Get It In Till the Sunrise....Doin' 90 in a 65

Full Tilt Poker Payout Situation

Wed, 08 Jun 2011 01:55:20 -0500

There has been a lot of negativity directed at Full Tilt Poker and not only their lack of communication but their lack of expediency in providing player cashouts post Black Friday. The problem is compounded when contrasted with the fact that Stars players have been allowed to cash out. I've seen a lot of opinions and conjecture and I'll offer up my own personal opinion, which I haven't really seen elsewhere.

I'm not going to go into detail about the various ways that companies are valued or the different formulas that are used. Instead, I'll offer up a few examples of what has happened in the past in similar situations and come up with a few conclusions based on FTP's motivations and interests. Let's start with the obvious - the passing of the UIGEA in 2006, which effectively forced the exit of Party Gaming and their US facing site PartyPoker.com from the US market. At the time, Party Gaming's market on the LSE was ~8.1 billion - they were without a doubt the market leader in a growing industry. When the UIGEA was passed the stock lost 60% of its value overnight and since then its value has eroded even further and according to the market, Party gaming has a valuation of ~1.2 billion.

In the longrun, withdrawing from the US and giving up access to the US market approximately reduced reduced Party's valuation by a factor of 8. Now, a company with a valuation of 1.2 billion is nothing to scoff at. Here are a few other numbers I want to throw out there 29 billion, 17 billion, and 7 billion - those are the current market valuations of Las Vegas Sands, Wynn Resorts and MGM Mirage as of close of market today. Here are a few things to note - if we're conservative and think that in a legalized environment, a B&M gaming company with its marketing and branding can increase that valuation to 5 billion, that's a significant increase in stock price and shareholder value. One of the hardest things to do in business is to find a second product after an initial success. There are many successful companies that had 1 big success but couldn't reproduce that success. Almost every single B&M casino is banking growth opportunities on Macau - online gaming is the perfect opportunity to diversify.

How does this relate to Full Tilt? Well, if you look at a company like Full Tilt, they had 4 assets pre Black Friday:

Player base - they had established a base of players where you knew that there would be plenty of games running 24/7 and tons of gauranteed tournaments
Branding - FTP is one of the most well-recognized international online poker sites because of its sound branding strategy. This brand has been built up through initially signing live pros, patches at live tournaments, affiliate marketing and sponsorship and advertisement on the most popular television programs and magazines related to poker.
Software - FTP owns a platform that is mature, proven, with a ton of features that have been iterated on and improved with customer feedback, and most importantly has high SLAs and scales well. The software has evolved over a number of years.
IP or Intellectual Property - There are two important factors in evaluating technology or startup companies. The first is management team and the second is IP or sustainable advantage. FTP holds the patents to Rush Poker. They also have a mobile client to go along with the Rush Poker concept - I would argue that Rush Poker works better than any other form of poker on a mobile device with limited screen real estate.

So, post Black Friday what changed? Well, obviously the average number of players on the site has decreased. The second is the branding has taken a huge hit - I would argue that there's still some international value in the brand. The software platform still exists and same with the intellectual property. Again, there's several ways of looking at FTP's valuation. According to PokerScout, PartyPoker has averaged about 4k players a day while FTP averaged 15k pre 4-15 and less than 10k afterwards - this 10k is still more than that of PartyPoker. So, a 1.2 billion dollar valuation for FTP is not at all unreasonable. If we want to take the pessimistic view and take Party Gaming as a baseline for what happened, then FTP could realistically expect to have a 4 billion dollar valuation pre 4-15 and a little less than 1.8 billion if you look at the immediate 60% valuation hit or about 500 million if you look at the long term ramifications and divide the value by 8 post 4-15.

Now let's look at the incentives. Let's treat payment as a binary event and look at the incentives behind running with the money and closing shop or paying out players and continuing to operate. Let's say FTP decides to say screw it, we're folding the company, the shareholders are running away with the 250 million in US funds - which is probably unrealistic as the DOJ probably has a significant amount of their liquidity. At the end of the day, the shareholders are 250 million dollars richer and Howard Lederer can't ever see his sister again and Jesus Ferguson will have to walk on water somewhere else.

However, let's look at the incentives for doing things right, raising capital, and paying out US players. If they can maintain some legitimacy, they can still operate in the international market and if they can conservatively rake in half of what Party is raking in, they'd still be better off 10 years down the line than running away with the 250 million.

