1 00:00:00,000 --> 00:00:00,090 2 00:00:00,090 --> 00:00:02,430 The following content is provided under a Creative 3 00:00:02,430 --> 00:00:03,820 Commons license. 4 00:00:03,820 --> 00:00:06,060 Your support will help MIT OpenCourseWare 5 00:00:06,060 --> 00:00:10,150 continue to offer high quality educational resources for free. 6 00:00:10,150 --> 00:00:12,700 To make a donation or to view additional materials 7 00:00:12,700 --> 00:00:16,600 from hundreds of MIT courses, visit MIT OpenCourseWare 8 00:00:16,600 --> 00:00:17,260 at ocw.mit.edu. 9 00:00:17,260 --> 00:00:21,102 10 00:00:21,102 --> 00:00:23,560 PROFESSOR: Today, we're going to be talking about something 11 00:00:23,560 --> 00:00:25,601 a little bit away from the game of poker, per se, 12 00:00:25,601 --> 00:00:28,320 and more about looking at poker as an investment. 13 00:00:28,320 --> 00:00:30,640 The conceit here is that, to some extent, 14 00:00:30,640 --> 00:00:32,390 you're either a winning poker player now, 15 00:00:32,390 --> 00:00:33,850 or eventually you'll get there. 16 00:00:33,850 --> 00:00:36,670 So this is looking at now that you have these alpha streams, 17 00:00:36,670 --> 00:00:39,810 these streams of positive EV that you 18 00:00:39,810 --> 00:00:42,070 can pick which ones you want to embrace, how do you 19 00:00:42,070 --> 00:00:42,730 balance out? 20 00:00:42,730 --> 00:00:45,440 How do you look at your future, given that this is now 21 00:00:45,440 --> 00:00:47,290 an option you hold? 22 00:00:47,290 --> 00:00:48,820 Cash game here just means anything 23 00:00:48,820 --> 00:00:52,840 that's not a tournament, where tournament is a poker 24 00:00:52,840 --> 00:00:55,700 structure where you buy in, and with money, you 25 00:00:55,700 --> 00:00:57,880 receive tournament chips, and you only 26 00:00:57,880 --> 00:01:01,997 get money to the extent that you survive longer 27 00:01:01,997 --> 00:01:03,830 than someone else, where the person with all 28 00:01:03,830 --> 00:01:06,280 the chips in the end wins some set piece, 29 00:01:06,280 --> 00:01:08,310 not necessarily all their chips. 30 00:01:08,310 --> 00:01:12,290 Whereas a cash game is one such that each chip has 31 00:01:12,290 --> 00:01:15,080 a specific value, like you're actually bedding real dollars, 32 00:01:15,080 --> 00:01:18,540 and you can enter or leave whenever you like. 33 00:01:18,540 --> 00:01:22,630 So in cash games, chips are effectively literal money, 34 00:01:22,630 --> 00:01:26,077 so the more chips you win, the more money you win. 35 00:01:26,077 --> 00:01:28,410 Whereas in tournaments, all that matters is the position 36 00:01:28,410 --> 00:01:29,090 you finish. 37 00:01:29,090 --> 00:01:31,090 When we talk about the Independent Chip model, 38 00:01:31,090 --> 00:01:33,290 we'll talk about when those diverge. 39 00:01:33,290 --> 00:01:36,970 The second point is about that, where Chip EV, like literally 40 00:01:36,970 --> 00:01:39,260 having more chips, in a cash game 41 00:01:39,260 --> 00:01:41,670 is directly related to the amount of money you make. 42 00:01:41,670 --> 00:01:43,337 If you're making a decision that results 43 00:01:43,337 --> 00:01:45,211 in you having more chips, you make more money 44 00:01:45,211 --> 00:01:46,020 in the long run. 45 00:01:46,020 --> 00:01:48,190 Whereas in a tournament, it's a little bit more complicated. 46 00:01:48,190 --> 00:01:49,760 They're congruent, and they generally 47 00:01:49,760 --> 00:01:51,520 trend in the same direction. 48 00:01:51,520 --> 00:01:54,100 But in some particular cases, what's 49 00:01:54,100 --> 00:01:57,200 something that's positive Chip Ev 50 00:01:57,200 --> 00:02:00,600 may be either positive or negative in terms of Dollar EV, 51 00:02:00,600 --> 00:02:03,265 and we'll talk about that in a little bit. 52 00:02:03,265 --> 00:02:05,390 Cash games-- you can come and go whenever you want. 53 00:02:05,390 --> 00:02:06,770 That makes them very liquid. 54 00:02:06,770 --> 00:02:08,880 If you're a big cash game player, 55 00:02:08,880 --> 00:02:12,310 you can generally grind out your hourly win rate 56 00:02:12,310 --> 00:02:13,894 whenever you want, especially online. 57 00:02:13,894 --> 00:02:16,060 There's a little bit of overhead when you play live, 58 00:02:16,060 --> 00:02:19,660 but cash games are much easier to just come and go with regard 59 00:02:19,660 --> 00:02:22,417 to kind of executing your skill. 60 00:02:22,417 --> 00:02:23,125 With tournaments. 61 00:02:23,125 --> 00:02:26,200 62 00:02:26,200 --> 00:02:29,420 you get all your EV from winning, from lasting long, 63 00:02:29,420 --> 00:02:31,040 so you're generally stuck. 64 00:02:31,040 --> 00:02:33,290 The better you are, the longer these tournaments take, 65 00:02:33,290 --> 00:02:35,900 and you have to kind of be there for the long run 66 00:02:35,900 --> 00:02:40,487 and generally plan to last a long time. 67 00:02:40,487 --> 00:02:42,820 In cash games, you can buy in as many times as you want. 68 00:02:42,820 --> 00:02:45,690 Like if you're in a cash game with a lot of bad players 69 00:02:45,690 --> 00:02:47,780 and you get knocked out, you can just buy back in. 70 00:02:47,780 --> 00:02:49,460 It's like it never happened. 71 00:02:49,460 --> 00:02:50,760 With a tournament, if you're at a tournament 72 00:02:50,760 --> 00:02:52,843 with a lot of bad players, and you get knocked out 73 00:02:52,843 --> 00:02:54,630 the first hand because you get unlucky, 74 00:02:54,630 --> 00:02:58,640 you never get to redo that for most tournaments. 75 00:02:58,640 --> 00:03:00,634 You always get kind of a new field of players, 76 00:03:00,634 --> 00:03:02,050 and you don't have the opportunity 77 00:03:02,050 --> 00:03:03,620 to reenter a tournament. 78 00:03:03,620 --> 00:03:07,170 Your only choice is to enter at the first time or not. 79 00:03:07,170 --> 00:03:09,430 Cash games have fixed blinds. 80 00:03:09,430 --> 00:03:11,347 The situation that you're in when you start 81 00:03:11,347 --> 00:03:13,680 is generally the situation you're always going to be in, 82 00:03:13,680 --> 00:03:17,260 so you don't need to factor in having a different size stack. 83 00:03:17,260 --> 00:03:18,920 Presumably, you're always going to have 84 00:03:18,920 --> 00:03:21,796 at least the maximum buy-in or more. 85 00:03:21,796 --> 00:03:23,170 Whereas in tournament situations, 86 00:03:23,170 --> 00:03:24,545 you're going to be short-stacked. 87 00:03:24,545 --> 00:03:26,180 People at your table are going to have 88 00:03:26,180 --> 00:03:28,390 a widely different stack size. 89 00:03:28,390 --> 00:03:30,990 In cash games, you have a single table selection, 90 00:03:30,990 --> 00:03:33,674 which is you get to see the nine people that you're 91 00:03:33,674 --> 00:03:34,590 going to play against. 92 00:03:34,590 --> 00:03:36,048 And you can watch them, and you can 93 00:03:36,048 --> 00:03:39,740 see if eight people call pre-flop in a cash game, 94 00:03:39,740 --> 00:03:42,240 you know that probably seven of those people are bad, 95 00:03:42,240 --> 00:03:45,530 and you can just enter that game and play against those eight 96 00:03:45,530 --> 00:03:47,380 or nine people-- totally fine. 97 00:03:47,380 --> 00:03:50,060 Whereas for tournaments, because you're only 98 00:03:50,060 --> 00:03:52,620 playing against nine other people in the tournament 99 00:03:52,620 --> 00:03:54,970 of a field of say, like 100, you only 100 00:03:54,970 --> 00:03:56,980 really get to target groups of people. 101 00:03:56,980 --> 00:04:00,777 You can identify an audience of people 102 00:04:00,777 --> 00:04:02,610 who would enter that tournament and then get 103 00:04:02,610 --> 00:04:04,900 an idea of what the average person you'll play against 104 00:04:04,900 --> 00:04:06,820 will be, but you can enter tournament 105 00:04:06,820 --> 00:04:10,817 with 90 fish and 10 pros and be at a table of 10 pros to start. 106 00:04:10,817 --> 00:04:12,400 So that adds a little bit of variance. 107 00:04:12,400 --> 00:04:15,670 It also adds some complexity in trying 108 00:04:15,670 --> 00:04:19,620 to get a read at your table and kind of make 109 00:04:19,620 --> 00:04:22,360 that jive with your read of what the average player should 110 00:04:22,360 --> 00:04:23,740 be for that tournament. 111 00:04:23,740 --> 00:04:26,820 Like the World Series of Poker is typically 112 00:04:26,820 --> 00:04:29,550 a tournament that has like 60% fish, 40% percent 113 00:04:29,550 --> 00:04:31,540 pros nowadays. 114 00:04:31,540 --> 00:04:34,420 But a lot of tables end up like eight pros and two fish, 115 00:04:34,420 --> 00:04:37,267 and that creates a much different type 116 00:04:37,267 --> 00:04:39,475 of situation for you than if you were at a table that 117 00:04:39,475 --> 00:04:42,408 was primarily new players. 118 00:04:42,408 --> 00:04:46,220 As I said before, cash games have higher liquidity. 119 00:04:46,220 --> 00:04:48,200 The best kind of career you can make in poker 120 00:04:48,200 --> 00:04:50,200 is being really good at a cash game, because you 121 00:04:50,200 --> 00:04:51,810 can go anywhere and play those. 122 00:04:51,810 --> 00:04:53,190 You can play as long as you want. 123 00:04:53,190 --> 00:04:56,030 Like if you only have two hours and you're in Vegas, 124 00:04:56,030 --> 00:04:58,060 you can grind out pretty confidently 125 00:04:58,060 --> 00:05:00,670 like \$150 in EV, no problem. 126 00:05:00,670 --> 00:05:02,880 Whereas in a tournament, it's much more uncertain 127 00:05:02,880 --> 00:05:05,620 how long it'll take you to capture that EV 128 00:05:05,620 --> 00:05:08,020 and how long you might be obligated to stick around. 129 00:05:08,020 --> 00:05:10,875 130 00:05:10,875 --> 00:05:12,920 For what's considered normal win rates, 131 00:05:12,920 --> 00:05:15,970 cash games are considered lower variance. 132 00:05:15,970 --> 00:05:17,874 Tournaments are considered higher variance. 133 00:05:17,874 --> 00:05:20,040 If you're winning at cash games, you're crushing it, 134 00:05:20,040 --> 00:05:23,390 but it's much, much harder to win at cash games, at least 135 00:05:23,390 --> 00:05:25,110 at the medium high stakes. 136 00:05:25,110 --> 00:05:28,120 It's for this reason-- it's because anyone who's 137 00:05:28,120 --> 00:05:31,505 a loser at a cash game knows it immediately and drops out 138 00:05:31,505 --> 00:05:32,130 really quickly. 