220
is a little bit higher.

548
00:23:01,220 --> 00:23:03,800
But when payouts are steep,
it gets a little bit more

549
00:23:03,800 --> 00:23:06,350
complicated, because
in some situations,

550
00:23:06,350 --> 00:23:10,710
surviving a little bit
longer has a material dollar

551
00:23:10,710 --> 00:23:14,300
difference and getting more
chips in that situation

552
00:23:14,300 --> 00:23:16,510
may not be as
important as surviving.

553
00:23:16,510 --> 00:23:17,930
And we'll go through examples.

554
00:23:17,930 --> 00:23:19,950
The Dollar-EV is not symmetric.

555
00:23:19,950 --> 00:23:21,120
There's curvature.

556
00:23:21,120 --> 00:23:27,400
So there's this idea of
convexity, where when you win,

557
00:23:27,400 --> 00:23:29,790
you always lose in
this kind of situation,

558
00:23:29,790 --> 00:23:33,260
because when you
win a lot of chips,

559
00:23:33,260 --> 00:23:35,580
those chips go down
in value over time.

560
00:23:35,580 --> 00:23:39,100
And when you lose chips, those
chips are really valuable.

561
00:23:39,100 --> 00:23:41,550
So it makes your
marginal threshold

562
00:23:41,550 --> 00:23:45,047
for making a risky
decision much higher.

563
00:23:45,047 --> 00:23:47,380
In addition, when you factor
in actual utility of money,

564
00:23:47,380 --> 00:23:51,130
it's even worse, where
clearly big upsides

565
00:23:51,130 --> 00:23:56,250
are less good than protecting
against big downsides.

566
00:23:56,250 --> 00:23:58,040
That's kind of the idea there.

567
00:23:58,040 --> 00:24:00,410
Losing hurts more than winning.

568
00:24:00,410 --> 00:24:02,210
Let's just go through
an example of this,

569
00:24:02,210 --> 00:24:04,410
and hopefully this
will make it intuitive.

570
00:24:04,410 --> 00:24:06,330
Say that we're playing
in this situation.

571
00:24:06,330 --> 00:24:09,230
It was whatever, like a
100-person tournament that

572
00:24:09,230 --> 00:24:13,160
was a $20 buy-in, and we're
down to the final four people,

573
00:24:13,160 --> 00:24:15,970
and we have 2,500 chips each,
and these are the payouts,

574
00:24:15,970 --> 00:24:21,330
where first gets a grand, second
gets $600, and third gets $400.

575
00:24:21,330 --> 00:24:23,970
If we look at player
Adam, what's his equity?

576
00:24:23,970 --> 00:24:27,360
Like what's his expected dollar
amount in this tournament,

577
00:24:27,360 --> 00:24:29,610
assuming that everyone is
approximately equal skill,

578
00:24:29,610 --> 00:24:32,890
which is the underlying
assumption here?

579
00:24:32,890 --> 00:24:34,670
STUDENT: [INAUDIBLE]

580
00:24:34,670 --> 00:24:37,960
PROFESSOR: Yeah, it should be
like just 25% of the whole pot,

581
00:24:37,960 --> 00:24:40,000
because he has 25% of the chips.

582
00:24:40,000 --> 00:24:44,120
The whole pot is $2,000, so
I expect that his EV is $500.

583
00:24:44,120 --> 00:24:44,670
And it is.

584
00:24:44,670 --> 00:24:46,460
So everyone has a $500 EV.

585
00:24:46,460 --> 00:24:49,700
But say that we're
in a situation where

586
00:24:49,700 --> 00:24:52,250
Adam and David go into
a coin flip, and then

587
00:24:52,250 --> 00:24:55,780
Adam beats David.

588
00:24:55,780 --> 00:25:00,100
Intuitively, what do you think
Adam's equity should change to?

589
00:25:00,100 --> 00:25:03,150
I would imagine you would
think that he just gets

590
00:25:03,150 --> 00:25:06,520
the equity from David,
because those 2,500 chips are

591
00:25:06,520 --> 00:25:10,710
worth $500 in equity
in the tournament.

592
00:25:10,710 --> 00:25:14,122
So when this happens, how
does the equity change?

593
00:25:14,122 --> 00:25:15,830
You could run it
through a poker tracker,

594
00:25:15,830 --> 00:25:18,910
and I'll go through the kind
of rudimentary math for it.

595
00:25:18,910 --> 00:25:22,790
You might think that Adam
now has $1,000 in EV,

596
00:25:22,790 --> 00:25:25,246
and these guys have $500 in EV.

597
00:25:25,246 --> 00:25:26,620
And like really,
you should think

598
00:25:26,620 --> 00:25:29,400
those guys shouldn't have
gain from this happening,

599
00:25:29,400 --> 00:25:30,900
because the pot
size doesn't change,

600
00:25:30,900 --> 00:25:33,200
and they don't even
change in chip value.

601
00:25:33,200 --> 00:25:37,810
But in actuality, Adam
only gains $266 of equity

602
00:25:37,810 --> 00:25:40,450
for doubling up here,
and these guys actually

603
00:25:40,450 --> 00:25:43,350
gain $100 from that happening.

604
00:25:43,350 --> 00:25:47,990
Let me show you why that is.

605
00:25:47,990 --> 00:25:52,030
Let's look at the
deltas of these payouts.

606
00:25:52,030 --> 00:25:54,680
This is worth $400, and
then this is worth $200,

607
00:25:54,680 --> 00:25:58,450
and getting to first is
worth an additional $400.

608
00:25:58,450 --> 00:26:01,350
So we originally have
$500 of value here,

609
00:26:01,350 --> 00:26:05,980
but now that one person's out,
everyone's guaranteed what?

610
00:26:05,980 --> 00:26:09,460
Like certainly, when
someone has zero chips,

611
00:26:09,460 --> 00:26:13,360
what's their equity
in this tournament?

