Skill? Or Luck?

[HFWR]

Gambling: Poker-faced | The Economist

But the opposite proved to be true. Those who had done well before did well in 2010, too. Whereas ordinary players made a loss of 15.6%, the skilled made a return on investment of 30.5%, suggesting that poker is after all a game of skill. The economists say that similar tests of persistence in returns have also been used to detect whether mutual-fund managers have genuine expertise. In contrast to the case of poker, they point out, those tests have tended to find “little evidence of skill in this domain”.

 

[Gone4Good]

Having played poker somewhat seriously I do believe there is skill involved. I've sat at tables where people's playing style was so obvious, and so consistent, that it wasn't hard to systematically take their money.

 

[Sarah in SC]

My boss knows a hedge fund guy who has made serious money at poker.

 

[clifp]

Some more detail is here. I may have to break down and pay for the paper. As somebody who has used poker rooms, in Hawaii, Las Vegas, and California, as his personal ATM and sole source of cash for the last 3 years I am pretty confident that poker is a game of skill over the long term.

IMO poker and investing have a similar skill set, balancing risk vs reward, with heavy focus on math, and a fair amount of psychology. Sadly because virtually all of the studies on mutual funds, and even hedge funds measure the performance of the funds and not the individual managers we end up with weird conclusion like the Economist makes that their is more skill in poker than investing.

 

[Mulligan]

Some more detail is here. I may have to break down and pay for the paper. As somebody who has used poker rooms, in Hawaii, Las Vegas, and California, as his personal ATM and sole source of cash for the last 3 years I am pretty confident that poker is a game of skill over the long term.

IMO poker and investing have a similar skill set, balancing risk vs reward, with heavy focus on math, and a fair amount of psychology. Sadly because virtually all of the studies on mutual funds, and even hedge funds measure the performance of the funds and not the individual managers we end up with weird conclusion like the Economist makes that their is more skill in poker than investing.

I'm jealous! I go to Vegas and Tahoe about 7-8 times a year for non stop sports betting. But am probably lucky if I am about even, no way could I make a living on it. I guess you subscribe to Paul Newman's line in the movie Color of Money-- "Money won is twice as sweet as money earned"

 

[clifp]

I'm jealous! I go to Vegas and Tahoe about 7-8 times a year for non stop sports betting. But am probably lucky if I am about even, no way could I make a living on it. I guess you subscribe to Paul Newman's line in the movie Color of Money-- "Money won is twice as sweet as money earned"

Don't be jealous of me. Be jealous of this guy, who has made tens of millions sports betting over the decades. I didn't think it was possible to make money sports betting, because the house take of 10% is so large.
Turns out I am wrong and really skilled players can make money because they can make more accurate predictions of risk and reward. The only guy I know locally who makes money sport betting is also one of the top poker players, and before that was very successful in real estate.

To be honest its been so long since I've made money by earning it, that I don't think about it. Even in my last few years working, I made more money winning it in the tech/dot com bubble, than earning it.

 

[Running_Man]

Don't be jealous of me. Be jealous of this guy, who has made tens of millions sports betting over the decades. I didn't think it was possible to make money sports betting, because the house take of 10% is so large.
Turns out I am wrong and really skilled players can make money because they can make more accurate predictions of risk and reward. The only guy I know locally who makes money sport betting is also one of the top poker players, and before that was very successful in real estate.

To be honest its been so long since I've made money by earning it, that I don't think about it. Even in my last few years working, I made more money winning it in the tech/dot com bubble, than earning it.

Clifp, isn't the take on sports betting only 4.5% not 10% In other words you make 2 $110 wagers win 1 of 2 your return will be $210 vs a bet of $220 on a standard wager?

 

[clifp]

Clifp, isn't the take on sports betting only 4.5% not 10% In other words you make 2 $110 wagers win 1 of 2 your return will be $210 vs a bet of $220 on a standard wager?

I guess it depends on how you look at. If I place a $100 bet for Miami to win and $100 for the Bulls to win today I'll get $90 back on a place like Bodog. Is that 5% or 10% I could argue either way.


Having never made a sport bet other than the silly superbowl squares I am no expert.

 

[haha]

And baseball can be much less than that.

Ha

 

[bbbamI]

Skill? Or Luck?

Yes.

 

[JOHNNIE36]

I am not a gambler. I know poker and how it's played and the rules, but skill is definitely the primary factor in winning. Remember Kenny Rogers, "you've got to know when to hold 'em, know when to fold 'em". That takes skill. Of course, you have to be lucky enough to be dealt the cards to hold. Maybe it is luck over skill.

 

[Mulligan]

I guess it depends on how you look at. If I place a $100 bet for Miami to win and $100 for the Bulls to win today I'll get $90 back on a place like Bodog. Is that 5% or 10% I could argue either way.

Having never made a sport bet other than the silly superbowl squares I am no expert.

My math considers the vig to be 10%. A standard spread bet is $11 to win $10. Of course you can play money line favorites or dogs that have their vig, too.