139 00:05:32,130 --> 00:05:34,634 Whereas in tournaments, some of the big name pros 140 00:05:34,634 --> 00:05:36,050 are probably losers at this point, 141 00:05:36,050 --> 00:05:37,080 they just don't know it yet. 142 00:05:37,080 --> 00:05:38,538 Because you can go years before you 143 00:05:38,538 --> 00:05:40,500 find out whether you're actually a winner 144 00:05:40,500 --> 00:05:42,170 or a loser at big tournaments. 145 00:05:42,170 --> 00:05:44,850 Let's talk about the tournament life cycle. 146 00:05:44,850 --> 00:05:49,390 The early game is going to be everything before the bubble. 147 00:05:49,390 --> 00:05:53,150 So it's going to be like the first 90% of eliminations 148 00:05:53,150 --> 00:05:55,010 in the tournament will be in the early game, 149 00:05:55,010 --> 00:05:56,718 although because of how tournaments work, 150 00:05:56,718 --> 00:05:59,350 that ends up being like half the tournament in terms of time. 151 00:05:59,350 --> 00:06:01,510 But you get the idea anyway. 152 00:06:01,510 --> 00:06:04,260 Play during the early game is very similar to cash games. 153 00:06:04,260 --> 00:06:06,250 There's no ICM. 154 00:06:06,250 --> 00:06:09,730 There's no difference in the value of chips 155 00:06:09,730 --> 00:06:12,310 early on, because when you have 1,000 chips, 156 00:06:12,310 --> 00:06:15,050 and you need 100,000 to win the tournament, 157 00:06:15,050 --> 00:06:17,530 a difference of 50 chips isn't that big of a deal. 158 00:06:17,530 --> 00:06:20,730 The difference in value of chips doesn't really 159 00:06:20,730 --> 00:06:24,300 matter that much, which is why I'm saying that Tournament Chip 160 00:06:24,300 --> 00:06:28,910 EV is approximately equal to real Dollar EV, 161 00:06:28,910 --> 00:06:32,990 so make decisions as if it were a normal cash game. 162 00:06:32,990 --> 00:06:35,860 In addition, your playing style is 163 00:06:35,860 --> 00:06:39,190 going to be entirely influenced by your stack size. 164 00:06:39,190 --> 00:06:42,560 Having the same proportional stack size 165 00:06:42,560 --> 00:06:44,560 later in the early game, you'll make 166 00:06:44,560 --> 00:06:46,990 the same types of decisions. 167 00:06:46,990 --> 00:06:50,630 I'm defining different zones of play based on your stack size. 168 00:06:50,630 --> 00:06:52,180 If your M is less than 2, I'm calling 169 00:06:52,180 --> 00:06:55,140 that the dead zone, Harrington called it that. 170 00:06:55,140 --> 00:06:57,530 2 to 8 is the steal period. 171 00:06:57,530 --> 00:06:59,830 8 to 12 is the steal re-steal period, 172 00:06:59,830 --> 00:07:01,890 and we'll explain what that is later. 173 00:07:01,890 --> 00:07:04,750 12 to 30 is the value-betting zone, and then 30 or more 174 00:07:04,750 --> 00:07:07,090 is a set-mining zone. 175 00:07:07,090 --> 00:07:10,290 Let me talk about tempo before we get into what exactly 176 00:07:10,290 --> 00:07:12,890 those things are. 177 00:07:12,890 --> 00:07:16,666 The most important thing about tournaments 178 00:07:16,666 --> 00:07:18,040 with regard to how it's different 179 00:07:18,040 --> 00:07:20,780 than a cash game is getting the speed 180 00:07:20,780 --> 00:07:23,960 right, like getting your aggression at the right level. 181 00:07:23,960 --> 00:07:27,990 Doyle Brunson used to say "never get caught 182 00:07:27,990 --> 00:07:29,910 speeding in a tournament." 183 00:07:29,910 --> 00:07:32,060 What that means is don't get caught 184 00:07:32,060 --> 00:07:35,860 being way too aggressive way too early on, and by early on, 185 00:07:35,860 --> 00:07:38,840 I mean when you have a big chip stack. 186 00:07:38,840 --> 00:07:41,280 So you need to win coin flips, like you 187 00:07:41,280 --> 00:07:44,400 will have to win several hands when you're behind 188 00:07:44,400 --> 00:07:45,550 to win a tournament. 189 00:07:45,550 --> 00:07:47,550 So what you should do is make sure 190 00:07:47,550 --> 00:07:50,230 that when you're not in coin flips, 191 00:07:50,230 --> 00:07:52,620 you slowly grow your stack, and you 192 00:07:52,620 --> 00:07:54,150 avoid flipping when you don't have 193 00:07:54,150 --> 00:07:56,380 to so that when you actually do flip, 194 00:07:56,380 --> 00:07:58,669 you end up with more chips. 195 00:07:58,669 --> 00:08:00,460 Like those small differences are the things 196 00:08:00,460 --> 00:08:02,780 that are multiplied all throughout the tournament 197 00:08:02,780 --> 00:08:05,090 to make you-- instead of like 1% chance of winning 198 00:08:05,090 --> 00:08:07,560 a tournament, like 3% or 4%. 199 00:08:07,560 --> 00:08:11,560 That's where your edge really materializes. 200 00:08:11,560 --> 00:08:14,680 The dead zone-- being in the dead zone is terrible. 201 00:08:14,680 --> 00:08:19,750 It's much worse than half of having 4M. 202 00:08:19,750 --> 00:08:21,950 You should only ever be in the zone 203 00:08:21,950 --> 00:08:26,350 because you lost the last hand, and you had slightly more chips 204 00:08:26,350 --> 00:08:27,290 than that guy. 205 00:08:27,290 --> 00:08:29,120 Because this is a really bad situation 206 00:08:29,120 --> 00:08:32,210 to be in, because you have no fold equity. 207 00:08:32,210 --> 00:08:33,635 So fold equity is where your value 208 00:08:33,635 --> 00:08:35,870 is going to come from, because you're not 209 00:08:35,870 --> 00:08:38,669 going to win a lot of showdowns in a tournament, 210 00:08:38,669 --> 00:08:41,450 and a lot of your EV from the tournament 211 00:08:41,450 --> 00:08:43,320 is going to come from fold equity. 212 00:08:43,320 --> 00:08:44,940 So if you have less than 2M, you're 213 00:08:44,940 --> 00:08:47,470 going to bet like pre-flop, and the big blind 214 00:08:47,470 --> 00:08:50,050 is going to call you without even looking at his hand, which 215 00:08:50,050 --> 00:08:53,120 means you have no fold equity-- like you basically 216 00:08:53,120 --> 00:08:57,000 have to win a showdown to get back into it, 217 00:08:57,000 --> 00:08:59,450 and that's a really bad situation. 218 00:08:59,450 --> 00:09:00,950 You want to get out of the dead zone 219 00:09:00,950 --> 00:09:02,436 before you have to pay a big blind, 220 00:09:02,436 --> 00:09:03,810 and then you're going to be stuck 221 00:09:03,810 --> 00:09:06,534 on whatever hand you get there. 222 00:09:06,534 --> 00:09:08,200 The reason is you want to be able to get 223 00:09:08,200 --> 00:09:10,490 your fold equity back. 224 00:09:10,490 --> 00:09:14,720 If you're under 1M under any circumstance-- so never, 225 00:09:14,720 --> 00:09:15,570 never do that. 226 00:09:15,570 --> 00:09:20,608 Call any two cards before you get to 1M. 227 00:09:20,608 --> 00:09:21,720 Why? 228 00:09:21,720 --> 00:09:25,510 Because if you have 1M, and then you double up, 229 00:09:25,510 --> 00:09:29,470 you still are in the dead zone, like you're basically 230 00:09:29,470 --> 00:09:34,140 at least one coin flip behind being in a terrible situation. 231 00:09:34,140 --> 00:09:40,680 So enter any sort of coin flip to avoid getting below 1M. 232 00:09:40,680 --> 00:09:43,560 So a lot of your value is going to come from this steal period, 233 00:09:43,560 --> 00:09:46,930 and by steal, I mean stealing blinds. 234 00:09:46,930 --> 00:09:50,310 When you have between 2 an 8M, your only decision 235 00:09:50,310 --> 00:09:51,890 is to go all in or fold. 236 00:09:51,890 --> 00:09:53,876 Because every time you steal the blinds, 237 00:09:53,876 --> 00:09:55,625 and the blinds are really valuable to you, 238 00:09:55,625 --> 00:09:58,620 you increase your stack by like 20% or 30%-- 239 00:09:58,620 --> 00:09:59,700 like that's a big deal. 240 00:09:59,700 --> 00:10:01,241 That's probably more than your equity 241 00:10:01,241 --> 00:10:04,910 from actually going to showdown. 242 00:10:04,910 --> 00:10:07,592 Unless you literally have aces, that's probably 243 00:10:07,592 --> 00:10:09,050 better than any sort of edge you're 244 00:10:09,050 --> 00:10:10,820 going to have by getting called. 245 00:10:10,820 --> 00:10:13,280 So find out who doesn't protect their blinds 246 00:10:13,280 --> 00:10:14,440 and steal from them. 247 00:10:14,440 --> 00:10:17,010 You should've been reading people early in the tournament 248 00:10:17,010 --> 00:10:19,160 to find out who's a pushover-- like they're 249 00:10:19,160 --> 00:10:21,243 going to be your best friend, because you're going 250 00:10:21,243 --> 00:10:22,800 to steal blinds from them. 251 00:10:22,800 --> 00:10:26,190 On the converse, pretend like you're 252 00:10:26,190 --> 00:10:28,650 someone who defends their blind, because if you get 253 00:10:28,650 --> 00:10:31,600 walked-- if everyone folds to your big blind-- you 254 00:10:31,600 --> 00:10:34,120 just get one additional M for free. 255 00:10:34,120 --> 00:10:36,282 But don't actually do it, because you 256 00:10:36,282 --> 00:10:37,490 don't want to see a showdown. 257 00:10:37,490 --> 00:10:42,300 It's a bit of a game of chicken, and I will actively pretend, 258 00:10:42,300 --> 00:10:44,290 like I will tell a person I will actively 259 00:10:44,290 --> 00:10:46,250 defend my blinds-- because it's not binding, 260 00:10:46,250 --> 00:10:50,130 and you can do that-- and then just think about whatever hand 261 00:10:50,130 --> 00:10:51,420 I have and then fold. 262 00:10:51,420 --> 00:10:54,480 You should still be calling at a very tight range, 263 00:10:54,480 --> 00:10:57,130 but to the extent that you can convince them not 264 00:10:57,130 --> 00:11:02,190 to push into you, it's almost as good as the stealing yourself. 265 00:11:02,190 --> 00:11:04,440 So avoid showdowns if at all possible. 266 00:11:04,440 --> 00:11:07,760 A lot of your hands are going to be played in this period, 267 00:11:07,760 --> 00:11:09,850 and the most important thing you can do 268 00:11:09,850 --> 00:11:11,860 is find opportunities to steal. 269 00:11:11,860 --> 00:11:13,170 Don't get into showdowns. 270 00:11:13,170 --> 00:11:15,962 Don't call unless you think you're like a 70% favorite. 271 00:11:15,962 --> 00:11:17,670 And it's related to the Gap Theory, which 272 00:11:17,670 --> 00:11:22,760 is by Sklansky, which says to call a hand, to call it all in, 273 00:11:22,760 --> 00:11:24,870 you need a much stronger hand than to push. 274 00:11:24,870 --> 00:11:25,370 Why? 275 00:11:25,370 --> 00:11:29,070 Because when you push, when you bet, you have full equity, 276 00:11:29,070 --> 00:11:30,367 and when you call, you don't. 277 00:11:30,367 --> 00:11:31,450 And that's the difference. 