612
00:26:13,360 --> 00:26:15,630
It should be this, right?
$400-- like they already

613
00:26:15,630 --> 00:26:18,170
are guaranteed $400 of chips.

614
00:26:18,170 --> 00:26:21,290
OK, so now that
everyone has $400,

615
00:26:21,290 --> 00:26:24,830
we're just allocating
the remainder of this.

616
00:26:24,830 --> 00:26:27,930
We're deciding who gets
this remaining $600.

617
00:26:27,930 --> 00:26:30,300
So you can see that
these guys have

618
00:26:30,300 --> 00:26:34,200
a 25% chance of getting
that remaining $600,

619
00:26:34,200 --> 00:26:37,060
which is why they
have just about $150

620
00:26:37,060 --> 00:26:40,250
more than that $400 number.

621
00:26:40,250 --> 00:26:44,140
So that's where it comes.

622
00:26:44,140 --> 00:26:48,930
The reason this is is because
the winner does not eventually

623
00:26:48,930 --> 00:26:52,290
get all of the equity, like
the winner doesn't end up

624
00:26:52,290 --> 00:26:53,260
with $2,000.

625
00:26:53,260 --> 00:26:55,380
He ends up with
$1,000, which is a less

626
00:26:55,380 --> 00:26:59,340
valuable than adding up all
the equities from every player.

627
00:26:59,340 --> 00:27:02,530
Really, he's giving value out
to the second and third place

628
00:27:02,530 --> 00:27:03,680
player.

629
00:27:03,680 --> 00:27:06,260
So that first spot is
probably the worst value

630
00:27:06,260 --> 00:27:11,154
when it comes to your equity per
chip, because if it were winner

631
00:27:11,154 --> 00:27:12,820
take all, then the
equity would be flat,

632
00:27:12,820 --> 00:27:13,900
and then who would care?

633
00:27:13,900 --> 00:27:15,210
But the fact that
he's giving money

634
00:27:15,210 --> 00:27:17,400
to players who didn't have
all the chips in the end

635
00:27:17,400 --> 00:27:19,400
caused that first
place to be really bad.

636
00:27:19,400 --> 00:27:21,956
So since Adam is really
close to first place,

637
00:27:21,956 --> 00:27:23,080
he's getting hurt the most.

638
00:27:23,080 --> 00:27:25,880
You would think like fair value
would be $1,000, but he's not.

639
00:27:25,880 --> 00:27:27,110
He's well short of it.

640
00:27:27,110 --> 00:27:29,630
Whereas these guys are
just gaining from it,

641
00:27:29,630 --> 00:27:32,050
because they're most likely
place is second and third,

642
00:27:32,050 --> 00:27:34,210
and they're capturing
some of that value.

643
00:27:34,210 --> 00:27:37,830
So a satellite is a tournament
that a certain x number

644
00:27:37,830 --> 00:27:41,190
of people win a ticket
to a bigger event.

645
00:27:41,190 --> 00:27:43,540
The World Series of Poker
runs a lot of satellites,

646
00:27:43,540 --> 00:27:45,206
and I think these
tournaments are great,

647
00:27:45,206 --> 00:27:47,620
because this is a really
difficult situation for people

648
00:27:47,620 --> 00:27:49,560
to figure out, and it
causes a lot of people

649
00:27:49,560 --> 00:27:51,580
to make a huge,
huge, huge mistakes.

650
00:27:51,580 --> 00:27:53,300
Say this is like
100-person tournament,

651
00:27:53,300 --> 00:27:57,280
where they all buy in for
like $90 or something,

652
00:27:57,280 --> 00:28:00,326
such that first through
ninth gets $10,000,

653
00:28:00,326 --> 00:28:03,780
and tenth place gets zero,
and there are 10 people left.

654
00:28:03,780 --> 00:28:07,290
So their equity is just
their percentage chance

655
00:28:07,290 --> 00:28:09,130
of winning this flat payout.

656
00:28:09,130 --> 00:28:10,630
Since they all have
the same amount,

657
00:28:10,630 --> 00:28:13,082
they're splitting that
$90,000 pool even, right?

658
00:28:13,082 --> 00:28:15,290
So they all have approximately
the same equity, here,

659
00:28:15,290 --> 00:28:17,190
because no one
gets hurt by having

660
00:28:17,190 --> 00:28:20,210
more chips by the curvature.

661
00:28:20,210 --> 00:28:23,630
Say they were in a situation--
blinds are $200-$400,

662
00:28:23,630 --> 00:28:27,020
and Irene, here, who's
in the small blind,

663
00:28:27,020 --> 00:28:30,477
raises $2,5000 to
Jessica, who has Kings.

664
00:28:30,477 --> 00:28:32,310
This is one person down
until we make money.

665
00:28:32,310 --> 00:28:33,640
Jessica has Kings, here.

666
00:28:33,640 --> 00:28:35,820
So intuitively, what
should we do, here?

667
00:28:38,430 --> 00:28:40,790
Yeah, like calling
seems not that bad.

668
00:28:40,790 --> 00:28:43,660
What do I give you, here?

669
00:28:43,660 --> 00:28:44,972
Like what is Jessica's range?

670
00:28:44,972 --> 00:28:46,680
Jessica is pushing
anything, here, right,

671
00:28:46,680 --> 00:28:48,764
because Jessica
has an M of like 3.

672
00:28:48,764 --> 00:28:50,930
And she's in the small
blind, so she's appropriately

673
00:28:50,930 --> 00:28:54,027
pushing any two cards,
because as we showed earlier,

674
00:28:54,027 --> 00:28:55,610
you're definitely,
definitely supposed

675
00:28:55,610 --> 00:28:59,450
to do that at least when
it comes to Chip-EV.

676
00:28:59,450 --> 00:29:02,310
So Jessica is 82%
with the Kings,

677
00:29:02,310 --> 00:29:05,960
and if we look at chip
equity, she is crushing it.

678
00:29:05,960 --> 00:29:10,080
She is 82% to win
$5,000, doubling up.