Where it gets even more interesting is a liquidation event. Full Tilt has assets that have a lot of value in a liquidation event. If online poker were to be legalized, even if FTP and Stars were out of the market, it would be a huge leg up for any of the B&M gaming companies to already have working, scalable software. They would gain several advantages by purchasing instead of rolling their own. First and foremost, they'd be purchasing a team of people that have experience running an online gaming company, understanding the security models, understanding how to promote and run affiliate programs, how to market tournaments and promotions, etc. Second of all, they'd gain first mover advantage by purchasing an existing, stable, and scalable software platform - software companies are valuable folks. Thirdly, they'd gain the Rush Poker IP - imagine machines set up in B&M casinos where players can sit down and play against online players - inside the casino. Imagine if you could add B&M players to your online base and combine them to play Rush Poker. It's not too huge of a leap of faith that if Wynn or MGM purchased both Stars and FTP that they could also create a competitor to the WSOP brand - because, let's face it, if players could fund their players cards through their online poker accounts and the casual player could get bought directly into a tournament, and only your casino branded tournaments, it'd add a lot of value to your company. Basically, a company like Full Tilt Poker can not only immediately increase the stock value of a company by a billion dollars, but it can add liquidity, 500 million to the bottom line, and if marketed, co-branded, and run properly adds an era of legitimacy to the online poker room, effectively increasing its value and the value of the B&M properties.

Even if the owners of FTP think they can only sell FTP for 250 million and still set foot in the US it'd probably be worth it. If they could keep a 5% equity stake for 10 years and still liquidate for 250 million, they're still way better off than they were if they had just refused to pay players out. What I'm effectively saying is that FTP's incentives are aligned in a way that bode well for players getting paid - maybe not immediately, but at some point in the future. I'd think NetTeller rather than Stars.

Here's a conspiracy theory for you all - if Phil Ivey is somehow successful in a lawsuit, then he effectively puts himself at the front of the queue as a creditor for FTP's assets. In order to do that, he needs to do 2 things - he needs to increase the likelihood that FTP goes bankrupt, and he has to file a lawsuit significantly large that he would be the primary creditor and first in line for reparations if FTP does go to receivership. If FTP goes bankrupt, he can probably negotiate the right to purchase their IP, their software, etc. If he gets the software, he can't do anything with it due to a non-compete clause - so he obviously has to get out of his non-compete as well in order to either put up a competitive site with the FTP software and IP or liquidate the asset to a third party. I wouldn't be surprised if Ivey was trying to lower the bidding price so that he could purchase a larger share in FTP, pay out players, and then own a significant percentage of the company for some liquidation event.

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Wed, 08 Jun 2011 01:48:52 -0500

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Life in the Fast Lane vs Life in the Past Lane

Tue, 15 Mar 2011 02:01:51 -0500

I want to preface this with yeah, this blog post is long. But if you're interested in the NBA and why people think superstars are so important, I'm sure you'll learn something. Something special is happening with the Nuggets, and if you aren't paying attention you'll miss it.

The Sports Analytics conference happened 2 weekends ago and Mark Cuban roasted Bill Simmons by saying something to the effect of "Some people live life in the fast lane, the Sports Guy lives life in the past lane." Additionally, he mentioned that Facebook and Twitter are old news - I thought it was pretty smart insight, particularly if you're looking towards what everyone else is doing, you're probably missing out on doing something truly innovative or great.

Among some other things Mark Cuban mentioned were that he hopes the Dallas Mavericks suck and suck badly after Dirk retires. I thought this was pointed because too often, teams get stuck in a results oriented cycle of win as many games as possible, refuse to rebuild, and become mediocre for years. My beloved Denver Broncos are currently doing this - they couldn't stomach the rebuilding process so they hit the reset button, and have the chance to set the franchise back years.

Finally, I wanted to point out a team that's living in the fast lane and talk about my thoughts on the Denver Nuggets / New York Knicks trade. My buddy Matt and I have long said that Carmelo Anthony doesn't matter on the Nuggets team. We first started noticing this phenomenon when Carmelo would get injured and the team wouldn't skip a beat. Then we looked at the advanced stats and realized maybe Carmelo isn't as good of a player as we think he is, particularly on a team that's fairly deep to begin with. Anyways, I'm going to go out on a limb again and proclaim that the Nuggets will contend for a championship, this year, without Melo. I don't think anyone realizes how good this team is.

