Tuesday, November 13, 2007

Similarities and Ratios

First off - I'd like to tip my hat to Hoyazo for mixing up the MATH tournaments these past couple weeks. I love both changes, 6-handed and turbo both made for an interesting variety. I suppose combining them could create a super-short donkfest. May I make a suggestion? $6 or $8 rebuy. It's large enough to stop complete donkery by most of the group (as opposed to Kat's $1 Donkament), but not big enough to make everyone play it like a freezeout. After 4 (or 3 if $8) rebuys, you've paid the standard MATH buy-in, and most people will have 3 minimum (buy-in, stack-doubling rebuy, and add-on). 1000 chips to start, 1000 rebuy, and 1500 add-on. It would likely increase the number of runners as you'll get the "buy-in once" types trying to get deep with tight play. You could even set it to only a 30 min rebuy period instead of an hour, but you'd have to make sure it's a turbo then. Worst case? The pot is smaller than usual.

Anyway, out 16th of 75 (umm... yay points). I saw some cards, but no monsters and stayed alive mostly by taking advantage of the turbo structure. Aggression and position are key in these, especially when antes are in before the first break. My stack, like everyone else's, was all over the place. I'll just have to take down the Mookie on Wednesday to try and lock-in my goals for the week. Congrats to Jamyhawk for the MATH win. Well done.

Onto the meat of this post. It's looong, and being written on ther fly. As usual, I suggest you don't trust a damn thing I say, because I'm just a luckbox donkey who isn't very bright.


Stockbrokers, bungee-jumpers, gamblers, drug addicts, and these guys all share a common pursuit - the ideal risk/reward ratio. Some might not realize it, but this is the goal.

One of the most valuable adages in life is, "the greater the risk, the greater the reward." Anybody in the financial world knows this. Penny-stocks, junk bonds, speculative trading, IPOs - these are all built off this truth. Some examples:

The initial trading price of Google stock was $85 per share. This is a pretty insane price for a company to start at. Most big IPOs (Initial Public Offerings) tend to be in the $10-$30 range. Naysayers were easy to find - "It's a search engine! Its entire business model is built of targeted advertising! How is it worth this much?" IF you could get in at the IPO price, 100 shares (a reasonable minimum purchase for Joe Average) would cost you $8500. It jumped to $200 a share. The naysayers grew. There was no way it would stay at that level. It wasn't worth it. It was the Dot-Com bubble all over again. Here's the thing. If you had $20,000 lying around to buy 100 shares at $200 in 2004, you could have sold them at $747.24 per share, or $74,724 at its high last week. If you wanted to take a bigger risk and buy 1000 shares for $200,000, you'd have nearly 3/4 of a million now.

The Dot-Com boom of the late 90's/early 00's is another example. Money was being poured into companies based on nothing more than poorly-written business plans with no viable revenue streams. Some, like Yahoo, Amazon, and eBay were successes; most were not. People were willing to take a risk because the potential rewards were so great. Paper billionaires were being created daily. Paper billionaires became broke just as quickly because most of them didn't liquidate their positions in hopes of even greater reward. I maintain Mark Cuban may have been the smartest guy to make it in that era. Start a company, sell it for a mint, and turn into cash pronto instead of useless options and rapidly devalued stocks.

What's my point? As often, it's poker-related.

Poker, for all the arguments against it, is a form of gambling. Yes, there is a tremendous amount of skill involved in being a winning player, but if there wasn't luck, it wouldn't be nearly as popular. Every time we sit down to play, we accept the risk involved. We mitigate this risk in various ways - game type, limits, bankroll management, playing style, table choice, position, buy-in size, locale - all are choices we make to try and minimize our risk while maximizing the reward. Limit or no limit? Hold'em or Omaha? Buy-in short or buy-in full? Weak-tight? Loose-aggressive? Tight-aggressive? The table with Negreanu or the one with the kid with the sunglasses and sideways baseball cap who talks too much? To the left or right of the massive chip stack bully? MGM or Bellagio? Can I afford $200NL or $50NL? Turbo rebuy or long-level doublestack? We might not consciously make all these decisions, but we DO make them, and they all affect our results.

For instance - you have the choice of sitting at one of two tables with the same buy-in. One is Limit Hold'em with a bunch of stacks around the max buy-in. The table is an average mix of players with nobody standing out. The other is No-limit Hold'em with a few very large stacks that are bigger than the maximum buy-in, and at least one or two loud-mouthed loose-aggressive players who are more than willing to buy back in when they get stacked. You know you can grind out a nice little profit at the limit game without risking very much. The no-limit game offers the possibility of a HUGE profit, but you could easily get stacked by one of the LAGs or the big stacks. What do you do?

Your decison is based purely on your situation. Do you have a few buy-ins to risk or only one? Are you just killing time or have you come to play for a few hours? How much confidence do you have in your game? Do you feel lucky? Even so, I'd hazard a guess that most people will take the seat at the NL game because the carrot is just so large and juicy. You're willing to risk losing everything you're willing to part with for the possibility of the much larger reward.

Once you've sat down and bought your chips, the decisions are far from over. Now you have to play poker. Anyone who's played this game seriously in the slightest knows this - poker isn't a card game. It's a betting game. The cards are just the instruments to pick a winner when at least two people won't give up. So now the risks fall into other categories - card selection, bet selection, fold equity, calling, position, tells, reads, chips, and so much more.

In essence, every penny won or lost at the table is due to risk assessment. If you hold bottom pair on a paired board with a flush draw, and straight draw on it, your risk of losing at a showdown is very high. The cards aren't the only factor in the risk though. If you're in position, your risk drops dramatically. If your opponents have shown weakness the whole time, your risk could be much smaller still. Let's say your on the button and it's checked to you on the river - what do you do?