 

[haha]

My math considers the vig to be 10%. A standard spread bet is $11 to win $10. Of course you can play money line favorites or dogs that have their vig, too.

Try this set-up:

Imagine that you were drunk and took both sides of a football bet, $110 on the favorite and $110 on the dog. So, you have sent $220 looking for your original $110 on the winning side, and $100 from the losing side =$210. So $220-$210 =$10 has stayed with the bookie. $10/$220= 4.55% =bookie take aka vigorish.

Ha

 

[ItDontMeanAThing]

Long term net gain is because of skill, short term winnings are from skill or luck.

The world series of poker broadcast a few years ago did a 2 minute feature on a player who thought he was good enough to go pro so he took a job dealing Texas hold-em in Vegas. After a year he knew most of the time what the players down cards were before they turned them over. He quit his job, went pro and climbed fast up the season's winnings leader board.

 

[Gone4Good]

Remember Kenny Rogers, "you've got to know when to hold 'em, know when to fold 'em". That takes skill. Of course, you have to be lucky enough to be dealt the cards to hold. Maybe it is luck over skill.

When I play poker I'm not just playing my hand, I'm playing my table. If all you do is bet good hands and fold bad ones, you'll almost certainly lose against a good player, even if you have better cards then him over the course of a night.

Having said that, luck matters a great deal too. It's possible to have read the table correct, have the best odds, bet perfectly and still lose. It happens all the time. Sometimes lots of times in a row. If you end up at a table where everyone really knows how to play, luck probably rules the night.

Which is why I think playing poker is nothing like investing. When at a poker table I usually know exactly who the fool is. And if I don't, I usually leave.

 

[W2R]

From HFWR's quote from the article,

But the opposite proved to be true. Those who had done well before did well in 2010, too. Whereas ordinary players made a loss of 15.6%, the skilled made a return on investment of 30.5%, suggesting that poker is after all a game of skill. The economists say that similar tests of persistence in returns have also been used to detect whether mutual-fund managers have genuine expertise. In contrast to the case of poker, they point out, those tests have tended to find “little evidence of skill in this domain”.

That study certainly seems a little discouraging.

Luckily the market has moved more or less upwards over long time periods, despite setbacks. So, even if mutual fund managers aren't skilled, it seems to me that in the long term funds may have a good chance to rise in value.

 

[Mulligan]

Try this set-up:

Imagine that you were drunk and took both sides of a football bet, $110 on the favorite and $110 on the dog. So, you have sent $220 looking for your original $110 on the winning side, and $100 from the losing side =$210. So $220-$210 =$10 has stayed with the bookie. $10/$220= 4.55% =bookie take aka vigorish.

Ha

Ha, I can see where your coming from. I've bet drunk, and I have bet drunk on a winning side, and bet drunk on the losing side... But fortunately I havent been drunk enough to bet on both sides on the same game!

 

[Hamlet]

Over thousands of hours of poker over about 10 years of on and off play, I've won roughly $2/hr.

It's a game of skill, but it is a very difficult game to win serious money at.

If you go into a casino and play, they are taking $100-$150/hr off the table for the rake, bad beat jackpot, and dealer tips. That means that at a 10 person table, the average person is losing $10-$15/hr. You have to be an awful lot better than the average player at your table to win money over the long term.

There are many, many tables of poker being played in which everyone at the table is really losing money long-term, due to the house rake.

At the other tables, there may be only one or two players that is actually playing the game with a positive expectation.

If I were to guess, I would say that 95%+ of players are losing players, or at best very marginal winners (like me).

Even for the winners, poker is not a pleasant way to make a living. The luck factor is gigantic, and can take literally thousands of hours of play to overcome in many forms of poker. When you start looking at the amount of money you need to be able to ride out the swings of the game if you were playing for a living, you start realizing that if you have that much money you probably don't need to play poker for a living

 

[utrecht]

Ive made six figures playing poker over the past 4-5 years and I can tell you with absolute certainty that poker is a game of skill. Obviously, in the short term luck plays a part, but if you and I both play 100,000 hands we will be both be dealt approx the same number of full houses, straights, flushes, good hands, bad hands..etc. The better player will make the most money with his good hands and lose the least with his bad hands (or good hands that turn out to be second best hands).

 

[Ready-4-ER-at-14]

Congratulations on your card playing abilities. I have never played poker unless you consider one evening where I donated money to everyone sitting at the same table.

However I do play other card games like bridge. I have played with or near life masters and the effort they put into the game is amazing.

They master observation of tells, determining the actual card in the hands by bids and point values. Also logic of play is involved in the finesse of a trick that a less skilled player would not make.

I have determined the only "safe" game for me is roulette because I know the odds are heavily stacked against me. An early win and I pull off the winning as each further spin only confirms my probably demise.

Should I win a few poker hands I might delude myself about my skill level.
Serious question: How do you justify to yourself taking the money of people who just are not at your level?

I mean I know they are there voluntarily, very similar to the stock and bond markets, but how is this really much different than playing a retarded person tick tack toe for money?

Do you ever take a player aside and tell them confidentially that they are in way above their head? Perhaps these players are just slightly below your level.