Here are the Nuggets' 4 factors analysis pre trade:

- eFG% offense|defense: 0.5238 | 0.5070
- TOV% offense|defense: 0.1318| 0.1218
- ORR offense| defense: 0.2315 | 0.7475
- FT/FG offense|defense: 0.2965 | 0.2285

And post trade:

- eFG% offense|defense: 0.5320 | 0.4771
- TOV% offense|defense: 0.1184 | 0.13631
- ORR offense| defense: 0.2727 | 0.81028
- FT/FG offense|defense: 0.2344 | 0.1895

That's great, Chan, what does this all mean you ask? Basically, our defense got WAY better, our offense got more efficient, we're rebounding an unheard of 81% of defensive rebounds (league average is like 76% from 74.75%), turning it over less, causing more turnovers on defense, getting to the line less and fouling less. The only category we got worse in is FT/FG. The only team that has a better eFG% differential is Boston. This Denver team is an ELITE basketball team. I know you're asking, but you gave up a superstar, how did that happen?

First, Carmelo Anthony isn't a true superstar - he's more like Joe Johnson than LeBron James. Second, Chauncey Billup's minutes are being replaced by a much more efficient Ty Lawson on offense, and Ty's defense, at this point in his career is much better than Chauncey's. Third, our offense has become what an NBA offense should be - layups and 3 pointers, with 2's thrown in only for game theoretical reasons.

Finally, what is the definition of a superstar? If you ask the media, it's someone who scores a lot of points, gets their points easily, and comes up big in the clutch. Conventional wisdom and history would suggest you need one of these guys to win a championship. If you think about the characteristics of a superstar, and why you need one, you come to some interesting conclusions. Here are the characteristics of a superstar as I would define them:

Ability to use up a large volume of shots efficiently, or more efficently than most NBA players.
The ability to at least defend at an above average level - Basketball is 1/2 defense and if you suck in half of the game, your team won't ever win championships.
An elite skill in addition to scoring. This can be rebounding, finding open teammates, or defending.

To me, a superstar is defined by those 3 traits. So, why do you need a superstar to win? Generally, the guys who the media considers superstars are the guys who score at an above level of efficiency while using up a lot of shots. For example, if your guy shoots at 50% and your opponent shoots at 45%, as an extreme example, if your guy took every shot and your opponent's guy took every shot, that would be a 10 point differential over the course of a 100 possession game (100 possessions * .5 * 2 points = 100, 100 possession * .45 * 2 = 90). The same goes for almost every single category in basketball, rebounding, defense, ability to get to the line. if your guys are slightly better than your opponent's guys, over the course of 100 possessions, you'll be the better team.

Someone has to take the shots on a team, since there are 100 possessions per game. An NBA team has to use these shots as efficiently as possible, and, in most cases, it's the best creator who can do that. Most NBA players' efficiency goes down with usage, including superstars. However, an average players' level of efficiency drops off more steeply than superstar's does. So on a bad team where no one can create a shot and everyone shoots .450, bringing in a Carmelo to use up 20 possessions per game at a .480 shooting percentage is a huge improvement. It also allows their role players to become more efficient as their usage levels drop.

So we've made the convincing argument that superstars are important in the NBA because they're more efficient than the average player, then why are the Nuggets so good after trading away Carmelo? It's because the Nuggets have been constructed in a way that I've almost never seen any other basketball team constructed except maybe the Pistons or Spurs. Every player is VERY efficient. In fact, each player is MORE EFFICIENT than Carmelo Anthony was, to the point that Carmelo Anthony shooting and stalling the offense was a detriment to the team. They don't need a superstar - because they're getting supestar production across the lineup. Even more unbelievable, is they've constructed the team, for the most part, of guys who only shoot good shots. None of the guys thinks they're a superstar, so they maintain high levels of efficiency because they don't go into hero isolation play mode. There are plenty of guys in the NBA who'd be efficient given a lower volume of shots, but they have too much pride to practice good shot selection and only take open shots or layups. Almost EVERY SINGLE NUGGET PRACTICES GOOD SHOT SELECTION! I'm pretty sure if Carmelo limited his shot selection to the best 10 shots a game, he'd shoot 8-10, put up 20 points a game on 55% shooting, but he thinks he's a superstar. In a league of egos, head cases, and selfish play, this is absolutely amazing.

You're probably wondering, who do they go to in the clutch? The beauty of it is they don't go to anyone - they run their offense and the defense has to defend all options. Which is a better outcome than the defense focusing on your one clutch player, who just happens to be able to score efficiently in those spots.