679
00:29:10,080 --> 00:29:12,210
She's 18% to lose.

680
00:29:12,210 --> 00:29:16,540
So her equity, her expected
value after this is 4,100,

681
00:29:16,540 --> 00:29:18,940
meaning her delta is 1,600.

682
00:29:18,940 --> 00:29:22,280
She is expected to win
1,600 chips for this.

683
00:29:22,280 --> 00:29:25,410
But what about when
we look at Dollar-EV?

684
00:29:25,410 --> 00:29:28,160
We see for Dollar-EV,
she has an 82% chance

685
00:29:28,160 --> 00:29:32,720
of winning $10,000 and an
18% chance of getting zero.

686
00:29:32,720 --> 00:29:34,760
So her expected
value after this call

687
00:29:34,760 --> 00:29:36,720
is actually $8,200,
which is worse

688
00:29:36,720 --> 00:29:38,780
than her equity of
this tournament.

689
00:29:38,780 --> 00:29:41,790
She actually loses money
if she makes us call.

690
00:29:41,790 --> 00:29:44,320
In fact, if you put the other
person on any two cards,

691
00:29:44,320 --> 00:29:46,080
you should even fold aces.

692
00:29:46,080 --> 00:29:48,280
Like you should only pretend
to look at your cards

693
00:29:48,280 --> 00:29:49,950
before you fold this hand.

694
00:29:49,950 --> 00:29:53,510
And this is what it is for
every person in this situation,

695
00:29:53,510 --> 00:29:55,490
unless you're more
than a 90% favorite

696
00:29:55,490 --> 00:29:59,250
to win, which you're not,
because unless you can

697
00:29:59,250 --> 00:30:01,850
particularly put them on
a hand, which you have

698
00:30:01,850 --> 00:30:04,830
a Pocket-Pair that
dominates their lower,

699
00:30:04,830 --> 00:30:08,530
uncorrelated cards,
you should fold.

700
00:30:08,530 --> 00:30:09,950
How should this pay out?

701
00:30:09,950 --> 00:30:13,090
It doesn't play out like this.

702
00:30:13,090 --> 00:30:16,530
In Vegas, there's
virtually 100% chance

703
00:30:16,530 --> 00:30:20,880
Jessica calls here, to
Irene and Jessica's dismay,

704
00:30:20,880 --> 00:30:24,080
but to the benefit of
everyone else at the table.

705
00:30:24,080 --> 00:30:25,280
But what should happen?

706
00:30:25,280 --> 00:30:27,390
If you're playing
in this situation,

707
00:30:27,390 --> 00:30:30,350
and everyone's
playing rationally,

708
00:30:30,350 --> 00:30:33,917
how do you think this will
play out at $200-$400 blinds.

709
00:30:33,917 --> 00:30:36,720
STUDENT: So Irene would
just push it, [INAUDIBLE]

710
00:30:36,720 --> 00:30:40,130
PROFESSOR: Yeah, so if
you're in the big blind,

711
00:30:40,130 --> 00:30:42,500
and you're pushed into,
what's your calling range?

712
00:30:46,080 --> 00:30:47,550
Zero, it's 0%.

713
00:30:47,550 --> 00:30:49,620
There are no cards
that you should call.

714
00:30:49,620 --> 00:30:52,930
And then every single person
at that table has that 0%

715
00:30:52,930 --> 00:30:54,140
calling range.

716
00:30:54,140 --> 00:30:56,780
However, knowing
that your fold equity

717
00:30:56,780 --> 00:31:00,050
is virtually 100%,
every single person,

718
00:31:00,050 --> 00:31:02,660
at the first opportunity,
should just go all in.

719
00:31:02,660 --> 00:31:05,135
Under the gun, every
single hand will open push,

720
00:31:05,135 --> 00:31:06,730
and everyone else will fold.

721
00:31:06,730 --> 00:31:09,280
And every single hand, that
will happen until the blinds

722
00:31:09,280 --> 00:31:12,330
eventually put someone
all in against their will.

723
00:31:12,330 --> 00:31:16,250
So this is a situation where
ICM comes into huge play,

724
00:31:16,250 --> 00:31:20,060
like people really screw
this up, especially live.

725
00:31:20,060 --> 00:31:22,370
That's why satellites are
one of my favorite types

726
00:31:22,370 --> 00:31:25,730
of tournaments to play-- is
because like every idiot will

727
00:31:25,730 --> 00:31:28,370
tell you that calling
with Kings here is clearly

728
00:31:28,370 --> 00:31:32,390
the right move, when even
folding Aces is like way, way,

729
00:31:32,390 --> 00:31:34,970
way better than
calling with anything.

730
00:31:34,970 --> 00:31:37,740
You should definitely do your
best to identify opportunities

731
00:31:37,740 --> 00:31:40,260
like this, because to
the extent that you

732
00:31:40,260 --> 00:31:42,060
find a tournament
like this that ends up

733
00:31:42,060 --> 00:31:45,250
in these types of
situations, it's

734
00:31:45,250 --> 00:31:48,440
really hard for live
players to get this right.

735
00:31:48,440 --> 00:31:49,509
Let's jump to late game.

736
00:31:49,509 --> 00:31:51,550
Late game-- I don't have
that much to talk about.

737
00:31:51,550 --> 00:31:55,660
Late game, you just have
to keep steal, re-stealing.

738
00:31:55,660 --> 00:31:58,270
You're going to have
an M less than 10

739
00:31:58,270 --> 00:32:01,740
probably, unless you
literally just doubled up.

740
00:32:01,740 --> 00:32:02,280
Yeah?

741
00:32:02,280 --> 00:32:03,860
STUDENT: What is re-stealing?

742
00:32:03,860 --> 00:32:07,130
PROFESSOR: Stealing is when
you try to steal the blinds,

743
00:32:07,130 --> 00:32:08,420
because they're so valuable.

