• What are the implications of that answer?
You may see that your definition of winning is very different from the standard one, “maximizing your long-term profits.” The closer your definition is to the standard one, the more willing you will be to sacrifice fun, and so on to increase your profits.
Conversely, if you have a nonstandard definition, you won’t make some sacrifices. For example, you may be unwilling to increase your profits in certain ways, such as by playing against only weak players.
I have asked many people, “How do you define ‘winning?’” Their answers are related to their motives on the “Why Do You Play Poker?” questionnaire. Here are just a few of their answers. They want to:
• Become recognized as a top player.
• Win a big tournament.
• Beat their current game for a certain amount.
• Beat a specific, larger game for a certain amount.
• Make enough to live on while living a balanced life.
• End the year ahead a few dollars, but have a lot of fun and never lose so much that it bothers them.
• Just have a good time, while not losing too much money.
This book defines winning in the standard way, “maximizing your long-term profits.” If your definition is different, some of its advice may conflict with what you want. When my advice conflicts with your priorities, decide whether your priorities are really right for you.
I emphasized “really” because most people don’t seriously examine their priorities. It’s a terrible mistake. As Socrates put it, “An unexamined life is not worth living.” If you don’t examine your motives, you can make extremely serious errors, not just at poker, but everywhere.
If you seriously examine your motives and decide that your personal definition of winning is different from the standard one of profit maximizing, you should ignore or modify some of my advice.
But understand why you’re doing so, and don’t pretend that you’re not losing anything. Since you can’t avoid trade-offs, make sure that you understand the costs and benefits of various alternatives and then make an informed decision. To put it bluntly, if you don’t know where you want to go, you’re probably not going to get there.
4. Winners Manage Risks and Information Very Well
The key to successful gambling is simply to “get the best of it” and then to “make the most of it.”
—Mason Malmuth14
“Getting the best of it” means discovering or creating situations in which you have an edge, a positive expectation (+EV). “Making the most of it” means acting decisively to get the full value from that edge.
These two steps are easy to describe, but very hard to do. Losers don’t perform either one well because:
• They don’t get enough information to discover or create an edge.
• They give away information that reduces or eliminates their edge.
• They don’t act decisively enough to make the most of it when they have an edge.
Malmuth’s quotation is the foundation of this book’s organization. Parts 2–5 describe how winners manage risks and information to discover, create, and increase their edge. Part 6 discusses how winners make the most of it by acting decisively.
Many people respond primarily to their emotions instead of managing risks in a controlled, unemotional way. Risk avoiders are so afraid of losing that they go to extreme lengths to avoid taking chances, while risk seekers take foolish chances to get a “kick.”
Instead of responding emotionally, winners avoid both extremes. They realistically analyze the situation, select the strategy that will give them “the best of it,” and act decisively to “make the most of it.” If you lack the motivation, discipline, and knowledge to get the best of it or if you lack the decisiveness to make the most of it, you can’t become a poker winner.
The Interdependence of Risk and Information Management
Because poker is an incomplete information game, you can’t manage risks properly without managing information well.
You do not need to manage information in chess, checkers, and other complete information games. Every piece is clearly visible on the board, and you know exactly what each piece can do. In poker you cannot see your opponents’ cards, nor can they see yours.
The Central Risk-Management Principle
Getting the best of it does not mean that you are probably going to succeed. In fact, your chances could be quite slim. There are three critical issues:
1. The probabilities of success and failure
2. The amount at risk
3. The potential payout
The combination of these factors is called expectation, expected value, or just EV. If you already understand this subject, skip the next few paragraphs.
If your EV is negative, you should pass. If it is positive, you should take the risk. “It is often worth taking chances on something that is probably not going to succeed if the rewards compared to the risk or cost compare favorably with the probability of success.”15
For example, there’s an overly simplistic rule: never draw to an inside straight. It’s not a bad rule, except for the word “never.” That rule is usually valid because the odds against making the straight are about 10 to 1 and the pot usually offers lower odds. However, if you get better odds, you should draw to it. Let’s look at the way winners decide whether a risk is worth taking.
Calculating EV
We will deal with a 50:50 risk, but the same principles apply regardless of the probabilities, if you can financially and psychologically tolerate the risk.
[EV is] the amount of money that you will win or lose on average by making a wager. Say you and a friend agree to bet on the outcome of a coin flip. If the coin lands on heads, he will pay you $1. If it lands on tails, you will pay him $1. Your expectation for this bet is zero. While you will win $1 half the time, you will lose $1 the other half. On average, this bet is break-even.
Let’s say your friend decides to pay you $2 for heads, but you still pay only $1 for tails. Now your expectation is fifty cents.... On any given flip, you will either win $2 or lose $1. But on average, you will win fifty cents per coin flip. Similarly, your friend’s expectation is negative fifty cents.
If you make fifty cents per flip, he must lose fifty cents per flip. Money does not appear from nowhere or disappear into nowhere: If one person has a positive expectation, another must have a negative one, and the sum of all expectations must be zero.16
Over the long term, EV will be approximately equal to results, but random variance (aka “luck”) will often cause short-term results to vary considerably from EV. For example, even though betting on heads with 2-to-1 odds has a large, +EV, tails might come up several times in a row, causing you to lose.
When flipping coins, there are only two possible outcomes, and each probability is obvious. In poker you may not know all the possibilities or their exact probabilities. If so, you can’t accurately calculate your EV.
EV and Poker
Casinos win, and their customers lose because nearly every bet is–EV for the customer and +EV for the casino. Only a few poker players win because the house takes so much in rakes and tips. They win only because they make far more +EV than–EV bets.
Your EV