To top this off, DSMOK at APBR had a great post where he analyzed the trade from the Nuggets perspective. While the production of the players the Knicks got was higher this year, based on applying standard age improvement curves to the assets going forward and weighing the value of salaries, by next year the Nuggets will have done EVEN BETTER in the trade. The reason for this is how a standard NBA player improves. In general, players continue to improve until they hit age 26. At which point they start to slowly drop off until the age of 34. At 34 they start to decline steeply. Carmelo Anthony has peaked, Chauncey Billups is about to fall off that cliff while all of our young assets are projected to improve. Oh, did I mention we got 2 great young assets in Gallo and Chandler, a backup point guard who has been a starter in Felton, a couple role players who are better than advertised and provide big depth in Mozgov and Koufos, and ALSO several draft picks??

What's wrong with the Miami Heat

Sun, 06 Mar 2011 17:19:26 -0600

Recently there's been a lot of focus on the Miami Heat's inability to win close games. I'm here to tell you, just like I did in November, that the Heat are really, really good and I wouldn't believe what the press is writing about them. That's not to say the Heat don't have problems - they do and here are their current issues:

1. Carmelo Anthony syndrome (more on this trade in a future post) but I call this the girah ball where a guy dribbles around, uses up the majority of the shot clock and then the defense focuses on the guy with the ball and they turn it over or force up a bad shot. This is even more pronounced in crunchtime.

2. Hoopdata had an article on this, but I first noticed this in the Knicks game - their inability to defend the 3 when 1. the team's offense is predicated around setting up the 3, particularly the corner 3, and 2. when they have to devote their best defenders in Wade and Bosh to helping defend the paint. This is misleading because the Heat are very good at defending the 3 because they rotate well. Against bad teams, the Heat close out quickly, and teams miss a lot of shots. Against well schemed teams like the Magic, Spurs, and to a way lesser extent the Bulls, they struggle to defend the 3.

I'll use the Spurs as an example. San Antonio is the smartest team in the league, hands down. This year, in the offseason, Popovich decided that he didn't like his team's offensive performance even though they made the 2nd round of the playoffs last year so he redesigned the offense around the most efficient shot in basketball - the corner 3. If you watch the Spurs, 3 things immediately happen almost everytime down the court. The first is 2 guys set up at the 2 corner 3's to space the floor. The second is Parker, Ginobli, or Hill receive a Tim Duncan screen. The third is Blair sets up under the basket for easy rebounds. A Spur's offensive play starts off with Duncan screening for a very fast slasher - effectively making the defense rotate and help or give up a layup. When the defense rotates, Parker passes it to one of the wings for a corner 3. If the corner 3 isn't open, they swing it around or pass it across the court for another corner 3. The whole offense is variations on this concept and is game theoretically impossible to defend both corner 3's and the layup, even if you know what they're doing.

This is problematic for Miami because their bigs don't rotate well to help when Parker blows by his defender and Wade or James has to help, effectively conceding a wide open 3. They struggled against Orlando because they couldn't defend Howard down low with 1 guy, which created all sorts of wide open 3 point opportunities.

3. The Heat's reluctance to push the pace and play a faster brand of basketball, putting pressure on opponents, and reducing the number of terribly executed half court sets they run.

4. This point relates to point 1, but they've tended to get poor shots and miss those shots in the 4th quarter. This could be fatigue, but a lot of it is also variance - which tends to even out.

Anyways, while the above things are problems, particularly point 2 when playoff teams almost all execute well. The good news is they're all correctable. I fully expect LeBron and Wade to get more minutes in the playoffs, I expect them to be pushing the pace, and I expect their execution to improve when they decide to try. I also expect the 4th quarter misses to stop.

If I'm Eric Spoelstra, the first thing I'm working on is conditioning. I don't want my team to tire down the stretch and I'm working on pushing the pace in practice and also during spurts at a time in practice. I'm also working on implementing a zone defensive schemes (3-2) against teams that execute well and scheme well to create open 3 pointers. The reason for this is 1. because we can't rotate fast enough against good teams and 2. zone defense conserves energy for the 2nd half, when the Heat have been fading. Finally, I'm implementing a full court press to get these teams out of their rythm. Something similar to what the late 90's Bulls would do.

The Heat's talent isn't the problem. When things are going well, they are getting out to 10 or 20 point leads against talented opposition. This doesn't suggest that they "struggle" against good teams. Quite the opposite actually, it says they're capable of completely destroying the good teams when they execute. They just have problems maintaining that level of play due to schematic issues, execution, fatigue, or a combination of all 3. Fatigue won't be an issue in the playoffs as I've seen LeBron and Wade both carry teams, playing a significant number of minutes in the playoffs.