744
00:32:08,420 --> 00:32:11,560
Re-stealing is when
someone you identify

745
00:32:11,560 --> 00:32:13,820
as stealing your blinds,
and you re-pop them

746
00:32:13,820 --> 00:32:15,850
some percentage of the time.

747
00:32:15,850 --> 00:32:21,060
It's like protecting your
blind, or in some cases, when

748
00:32:21,060 --> 00:32:22,932
you see someone
steal before you,

749
00:32:22,932 --> 00:32:24,390
and you're not
necessarily a blind,

750
00:32:24,390 --> 00:32:26,400
just raising against them.

751
00:32:26,400 --> 00:32:28,500
This is all going to
be pre-flop stuff.

752
00:32:28,500 --> 00:32:31,487
Just be conscious of
ICM, like maybe it's

753
00:32:31,487 --> 00:32:33,570
not a good time to take a
coin flip for your life.

754
00:32:33,570 --> 00:32:35,830
Like don't call
with Ace-King, here,

755
00:32:35,830 --> 00:32:40,130
because you have like a 2%
edge for [? a certain ?] range.

756
00:32:40,130 --> 00:32:41,620
OK, so that's it for late game.

757
00:32:41,620 --> 00:32:43,880
I really don't find it
to be hugely different.

758
00:32:43,880 --> 00:32:48,410
Late game just plays like
a 10-handed sit-and-go.

759
00:32:48,410 --> 00:32:52,650
The biggest difference is that
it's as if all the players are

760
00:32:52,650 --> 00:32:55,930
playing way above their head,
because say you're bankrolled

761
00:32:55,930 --> 00:32:58,280
for a $100 tournament
with 1,000 people,

762
00:32:58,280 --> 00:32:59,730
and you get down to last 10.

763
00:32:59,730 --> 00:33:01,370
It's now is if
you're all playing

764
00:33:01,370 --> 00:33:03,090
in a $10,000 tournament.

765
00:33:03,090 --> 00:33:05,690
So to some extent
that changes it up,

766
00:33:05,690 --> 00:33:08,340
but it should
generally be treated

767
00:33:08,340 --> 00:33:12,405
as if it is a sit-and-go that
just pays out a little bit

768
00:33:12,405 --> 00:33:12,905
flatter.

769
00:33:15,910 --> 00:33:17,970
That's it for tournament play.

770
00:33:17,970 --> 00:33:19,960
Any questions on that?

771
00:33:19,960 --> 00:33:23,330
Otherwise, we can move on
to bankroll management.

772
00:33:23,330 --> 00:33:25,360
This is really the
stuff that's going to be

773
00:33:25,360 --> 00:33:28,056
about poker as an investment.

774
00:33:28,056 --> 00:33:28,930
So what's a bankroll?

775
00:33:28,930 --> 00:33:31,430
Bankroll has a couple
different definitions.

776
00:33:31,430 --> 00:33:33,490
The bankroll is like
the amount of money

777
00:33:33,490 --> 00:33:37,450
you can devote to playing
poker, making poker investments.

778
00:33:37,450 --> 00:33:40,160
However, like I think
it should be defined

779
00:33:40,160 --> 00:33:43,180
as the amount of money
that you would have to lose

780
00:33:43,180 --> 00:33:47,060
to never play poker again.

781
00:33:47,060 --> 00:33:49,680
Not because you're necessarily
ashamed of how much you lost,

782
00:33:49,680 --> 00:33:52,270
but because like you
lost so much money

783
00:33:52,270 --> 00:33:56,030
that the stakes that you
would be required to play,

784
00:33:56,030 --> 00:33:58,390
given your remaining
amount of money

785
00:33:58,390 --> 00:34:01,950
would be so low that you would
never make that amount of money

786
00:34:01,950 --> 00:34:02,720
back.

787
00:34:02,720 --> 00:34:07,090
It's like if you can conceivably
put like $20,000 into poker,

788
00:34:07,090 --> 00:34:10,659
and you lose like
$19,900, you're

789
00:34:10,659 --> 00:34:13,620
not going to grind out like
one-cent, two-cent games

790
00:34:13,620 --> 00:34:15,360
until you have
that $20,000 back.

791
00:34:15,360 --> 00:34:17,020
You would just
stop playing poker.

792
00:34:17,020 --> 00:34:20,520
You would just be like OK,
you would get a normal job

793
00:34:20,520 --> 00:34:23,030
and rebuild your bankroll
through something else.

794
00:34:23,030 --> 00:34:24,530
So that's how I'm
defining bankroll.

795
00:34:24,530 --> 00:34:27,159
It's the amount of
money where poker

796
00:34:27,159 --> 00:34:31,574
is no longer a realistic option
to be making money for you.

797
00:34:31,574 --> 00:34:33,449
This only matters if
you're a winning player,

798
00:34:33,449 --> 00:34:38,030
because if you're
losing player, I mean,

799
00:34:38,030 --> 00:34:39,415
you should play not at all.

800
00:34:39,415 --> 00:34:40,790
You should figure
out how to win,

801
00:34:40,790 --> 00:34:42,659
or more accurately, you
should move down to stakes

802
00:34:42,659 --> 00:34:43,920
that you're actually a winner.

803
00:34:43,920 --> 00:34:46,820
That only matters
if you're winning.

804
00:34:46,820 --> 00:34:48,409
The formula for
your right bankroll

805
00:34:48,409 --> 00:34:50,690
doesn't work if you're
in negative expectation,

806
00:34:50,690 --> 00:34:54,000
because you're eventually going
to go broke no matter what.

807
00:34:54,000 --> 00:34:56,800
Some examples of what this
is-- for like a new player,

808
00:34:56,800 --> 00:35:01,780
you're just going to think of
what's a lot of money to you.

809
00:35:01,780 --> 00:35:04,670
If you're a new player to
poker, and you lose $10,000,

810
00:35:04,670 --> 00:35:06,420
you're probably never
playing poker again.