Wait, that isn't enough information, is it? Let's say the pot is just the blinds and your limp at level 3 blinds. What now? How about if the pot could double your stack? The risk:reward profile is very different for these two situations. The risk stays the same, but the reward increases tremendously. Is it worth betting at the pot to try and take it? Take the same pots, but now change your position, or the actions of your opponents? There's a bet that puts you all-in. Do you call? You're UTG. You're MP. You're at the final table of the WSOP ME and short-stacked. You're at a home game with your drunk friends playing for $20. Your opponent is shaking like a leaf. It's Mike Caro. The person left to act behind is Jennifer Tilly and her chest is about to explode. It's the turn. It's the river.

Every piece of info I give you there changes the situation completely, and alters the risk:reward ratio dramatically. You can take the worst possible risk but pair it with the greatest reward and it makes it palatable. Let's say you're the chipleader at the final table of the WSOP ME and everyone goes all-in and you have 23o. You can call and be crippled if you lose, possibly facing someone with 90% of the chips heads-up, or you could win it all with one hand, knocking out 8 opponents at once and be a legend in your own time. Is it worth the risk for that reward?

Of course, we control our risk profile. You can play only premium hands aggressively in position and fold to anything that puts you outside statistical allowances. You will make money. You'll be bored to death, but you will make money. You won't win BIG money, but you will make money.

What if you get to set the tone instead of react? Every steal and resteal is an exercise in assessing risk. A steal from UTG has higher risk than from the button, yet the reward is the same, it's therefore a worse choice. A resteal is riskier than a steal, but the reward is much greater. It's a question of which you value more.

Implied odds are a major part of any game, and one of the most common form of risk-to-reward decision-making we see in poker. J8o is absolute crap UTG. But if you're facing a 3x BB raise and 3 callers when you're on the button with it, does it become worth the call? 9TQ or 88J comes down and you're laughing because there's no way anybody puts you on J8, but a Q, J, AK, or overpairs are all likely for your opponents. UTG with AA, do you limp or bet? Nobody has a read on you. Everybody has a read on you. You've been betting all day and now you limp? You flop a straight with two clubs on the board and you're all red. Bet and risk scaring your opponent or risk the 3rd club and your opponent having two and check-call? Your opponent is Fuel and one of those cards is a 5.

I like KJ. There, I said it. I throw it away more often than I play it, but I like it. Why? Because if I can see a flop with it cheaply, it has HUGE implied odds. TQA, 9TQ, KJx, and even more if its suited, most Kxx and Jxx flops are also solid here, not to mention hands you "create" based on your betting. Plus, it is easy to get away from. If you get your straight your chances of meeting TPTK, two pair, or a set are HUGE, and they won't lay them down. You just have to make sure the risk is worth the potential payoff. The question is, what are you willing to pay for that chance?

Let's generalize further. Pre-flop, everyone knows the good hands (not necessarily in order): AA-TT, AKs, AKo, AQs. Hell, even 22 is ahead of 78s. If you look at pot odds only. 78s is the hand with the BEST odds vs AA at 22.46%. 57s is 20.98%, and 47s is 19.33%. 69o is 15.60%. Think about that. You're against the best starting hand in poker, which will win 85% of the time against two random cards, and the difference between middle suited connectors and an unsuited 2-gapper is under 7%. But look at the difference in a risk vs reward light.

Flop comes 9TJs. You flopped your straight flush with 78s. AA has to be worried if they're any good at all. Any suited board is scary to AA. If it comes 456 rainbow, they're less so, but still wary of straight draws, depending on the preflop action. Maybe 569 or 69T isn't scary, but suited connectors are always a possibility. 7Q8 isn't scarier than any other random flop to AA.

What if you have 69o? Flop comes 578 or 78T rainbow and you'd better be playing online because there's no way you hide your grin. AA isn't afraid of this at all. You can also possibly play up any flush draws to your advantage here.

69o has the better implied odds here, because it was a riskier gambit and is much better disguised. Against a good, observant player, 69o could net you much more than 78s. It could be seen as a better risk:reward choice preflop, even though it's the weaker hand. The potential payoff is huge if you catch a big hand with shitty hole cards like these. The question is - is it worth it to you? If you're willing to play 78s vs what you think is aces, does the 7% difference sway you? What if I say 7% = an 8.6 million difference in possible hands?

One last example. You have 57s on the button, with an M < 3. When do YOU decide it's worth calling action before you? Do you call one minraise? Do you limp? What if the pot is 4x your stack? At some point that suited one-gapper has to look like a worthwhile risk. What does the other side of that ratio have to be? At what point do your opponents not even matter any more and the entire risk vs reward decision get based solely on the chips?

I'm not saying that you should play the longshots like they're aces. That's losing poker, short-term or long-term. What I am saying is that every situation needs to be assessed, and you have to figure out if the risk is worth the reward. Only you can decide that for yourself. You might be the type who will fold KK to a third raise in a 1/2 limit game, or push with J9s over a 7x BB raise in the Big Game at the Bellagio. It's no different than buying bonds vs writing naked calls, or jumping on a trampoline vs jumping out of a plane -- everyone has their sweet spot. That said, you never know where your comfort zone is if you don't step outside of it from time to time.

There, hundreds of words spent to go over what could be said in three sentences.

1 comment:

Dillo said...

You're right Astin. It could've been covered in three sentences, but it wouldn't have been anywhere near as entertaining to read!

Nice article.... and that's why I love poker. Decisions ... decisions ....