To close this off, I'll throw out some quantitative evidence to show how good this Heat team is. There are basically 4 levels of projecting a team's future performance in terms of future win%:

1. win/loss record - this is a very poor predictor

2. point differential - some of you may know this as pythagorean win%. this is a little bit better, but still insufficient for gambling

3. regression analysis of which variables correlate to winning - this is a good predictor of future success

4. a more advanced version of 3 - I won't mention this but those of you who have followed Nate Silver's work on Pecota should be familiar with this

You're going to have to take a leap of faith here with me but the most important predictor of who will win a game in the NBA is a team's eFG% on offense and a team's eFG% given up on defense. The Heat have been the best team in the league, or at the top of the league all year in this category. Their eFG% on offense is 51.82% and their eFG% on defense given up is 46.61% - a differential of 5.21 good for 2nd in the league behind Boston at 5.61. The Heat are very, very good, despite the recent bumps in the road - and given that it seems like they haven't played to their potential at times this year, they're the only team that the numbers could be underpredicting.

As a side note, if the Heat ran the Spurs' style of offense where Bosh takes the role of Duncan, LeBron is Tony Parker, and Wade Ginobli, with their role players in Mike Miller, James Jones, etc taking the roles of Jefferson and George Hill, they'd be unstoppable.

This all reminds me of the Peyton Manning or x and y player isn't clutch debate because they can't win a playoff game. It's the problem when you pick arbitrary endpoints. If we had looked at Manning and Brady's careers in reverse, Brady would be the one we would call the choke artist. The Heat are fine, they'll challenge for the NBA championship along with Orlando and a very very good Bulls team (probably the most underrated team in the league).

The Wisdom of the Crowds, Market Theory, and How Markets Really Work

Wed, 23 Feb 2011 02:16:05 -0600

Hey guys - it's been awhile. I joined the real world and have been working 80 hour weeks for the past 3 weeks. Sigh.

Anyways, as some of you know a buddy and I do a lot of NBA handicapping. We have a lot of confidence in our work, so we back up the work we do with wagers - small potatoes compared to some guys out there, but most people would look at how much we bet per night on NBA games and think we're huge degens. One of the places where we place our wagers is a place called Matchbook, which is an exchange or prediction market. Instead of the Sportsbook taking a Vig, the site takes a commission and you lay and take bets from other members of the site.

As I've watched how things work on Matchbook, and more generally how the sports betting marketplace works, I've learned more about how prediction markets work in theory and how they work in practice. Watching the Billy Walters 60 minutes interview reinforced these points. For those of you who have read the Wisdom of the Crowds by James Surowiecki, Surowiecki argues that by leveraging the knowledge of the crowd, outcomes can be predicted with surprising accuracy, in many cases, more accurately than specific subject matter experts can predict. For example, if you polled a random group of 100 people on the average temperature in March in Brazil, by leveraging their collective opinions or intelligence, you'd get a better prediction than that of a meteorologist living in Brazil. This theory is kind of the basis for efficient markets - where as soon as there's new information the information is acted upon and the market has corrected accordingly. The market is always perfectly efficient because it's at equilibrium from all the people wanting to buy and sell at that price point, given all the currently available information.

I personally don't believe in efficient markets - evidence of this is asset bubbles.

At a very high level, if you look at the stock market, it's comprised of professionals and the public. Professionals are smart analysts with money to move. The public are you and I, the everyday investor, who dabbles around in the market and can find value here and there and moves markets based on the aggregate of many smaller transactions. Generally, one individual isn't going to move a market - few individuals have the buying powe to move that type of volume. Likewise, your 500 dollar bet won't move most sports betting markets. Sometimes popular sentiment and professionals are on the same side - Apple in the case of the stock market or the Packers at -2.5 in the case of the Super Bowl. Sometimes professional money is on one side and public money is on another - for example Colts / Saints last year or United Airlines on the brink of bankruptcy a few years ago where the general public was dumping and smart money was buying.

All this brings me to the conclusion that the reason why markets work, and the only opinions that matter in a market are the very smartest opinions. Crowds form reasonable opinions and generally price things in the ballpark, but the best of the best exert influence and drive markets. Think about it for a second. In order to significantly move a market, the implication is that you've been successful many times before, and that it's NOT because of luck. Anyone can sell a company for a billion dollars once. Anyone can make a big bet and win. To be a market maker, you have to have done it again and again and been so successful at it that you have many more times as much cash as the next guy. Your opinion combined with the volume of cash you put behind that opinion moves the market. In order to remain at the top, you not only have to be better than the 2nd best guy(who is probably very good and also moving the market), but also the next guy who comes along, and also maintain that success with scale (which requires different skills than rising to the top in the first place). I'll reiterate: markets aren't really driven by collective wisdom, or the aggregate of all available information. They're driven by the smartest and brightest, with the most money, who analyze the information and act on it with enough conviction that the market moves.