811
00:35:10,900 --> 00:35:12,940
You're a huge underdog
to ever make that up,

812
00:35:12,940 --> 00:35:14,939
so that's probably the
end of your poker career,

813
00:35:14,939 --> 00:35:15,880
if you're fairly new.

814
00:35:15,880 --> 00:35:18,512
If you're an amateur,
realistically I

815
00:35:18,512 --> 00:35:20,970
would consider your bankroll
your liquid investments-- cash

816
00:35:20,970 --> 00:35:23,440
that, if you lose-- like
you shouldn't mortgage

817
00:35:23,440 --> 00:35:28,300
your house-- but like
a portion of the money

818
00:35:28,300 --> 00:35:30,660
you have in the bank
that if you lose,

819
00:35:30,660 --> 00:35:34,440
you wouldn't be homeless
seems kind of realistic, here.

820
00:35:34,440 --> 00:35:37,240
The amount of money
that you're not

821
00:35:37,240 --> 00:35:42,530
investing for the long
term, but if you lost it,

822
00:35:42,530 --> 00:35:45,130
and as a result, would
have to stop playing poker,

823
00:35:45,130 --> 00:35:46,820
you would find that
to be reasonable.

824
00:35:46,820 --> 00:35:50,550
The threshold here is like--
the bankroll management rules

825
00:35:50,550 --> 00:35:53,350
are such that you're at a
2% chance of ever losing

826
00:35:53,350 --> 00:35:54,840
your bankroll.

827
00:35:54,840 --> 00:35:57,900
So that's a kind of ballpark
for someone who's an amateur.

828
00:35:57,900 --> 00:36:00,740
And for pros, it's
all of that money,

829
00:36:00,740 --> 00:36:02,920
plus as much money as
they could possibly

830
00:36:02,920 --> 00:36:04,840
borrow before they get cut off.

831
00:36:04,840 --> 00:36:07,437
Look, if you're
a Phil Hellmuth--

832
00:36:07,437 --> 00:36:09,520
he's probably worth like
$5 million or something--

833
00:36:09,520 --> 00:36:12,360
and he loses $5 million,
he's not quitting poker.

834
00:36:12,360 --> 00:36:14,760
He's going to raise
another million dollars

835
00:36:14,760 --> 00:36:15,876
and start playing again.

836
00:36:15,876 --> 00:36:18,500
So his bankroll is probably like
$8 million before every single

837
00:36:18,500 --> 00:36:21,430
person goes OK, I'm not
loaning you any money,

838
00:36:21,430 --> 00:36:24,700
and then he has to get a
job at like McDonald's.

839
00:36:24,700 --> 00:36:26,305
So they're in a
different situation,

840
00:36:26,305 --> 00:36:31,070
and especially when we're
talking about like staking.

841
00:36:31,070 --> 00:36:34,870
You can have no money and have
a bankroll of a couple hundred

842
00:36:34,870 --> 00:36:36,690
grand, if you have a
track record that's

843
00:36:36,690 --> 00:36:40,210
good enough that people
will just loan you money.

844
00:36:40,210 --> 00:36:45,352
Let's go through some rules of
thumb for bankroll management.

845
00:36:45,352 --> 00:36:46,060
This is the idea.

846
00:36:46,060 --> 00:36:47,059
This was the motivation.

847
00:36:47,059 --> 00:36:48,550
Someone did the math on this.

848
00:36:48,550 --> 00:36:49,800
I remember checking it before.

849
00:36:49,800 --> 00:36:50,820
It seemed about right.

850
00:36:50,820 --> 00:36:54,660
So we're assuming a
2% chance to go broke

851
00:36:54,660 --> 00:36:58,840
based on your average
buy-in, and we're assuming

852
00:36:58,840 --> 00:37:00,080
you don't change stakes.

853
00:37:02,734 --> 00:37:04,650
People kind of forget
what this assumption is,

854
00:37:04,650 --> 00:37:08,060
so if you change stakes,
you're never going to go broke.

855
00:37:08,060 --> 00:37:08,560
Why?

856
00:37:08,560 --> 00:37:10,650
Because when you
lose half your money,

857
00:37:10,650 --> 00:37:13,350
you're going to drop
down to half the stakes.

858
00:37:13,350 --> 00:37:15,430
So like, you
asymptote near zero,

859
00:37:15,430 --> 00:37:17,784
but you're never going to
actually lose all that money,

860
00:37:17,784 --> 00:37:20,450
you're just going to lose a lot,
until eventually your hourly is

861
00:37:20,450 --> 00:37:21,390
not worth it.

862
00:37:21,390 --> 00:37:23,400
And when you go up in
stakes, it's the opposite.

863
00:37:23,400 --> 00:37:29,710
Like your 2%-- -- say one the
rolls is like $100 buy-ins.

864
00:37:29,710 --> 00:37:32,540
So if you have $100 buy-ins
for the main event of the World

865
00:37:32,540 --> 00:37:34,500
Series-- like you have
$1 million dollars,

866
00:37:34,500 --> 00:37:38,660
and then as a result of
winning that, you start playing

867
00:37:38,660 --> 00:37:42,420
$50,000 buy-in tournaments,
you're not that still 2%

868
00:37:42,420 --> 00:37:46,320
from the beginning to go
broke, you are now a new 2%.

869
00:37:46,320 --> 00:37:51,820
So it causes a multiplying
factor if, when you win,

870
00:37:51,820 --> 00:37:53,350
you take on more risk.

871
00:37:53,350 --> 00:37:55,750
And the same way, if you
lose and take on less risk,

872
00:37:55,750 --> 00:37:57,250
it has a dampening factor.

873
00:37:57,250 --> 00:38:01,410
So this 2% is only if
you don't change stakes,

874
00:38:01,410 --> 00:38:03,640
and you really should be
changing stakes, especially

875
00:38:03,640 --> 00:38:08,210
because there's a high
correlation between actually

876
00:38:08,210 --> 00:38:10,470
losing and not being a good
player at whatever stakes

877
00:38:10,470 --> 00:38:12,030
you're playing,
and it'll give you

878
00:38:12,030 --> 00:38:16,674
a chance to identify what's the
right place for you to play.

