What I Learned About Entrepreneurship From Watching the World Series of Poker
gigaom.com
gigaom.com
Where to start:
> Both [poker and entrepreneurship] rely on acting strategically under conditions of extreme uncertainty
This is true in a sense, but only in the shallowest sense. In entrepreneurship there's real uncertainty, having no idea what you have to do, and knowing that there's no real way to determine if you're even on the right path. Often, you're just in the dark. With poker the uncertainty only applies on the scale of a single hand: "Does he have it?". Even then you know almost exactly what your equity will be against the range (possible holdings) of the other player. So when few chips are at risk you optimize for equity, and if almost all your chips are at risk you better have the nuts (best possible holding). The uncertainty that remains is of the "dice rolling kind", not of the "what is this guy up to" kind. Since the "dice rolling kind" of uncertainty is beyond your control there's not much to learn from it.
> Why are some terrible entrepreneurs so successful?
Is this even true? I can't think of any terrible and successful entrepreneurs.
> In the World Series of Poker, no professional has won the Main Event in seven years
Okay, so what are the characteristics of the World Series of Poker? Starts out with a reasonably deep stack (skill matters a lot), takes days (endurance is crucial), ends with short stacked play (lottery). You can get through the first stages with luck, and since the amateurs outnumber the professionals there are no surprises here: a lot of amateurs make it far into the tournament. You have to have endurance, which favours the young. And in the end very little skill is involved, because the mathematically correct play is to put all your chips in (to maximize fold equity) and often you're only a 2 to 1 favourite when you get called. So only if the final table consists mostly of professionals can we expect a professional to win. I argue that the middle phase (endurance) is the most important, and that therefore one of the 21-25 year old internet players will win most of the tournaments in the next few years. They have millions of hands of experience, which means they're far more likely to intuitively do the correct thing when tired and worn out because of days of play. They're almost as good as the TV pros, but younger. They also have as advantage that they can recognize the TV pros, but the TV pros don't immediately know which of the young players are the sharks and fish.
> Yet the Main Event has been won year in and year out by a complete unknown player.
Last year it was won by an unknown but incredibly skilled internet player. He probably played more hands in the last 5 years than almost all TV professionals.
> a given pro will play thousands of poker hands
Thousands? Haha.
> Similarly, given enough amateurs in the field, the law of large numbers means that at least some of them will get lucky enough times to outperform even the best pros.
Not neccessarily. In a deep stacked cash game an amateur will _never_ win over a pro. Not ever. Real amateurs have a chance only because of the lottery aspects of the world series. This is by design: it makes for better TV.
> and, if you find advice that seems to work, be ready to go all-in.
What does that even mean in the context of entrepreneurship? How do you go all in with a company? By signing a 10 year lease on office space (just stupid)? Is there ever a good reason to go all in with your company if you don't face certain doom?
> Take any advice (including mine), and think it through for yourself.
Why? Most advice is terrible, or simply not applicable to your situation. And it's almost impossible to distinguish between good advice and bad advice (by definition). And since two people always argue the opposite, how can you possibly agree with them both? I think a lot of interesting things can be said about how to best take advice, but the solution probably isn't to listen to everybody and then go all in.
To conclude:
Poker is zero sum. Entrepreneurship is not. Poker is about exploiting mistakes, entrepreneurship is about creating value for your customers. Poker has known optimal strategies, Entrepreneurship does not. You could just as easily compare entrepreneurship to chess or monopoly, and the comparison would be just as shallow and meaningless.
Yeah, that was pretty hilarious. I was trying to reach a milestone at the end of September and I put in over 5500 hands on 9/30 alone in about 11 hours of play.
The only correction I have to your post is: They're almost as good as the TV pros, but younger. Most of the cash game Internet pros (and many of the tournament Internet pros) are much better than the TV pros (other than a select few like Ivey and Antonious, who also play online anyways) because the Internet pros have played so many hands and tirelessly gone over areas where they are losing money to improve. When you're playing 400-500 hands/hr, a small improvement in your game can mean a difference of over $25/hr for mid-high stakes players. Many of these players aren't "TV pros" simply because they make a better hourly rate playing online where they can put in 8x the hands in the same time span, or because they don't (yet?) have the bankroll to risk losing $100K+ on a single hand.
I'm sure you (gizmo) know all this, but I thought some of these points would be useful information for the HN reader who is less knowledgeable about the poker world.