278 00:11:31,450 --> 00:11:36,010 Like you can push with any two cards in a lot of situations, 279 00:11:36,010 --> 00:11:38,610 but you need to have a good hand to call. 280 00:11:38,610 --> 00:11:41,290 So you're here your goal here is to keep your head above water. 281 00:11:41,290 --> 00:11:43,370 Don't fall below 2, and preferably 282 00:11:43,370 --> 00:11:50,260 get into like the 10M period, either by doubling up 283 00:11:50,260 --> 00:11:51,840 or by stealing. 284 00:11:51,840 --> 00:11:53,930 So if you steal three hands in a row, 285 00:11:53,930 --> 00:11:56,164 you have 11M, if you're at 8. 286 00:11:56,164 --> 00:11:57,080 That's the idea, here. 287 00:11:57,080 --> 00:11:58,540 And then once you're at 11M, you're 288 00:11:58,540 --> 00:12:00,600 in a much more interesting situation. 289 00:12:00,600 --> 00:12:02,270 So this steal, re-steal period is 290 00:12:02,270 --> 00:12:05,190 when everyone is trying to steal blinds, 291 00:12:05,190 --> 00:12:10,060 except you have the equity such that if you get re-raised, 292 00:12:10,060 --> 00:12:11,310 you can fold. 293 00:12:11,310 --> 00:12:13,400 What will happen is people bet into you, 294 00:12:13,400 --> 00:12:15,400 and you have to re-pop them sometimes. 295 00:12:15,400 --> 00:12:17,620 And then like you have to identify who's going 296 00:12:17,620 --> 00:12:20,750 to re-pop you and avoid them. 297 00:12:20,750 --> 00:12:21,570 Here's the idea. 298 00:12:21,570 --> 00:12:26,090 If you steal a bet with like 2M, and if he re-raises you 299 00:12:26,090 --> 00:12:30,350 with 6M, you're like marginally to call any two cards. 300 00:12:30,350 --> 00:12:36,330 Then if you have an M of 5, for example, you fall below. 301 00:12:36,330 --> 00:12:39,320 If you have a 27% equity, it's a good call, 302 00:12:39,320 --> 00:12:42,540 meaning any two cards, because you're at least 70%-30% 303 00:12:42,540 --> 00:12:43,980 basically all the time. 304 00:12:43,980 --> 00:12:46,290 Whereas if you have an M of 12 and he pushes, 305 00:12:46,290 --> 00:12:48,259 you have to have a 40% chance of calling, 306 00:12:48,259 --> 00:12:50,300 like you can actually fold this, and that's good, 307 00:12:50,300 --> 00:12:52,500 it gives you more optionality. 308 00:12:52,500 --> 00:12:56,080 The Value Betting Zone is where you might actually 309 00:12:56,080 --> 00:12:58,320 get to see a flop, and you have to plan for that. 310 00:12:58,320 --> 00:13:02,150 Your hand, pre-flop, is actually valuable to the extent 311 00:13:02,150 --> 00:13:05,744 it hits the flop, not like it is when you have lower M, where 312 00:13:05,744 --> 00:13:07,660 your hand's going to be valuable to the extent 313 00:13:07,660 --> 00:13:10,000 that you're likely to be winning pre-flop. 314 00:13:10,000 --> 00:13:13,900 So this play in 15M to 30M is very similar to what 315 00:13:13,900 --> 00:13:15,440 a cash game play is like. 316 00:13:15,440 --> 00:13:17,481 So you're probably going to see a bunch of flops, 317 00:13:17,481 --> 00:13:19,630 and we're going to plan accordingly. 318 00:13:19,630 --> 00:13:21,935 You still don't want to flat call pre-flop. 319 00:13:21,935 --> 00:13:24,060 When you play a hand, you want to be the aggressor. 320 00:13:24,060 --> 00:13:26,150 You want to raise when you have a good hand. 321 00:13:26,150 --> 00:13:28,060 You want to fold when you have a bad hand. 322 00:13:28,060 --> 00:13:30,018 I'm going to call this Flop, Turn, River, Play, 323 00:13:30,018 --> 00:13:33,090 but I really mean it's play when you have enough ships 324 00:13:33,090 --> 00:13:34,850 to actually see the flop. 325 00:13:34,850 --> 00:13:37,410 What you should do is not play that many hands, 326 00:13:37,410 --> 00:13:40,780 but when you play hands, play them aggressively. 327 00:13:40,780 --> 00:13:42,320 So the standard bet here is going 328 00:13:42,320 --> 00:13:45,560 to be 3 big blinds, plus one big blind 329 00:13:45,560 --> 00:13:47,290 for every caller before you. 330 00:13:47,290 --> 00:13:49,910 So if everyone folded before you, you bet 3. 331 00:13:49,910 --> 00:13:54,220 If two people call before you, you bet 5, 5 times a big blind. 332 00:13:54,220 --> 00:13:55,810 All your bets should be big. 333 00:13:55,810 --> 00:13:57,970 They should be big, big portions of the pot. 334 00:13:57,970 --> 00:13:59,420 2/3 is an OK number. 335 00:13:59,420 --> 00:14:01,400 If you think the person is particularly weak, 336 00:14:01,400 --> 00:14:03,486 you can bet the pot. 337 00:14:03,486 --> 00:14:05,110 First, we're going talk about pre-flop. 338 00:14:05,110 --> 00:14:07,390 When your M is high, your value comes 339 00:14:07,390 --> 00:14:10,480 from having a good hand on the flop. 340 00:14:10,480 --> 00:14:13,010 I still don't care about the river. 341 00:14:13,010 --> 00:14:14,840 If you do this right, you're probably 342 00:14:14,840 --> 00:14:16,214 not even going to reach the river 343 00:14:16,214 --> 00:14:17,780 by the time someone is all in. 344 00:14:17,780 --> 00:14:19,770 We're only worried about the extent 345 00:14:19,770 --> 00:14:22,590 that your hand is valuable on the flop. 346 00:14:22,590 --> 00:14:24,330 Depending on your position, this is 347 00:14:24,330 --> 00:14:26,270 what I'm recommending your opening range is, 348 00:14:26,270 --> 00:14:32,200 where I'm saying you're opening by raising to three big blinds. 349 00:14:32,200 --> 00:14:34,860 So I'm saying that if you're an early position, 350 00:14:34,860 --> 00:14:37,840 you should really only do this with like the top 5% of hands, 351 00:14:37,840 --> 00:14:42,340 which is 10s or Ace-Queen, suited, or Ace-King. 352 00:14:42,340 --> 00:14:45,090 The difference in suitedness actually matters there. 353 00:14:45,090 --> 00:14:47,630 If you're first to act, any other hand, 354 00:14:47,630 --> 00:14:50,020 you should fold, which is obviously 355 00:14:50,020 --> 00:14:52,370 the majority of hands, because you 356 00:14:52,370 --> 00:14:53,870 have the least amount of information 357 00:14:53,870 --> 00:14:56,210 now-- like you might be up against someone 358 00:14:56,210 --> 00:14:58,120 with another strong hand, now. 359 00:14:58,120 --> 00:15:02,860 And then on like every card hereafter, 360 00:15:02,860 --> 00:15:05,180 you're going to be in the worst position. 361 00:15:05,180 --> 00:15:11,740 So to win in that position, to be profitable in that position, 362 00:15:11,740 --> 00:15:14,140 you need to already have a really good hand. 363 00:15:14,140 --> 00:15:16,977 To the extent that you have the option to just not play a hand, 364 00:15:16,977 --> 00:15:19,560 it seems to make sense that you would prefer not playing hands 365 00:15:19,560 --> 00:15:21,010 when you're in a bad position. 366 00:15:21,010 --> 00:15:23,456 So that's why that's a really tight range. 367 00:15:23,456 --> 00:15:24,830 When you get to middle position-- 368 00:15:24,830 --> 00:15:27,930 so maybe like four people to act after you-- 369 00:15:27,930 --> 00:15:31,390 you could widen up a little bit, which a lot of you might think 370 00:15:31,390 --> 00:15:34,000 is still very tight range-- and it is. 371 00:15:34,000 --> 00:15:37,110 This might be close to like 15%, where 372 00:15:37,110 --> 00:15:41,200 you have 8s or Ace-Jack, and maybe, King-Queen. 373 00:15:41,200 --> 00:15:43,280 Every other hand, you should be folding. 374 00:15:43,280 --> 00:15:45,040 Like that's your range for raising out 375 00:15:45,040 --> 00:15:46,967 of any sort of middle position. 376 00:15:46,967 --> 00:15:48,550 And then it makes it easy, because you 377 00:15:48,550 --> 00:15:51,060 can imagine what type of flop you either hit 378 00:15:51,060 --> 00:15:53,270 or don't hit, here. 379 00:15:53,270 --> 00:15:55,380 So if you're facing a raise, what I recommend 380 00:15:55,380 --> 00:15:57,590 is you just move everything up one. 381 00:15:57,590 --> 00:16:00,880 So if you're facing a raise in early or middle position, 382 00:16:00,880 --> 00:16:04,430 then you can play 10s, Ace-Queen, Ace-King, 383 00:16:04,430 --> 00:16:08,080 and if you're late, then you can start playing like Ace-Jack. 384 00:16:08,080 --> 00:16:10,390 So when it comes to a flop, by this time, 385 00:16:10,390 --> 00:16:13,690 you will have raised pre-flop, and you are now 386 00:16:13,690 --> 00:16:15,800 the aggressor in the hand. 387 00:16:15,800 --> 00:16:19,060 So if you were the aggressor, you should bet 2/3 of the pot. 388 00:16:19,060 --> 00:16:20,890 That works a lot more often than you 389 00:16:20,890 --> 00:16:24,680 would think, even among people who know what a seed bet is. 390 00:16:24,680 --> 00:16:26,430 Then the break-even, based on our formula, 391 00:16:26,430 --> 00:16:31,230 is going to be 2/3 divided by 5/3, or 40%. 392 00:16:31,230 --> 00:16:33,690 This is what I'm recommending in terms of tiers. 393 00:16:33,690 --> 00:16:36,850 This Tier 1 is a King-high flush, 394 00:16:36,850 --> 00:16:39,312 like I'm giving you a little bit of leeway, 395 00:16:39,312 --> 00:16:40,770 there, where you don't need to have 396 00:16:40,770 --> 00:16:42,470 literally the Ace-high flush. 397 00:16:42,470 --> 00:16:44,050 But if you have the King-high flush, 398 00:16:44,050 --> 00:16:46,310 you can go broke for 30M. 399 00:16:46,310 --> 00:16:48,740 In addition, the literal top straight. 400 00:16:48,740 --> 00:16:52,010 So if the board is 4, 5, 6, and you have 7, 8, 401 00:16:52,010 --> 00:16:53,790 you can consider that Tier 1. 402 00:16:53,790 --> 00:16:56,260 And this is only going to be relevant on an unpaired board. 403 00:16:56,260 --> 00:16:56,760 Why? 404 00:16:56,760 --> 00:16:59,452 Like, what does a paired board mean? 405 00:16:59,452 --> 00:17:01,102 STUDENT: Somebody's got a flush. 406 00:17:01,102 --> 00:17:02,310 STUDENT: Somebody [INAUDIBLE] 407 00:17:02,310 --> 00:17:04,510 PROFESSOR: It means a full house is possible. 408 00:17:04,510 --> 00:17:07,420 So if a full house is possible, it basically 409 00:17:07,420 --> 00:17:11,619 makes your hand worse than six more hands that are possible. 