879
00:38:16,674 --> 00:38:17,840
That's what the numbers are.

880
00:38:17,840 --> 00:38:22,810
I'd recommend-- I happen to
play over bankroll, typically,

881
00:38:22,810 --> 00:38:27,320
just because I find 2% a little
bit too-- like I wouldn't

882
00:38:27,320 --> 00:38:31,440
be happy with 2% that I lost all
my money, but some people are.

883
00:38:31,440 --> 00:38:35,600
I usually double these.

884
00:38:35,600 --> 00:38:37,950
If you're kind of nervous
when you play poker,

885
00:38:37,950 --> 00:38:39,950
it's either because you're
new, and you've never

886
00:38:39,950 --> 00:38:42,240
done it before, in which
case, you'll get over it.

887
00:38:42,240 --> 00:38:44,100
But if you actually
get hurt by losses,

888
00:38:44,100 --> 00:38:46,460
to the point where it's
always on your mind,

889
00:38:46,460 --> 00:38:48,630
it's probably because
you're not really bankrolled

890
00:38:48,630 --> 00:38:49,290
appropriately.

891
00:38:49,290 --> 00:38:51,950
It's because if you lost
five of those buy-ins,

892
00:38:51,950 --> 00:38:53,870
you would stop
playing poker, which

893
00:38:53,870 --> 00:38:56,680
meant that you
didn't really have

894
00:38:56,680 --> 00:38:58,160
20 buy-ins worth of bankroll.

895
00:38:58,160 --> 00:39:00,850
You only had 5.

896
00:39:00,850 --> 00:39:03,400
So the theory here, it's based
on-- do you have question?

897
00:39:03,400 --> 00:39:05,200
STUDENT: Yeah, when
you play a cash game,

898
00:39:05,200 --> 00:39:08,430
and say you double or triple
your money, should you just

899
00:39:08,430 --> 00:39:12,022
walk away, or should you just,
because you're playing well,

900
00:39:12,022 --> 00:39:14,994
you have a bigger stack,
should you just keep playing?

901
00:39:14,994 --> 00:39:16,250
What's the [INAUDIBLE]

902
00:39:16,250 --> 00:39:19,730
PROFESSOR: So if they're
really bad players--

903
00:39:19,730 --> 00:39:21,905
This is based on average
buy-in, so basically,

904
00:39:21,905 --> 00:39:23,060
if you double your
stack, and then

905
00:39:23,060 --> 00:39:24,851
a lot of players at
the table also doubled,

906
00:39:24,851 --> 00:39:27,630
you're playing a game
that's twice as big.

907
00:39:27,630 --> 00:39:31,380
So it's not like that
makes it your normal game,

908
00:39:31,380 --> 00:39:33,350
especially if they're bad.

909
00:39:33,350 --> 00:39:37,600
These numbers go way down if
you're ROI goes up materially,

910
00:39:37,600 --> 00:39:38,680
or your win rate.

911
00:39:38,680 --> 00:39:42,500
So if you're winning a game
by a lot more than average,

912
00:39:42,500 --> 00:39:43,750
you can go with fewer buy-ins.

913
00:39:43,750 --> 00:39:46,041
So if you're in a situation
where the other players are

914
00:39:46,041 --> 00:39:47,419
bad, I would just stay there.

915
00:39:47,419 --> 00:39:49,210
If you're in a situation
that they're good,

916
00:39:49,210 --> 00:39:51,920
I would, as soon as I double
up, I would change tables.

917
00:39:51,920 --> 00:39:53,420
STUDENT: So it
depends on the table.

918
00:39:53,420 --> 00:39:56,890
PROFESSOR: You can't take
money off a table in a casino,

919
00:39:56,890 --> 00:39:59,780
but in general, I wouldn't
be too happy about having now

920
00:39:59,780 --> 00:40:04,230
like more at risk than my
normal risk metrics dictate.

921
00:40:07,050 --> 00:40:09,820
The theory, here, is based
on the Kelly Criterion.

922
00:40:09,820 --> 00:40:13,340
Kelly was a big guy
in information theory

923
00:40:13,340 --> 00:40:15,300
a couple of decades ago.

924
00:40:15,300 --> 00:40:18,120
His idea is that, say you're
utility curve is logarithmic,

925
00:40:18,120 --> 00:40:19,760
you maximize your
utility by betting

926
00:40:19,760 --> 00:40:21,090
with regard to your edge.

927
00:40:21,090 --> 00:40:23,200
For example, if
you're in a one to one

928
00:40:23,200 --> 00:40:24,680
bet, where you're
60% to win, you

929
00:40:24,680 --> 00:40:26,570
should bet 20% of your bankroll.

930
00:40:26,570 --> 00:40:27,847
And he proves it out.

931
00:40:27,847 --> 00:40:28,930
You can look up his paper.

932
00:40:28,930 --> 00:40:30,636
It's pretty famous.

933
00:40:30,636 --> 00:40:33,010
He's been getting a lot of
flak, because this is probably

934
00:40:33,010 --> 00:40:36,170
not a great assumption,
the logarithmic utility.

935
00:40:36,170 --> 00:40:38,800
So this is used in
blackjack, in particular,

936
00:40:38,800 --> 00:40:41,300
where the crux of
counting cards is

937
00:40:41,300 --> 00:40:43,800
that when the count
is in your favor,

938
00:40:43,800 --> 00:40:47,200
you bet more, such
that eventually

939
00:40:47,200 --> 00:40:49,410
your wins outpace your losses.

940
00:40:49,410 --> 00:40:50,910
And then investment
management, it's

941
00:40:50,910 --> 00:40:52,285
the same idea,
where you're going

942
00:40:52,285 --> 00:40:54,180
to put more money
to what you consider

943
00:40:54,180 --> 00:40:56,756
higher alpha-generating ideas.