Many times in life I could have hosed less knowledgeable or slower people in business transactions and didn't. Was I a saint or a fool?

 

[Mulligan]

Congratulations on your card playing abilities. I have never played poker unless you consider one evening where I donated money to everyone sitting at the same table.

However I do play other card games like bridge. I have played with or near life masters and the effort they put into the game is amazing.

They master observation of tells, determining the actual card in the hands by bids and point values. Also logic of play is involved in the finesse of a trick that a less skilled player would not make.

I have determined the only "safe" game for me is roulette because I know the odds are heavily stacked against me. An early win and I pull off the winning as each further spin only confirms my probably demise.

Should I win a few poker hands I might delude myself about my skill level.
Serious question: How do you justify to yourself taking the money of people who just are not at your level?

I mean I know they are there voluntarily, very similar to the stock and bond markets, but how is this really much different than playing a retarded person tick tack toe for money?

Do you ever take a player aside and tell them confidentially that they are in way above their head? Perhaps these players are just slightly below your level.

Many times in life I could have hosed less knowledgeable or slower people in business transactions and didn't. Was I a saint or a fool?

While you have some great ideas, Ready, It has been my experience, including my own, that people have to learn the hard way, especially when it comes to betting/gambling. A lot of people will hang to the clinging idea, that their luck will change, or they had some bad breaks. Plus, while everyone likes to make money, some just love the challenge and are willing to lose money to "be in the hunt". If it isn't destroying the finances, why not?

 

[Hamlet]

One thing to keep in mind is that very few people are able to accurately assess their skill at poker.

Like driving, it is something that everyone thinks they are good at.

The luck factor in the game is huge, so even most bad players have a fair number of winning nights. To get into the math of it, the standard deviation of the game is probably 10-15 times what someone's longterm win rate is. So if someone is good enough to win $20/hr, they will have some hours where they win $620, and some where they lose $580 (three standard deviations). The bad players will have a similiar distribution, but just shifted down to win $580/lose $620. Note that these are wild simplifications, but it means that you're rarely playing someone bad enough that you need to feel bad about winning.

Trying to tell someone that they're over-matched is almost impossible. The odds are, they think you're the actual terrible player

Most of the time, the edge that a good player has over a bad player (unless they are really, really bad) is not gigantic. It's probably no higher than the house edge in roulette.

People happily dump money to the casinos for entertainment. Poker is just a game where they dump money to the other players for entertainment. And win or lose, poker is a lot more fun than any other game in the casino.

Should I win a few poker hands I might delude myself about my skill level.
Serious question: How do you justify to yourself taking the money of people who just are not at your level?

I mean I know they are there voluntarily, very similar to the stock and bond markets, but how is this really much different than playing a retarded person tick tack toe for money?

Do you ever take a player aside and tell them confidentially that they are in way above their head? Perhaps these players are just slightly below your level.

Many times in life I could have hosed less knowledgeable or slower people in business transactions and didn't. Was I a saint or a fool?

 

[utrecht]

When someone sits at a poker table, they do it knowing full well that they might lose their money. They know that they might not be good enough to win but they do it anyway. The challenge of it is what makes it fun.

If I could see everyone at the tables cards, the game wouldn't be fun. I would win a lot of money but it wouldn't give me a rush. The rush is why people gamble in the first place.

What am I supposed to do? Play with only people who are the same skill level or better than me? Then I would be the guy who someone needs to tell that I am in over my head. Ive played in games like that, but not for long. I have the free will to play in any game I want and so does every other adult.

 

[clifp]

Should I win a few poker hands I might delude myself about my skill level.
Serious question: How do you justify to yourself taking the money of people who just are not at your level?

I mean I know they are there voluntarily, very similar to the stock and bond markets, but how is this really much different than playing a retarded person tick tack toe for money?

Do you ever take a player aside and tell them confidentially that they are in way above their head? Perhaps these players are just slightly below your level.

Many times in life I could have hosed less knowledgeable or slower people in business transactions and didn't. Was I a saint or a fool?

The beauty of poker is that even really bad players have winning nights, sometimes even winning weeks which keeps them coming back. I definitely will give players advice if asked and occasionally unsolicited, I am sure the former is appreciated more than the latter. I also have a soft spot for pretty girls (big shock) and young kids in the military and will keep the pots small when possible.

Still overall I know that golfers, pool players and many other events the higher skilled players routinly take money off the lower skilled ones. I also think there is some truth to the saying "there is no such thing as losing poker session, just expensive lessons" .

Finally, I just got copy of Nords The Military Guide to Financial Independence and Retirement, and I'm going order a bunch and hand them out to all the military poker players. I am sure if they follow the advice they'll save more money than I'll ever take from them at the poker table.

 

[W2R]

Still overall I know that golfers, pool players and many other events the higher skilled players routinly take money off the lower skilled ones.

A deceased friend was a professional pool player all his life starting in the 1930's. It's not a life that he would have recommended. He fell into it by circumstance and had the talent and ability make it work for him.