410 00:17:11,619 --> 00:17:13,650 Like a flush or a straight on a paired 411 00:17:13,650 --> 00:17:16,150 board would be considered Tier 2. 412 00:17:16,150 --> 00:17:18,066 Like if they're betting aggressively into you, 413 00:17:18,066 --> 00:17:20,740 and you have an Ace-high flush, you might be ahead. 414 00:17:20,740 --> 00:17:23,020 But then if they're raising you, then I 415 00:17:23,020 --> 00:17:25,710 would be very worried about you being up against a full house. 416 00:17:25,710 --> 00:17:28,099 So I would bet those much less aggressively, 417 00:17:28,099 --> 00:17:30,780 and then I would only bet the Ace-high flush, here. 418 00:17:30,780 --> 00:17:33,010 Like if you have a King-high flush on that board, 419 00:17:33,010 --> 00:17:36,580 there are all sorts of hand that can beat you. 420 00:17:36,580 --> 00:17:39,310 In addition, I'm saying if you have what-- 421 00:17:39,310 --> 00:17:42,130 like the fourth best flush, here, you can bet it, 422 00:17:42,130 --> 00:17:45,131 but you can't raise it, really. 423 00:17:45,131 --> 00:17:48,390 You can't raise it if they raise into you, because that just 424 00:17:48,390 --> 00:17:50,400 gives them too many opportunities 425 00:17:50,400 --> 00:17:52,570 to have a hand that would actually beat you. 426 00:17:52,570 --> 00:17:53,940 So a 10-high flush isn't bad. 427 00:17:53,940 --> 00:17:55,220 You shouldn't fold it. 428 00:17:55,220 --> 00:17:57,496 And you're not really drawing, but you 429 00:17:57,496 --> 00:17:58,870 should understand that it doesn't 430 00:17:58,870 --> 00:18:00,290 have four bets of value. 431 00:18:00,290 --> 00:18:02,280 It only really has two bets of value, 432 00:18:02,280 --> 00:18:04,640 either a bet and their raise, which you'll call. 433 00:18:04,640 --> 00:18:09,030 Or if they bet, you can raise them, and that's generally it. 434 00:18:09,030 --> 00:18:11,060 And that's obviously on an unpaired board. 435 00:18:11,060 --> 00:18:13,330 This also counts a second straight-- so a straight 436 00:18:13,330 --> 00:18:15,744 where you don't have the top two cards, 437 00:18:15,744 --> 00:18:17,910 but you have two cards that give you a straight that 438 00:18:17,910 --> 00:18:19,540 are slightly lower. 439 00:18:19,540 --> 00:18:22,460 In addition, bottom set-- I would put here 440 00:18:22,460 --> 00:18:24,360 in addition to any two pair. 441 00:18:24,360 --> 00:18:28,700 So two pair is crushed by a set, and then bottom set 442 00:18:28,700 --> 00:18:30,590 is also crushed by any set. 443 00:18:30,590 --> 00:18:32,400 It has the same problem. 444 00:18:32,400 --> 00:18:34,150 So I'm calling this Tier 2, and I'm saying 445 00:18:34,150 --> 00:18:35,750 that's good for like two bets. 446 00:18:35,750 --> 00:18:38,060 Tier 3 is an Overpair. 447 00:18:38,060 --> 00:18:41,797 So if you have a pair of Jacks, and the flop comes 2, 3, 4, 448 00:18:41,797 --> 00:18:43,880 or something that is a little bit less correlated, 449 00:18:43,880 --> 00:18:45,320 like 2, 3, 10. 450 00:18:45,320 --> 00:18:46,700 Like an Overpair is good. 451 00:18:46,700 --> 00:18:51,080 It's slightly better than Top-Pair Top-Kicker, 452 00:18:51,080 --> 00:18:54,380 because you beat Top-Pair Top-Kicker. 453 00:18:54,380 --> 00:18:56,390 And then Top-Pair Good-Kicker, I'm saying 454 00:18:56,390 --> 00:19:00,020 is also Tier 3, where you might be able to take it down. 455 00:19:00,020 --> 00:19:02,650 Like if you bet, and they call, you might still 456 00:19:02,650 --> 00:19:03,890 be ahead if they're drawing. 457 00:19:03,890 --> 00:19:05,910 But if you bet, and they raise, you're 458 00:19:05,910 --> 00:19:07,460 probably behind, and should treat it 459 00:19:07,460 --> 00:19:09,450 like you're drawing thereafter. 460 00:19:09,450 --> 00:19:10,950 Then all these hands, which you guys 461 00:19:10,950 --> 00:19:13,490 might have previously thought were good hands, are not. 462 00:19:13,490 --> 00:19:15,910 They're just going to be called drawing hands-- so 463 00:19:15,910 --> 00:19:18,640 Top-Pair Bad-Kicker, Mid or Bottom Pair, 464 00:19:18,640 --> 00:19:20,700 or a Pocket Pair that's not an Overpair. 465 00:19:20,700 --> 00:19:23,730 So if you have 5s, when the board is 2, 6, 7. 466 00:19:23,730 --> 00:19:25,180 So by the Turn and the River, all 467 00:19:25,180 --> 00:19:28,084 your turns, like they're already going to be big pots. 468 00:19:28,084 --> 00:19:29,750 You don't need to worry about extracting 469 00:19:29,750 --> 00:19:31,580 additional bets on the Turn. 470 00:19:31,580 --> 00:19:33,340 So in general, try to figure out, 471 00:19:33,340 --> 00:19:36,410 based on his action, what are the possible groups of hands 472 00:19:36,410 --> 00:19:37,550 that he could have here. 473 00:19:37,550 --> 00:19:39,020 And in general, like that's it. 474 00:19:39,020 --> 00:19:41,170 By the time you're on the Turn, there 475 00:19:41,170 --> 00:19:43,450 aren't like going to be that many more bets. 476 00:19:43,450 --> 00:19:47,011 So usually on the Turn, it's either like go all in or fold. 477 00:19:47,011 --> 00:19:49,010 Then hopefully you're going to be in a situation 478 00:19:49,010 --> 00:19:51,296 where you played it right previously, where 479 00:19:51,296 --> 00:19:53,670 you're going to have a better idea of whether to do that. 480 00:19:53,670 --> 00:20:00,840 Bubble play is going to be around 20% to 10% 481 00:20:00,840 --> 00:20:01,620 of the field left. 482 00:20:01,620 --> 00:20:04,020 If we're saying that 10% of the field makes money, 483 00:20:04,020 --> 00:20:06,470 we're saying that around 10% more 484 00:20:06,470 --> 00:20:10,370 is when like everyone at every table thinks that oh, like they 485 00:20:10,370 --> 00:20:13,790 have a pretty good chance of making money at some point. 486 00:20:13,790 --> 00:20:15,500 So they change around a little bit. 487 00:20:15,500 --> 00:20:17,110 This is when ICM starts mattering. 488 00:20:17,110 --> 00:20:20,070 This is when your decisions to win more chips 489 00:20:20,070 --> 00:20:23,150 may not necessarily be the maximal decision with regard 490 00:20:23,150 --> 00:20:25,250 to winning money. 491 00:20:25,250 --> 00:20:29,400 And it's when players who are probably not 492 00:20:29,400 --> 00:20:31,150 very comfortable with the amount of stakes 493 00:20:31,150 --> 00:20:34,620 that they're playing for start to make really big mistakes. 494 00:20:34,620 --> 00:20:37,910 Typically, the bad players around the bubble 495 00:20:37,910 --> 00:20:39,852 will be a little bit too tight, like if you're 496 00:20:39,852 --> 00:20:41,310 playing in the World Series, you'll 497 00:20:41,310 --> 00:20:45,820 see that like there are 250 people left, 498 00:20:45,820 --> 00:20:50,200 and 240 people get \$12,000, and everyone else gets zero. 499 00:20:50,200 --> 00:20:52,110 And they're going to say like OK, 500 00:20:52,110 --> 00:20:53,960 maybe I don't need to worry about increasing 501 00:20:53,960 --> 00:20:56,872 my chances of getting first place by half a percent 502 00:20:56,872 --> 00:20:58,330 if it means that I'm putting myself 503 00:20:58,330 --> 00:21:00,280 at risk of getting zero now. 504 00:21:00,280 --> 00:21:03,180 Like they weigh that little jump in money quite a bit, 505 00:21:03,180 --> 00:21:07,540 and as a result, they play a little bit too tight. 506 00:21:07,540 --> 00:21:10,310 Then the general-- at least as of a couple years 507 00:21:10,310 --> 00:21:13,469 ago-- the consensus was that how you do during this bubble 508 00:21:13,469 --> 00:21:15,260 period basically determines how deep you're 509 00:21:15,260 --> 00:21:16,650 going to go during the tournament, 510 00:21:16,650 --> 00:21:18,733 because this is when the amateurs make the biggest 511 00:21:18,733 --> 00:21:20,450 mistakes. 512 00:21:20,450 --> 00:21:23,750 So if you're a player who likes to exploit those mistakes, 513 00:21:23,750 --> 00:21:26,990 this is when you're going to-- a good player can just crush it. 514 00:21:26,990 --> 00:21:30,670 Like he can be much more than 50% 515 00:21:30,670 --> 00:21:34,610 to double up during this period by just identifying 516 00:21:34,610 --> 00:21:37,920 weaker players who don't want to get knocked out for any reason 517 00:21:37,920 --> 00:21:40,080 and just bullying them around. 518 00:21:40,080 --> 00:21:42,630 So there are two types of meta-game going on now, 519 00:21:42,630 --> 00:21:43,510 just so you know. 520 00:21:43,510 --> 00:21:46,010 This was a conventional belief-- "the average amateur player 521 00:21:46,010 --> 00:21:47,390 is way too tight." 522 00:21:47,390 --> 00:21:49,420 But then once everyone realized that, 523 00:21:49,420 --> 00:21:53,320 it became the opposite, where the average amateur player 524 00:21:53,320 --> 00:21:56,550 was way too aggressive. 525 00:21:56,550 --> 00:22:00,550 Because once the first one gets priced in, 526 00:22:00,550 --> 00:22:03,390 then everyone starts to be too aggressive, 527 00:22:03,390 --> 00:22:05,050 because everyone wants to do what 528 00:22:05,050 --> 00:22:06,782 good players do on the bubble. 529 00:22:06,782 --> 00:22:08,990 You could probably identify your table pretty quickly 530 00:22:08,990 --> 00:22:10,810 around this time, whether you see 531 00:22:10,810 --> 00:22:15,470 weaker players making really bad calls or really bad folds. 532 00:22:15,470 --> 00:22:17,450 That will kind of give you an idea 533 00:22:17,450 --> 00:22:18,840 of what situation you're in. 534 00:22:18,840 --> 00:22:20,710 To the extent you can bully people around, 535 00:22:20,710 --> 00:22:23,590 but to the extent that other people are bullying you, 536 00:22:23,590 --> 00:22:27,120 you don't need to necessarily push them back. 537 00:22:27,120 --> 00:22:28,060 Let's talk about ICM. 538 00:22:28,060 --> 00:22:30,950 The Independent Chip Model is highlighting 539 00:22:30,950 --> 00:22:36,320 when the chip value diverges from your dollar 540 00:22:36,320 --> 00:22:37,410 value in the tournament. 541 00:22:37,410 --> 00:22:39,510 So Chip-EV, which is a C, here-- how 542 00:22:39,510 --> 00:22:41,930 it's different than Dollar-EV in tournaments. 543 00:22:41,930 --> 00:22:44,680 It's related to the chance of you ending up 544 00:22:44,680 --> 00:22:46,670 in certain payout spots. 545 00:22:46,670 --> 00:22:48,660 That's why it's particularly nonlinear. 