944
00:40:56,756 --> 00:40:58,380
The World Series of
Poker is an example

945
00:40:58,380 --> 00:41:01,970
I find to be really ridiculous,
because it's like the biggest

946
00:41:01,970 --> 00:41:03,680
tournament in the
world-- at least,

947
00:41:03,680 --> 00:41:06,970
live-- 6,000 entries, $10,000,
like one of the biggest

948
00:41:06,970 --> 00:41:07,990
entries in the world.

949
00:41:07,990 --> 00:41:09,990
So the right bankroll is
like $1 million dollars

950
00:41:09,990 --> 00:41:11,110
for this tournament.

951
00:41:11,110 --> 00:41:15,240
And given the risk of playing
a $10,000, 6,000 person

952
00:41:15,240 --> 00:41:17,977
tournament, like you're
not getting good returns

953
00:41:17,977 --> 00:41:19,227
on your $1 million investment.

954
00:41:23,180 --> 00:41:24,840
I always found this
to be a paradox.

955
00:41:24,840 --> 00:41:27,660
For someone who actually plays
poker for money, no matter

956
00:41:27,660 --> 00:41:29,160
how easy The World
Series is, you're

957
00:41:29,160 --> 00:41:31,451
not getting good risk-adjusted
returns, especially when

958
00:41:31,451 --> 00:41:32,570
you count overhead.

959
00:41:32,570 --> 00:41:35,285
However, The World Series
of Poker, the average player

960
00:41:35,285 --> 00:41:36,930
is really bad, still.

961
00:41:36,930 --> 00:41:39,140
And you have good
upside in that I

962
00:41:39,140 --> 00:41:42,720
think there are a lot of good
outside benefits from making

963
00:41:42,720 --> 00:41:45,660
big live scores.

964
00:41:45,660 --> 00:41:47,590
Like Chris Moneymaker
has made way more money

965
00:41:47,590 --> 00:41:50,630
as a result of winning
the World Series

966
00:41:50,630 --> 00:41:52,380
and getting these
sponsorships than he has

967
00:41:52,380 --> 00:41:53,927
from actually winning, I'm sure.

968
00:41:53,927 --> 00:41:56,260
And he won, I think, like
probably more than $1 million.

969
00:41:56,260 --> 00:41:58,070
It wasn't huge then.

970
00:41:58,070 --> 00:42:01,720
But there are a lot of
pretty big upsides there.

971
00:42:01,720 --> 00:42:04,300
However, you can do-- for
the summer tournament,

972
00:42:04,300 --> 00:42:06,050
I think it's very
common for pros

973
00:42:06,050 --> 00:42:09,030
to do some risk
management techniques.

974
00:42:09,030 --> 00:42:11,590
One is staking.

975
00:42:11,590 --> 00:42:14,110
If I have an investor that
has more than $1 million,

976
00:42:14,110 --> 00:42:18,300
he can allocate this to
his portfolio and stake

977
00:42:18,300 --> 00:42:20,530
like 10 people and
have a little bit more

978
00:42:20,530 --> 00:42:22,300
of a diversified investment.

979
00:42:22,300 --> 00:42:25,450
So the common deal for
this, just so you know,

980
00:42:25,450 --> 00:42:28,180
is them getting
50% of the upside.

981
00:42:28,180 --> 00:42:31,530
So they get the first $10,000
and 50% of the remainder.

982
00:42:31,530 --> 00:42:34,132
And to the extent that it's
a long term staking deal,

983
00:42:34,132 --> 00:42:35,840
you don't get money
until they get money.

984
00:42:35,840 --> 00:42:38,910
So if we play two of these,
and I lose the first one,

985
00:42:38,910 --> 00:42:43,490
they get $20,000 of the second
one, plus 50% of the remainder.

986
00:42:43,490 --> 00:42:45,410
That's a pretty
common staking deal.

987
00:42:45,410 --> 00:42:46,530
It generally works out.

988
00:42:46,530 --> 00:42:48,110
And that was, to
the extent that you

989
00:42:48,110 --> 00:42:49,610
don't need to worry
about friction--

990
00:42:49,610 --> 00:42:51,950
like trustworthiness--
it seems to work out

991
00:42:51,950 --> 00:42:54,260
for everyone involved where
there is a lot of overhead,

992
00:42:54,260 --> 00:42:56,865
but the player is grinding
out like a high dollar amount,

993
00:42:56,865 --> 00:42:58,865
and the investor is getting
good diversification

994
00:42:58,865 --> 00:43:01,279
to his portfolio.

995
00:43:01,279 --> 00:43:03,820
And it's an equity investment--
like you don't owe this money

996
00:43:03,820 --> 00:43:04,780
back if you lose it.

997
00:43:04,780 --> 00:43:08,697
They're just partnering
with you in the tournament.

998
00:43:08,697 --> 00:43:10,280
Something that is
more common recently

999
00:43:10,280 --> 00:43:12,640
is selling shares and
trading percentages.

1000
00:43:12,640 --> 00:43:14,820
So this lets them create
some sort of syndicate.

1001
00:43:14,820 --> 00:43:16,450
I think it's all
like handshakes,

1002
00:43:16,450 --> 00:43:20,840
but it makes it so that
they're pretty diversified.

1003
00:43:20,840 --> 00:43:23,390
In addition, with regard
to outside investors,

1004
00:43:23,390 --> 00:43:28,780
players will just sell shares of
themselves to other investors.

1005
00:43:28,780 --> 00:43:32,990
They'll cut their next 10
tournaments into 10 pieces,

1006
00:43:32,990 --> 00:43:35,490
and they'll try to raise
like $15,000 for them,

1007
00:43:35,490 --> 00:43:38,300
where they sell it
off in $1,500 pieces.

1008
00:43:38,300 --> 00:43:39,910
So it lets a relatively
small investor

1009
00:43:39,910 --> 00:43:43,320
diversify across a lot
of different players.