The conclusion I came to has all sorts of implications across many aspects of life. Here are a few: The opinions of people who move markets, should be watched very carefully and listened to. In poker, you should only be watching videos of coaches who have been succesful since the beginning and continue to be successful in today's games. The fact that our political system is driven by special interests may not necessarily be as bad as most people would lead you to believe - the best and brightest have the most influence, and they generally tend to know what traits and policies promote success. Finally, and this may seem obvious - but when investing, look to companies who fundamentally affect and change markets - they're usually best of breed.

How fast does Online Poker evolve?

Sun, 21 Nov 2010 03:36:24 -0600

I was reading this thread talking about winners from 2006-2007:

forumserver.twoplustwo.com/29/news-views-gossip/online-pokers-biggest-one-hit-wonders-what-happened-where-they-now-746558/index11.html

That was 3 or 4 years ago, which isn't that much time. It's kind of weird to see all the guys I used to think were awesome, who crushed, mentioned in a nostalgic way.

Almost all these guys don't win or play anymore. I remember how I got my start in online poker. I used to play Warcraft 3 and was above average at it. I used to watch Tillerman videos ("wut chen ehhhh deeewww") and I read a blog post of his where he mentioned that he never played with more than 5% of his roll on the table and he played 12 tables of 5-10NL, so he made over a million in 8 months. I remember thinking: "well, he's smart, but I'm not that much dumber than he is. I should be able to make half that??" So I started playing online poker.

Other guys I remember: Genius28 playing Ivey, the SBRugby worship, Bldswttrs being light years ahead of everyone. That was 3 years ago! Look how much the game has evolved in such a short span.

It's weird to see guys like H@LLING0L who were so revered just 3 years ago become small stakes grinders. Niman mentioned it in his blog where he said his C game isn't good enough to win anymore. The days of dropping into threads and seeing CTS, Samo, BldSwtTrs, Strassa2, hell even EmpireMaker2 discussing hands, being the best in the world are gone. People are remembering them nostalgically. What other industry to people go from best of the best to irrelevant in 3 years? In what other pursuit do people reminisce about the good ole days when it was merely 3 years ago? What does this imply about the state of the games going forward? At what point do you know you're not a winner in the games anymore? Ansky had an interesting post where he said something along the lines of " For most of 07-08 I made my living playing against everyone HU, and at a certain point people started getting insanely good and I probably lagged behind a bit too much to keep up with the junglemans, urnotindanger, etc." Look how quickly it happened. How hard is it to recognize the fact that you're not a winner? Does it take going broke? Losing half your roll? Most people are not self aware enough to realize that their edge doesn't exist anymore until it's too late. Just some things to think about.

My roll is 1/3 what it was in May. I've been completely breakeven or losing. At some point, I have to be honest with myself and say "look, I may not be a winner in the lineups I'm playing in." Sure, I ran 8k below EV at 1-2...but it's been going on for so long that maybe it's not coolers, maybe it's not running bad, maybe it's me. Maybe it's time to drop down in stakes or entirely cashout. How many players have gone through this? How many have dropped down and continued to lose? This is the state of online poker just 3 years after 800k 3 month graphs were routinely posted. How will the landscape look 3 years later?

Quick update, more doom and gloom...

Mon, 08 Nov 2010 23:45:39 -0600

Hey guys, it's been awhile and just wanted to give you guys a quick update. Been super busy with the new job and with getting ready for the NBA season. We're hoping to have a huge year this year, have spent the offseason tracking injuries and making improvements to our system. It's going to be an exciting year :)

I made a previous blog post about the concerning state of cash games online and reading a online hourly vs live hourly thread on 2p2 kind of brought the topic to light again. Basically, someone posted that there's only a handful of people at midstakes who have made over 100k this year, whereas in previous years, there were many. I know from reading the blogs around here that a lot of you are bright eyed and bushy tailed and excited to make 250k a year playing, have had a good month or 2 and are working on and improving your games, but hear me out. The easiest way I can describe this is to post graphs from my circle of poker buddies. If one of the graphs is yours, and you don't want it used as an example, please respond in comments and I'll take it down. All these players are very good players who, most of which, won over 100k in 2008. These were all 3.5-4bb winners in 2008 and 2009. They didn't all magically forget how to play poker. They've all continued to improve, actively work on their games, game select, practice good bankroll management, and all have habits that make winning players successful. Take a look:

And finally, BlueFirePoker's very own DrGiggy, one who absolutely crushed in 2008 and 2009:

So what exactly is happening here? It's very obvious that less fish + everyone improving has made the games tougher across the board. Winrates have decreased by 2bb-3bb across the board for some of the best players. That means if you were a 3bb winner before, you're a 1bb winner. If you were a 2bb winner, you're breakeven. At a 1bb winrate, your breakeven stretches can last a long, long time. Look at how systematically this is happening, across different players with different styles, and across fairly large sample sizes of hands.

It's really, really concerning how quickly the games are dying and how unprofitable the games are becoming. My advice would be this: if you're a pro practice very, very good bankroll management. Traditional bankroll advice no longer applies in this environment. 200 buyins used to be super nitty...it's sound advice now. If you're considering going pro, take a look at these graphs and think about where the game will be 2 or 3 years from now. This all happened in less than a year.

I've seen the light..

Tue, 28 Sep 2010 23:55:21 -0500

Google recently killed the Google Wave product. I remember all the buzz surrounding it when they first launched it a little more than a year ago. It was supposed to revolutionize the way people communicated and collaborated. It was innovative because someone would be typing something and their contacts could see what they were typing in real time. I, like everyone else, decided to signup and see what this product that had such fanfare was all about. I was dissapointed, had no idea what the point was, and never used it again, telling everyone I knew how worthless it was. I thought it was worthless for several reasons:

1. The interface and concept was so radically different than anything I had used before. It was hard to understand the interface and also think about how to practically use it.

2. The real time typing feature was so heavily marketed that almost all users found themselves focusing on the aspect of "IM" without the delay instead of the underlying functionality.

3. The general public, myself included, didn't understand what Google meant by "collaboration". Google's interface provided templates and allowed people to make changes to these templates in real time. I, like many others, thought that collaboration meant working at the same time on a document. Why the hell would anyone want to do that? People want to work separately, then share the document and merge the changes.

I was completely wrong about this product. It's revolutionary, super relevant, and is a game changer with regards to how people share information, manage projects, and work together. In order to understand Wave, you need to understand what Google means by "collaboration". When I first looked at Wave I thought it meant working on the same document, in real time, together...something that I would never do. What Google truly means by collaboration is genericly how we work together and how we share, improve, brainstorm, schedule, discuss topics, projects, etc.

To understand this a little bit more, let's say you want to go to dinner with a friend so you send them an email. Let's say you want to invite a few other people, so you copy 10 more friends to the email. Email is inherently unscalable, it's hard to find messages in your inbox from a year ago, and when people get added to a thread, it's hard for them to get up to speed. Also, replies tend to fill up inboxes. We've all been on long email threads where everyone replies to all, it's hard to find content, and people get messages they don't want - the problem with email is it's unscalable.

A trend that started 5 or 6 years ago is people using Wikis to manage projects. You could create informational pages, upload files, and understand the context of a project via a wiki. The problem with a wiki is it doesn't preserve critical discussions that happen during a project, it's hard to have discussions in, and it becomes a random dumping ground of content. Traditional collaboration is a glorified wiki, or shared spaces.

You're probably wondering what the hell does Google Wave actually do? Fundamentally, it is a tool that allows you to start a wave. A wave is similar to a message board post, the start of an IM conversation, or an email. Users can join or leave this wave or conversation as they see fit. You can upload documents or files, start brainstorming sessions, track tasks, etc.

The power of Google Wave is it can be really, really simple, yet it can scale to manage entire projects very efficiently. It can start off as a conversation between two people, yet you can add many people to the conversation and they have all the context of that conversation and can get up to speed quickly or can leave the conversation at any point.

It also preserves historical context and history. Let me repeat those 2 points because they're so important: Wave SCALES from a quick conversation simpler than email between 2 people to 1000's of people having 100's of threads and then PRESERVES CONTEXT AND HISTORY. Imagine a call center where one call center rep solves a very difficult question and documents the process in Google Wave. Another rep can come along on a different shift and searches that situation and the knowledge of how to solve that situation is now preserved. Imagine a company setting up Wave as a customer service tool to interact with customers instead of a forum. Imagine a project being managed with Wave where functional specifications, marketing documents are uploaded and critiqued. A new hire joins the marketing team, can browse the history of the project and quickly get up to speed. Project managers have unlimited visiblity into the project, can resolve issues in real time without long email chains and meetings.