Here's one more tangent point you might find interesting about deep stacks (http://www.twoplustwo.com/magazine/issue56/Savage-Deep-Stack...). Here a well-known tournament director points out that deep stacked tournaments typically hinder the pro. Of course this doesn't apply to cash games (which you were obviously referring to), but because of tournaments' increasing blind levels and the need to end after a period of time, deeper stacks at the beginning actually mean a more-pronounced lottery period later on.
You're absolutely right, I should have qualified that statement. I meant "almost as good as the TV pros in WSOP-style tournaments". In cash games they effortlessly crush most TV pros, but most have (afaik) only very little live and marathon-tournament experience.
Thanks for the link about deep stacked tournaments. Interesting read.
I've been playing seriously for a decade, and this is the most insightful breakdown of the game I've read. Kudos.
Most bets (there are some exceptions, but they are very few) have one of two purposes:
1) To make a hand with good equity (the chance of winning if no one ever folded) fold, especially a hand that is currently beating your own.
2) To get value from a hand with worse equity that will call.
The best situations are where your bet is doing both. For example, if we raised preflop with 8-7 and are greeted with an A J 8 flop with 2 clubs, we can bet and get hands like 10-10 and 9-9 to fold, while hands like a flush draw or straight draw will call. We can bet sometimes on the turn against certain players and get all but an A to fold.
Contrast this with a situation where we have K-K on an A 8 2 flop with no draws. A LOT of bad players bet small here so that if someone raises (or even calls), they can assume they have the A and fold. This is a huge mistake. We're only folding out hands we beat, getting called by hands that beat us, and possibly giving a smart opponent a chance to bluff us off the best hand. It is much better to check and let an opponent with a hand like QJ hit a worse pair (or give someone with TT a chance to think he might have the best hand when the turn is a 9) so that we can make money from a couple bets. Furthermore we give aggressive opponents a chance to bluff at us.
When we bet for information, our bet has no value, therefore we make no money from it. When we instead bet for value (or to fold a better hand) we do make money (in the long run) from our bet.
This post got longer than intended, but seeing your comment get a few upvotes, I wanted to make sure that people didn't think his insights were actually good. The most insightful thing he said was:
Professional players are so much better
than amateurs that they can make a living
in many cases, becoming very very rich by
exploiting the difference between their
level of skill and the level of the people
they play with.
This just isn't true. Last years winner, Peter Eastgate, was a professional poker player. In fact at last years final table there was 6 professional poker players, an accountant, a student and a trucking company manager.
Just because they're not one of the big-name TV-pros that get promoted by ESPN as big names doesn't mean that they're not professional. In fact many of the big-name pros are not actually very good in comparison to the online pros.
I don't actually know if that's true, but my impression is the exact opposite - that pro poker players have basically parlayed a bit of initial luck into a lucrative career that really has little to do with differential skill and more to do with self-promotion.
Which, to my mind, is just as useful a perspective on entrepreneurship.
Players who rely on winnings for their livelihood do meet the author's description. In particular, for online poker players, the # of hands per year can total in the millions, and you can get pretty specific about the types of strategies/decisions that will alter your bottom line. I played poker online pretty seriously (and profitably) for about 2 years, logging over a million hands, and I definitely did no self-promotion.
Check http://www.pokertableratings.com/, a site that logs all hands played at the major poker websites. A major statistic is BB/100 (big blinds won per 100 hands), which is an oft used metric for profitability. The online poker community has a very good idea of the expected BB/100 at various skill levels/stakes, and the associated variance - it's very much a 'science'. The impression of self-promotion that you have is an unfortunate result of commercialized poker TV.
Certainly well-known poker players are happy to take advantage of any chance to make money with less risk. Therefore you'll rarely see them turn down opportunities to do an endorsement, be on TV, write articles, and so on. The ones who get that opportunity are not always the best. It is also clear that the chance to do this is a significant motivation to participate in tournaments.
However most pros make significant money day in and day out playing cash games. In fact most live on that. And I guarantee that you aren't going to make money on cash games with just a little bit of initial luck. I also guarantee that if you lack skill and play those cash games, you'll get wiped out.
And the pros who make a living online? I guarantee they have skill! The level of competition in high stake online games is much, much higher than in casinos.
I guess I was surprised to see for once an article advising us to act more like the Goliaths and not the Davids.