1010
00:43:43,320 --> 00:43:45,610
This make a lot more sense
from a finance standpoint

1011
00:43:45,610 --> 00:43:50,110
in terms of you still
get this dollar amount,

1012
00:43:50,110 --> 00:43:52,910
but you're reducing the
variance by quite a bit.

1013
00:43:52,910 --> 00:43:55,030
So counter-party risk is
important, for staking,

1014
00:43:55,030 --> 00:43:55,530
certainly.

1015
00:43:55,530 --> 00:43:58,640
Like if you stake someone, and
they don't play the tournament,

1016
00:43:58,640 --> 00:44:01,010
or you need to worry
about them not paying you

1017
00:44:01,010 --> 00:44:02,840
back if they win,
that's a huge friction,

1018
00:44:02,840 --> 00:44:05,740
in addition to if you play in
like underground card rooms

1019
00:44:05,740 --> 00:44:08,340
or play online, you may
not your money back,

1020
00:44:08,340 --> 00:44:10,300
and you should
keep that in mind.

1021
00:44:10,300 --> 00:44:13,610
So if you think the club
that you pay in is 1 in 10

1022
00:44:13,610 --> 00:44:16,570
to get raided during
any night that you play,

1023
00:44:16,570 --> 00:44:20,489
you should probably reduce your
expected gross winnings by 10%

1024
00:44:20,489 --> 00:44:21,280
and factor that in.

1025
00:44:21,280 --> 00:44:26,390
The current poker environment
is-- online poker started out,

1026
00:44:26,390 --> 00:44:30,430
basically, back in 2003, where
The World Series of Poker

1027
00:44:30,430 --> 00:44:34,050
started investing a lot of
money to build up the publicity.

1028
00:44:34,050 --> 00:44:36,571
They invested in hold
card cams, and then

1029
00:44:36,571 --> 00:44:37,570
they really built it up.

1030
00:44:37,570 --> 00:44:39,736
And then Chris Moneymaker--
arguably the worst poker

1031
00:44:39,736 --> 00:44:41,610
player, yet the
most charismatic--

1032
00:44:41,610 --> 00:44:42,610
won the tournament.

1033
00:44:42,610 --> 00:44:44,030
And he was a great ambassador.

1034
00:44:44,030 --> 00:44:45,529
And then the following
year, someone

1035
00:44:45,529 --> 00:44:48,800
else who played a
satellite to get in also

1036
00:44:48,800 --> 00:44:51,780
won-- Brehmer, who was a pretty
good guy-- so poker blew up,

1037
00:44:51,780 --> 00:44:53,327
and then online poker blew up.

1038
00:44:53,327 --> 00:44:54,910
And it was great,
because people could

1039
00:44:54,910 --> 00:44:57,780
just, like your average Joe
college student could just load

1040
00:44:57,780 --> 00:45:02,010
like $50 on Poker Stars
and lose it to me.

1041
00:45:02,010 --> 00:45:03,860
So that was really good
for like five years,

1042
00:45:03,860 --> 00:45:06,720
and then eventually the
natural course of the game

1043
00:45:06,720 --> 00:45:07,930
is players get better.

1044
00:45:07,930 --> 00:45:11,620
Then eventually Black Friday
happened a couple years back,

1045
00:45:11,620 --> 00:45:13,910
where Full Tilt, one
of the poker sites,

1046
00:45:13,910 --> 00:45:17,380
turned out to be a Ponzi
scheme, and they actually

1047
00:45:17,380 --> 00:45:21,030
took everyone's money, so
anyone who had money on that

1048
00:45:21,030 --> 00:45:23,530
got it confiscated, and they
possibly got a percentage back,

1049
00:45:23,530 --> 00:45:26,116
although I'm not sure
exactly how that worked.

1050
00:45:26,116 --> 00:45:28,240
Then all of the poker sites
got banned from the US.

1051
00:45:28,240 --> 00:45:31,450
So online is kind of
gone, and like that was

1052
00:45:31,450 --> 00:45:32,760
a bit of a nail in the coffin.

1053
00:45:32,760 --> 00:45:34,610
Then poker has
contracted quite a bit.

1054
00:45:34,610 --> 00:45:37,610
The World Series of Poker used
to have-- you could sit down

1055
00:45:37,610 --> 00:45:40,930
at a table, and there would
be like six amateurs, one pro,

1056
00:45:40,930 --> 00:45:43,390
and two guys reading
like Poker For Dummies.

1057
00:45:43,390 --> 00:45:44,700
Now it's like 50-50.

1058
00:45:44,700 --> 00:45:47,140
Like for a $10,000 tournament,
it's still pretty soft.

1059
00:45:47,140 --> 00:45:48,970
But like I played
a couple years ago,

1060
00:45:48,970 --> 00:45:52,220
and I played in a cash game,
where 10 people at my table

1061
00:45:52,220 --> 00:45:54,840
were saying that they were
professional poker players.

1062
00:45:54,840 --> 00:45:58,030
Probably a couple were lying,
but it's much different

1063
00:45:58,030 --> 00:45:59,444
than it was before.

1064
00:45:59,444 --> 00:46:01,110
However, if you use
good game selection,

1065
00:46:01,110 --> 00:46:03,410
if you can find games that
are soft-- like the side

1066
00:46:03,410 --> 00:46:05,720
games of the World Series
are soft, and like low stakes

1067
00:46:05,720 --> 00:46:07,840
games are always
soft-- I find it

1068
00:46:07,840 --> 00:46:10,930
to be something that
could add a lot of value

1069
00:46:10,930 --> 00:46:14,030
to an otherwise good,
separate career,

1070
00:46:14,030 --> 00:46:17,200
like it diversifies
your own investments,

1071
00:46:17,200 --> 00:46:21,640
especially if you handle
the bankroll stuff properly.

1072
00:46:21,640 --> 00:46:22,337
And that's it.

1073
00:46:22,337 --> 00:46:23,420
So thanks a lot, everyone.

1074
00:46:23,420 --> 00:46:24,849
[APPLAUSE]