Friday, February 20, 2009

Money and the Limits of Happiness

In reading MyTurn2Raise's “Shortstacker Illuminati” thread on 2+2, he lays down some certain strategy points for short-stacking. He also has to field the typical complaints of short-stacker etiquette (some of which I have already addressed) and also the common sense approach as to why he was engaging in it. When someone had piped in the quip that anyone knowledgeable and skillful enough to show a large profit short-stacking should be buying full anyway, his response was even more illuminating than the advice he gave. In a nutshell, he said that playing poker for a living was never really about the money, but rather about not having to get a traditional job out in the “real world.” And besides, he added, relieving himself of the stress of full-stacking is more likely to add years on his life than making a few extra bones in his time on this planet.

Think about this for a minute. A long minute....

So now as a mental exercise, I pose two possibilities before you. Would you rather make

A) $400,000 a year for the rest of your life or
B) $600,000 a year for the rest of your life?

Even those non-materialistic charitable types would certainly choose option B, if nothing more than for the reason that they would have an extra $200,000 a year to do good works with. But wait! There's a catch, of course....

To earn $400,000 a year you would have to work (or play) the normal 40 hour work week. To get the $600,000 you would have to work 59.5 hours a week. The payback ratio here is slightly skewed in favor of option B, but is getting a good ROE (return-on-effort) really worth sacrificing all of that extra time?

Now I know that they say that money isn't happiness, but that doesn't entirely support the facts. The first thing that needs to be addressed is “what is money really good for?” Here is the short list, in the order in which they are satisfied:

1)Fulfilling basic needs
3)Recreation and materialistic wealth

I would say that money that covers your basic needs “buys” the most possible happiness. While the extra money to cover security issues might not buy you more happiness directly, it frees you of certain burdens that will allow you to enjoy happiness that comes from other endeavors more intensely. Recreation is obviously important, but the manner in which it is enjoyed and consumed may or may not be directly tied in with your income. After these first three facets are filled, the value of any extra money you make rapidly begins to decline according to The Law of Diminishing Marginal Utility. Even though the creation of extra wealth may gain you status, that status is relative to the wealth and prestige of those around you and many other factors. After all, making $600,000 a year may make you a big timer in the world of poker but your wife or girlfriend that you have been habitually ignoring is probably not all that impressed.

So back to short-stacking...

I do this for the same reason that MyTurn2Raise does. It prevents stress and gives me a solid income. By relieving myself of normal poker-related stress, I have more energy, sleep less, eat healthier, and generally am more pleasant to be around. These things are no small matter and could not possibly be bought for an extra $10 an hour.

A Great Quote

Poker has us all by the balls. The fortunate thing is we get to adjust the grip.  - Kyle "Cottonseed" Hendon

Monday, February 16, 2009

Two Simple Thoughts...

I don't always have to get deep....

"Give a man a fish and feed him for a day, teach a man to bum hunt and feed him for a lifetime."

To all of you rakeback "pros":  GET A FUCKING JOB!!

Wednesday, February 11, 2009

Leaks in Poker, Leaks in Life

"No decision is ever too small." - Dusty "Leatherass" Schmidt

Until recently, I had often wondered why I have always been tremendous at managing my poker money yet have failed to translate that approach to my off-line finances. Having averaged about $6,000 or more a month or for the past couple of years, I have always been baffled at the fact that I had no money left over after paying my living and recreational costs and yet the debt kept managing to pile up. After reading The Tipping Point by Malcolm Gladwell, this is a mystery no more.

You see, when playing poker, I would always treat every single dollar at stake with care. If someone were to point out to me that I had some minor leak that was costing me $5 a day, that would be completely unacceptable. I've always treated that minor edge with value and I had hoped that I always gave some thought before making that little call or tiny bluff. Truth be told, if you examine the win rates of the absolute best winners at the $1/2 NL stake, you will see that they are winning about $12 per 100 hands, or 3ptBB/100. That's about $9.50 per hour at a full ring table. Some of you might be surprised to find that edge is so small, but what that translates into is that one extra pot they stole or that one small opponent value bet that they failed to pay off.

As for my off-line life: I was sloppy to the extreme. After all, if I don't pay my utility bill on time they only clip me an extra $5. An overdraft fee is $33, but paying that is easier than getting off my fat ass to go deposit some money or asking a friend for a short term loan. Paying late fees on movie rentals is more convenient than driving out of my way to return them. Leaving the lights on in the house at all times probably only costs a few extra bucks a month, so who cares, right? I probably have about a dozen of these careless leaks, and truth be told, they were probably costing me about $20 or so- a DAY! All of this is rather embarrassing in retrospect and I am working to fix them all right now. We need to treat every single dollar like it matters. But there is also something that goes along with that that few people have ever considered...

I read a brilliant passage once in an investment guide. The author wrote that the dollars you save have more value than the dollars you earn. The reason? The dollars we earn are taxed but the ones we save are not. The ones we make might be worth about 75% of that, but we get a 100% ROI on the ones we don't spend. It's like rakeback. For those who are not very high volume players, Poker Stars players are pissing their money away. They should be playing at Cake Poker, where the savvy player can get back 35% of their contribution on top of beating up on shitty competition. Compare that to the lousy 12% or so return that the casual player or aspiring pro will get back at Stars. I tell people about this all the time and the fact that they simply do not care tells me that they do not have the mind set of the professional. They are making the comfortable decision to stay where they are rather than having to go through the trouble of re-depositing at another site. And believe me, I don't give a shit about how great their comp program is. All those pretty gadgets are subsidized by the rake you are giving them and getting a "free" PS3 might seem cool, but you'd still have to hawk it at a discount to pay your car loan.

I often like to tell people that the easiest thing about being a professional poker player is knowing to how win at the game. Your typical pro is by no means a baller; he is more akin to a coupon clipping deal seeker. He is constantly looking for that tiny edge- that 6:5 favorite on a coin-flip. If you are giving away those tiny edges, pretty soon you will be looking at the wrong side of that coin and an empty ewallet account.