546 00:22:48,660 --> 00:22:51,815 Rather, when the first place gets everything, 547 00:22:51,815 --> 00:22:53,940 Chip-EV goes Dollar-EV, because you eventually just 548 00:22:53,940 --> 00:22:54,950 have to win all the chips. 549 00:22:54,950 --> 00:22:56,533 And to the extent it brings you closer 550 00:22:56,533 --> 00:22:59,690 to winning all the chips, your expectation for the tournament 551 00:22:59,690 --> 00:23:01,220 is a little bit higher. 552 00:23:01,220 --> 00:23:03,800 But when payouts are steep, it gets a little bit more 553 00:23:03,800 --> 00:23:06,350 complicated, because in some situations, 554 00:23:06,350 --> 00:23:10,710 surviving a little bit longer has a material dollar 555 00:23:10,710 --> 00:23:14,300 difference and getting more chips in that situation 556 00:23:14,300 --> 00:23:16,510 may not be as important as surviving. 557 00:23:16,510 --> 00:23:17,930 And we'll go through examples. 558 00:23:17,930 --> 00:23:19,950 The Dollar-EV is not symmetric. 559 00:23:19,950 --> 00:23:21,120 There's curvature. 560 00:23:21,120 --> 00:23:27,400 So there's this idea of convexity, where when you win, 561 00:23:27,400 --> 00:23:29,790 you always lose in this kind of situation, 562 00:23:29,790 --> 00:23:33,260 because when you win a lot of chips, 563 00:23:33,260 --> 00:23:35,580 those chips go down in value over time. 564 00:23:35,580 --> 00:23:39,100 And when you lose chips, those chips are really valuable. 565 00:23:39,100 --> 00:23:41,550 So it makes your marginal threshold 566 00:23:41,550 --> 00:23:45,047 for making a risky decision much higher. 567 00:23:45,047 --> 00:23:47,380 In addition, when you factor in actual utility of money, 568 00:23:47,380 --> 00:23:51,130 it's even worse, where clearly big upsides 569 00:23:51,130 --> 00:23:56,250 are less good than protecting against big downsides. 570 00:23:56,250 --> 00:23:58,040 That's kind of the idea there. 571 00:23:58,040 --> 00:24:00,410 Losing hurts more than winning. 572 00:24:00,410 --> 00:24:02,210 Let's just go through an example of this, 573 00:24:02,210 --> 00:24:04,410 and hopefully this will make it intuitive. 574 00:24:04,410 --> 00:24:06,330 Say that we're playing in this situation. 575 00:24:06,330 --> 00:24:09,230 It was whatever, like a 100-person tournament that 576 00:24:09,230 --> 00:24:13,160 was a \$20 buy-in, and we're down to the final four people, 577 00:24:13,160 --> 00:24:15,970 and we have 2,500 chips each, and these are the payouts, 578 00:24:15,970 --> 00:24:21,330 where first gets a grand, second gets \$600, and third gets \$400. 579 00:24:21,330 --> 00:24:23,970 If we look at player Adam, what's his equity? 580 00:24:23,970 --> 00:24:27,360 Like what's his expected dollar amount in this tournament, 581 00:24:27,360 --> 00:24:29,610 assuming that everyone is approximately equal skill, 582 00:24:29,610 --> 00:24:32,890 which is the underlying assumption here? 583 00:24:32,890 --> 00:24:34,670 STUDENT: [INAUDIBLE] 584 00:24:34,670 --> 00:24:37,960 PROFESSOR: Yeah, it should be like just 25% of the whole pot, 585 00:24:37,960 --> 00:24:40,000 because he has 25% of the chips. 586 00:24:40,000 --> 00:24:44,120 The whole pot is \$2,000, so I expect that his EV is \$500. 587 00:24:44,120 --> 00:24:44,670 And it is. 588 00:24:44,670 --> 00:24:46,460 So everyone has a \$500 EV. 589 00:24:46,460 --> 00:24:49,700 But say that we're in a situation where 590 00:24:49,700 --> 00:24:52,250 Adam and David go into a coin flip, and then 591 00:24:52,250 --> 00:24:55,780 Adam beats David. 592 00:24:55,780 --> 00:25:00,100 Intuitively, what do you think Adam's equity should change to? 593 00:25:00,100 --> 00:25:03,150 I would imagine you would think that he just gets 594 00:25:03,150 --> 00:25:06,520 the equity from David, because those 2,500 chips are 595 00:25:06,520 --> 00:25:10,710 worth \$500 in equity in the tournament. 596 00:25:10,710 --> 00:25:14,122 So when this happens, how does the equity change? 597 00:25:14,122 --> 00:25:15,830 You could run it through a poker tracker, 598 00:25:15,830 --> 00:25:18,910 and I'll go through the kind of rudimentary math for it. 599 00:25:18,910 --> 00:25:22,790 You might think that Adam now has \$1,000 in EV, 600 00:25:22,790 --> 00:25:25,246 and these guys have \$500 in EV. 601 00:25:25,246 --> 00:25:26,620 And like really, you should think 602 00:25:26,620 --> 00:25:29,400 those guys shouldn't have gain from this happening, 603 00:25:29,400 --> 00:25:30,900 because the pot size doesn't change, 604 00:25:30,900 --> 00:25:33,200 and they don't even change in chip value. 605 00:25:33,200 --> 00:25:37,810 But in actuality, Adam only gains \$266 of equity 606 00:25:37,810 --> 00:25:40,450 for doubling up here, and these guys actually 607 00:25:40,450 --> 00:25:43,350 gain \$100 from that happening. 608 00:25:43,350 --> 00:25:47,990 Let me show you why that is. 609 00:25:47,990 --> 00:25:52,030 Let's look at the deltas of these payouts. 610 00:25:52,030 --> 00:25:54,680 This is worth \$400, and then this is worth \$200, 611 00:25:54,680 --> 00:25:58,450 and getting to first is worth an additional \$400. 612 00:25:58,450 --> 00:26:01,350 So we originally have \$500 of value here, 613 00:26:01,350 --> 00:26:05,980 but now that one person's out, everyone's guaranteed what? 614 00:26:05,980 --> 00:26:09,460 Like certainly, when someone has zero chips, 615 00:26:09,460 --> 00:26:13,360 what's their equity in this tournament? 616 00:26:13,360 --> 00:26:15,630 It should be this, right? \$400-- like they already 617 00:26:15,630 --> 00:26:18,170 are guaranteed \$400 of chips. 618 00:26:18,170 --> 00:26:21,290 OK, so now that everyone has \$400, 619 00:26:21,290 --> 00:26:24,830 we're just allocating the remainder of this. 620 00:26:24,830 --> 00:26:27,930 We're deciding who gets this remaining \$600. 621 00:26:27,930 --> 00:26:30,300 So you can see that these guys have 622 00:26:30,300 --> 00:26:34,200 a 25% chance of getting that remaining \$600, 623 00:26:34,200 --> 00:26:37,060 which is why they have just about \$150 624 00:26:37,060 --> 00:26:40,250 more than that \$400 number. 625 00:26:40,250 --> 00:26:44,140 So that's where it comes. 626 00:26:44,140 --> 00:26:48,930 The reason this is is because the winner does not eventually 627 00:26:48,930 --> 00:26:52,290 get all of the equity, like the winner doesn't end up 628 00:26:52,290 --> 00:26:53,260 with \$2,000. 629 00:26:53,260 --> 00:26:55,380 He ends up with \$1,000, which is a less 630 00:26:55,380 --> 00:26:59,340 valuable than adding up all the equities from every player. 631 00:26:59,340 --> 00:27:02,530 Really, he's giving value out to the second and third place 632 00:27:02,530 --> 00:27:03,680 player. 633 00:27:03,680 --> 00:27:06,260 So that first spot is probably the worst value 634 00:27:06,260 --> 00:27:11,154 when it comes to your equity per chip, because if it were winner 635 00:27:11,154 --> 00:27:12,820 take all, then the equity would be flat, 636 00:27:12,820 --> 00:27:13,900 and then who would care? 637 00:27:13,900 --> 00:27:15,210 But the fact that he's giving money 638 00:27:15,210 --> 00:27:17,400 to players who didn't have all the chips in the end 639 00:27:17,400 --> 00:27:19,400 caused that first place to be really bad. 640 00:27:19,400 --> 00:27:21,956 So since Adam is really close to first place, 641 00:27:21,956 --> 00:27:23,080 he's getting hurt the most. 642 00:27:23,080 --> 00:27:25,880 You would think like fair value would be \$1,000, but he's not. 643 00:27:25,880 --> 00:27:27,110 He's well short of it. 644 00:27:27,110 --> 00:27:29,630 Whereas these guys are just gaining from it, 645 00:27:29,630 --> 00:27:32,050 because they're most likely place is second and third, 646 00:27:32,050 --> 00:27:34,210 and they're capturing some of that value. 647 00:27:34,210 --> 00:27:37,830 So a satellite is a tournament that a certain x number 648 00:27:37,830 --> 00:27:41,190 of people win a ticket to a bigger event. 649 00:27:41,190 --> 00:27:43,540 The World Series of Poker runs a lot of satellites, 650 00:27:43,540 --> 00:27:45,206 and I think these tournaments are great, 651 00:27:45,206 --> 00:27:47,620 because this is a really difficult situation for people 652 00:27:47,620 --> 00:27:49,560 to figure out, and it causes a lot of people 653 00:27:49,560 --> 00:27:51,580 to make a huge, huge, huge mistakes. 654 00:27:51,580 --> 00:27:53,300 Say this is like 100-person tournament, 655 00:27:53,300 --> 00:27:57,280 where they all buy in for like \$90 or something, 656 00:27:57,280 --> 00:28:00,326 such that first through ninth gets \$10,000, 657 00:28:00,326 --> 00:28:03,780 and tenth place gets zero, and there are 10 people left. 658 00:28:03,780 --> 00:28:07,290 So their equity is just their percentage chance 659 00:28:07,290 --> 00:28:09,130 of winning this flat payout. 660 00:28:09,130 --> 00:28:10,630 Since they all have the same amount, 661 00:28:10,630 --> 00:28:13,082 they're splitting that \$90,000 pool even, right? 662 00:28:13,082 --> 00:28:15,290 So they all have approximately the same equity, here, 663 00:28:15,290 --> 00:28:17,190 because no one gets hurt by having 664 00:28:17,190 --> 00:28:20,210 more chips by the curvature. 665 00:28:20,210 --> 00:28:23,630 Say they were in a situation-- blinds are \$200-\$400, 666 00:28:23,630 --> 00:28:27,020 and Irene, here, who's in the small blind, 667 00:28:27,020 --> 00:28:30,477 raises \$2,5000 to Jessica, who has Kings. 668 00:28:30,477 --> 00:28:32,310 This is one person down until we make money. 669 00:28:32,310 --> 00:28:33,640 Jessica has Kings, here. 670 00:28:33,640 --> 00:28:35,820 So intuitively, what should we do, here? 671 00:28:35,820 --> 00:28:38,430 672 00:28:38,430 --> 00:28:40,790 Yeah, like calling seems not that bad. 673 00:28:40,790 --> 00:28:43,660 What do I give you, here? 674 00:28:43,660 --> 00:28:44,972 Like what is Jessica's range? 675 00:28:44,972 --> 00:28:46,680 Jessica is pushing anything, here, right, 676 00:28:46,680 --> 00:28:48,764 because Jessica has an M of like 3. 677 00:28:48,764 --> 00:28:50,930 And she's in the small blind, so she's appropriately 678 00:28:50,930 --> 00:28:54,027 pushing any two cards, because as we showed earlier, 679 00:28:54,027 --> 00:28:55,610 you're definitely, definitely supposed 680 00:28:55,610 --> 00:28:59,450 to do that at least when it comes to Chip-EV. 681 00:28:59,450 --> 00:29:02,310 So Jessica is 82% with the Kings, 682 00:29:02,310 --> 00:29:05,960 and if we look at chip equity, she is crushing it. 683 00:29:05,960 --> 00:29:10,080 She is 82% to win \$5,000, doubling up. 684 00:29:10,080 --> 00:29:12,210 She's 18% to lose. 685 00:29:12,210 --> 00:29:16,540 So her equity, her expected value after this is 4,100, 686 00:29:16,540 --> 00:29:18,940 meaning her delta is 1,600. 687 00:29:18,940 --> 00:29:22,280 She is expected to win 1,600 chips for this. 688 00:29:22,280 --> 00:29:25,410 But what about when we look at Dollar-EV? 689 00:29:25,410 --> 00:29:28,160 We see for Dollar-EV, she has an 82% chance 690 00:29:28,160 --> 00:29:32,720 of winning \$10,000 and an 18% chance of getting zero. 691 00:29:32,720 --> 00:29:34,760 So her expected value after this call 692 00:29:34,760 --> 00:29:36,720 is actually \$8,200, which is worse 693 00:29:36,720 --> 00:29:38,780 than her equity of this tournament. 694 00:29:38,780 --> 00:29:41,790 She actually loses money if she makes us call. 695 00:29:41,790 --> 00:29:44,320 In fact, if you put the other person on any two cards, 696 00:29:44,320 --> 00:29:46,080 you should even fold aces. 697 00:29:46,080 --> 00:29:48,280 Like you should only pretend to look at your cards 698 00:29:48,280 --> 00:29:49,950 before you fold this hand. 699 00:29:49,950 --> 00:29:53,510 And this is what it is for every person in this situation, 700 00:29:53,510 --> 00:29:55,490 unless you're more than a 90% favorite 701 00:29:55,490 --> 00:29:59,250 to win, which you're not, because unless you can 702 00:29:59,250 --> 00:30:01,850 particularly put them on a hand, which you have 703 00:30:01,850 --> 00:30:04,830 a Pocket-Pair that dominates their lower, 704 00:30:04,830 --> 00:30:08,530 uncorrelated cards, you should fold. 705 00:30:08,530 --> 00:30:09,950 How should this pay out? 706 00:30:09,950 --> 00:30:13,090 It doesn't play out like this. 707 00:30:13,090 --> 00:30:16,530 In Vegas, there's virtually 100% chance 708 00:30:16,530 --> 00:30:20,880 Jessica calls here, to Irene and Jessica's dismay, 709 00:30:20,880 --> 00:30:24,080 but to the benefit of everyone else at the table. 710 00:30:24,080 --> 00:30:25,280 But what should happen? 711 00:30:25,280 --> 00:30:27,390 If you're playing in this situation, 712 00:30:27,390 --> 00:30:30,350 and everyone's playing rationally, 713 00:30:30,350 --> 00:30:33,917 how do you think this will play out at \$200-\$400 blinds. 714 00:30:33,917 --> 00:30:36,720 STUDENT: So Irene would just push it, [INAUDIBLE] 715 00:30:36,720 --> 00:30:40,130 PROFESSOR: Yeah, so if you're in the big blind, 716 00:30:40,130 --> 00:30:42,500 and you're pushed into, what's your calling range? 717 00:30:42,500 --> 00:30:46,080 718 00:30:46,080 --> 00:30:47,550 Zero, it's 0%. 719 00:30:47,550 --> 00:30:49,620 There are no cards that you should call. 720 00:30:49,620 --> 00:30:52,930 And then every single person at that table has that 0% 721 00:30:52,930 --> 00:30:54,140 calling range. 722 00:30:54,140 --> 00:30:56,780 However, knowing that your fold equity 723 00:30:56,780 --> 00:31:00,050 is virtually 100%, every single person, 724 00:31:00,050 --> 00:31:02,660 at the first opportunity, should just go all in. 725 00:31:02,660 --> 00:31:05,135 Under the gun, every single hand will open push, 726 00:31:05,135 --> 00:31:06,730 and everyone else will fold. 727 00:31:06,730 --> 00:31:09,280 And every single hand, that will happen until the blinds 728 00:31:09,280 --> 00:31:12,330 eventually put someone all in against their will. 729 00:31:12,330 --> 00:31:16,250 So this is a situation where ICM comes into huge play, 730 00:31:16,250 --> 00:31:20,060 like people really screw this up, especially live. 731 00:31:20,060 --> 00:31:22,370 That's why satellites are one of my favorite types 732 00:31:22,370 --> 00:31:25,730 of tournaments to play-- is because like every idiot will 733 00:31:25,730 --> 00:31:28,370 tell you that calling with Kings here is clearly 734 00:31:28,370 --> 00:31:32,390 the right move, when even folding Aces is like way, way, 735 00:31:32,390 --> 00:31:34,970 way better than calling with anything. 736 00:31:34,970 --> 00:31:37,740 You should definitely do your best to identify opportunities 737 00:31:37,740 --> 00:31:40,260 like this, because to the extent that you 738 00:31:40,260 --> 00:31:42,060 find a tournament like this that ends up 739 00:31:42,060 --> 00:31:45,250 in these types of situations, it's 740 00:31:45,250 --> 00:31:48,440 really hard for live players to get this right. 741 00:31:48,440 --> 00:31:49,509 Let's jump to late game. 742 00:31:49,509 --> 00:31:51,550 Late game-- I don't have that much to talk about. 743 00:31:51,550 --> 00:31:55,660 Late game, you just have to keep steal, re-stealing. 744 00:31:55,660 --> 00:31:58,270 You're going to have an M less than 10 745 00:31:58,270 --> 00:32:01,740 probably, unless you literally just doubled up. 746 00:32:01,740 --> 00:32:02,280 Yeah? 747 00:32:02,280 --> 00:32:03,860 STUDENT: What is re-stealing? 748 00:32:03,860 --> 00:32:07,130 PROFESSOR: Stealing is when you try to steal the blinds, 749 00:32:07,130 --> 00:32:08,420 because they're so valuable. 750 00:32:08,420 --> 00:32:11,560 Re-stealing is when someone you identify 751 00:32:11,560 --> 00:32:13,820 as stealing your blinds, and you re-pop them 752 00:32:13,820 --> 00:32:15,850 some percentage of the time. 753 00:32:15,850 --> 00:32:21,060 It's like protecting your blind, or in some cases, when 754 00:32:21,060 --> 00:32:22,932 you see someone steal before you, 755 00:32:22,932 --> 00:32:24,390 and you're not necessarily a blind, 756 00:32:24,390 --> 00:32:26,400 just raising against them. 757 00:32:26,400 --> 00:32:28,500 This is all going to be pre-flop stuff. 758 00:32:28,500 --> 00:32:31,487 Just be conscious of ICM, like maybe it's 759 00:32:31,487 --> 00:32:33,570 not a good time to take a coin flip for your life. 760 00:32:33,570 --> 00:32:35,830 Like don't call with Ace-King, here, 761 00:32:35,830 --> 00:32:40,130 because you have like a 2% edge for [? a certain ?] range. 762 00:32:40,130 --> 00:32:41,620 OK, so that's it for late game. 763 00:32:41,620 --> 00:32:43,880 I really don't find it to be hugely different. 764 00:32:43,880 --> 00:32:48,410 Late game just plays like a 10-handed sit-and-go. 765 00:32:48,410 --> 00:32:52,650 The biggest difference is that it's as if all the players are 766 00:32:52,650 --> 00:32:55,930 playing way above their head, because say you're bankrolled 767 00:32:55,930 --> 00:32:58,280 for a \$100 tournament with 1,000 people, 768 00:32:58,280 --> 00:32:59,730 and you get down to last 10. 769 00:32:59,730 --> 00:33:01,370 It's now is if you're all playing 770 00:33:01,370 --> 00:33:03,090 in a \$10,000 tournament. 771 00:33:03,090 --> 00:33:05,690 So to some extent that changes it up, 772 00:33:05,690 --> 00:33:08,340 but it should generally be treated 773 00:33:08,340 --> 00:33:12,405 as if it is a sit-and-go that just pays out a little bit 774 00:33:12,405 --> 00:33:12,905 flatter. 775 00:33:12,905 --> 00:33:15,910 776 00:33:15,910 --> 00:33:17,970 That's it for tournament play. 777 00:33:17,970 --> 00:33:19,960 Any questions on that? 778 00:33:19,960 --> 00:33:23,330 Otherwise, we can move on to bankroll management. 779 00:33:23,330 --> 00:33:25,360 This is really the stuff that's going to be 780 00:33:25,360 --> 00:33:28,056 about poker as an investment. 781 00:33:28,056 --> 00:33:28,930 So what's a bankroll? 782 00:33:28,930 --> 00:33:31,430 Bankroll has a couple different definitions. 783 00:33:31,430 --> 00:33:33,490 The bankroll is like the amount of money 784 00:33:33,490 --> 00:33:37,450 you can devote to playing poker, making poker investments. 785 00:33:37,450 --> 00:33:40,160 However, like I think it should be defined 786 00:33:40,160 --> 00:33:43,180 as the amount of money that you would have to lose 787 00:33:43,180 --> 00:33:47,060 to never play poker again. 788 00:33:47,060 --> 00:33:49,680 Not because you're necessarily ashamed of how much you lost, 789 00:33:49,680 --> 00:33:52,270 but because like you lost so much money 790 00:33:52,270 --> 00:33:56,030 that the stakes that you would be required to play, 791 00:33:56,030 --> 00:33:58,390 given your remaining amount of money 792 00:33:58,390 --> 00:34:01,950 would be so low that you would never make that amount of money 793 00:34:01,950 --> 00:34:02,720 back. 794 00:34:02,720 --> 00:34:07,090 It's like if you can conceivably put like \$20,000 into poker, 795 00:34:07,090 --> 00:34:10,659 and you lose like \$19,900, you're 796 00:34:10,659 --> 00:34:13,620 not going to grind out like one-cent, two-cent games 797 00:34:13,620 --> 00:34:15,360 until you have that \$20,000 back. 798 00:34:15,360 --> 00:34:17,020 You would just stop playing poker. 799 00:34:17,020 --> 00:34:20,520 You would just be like OK, you would get a normal job 800 00:34:20,520 --> 00:34:23,030 and rebuild your bankroll through something else. 801 00:34:23,030 --> 00:34:24,530 So that's how I'm defining bankroll. 802 00:34:24,530 --> 00:34:27,159 It's the amount of money where poker 803 00:34:27,159 --> 00:34:31,574 is no longer a realistic option to be making money for you. 804 00:34:31,574 --> 00:34:33,449 This only matters if you're a winning player, 805 00:34:33,449 --> 00:34:38,030 because if you're losing player, I mean, 806 00:34:38,030 --> 00:34:39,415 you should play not at all. 807 00:34:39,415 --> 00:34:40,790 You should figure out how to win, 808 00:34:40,790 --> 00:34:42,659 or more accurately, you should move down to stakes 809 00:34:42,659 --> 00:34:43,920 that you're actually a winner. 810 00:34:43,920 --> 00:34:46,820 That only matters if you're winning. 811 00:34:46,820 --> 00:34:48,409 The formula for your right bankroll 812 00:34:48,409 --> 00:34:50,690 doesn't work if you're in negative expectation, 813 00:34:50,690 --> 00:34:54,000 because you're eventually going to go broke no matter what. 814 00:34:54,000 --> 00:34:56,800 Some examples of what this is-- for like a new player, 815 00:34:56,800 --> 00:35:01,780 you're just going to think of what's a lot of money to you. 816 00:35:01,780 --> 00:35:04,670 If you're a new player to poker, and you lose \$10,000, 817 00:35:04,670 --> 00:35:06,420 you're probably never playing poker again. 818 00:35:06,420 --> 00:35:10,900 819 00:35:10,900 --> 00:35:12,940 You're a huge underdog to ever make that up, 820 00:35:12,940 --> 00:35:14,939 so that's probably the end of your poker career, 821 00:35:14,939 --> 00:35:15,880 if you're fairly new. 822 00:35:15,880 --> 00:35:18,512 If you're an amateur, realistically I 823 00:35:18,512 --> 00:35:20,970 would consider your bankroll your liquid investments-- cash 824 00:35:20,970 --> 00:35:23,440 that, if you lose-- like you shouldn't mortgage 825 00:35:23,440 --> 00:35:28,300 your house-- but like a portion of the money 826 00:35:28,300 --> 00:35:30,660 you have in the bank that if you lose, 827 00:35:30,660 --> 00:35:34,440 you wouldn't be homeless seems kind of realistic, here. 828 00:35:34,440 --> 00:35:37,240 The amount of money that you're not 829 00:35:37,240 --> 00:35:42,530 investing for the long term, but if you lost it, 830 00:35:42,530 --> 00:35:45,130 and as a result, would have to stop playing poker, 831 00:35:45,130 --> 00:35:46,820 you would find that to be reasonable. 832 00:35:46,820 --> 00:35:50,550 The threshold here is like-- the bankroll management rules 833 00:35:50,550 --> 00:35:53,350 are such that you're at a 2% chance of ever losing 834 00:35:53,350 --> 00:35:54,840 your bankroll. 835 00:35:54,840 --> 00:35:57,900 So that's a kind of ballpark for someone who's an amateur. 836 00:35:57,900 --> 00:36:00,740 And for pros, it's all of that money, 837 00:36:00,740 --> 00:36:02,920 plus as much money as they could possibly 838 00:36:02,920 --> 00:36:04,840 borrow before they get cut off. 839 00:36:04,840 --> 00:36:07,437 Look, if you're a Phil Hellmuth-- 840 00:36:07,437 --> 00:36:09,520 he's probably worth like \$5 million or something-- 841 00:36:09,520 --> 00:36:12,360 and he loses \$5 million, he's not quitting poker. 842 00:36:12,360 --> 00:36:14,760 He's going to raise another million dollars 843 00:36:14,760 --> 00:36:15,876 and start playing again. 844 00:36:15,876 --> 00:36:18,500 So his bankroll is probably like \$8 million before every single 845 00:36:18,500 --> 00:36:21,430 person goes OK, I'm not loaning you any money, 846 00:36:21,430 --> 00:36:24,700 and then he has to get a job at like McDonald's. 847 00:36:24,700 --> 00:36:26,305 So they're in a different situation, 848 00:36:26,305 --> 00:36:31,070 and especially when we're talking about like staking. 849 00:36:31,070 --> 00:36:34,870 You can have no money and have a bankroll of a couple hundred 850 00:36:34,870 --> 00:36:36,690 grand, if you have a track record that's 851 00:36:36,690 --> 00:36:40,210 good enough that people will just loan you money. 852 00:36:40,210 --> 00:36:45,352 Let's go through some rules of thumb for bankroll management. 853 00:36:45,352 --> 00:36:46,060 This is the idea. 854 00:36:46,060 --> 00:36:47,059 This was the motivation. 855 00:36:47,059 --> 00:36:48,550 Someone did the math on this. 856 00:36:48,550 --> 00:36:49,800 I remember checking it before. 857 00:36:49,800 --> 00:36:50,820 It seemed about right. 858 00:36:50,820 --> 00:36:54,660 So we're assuming a 2% chance to go broke 859 00:36:54,660 --> 00:36:58,840 based on your average buy-in, and we're assuming 860 00:36:58,840 --> 00:37:00,080 you don't change stakes. 861 00:37:00,080 --> 00:37:02,734 862 00:37:02,734 --> 00:37:04,650 People kind of forget what this assumption is, 863 00:37:04,650 --> 00:37:08,060 so if you change stakes, you're never going to go broke. 864 00:37:08,060 --> 00:37:08,560 Why? 865 00:37:08,560 --> 00:37:10,650 Because when you lose half your money, 866 00:37:10,650 --> 00:37:13,350 you're going to drop down to half the stakes. 867 00:37:13,350 --> 00:37:15,430 So like, you asymptote near zero, 868 00:37:15,430 --> 00:37:17,784 but you're never going to actually lose all that money, 869 00:37:17,784 --> 00:37:20,450 you're just going to lose a lot, until eventually your hourly is 870 00:37:20,450 --> 00:37:21,390 not worth it. 871 00:37:21,390 --> 00:37:23,400 And when you go up in stakes, it's the opposite. 872 00:37:23,400 --> 00:37:29,710 Like your 2%-- -- say one the rolls is like \$100 buy-ins. 873 00:37:29,710 --> 00:37:32,540 So if you have \$100 buy-ins for the main event of the World 874 00:37:32,540 --> 00:37:34,500 Series-- like you have \$1 million dollars, 875 00:37:34,500 --> 00:37:38,660 and then as a result of winning that, you start playing 876 00:37:38,660 --> 00:37:42,420 \$50,000 buy-in tournaments, you're not that still 2% 877 00:37:42,420 --> 00:37:46,320 from the beginning to go broke, you are now a new 2%. 878 00:37:46,320 --> 00:37:51,820 So it causes a multiplying factor if, when you win, 879 00:37:51,820 --> 00:37:53,350 you take on more risk. 880 00:37:53,350 --> 00:37:55,750 And the same way, if you lose and take on less risk, 881 00:37:55,750 --> 00:37:57,250 it has a dampening factor. 882 00:37:57,250 --> 00:38:01,410 So this 2% is only if you don't change stakes, 883 00:38:01,410 --> 00:38:03,640 and you really should be changing stakes, especially 884 00:38:03,640 --> 00:38:08,210 because there's a high correlation between actually 885 00:38:08,210 --> 00:38:10,470 losing and not being a good player at whatever stakes 886 00:38:10,470 --> 00:38:12,030 you're playing, and it'll give you 887 00:38:12,030 --> 00:38:16,674 a chance to identify what's the right place for you to play. 888 00:38:16,674 --> 00:38:17,840 That's what the numbers are. 889 00:38:17,840 --> 00:38:22,810 I'd recommend-- I happen to play over bankroll, typically, 890 00:38:22,810 --> 00:38:27,320 just because I find 2% a little bit too-- like I wouldn't 891 00:38:27,320 --> 00:38:31,440 be happy with 2% that I lost all my money, but some people are. 892 00:38:31,440 --> 00:38:35,600 I usually double these. 893 00:38:35,600 --> 00:38:37,950 If you're kind of nervous when you play poker, 894 00:38:37,950 --> 00:38:39,950 it's either because you're new, and you've never 895 00:38:39,950 --> 00:38:42,240 done it before, in which case, you'll get over it. 896 00:38:42,240 --> 00:38:44,100 But if you actually get hurt by losses, 897 00:38:44,100 --> 00:38:46,460 to the point where it's always on your mind, 898 00:38:46,460 --> 00:38:48,630 it's probably because you're not really bankrolled 899 00:38:48,630 --> 00:38:49,290 appropriately. 900 00:38:49,290 --> 00:38:51,950 It's because if you lost five of those buy-ins, 901 00:38:51,950 --> 00:38:53,870 you would stop playing poker, which 902 00:38:53,870 --> 00:38:56,680 meant that you didn't really have 903 00:38:56,680 --> 00:38:58,160 20 buy-ins worth of bankroll. 904 00:38:58,160 --> 00:39:00,850 You only had 5. 905 00:39:00,850 --> 00:39:03,400 So the theory here, it's based on-- do you have question? 906 00:39:03,400 --> 00:39:05,200 STUDENT: Yeah, when you play a cash game, 907 00:39:05,200 --> 00:39:08,430 and say you double or triple your money, should you just 908 00:39:08,430 --> 00:39:12,022 walk away, or should you just, because you're playing well, 909 00:39:12,022 --> 00:39:14,994 you have a bigger stack, should you just keep playing? 910 00:39:14,994 --> 00:39:16,250 What's the [INAUDIBLE] 911 00:39:16,250 --> 00:39:19,730 PROFESSOR: So if they're really bad players-- 912 00:39:19,730 --> 00:39:21,905 This is based on average buy-in, so basically, 913 00:39:21,905 --> 00:39:23,060 if you double your stack, and then 914 00:39:23,060 --> 00:39:24,851 a lot of players at the table also doubled, 915 00:39:24,851 --> 00:39:27,630 you're playing a game that's twice as big. 916 00:39:27,630 --> 00:39:31,380 So it's not like that makes it your normal game, 917 00:39:31,380 --> 00:39:33,350 especially if they're bad. 918 00:39:33,350 --> 00:39:37,600 These numbers go way down if you're ROI goes up materially, 919 00:39:37,600 --> 00:39:38,680 or your win rate. 920 00:39:38,680 --> 00:39:42,500 So if you're winning a game by a lot more than average, 921 00:39:42,500 --> 00:39:43,750 you can go with fewer buy-ins. 922 00:39:43,750 --> 00:39:46,041 So if you're in a situation where the other players are 923 00:39:46,041 --> 00:39:47,419 bad, I would just stay there. 924 00:39:47,419 --> 00:39:49,210 If you're in a situation that they're good, 925 00:39:49,210 --> 00:39:51,920 I would, as soon as I double up, I would change tables. 926 00:39:51,920 --> 00:39:53,420 STUDENT: So it depends on the table. 927 00:39:53,420 --> 00:39:56,890 PROFESSOR: You can't take money off a table in a casino, 928 00:39:56,890 --> 00:39:59,780 but in general, I wouldn't be too happy about having now 929 00:39:59,780 --> 00:40:04,230 like more at risk than my normal risk metrics dictate. 930 00:40:04,230 --> 00:40:07,050 931 00:40:07,050 --> 00:40:09,820 The theory, here, is based on the Kelly Criterion. 932 00:40:09,820 --> 00:40:13,340 Kelly was a big guy in information theory 933 00:40:13,340 --> 00:40:15,300 a couple of decades ago. 934 00:40:15,300 --> 00:40:18,120 His idea is that, say you're utility curve is logarithmic, 935 00:40:18,120 --> 00:40:19,760 you maximize your utility by betting 936 00:40:19,760 --> 00:40:21,090 with regard to your edge. 937 00:40:21,090 --> 00:40:23,200 For example, if you're in a one to one 938 00:40:23,200 --> 00:40:24,680 bet, where you're 60% to win, you 939 00:40:24,680 --> 00:40:26,570 should bet 20% of your bankroll. 940 00:40:26,570 --> 00:40:27,847 And he proves it out. 941 00:40:27,847 --> 00:40:28,930 You can look up his paper. 942 00:40:28,930 --> 00:40:30,636 It's pretty famous. 943 00:40:30,636 --> 00:40:33,010 He's been getting a lot of flak, because this is probably 944 00:40:33,010 --> 00:40:36,170 not a great assumption, the logarithmic utility. 945 00:40:36,170 --> 00:40:38,800 So this is used in blackjack, in particular, 946 00:40:38,800 --> 00:40:41,300 where the crux of counting cards is 947 00:40:41,300 --> 00:40:43,800 that when the count is in your favor, 948 00:40:43,800 --> 00:40:47,200 you bet more, such that eventually 949 00:40:47,200 --> 00:40:49,410 your wins outpace your losses. 950 00:40:49,410 --> 00:40:50,910 And then investment management, it's 951 00:40:50,910 --> 00:40:52,285 the same idea, where you're going 952 00:40:52,285 --> 00:40:54,180 to put more money to what you consider 953 00:40:54,180 --> 00:40:56,756 higher alpha-generating ideas. 954 00:40:56,756 --> 00:40:58,380 The World Series of Poker is an example 955 00:40:58,380 --> 00:41:01,970 I find to be really ridiculous, because it's like the biggest 956 00:41:01,970 --> 00:41:03,680 tournament in the world-- at least, 957 00:41:03,680 --> 00:41:06,970 live-- 6,000 entries, \$10,000, like one of the biggest 958 00:41:06,970 --> 00:41:07,990 entries in the world. 959 00:41:07,990 --> 00:41:09,990 So the right bankroll is like \$1 million dollars 960 00:41:09,990 --> 00:41:11,110 for this tournament. 961 00:41:11,110 --> 00:41:15,240 And given the risk of playing a \$10,000, 6,000 person 962 00:41:15,240 --> 00:41:17,977 tournament, like you're not getting good returns 963 00:41:17,977 --> 00:41:19,227 on your \$1 million investment. 964 00:41:19,227 --> 00:41:23,180 965 00:41:23,180 --> 00:41:24,840 I always found this to be a paradox. 966 00:41:24,840 --> 00:41:27,660 For someone who actually plays poker for money, no matter 967 00:41:27,660 --> 00:41:29,160 how easy The World Series is, you're 968 00:41:29,160 --> 00:41:31,451 not getting good risk-adjusted returns, especially when 969 00:41:31,451 --> 00:41:32,570 you count overhead. 970 00:41:32,570 --> 00:41:35,285 However, The World Series of Poker, the average player 971 00:41:35,285 --> 00:41:36,930 is really bad, still. 972 00:41:36,930 --> 00:41:39,140 And you have good upside in that I 973 00:41:39,140 --> 00:41:42,720 think there are a lot of good outside benefits from making 974 00:41:42,720 --> 00:41:45,660 big live scores. 975 00:41:45,660 --> 00:41:47,590 Like Chris Moneymaker has made way more money 976 00:41:47,590 --> 00:41:50,630 as a result of winning the World Series 977 00:41:50,630 --> 00:41:52,380 and getting these sponsorships than he has 978 00:41:52,380 --> 00:41:53,927 from actually winning, I'm sure. 979 00:41:53,927 --> 00:41:56,260 And he won, I think, like probably more than \$1 million. 980 00:41:56,260 --> 00:41:58,070 It wasn't huge then. 981 00:41:58,070 --> 00:42:01,720 But there are a lot of pretty big upsides there. 982 00:42:01,720 --> 00:42:04,300 However, you can do-- for the summer tournament, 983 00:42:04,300 --> 00:42:06,050 I think it's very common for pros 984 00:42:06,050 --> 00:42:09,030 to do some risk management techniques. 985 00:42:09,030 --> 00:42:11,590 One is staking. 986 00:42:11,590 --> 00:42:14,110 If I have an investor that has more than \$1 million, 987 00:42:14,110 --> 00:42:18,300 he can allocate this to his portfolio and stake 988 00:42:18,300 --> 00:42:20,530 like 10 people and have a little bit more 989 00:42:20,530 --> 00:42:22,300 of a diversified investment. 990 00:42:22,300 --> 00:42:25,450 So the common deal for this, just so you know, 991 00:42:25,450 --> 00:42:28,180 is them getting 50% of the upside. 992 00:42:28,180 --> 00:42:31,530 So they get the first \$10,000 and 50% of the remainder. 993 00:42:31,530 --> 00:42:34,132 And to the extent that it's a long term staking deal, 994 00:42:34,132 --> 00:42:35,840 you don't get money until they get money. 995 00:42:35,840 --> 00:42:38,910 So if we play two of these, and I lose the first one, 996 00:42:38,910 --> 00:42:43,490 they get \$20,000 of the second one, plus 50% of the remainder. 997 00:42:43,490 --> 00:42:45,410 That's a pretty common staking deal. 998 00:42:45,410 --> 00:42:46,530 It generally works out. 999 00:42:46,530 --> 00:42:48,110 And that was, to the extent that you 1000 00:42:48,110 --> 00:42:49,610 don't need to worry about friction-- 1001 00:42:49,610 --> 00:42:51,950 like trustworthiness-- it seems to work out 1002 00:42:51,950 --> 00:42:54,260 for everyone involved where there is a lot of overhead, 1003 00:42:54,260 --> 00:42:56,865 but the player is grinding out like a high dollar amount, 1004 00:42:56,865 --> 00:42:58,865 and the investor is getting good diversification 1005 00:42:58,865 --> 00:43:01,279 to his portfolio. 1006 00:43:01,279 --> 00:43:03,820 And it's an equity investment-- like you don't owe this money 1007 00:43:03,820 --> 00:43:04,780 back if you lose it. 1008 00:43:04,780 --> 00:43:08,697 They're just partnering with you in the tournament. 1009 00:43:08,697 --> 00:43:10,280 Something that is more common recently 1010 00:43:10,280 --> 00:43:12,640 is selling shares and trading percentages. 1011 00:43:12,640 --> 00:43:14,820 So this lets them create some sort of syndicate. 1012 00:43:14,820 --> 00:43:16,450 I think it's all like handshakes, 1013 00:43:16,450 --> 00:43:20,840 but it makes it so that they're pretty diversified. 1014 00:43:20,840 --> 00:43:23,390 In addition, with regard to outside investors, 1015 00:43:23,390 --> 00:43:28,780 players will just sell shares of themselves to other investors. 1016 00:43:28,780 --> 00:43:32,990 They'll cut their next 10 tournaments into 10 pieces, 1017 00:43:32,990 --> 00:43:35,490 and they'll try to raise like \$15,000 for them, 1018 00:43:35,490 --> 00:43:38,300 where they sell it off in \$1,500 pieces. 1019 00:43:38,300 --> 00:43:39,910 So it lets a relatively small investor 1020 00:43:39,910 --> 00:43:43,320 diversify across a lot of different players. 1021 00:43:43,320 --> 00:43:45,610 This make a lot more sense from a finance standpoint 1022 00:43:45,610 --> 00:43:50,110 in terms of you still get this dollar amount, 1023 00:43:50,110 --> 00:43:52,910 but you're reducing the variance by quite a bit. 1024 00:43:52,910 --> 00:43:55,030 So counter-party risk is important, for staking, 1025 00:43:55,030 --> 00:43:55,530 certainly. 1026 00:43:55,530 --> 00:43:58,640 Like if you stake someone, and they don't play the tournament, 1027 00:43:58,640 --> 00:44:01,010 or you need to worry about them not paying you 1028 00:44:01,010 --> 00:44:02,840 back if they win, that's a huge friction, 1029 00:44:02,840 --> 00:44:05,740 in addition to if you play in like underground card rooms 1030 00:44:05,740 --> 00:44:08,340 or play online, you may not your money back, 1031 00:44:08,340 --> 00:44:10,300 and you should keep that in mind. 1032 00:44:10,300 --> 00:44:13,610 So if you think the club that you pay in is 1 in 10 1033 00:44:13,610 --> 00:44:16,570 to get raided during any night that you play, 1034 00:44:16,570 --> 00:44:20,489 you should probably reduce your expected gross winnings by 10% 1035 00:44:20,489 --> 00:44:21,280 and factor that in. 1036 00:44:21,280 --> 00:44:26,390 The current poker environment is-- online poker started out, 1037 00:44:26,390 --> 00:44:30,430 basically, back in 2003, where The World Series of Poker 1038 00:44:30,430 --> 00:44:34,050 started investing a lot of money to build up the publicity. 1039 00:44:34,050 --> 00:44:36,571 They invested in hold card cams, and then 1040 00:44:36,571 --> 00:44:37,570 they really built it up. 1041 00:44:37,570 --> 00:44:39,736 And then Chris Moneymaker-- arguably the worst poker 1042 00:44:39,736 --> 00:44:41,610 player, yet the most charismatic-- 1043 00:44:41,610 --> 00:44:42,610 won the tournament. 1044 00:44:42,610 --> 00:44:44,030 And he was a great ambassador. 1045 00:44:44,030 --> 00:44:45,529 And then the following year, someone 1046 00:44:45,529 --> 00:44:48,800 else who played a satellite to get in also 1047 00:44:48,800 --> 00:44:51,780 won-- Brehmer, who was a pretty good guy-- so poker blew up, 1048 00:44:51,780 --> 00:44:53,327 and then online poker blew up. 1049 00:44:53,327 --> 00:44:54,910 And it was great, because people could 1050 00:44:54,910 --> 00:44:57,780 just, like your average Joe college student could just load 1051 00:44:57,780 --> 00:45:02,010 like \$50 on Poker Stars and lose it to me. 1052 00:45:02,010 --> 00:45:03,860 So that was really good for like five years, 1053 00:45:03,860 --> 00:45:06,720 and then eventually the natural course of the game 1054 00:45:06,720 --> 00:45:07,930 is players get better. 1055 00:45:07,930 --> 00:45:11,620 Then eventually Black Friday happened a couple years back, 1056 00:45:11,620 --> 00:45:13,910 where Full Tilt, one of the poker sites, 1057 00:45:13,910 --> 00:45:17,380 turned out to be a Ponzi scheme, and they actually 1058 00:45:17,380 --> 00:45:21,030 took everyone's money, so anyone who had money on that 1059 00:45:21,030 --> 00:45:23,530 got it confiscated, and they possibly got a percentage back, 1060 00:45:23,530 --> 00:45:26,116 although I'm not sure exactly how that worked. 1061 00:45:26,116 --> 00:45:28,240 Then all of the poker sites got banned from the US. 1062 00:45:28,240 --> 00:45:31,450 So online is kind of gone, and like that was 1063 00:45:31,450 --> 00:45:32,760 a bit of a nail in the coffin. 1064 00:45:32,760 --> 00:45:34,610 Then poker has contracted quite a bit. 1065 00:45:34,610 --> 00:45:37,610 The World Series of Poker used to have-- you could sit down 1066 00:45:37,610 --> 00:45:40,930 at a table, and there would be like six amateurs, one pro, 1067 00:45:40,930 --> 00:45:43,390 and two guys reading like Poker For Dummies. 1068 00:45:43,390 --> 00:45:44,700 Now it's like 50-50. 1069 00:45:44,700 --> 00:45:47,140 Like for a \$10,000 tournament, it's still pretty soft. 1070 00:45:47,140 --> 00:45:48,970 But like I played a couple years ago, 1071 00:45:48,970 --> 00:45:52,220 and I played in a cash game, where 10 people at my table 1072 00:45:52,220 --> 00:45:54,840 were saying that they were professional poker players. 1073 00:45:54,840 --> 00:45:58,030 Probably a couple were lying, but it's much different 1074 00:45:58,030 --> 00:45:59,444 than it was before. 1075 00:45:59,444 --> 00:46:01,110 However, if you use good game selection, 1076 00:46:01,110 --> 00:46:03,410 if you can find games that are soft-- like the side 1077 00:46:03,410 --> 00:46:05,720 games of the World Series are soft, and like low stakes 1078 00:46:05,720 --> 00:46:07,840 games are always soft-- I find it 1079 00:46:07,840 --> 00:46:10,930 to be something that could add a lot of value 1080 00:46:10,930 --> 00:46:14,030 to an otherwise good, separate career, 1081 00:46:14,030 --> 00:46:17,200 like it diversifies your own investments, 1082 00:46:17,200 --> 00:46:21,640 especially if you handle the bankroll stuff properly. 1083 00:46:21,640 --> 00:46:22,337 And that's it. 1084 00:46:22,337 --> 00:46:23,420 So thanks a lot, everyone. 1085 00:46:23,420 --> 00:46:24,849 [APPLAUSE] 1086 00:46:24,849 --> 00:46:25,349