What were Google's mistakes with this product?

1. They billed it as an email killer which was a political disaster internally, where Gmail is their # 2 product.

2. They should have integrated the tool into Gmail.

3. Too much emphasis on the technology instead of actual use cases. They should have created separate instances of Wave, with examples, for different use cases. "Oh, you can type in real time." People became cynical of this complex new technology because no one else was using it and it seemed like technology with no practical use.

4. They should have spent time teaching people how to use it instead of hoping they'd figure out what to do with it.

5. They needed a user base to evangelize the tool. To that end, they should have deployed the tool internally for project management so that each Google employee could evangelize the technology.

6. Wave had to be used with a specific project or purpose in mind with more than one person. Very few people, including myself, understood Wave well enough to use it for a project or for a purpose. If they did understand, they had to find other similar early adopters who also understood the power of Wave.

Doom and Gloom...

Wed, 15 Sep 2010 22:14:56 -0500

I've had some time to reflect on some things recently. Specifically, the state of the poker economy and some of the implications. The last 8-10 months have been kind of eye opening as I've slowly observed the same phenomena happen to all my poker buddies.

I started playing poker in the spring of 2007 and started off in the micro PLHE games and started talking online with a few regs in those games and we all happened to move up together from 25PL to 50PL to 100PL then 200 and 400NL...with some of us taking shots at 5-10 games but never really becoming regs and settling in as winning 2-4 players. Late 2007-2008 seemed to be our peak where our hourlies were 150-250 an hour and we all had 3.5bb or higher winrates. Some of us had 5 or 6bb winrates. Most of us made over 100k in 2008 and 2009. We all sent each other hands, became good friends IRL and hungout in Vegas, and things were good. Most of us played overrolled (at least 100-150 buyins) in the games we were playing.

Around the end of 2009 some of us started going on the worst downswings we've ever been on. We started experiencing long breakeven stretches. Now, we'd all had downswings and breakeven stretches before, but these were prolonged and we seemed to see cooler after cooler after cooler. Coincidence? Maybe. What I actually think happened is the games got significantly tougher in that 1 year period and 3bb winners became 1bb winners. 5bb winners became 3.5 or 3bb winners. We kept running into coolers because people were playing more solid, not getting it in as light, etc. Instead of winning while running slightly bad, you had to run good to win. Some very, very good poker players have been breaking even or winning at 1bb for the year. Some of us have decided to move on from poker, some of us have switched to PLO. Have we been studying the game as much as we should? Probably not. Has the game passed us by? I dont' think so. If it was 1 or 2 of us, I'd probably think it was just variance - but it's 4 or 5 of us.

So I started to PTR guys who I knew to be winning players and who I knew to put in a huge amount of volume (Leatherass). Found the guys who used to be big, big winners. Guys who had won 200 or 300k at 2-4 or 5-10. I looked at how long at how a lot of these guy's graphs have been flattening, how a lot of winners have been breaking even for a long time. They're still obviously winners...but when your winrates decrease, it takes a long, long time to get to the long run. Consistent winning is replaced with breaking even, and you win only when you're running well. When you're running bad, you experience big downswings. 500 or 600k hand breakeven stretches are possible. I'm not going to list examples, you guys can go through the exercise if you want...but look at how everyone's graphs are flatlining.

Where am I going with all of this? I want to make 2 specific points. The first is if you're thinking about getting into poker as your main source of income, think very hard about your long term prospects in both poker and in the career you'd be givinng up (most people who can succeed at poker are really bright and could do much better outside of poker). Think very hard about where you think the poker economy is going and where you see the games in 3 or 4 years. I'm not saying the games aren't beatable, or that they won't continue to be beatable, but give some thought to this question. Hell, you might read this and decide a lot of good players and regs are dropping out due to being underrolled, which will eventually make the games softer. The second implication is bankroll requirements. It used to be conventional wisdom that you needed 20 buyins for a stake, then people started saying 50, then people started saying 100. I think with the state of today's games you aren't safe unless you have 200 buyins (if you don't want to drop down in stakes). I was playing with 125 buyins and I've burned through 75% of my roll in the past 3 months via a long breakeven / downswing stretch, tilt, and withdraws for expenses. A lot of you are going to experience poker where you breakeven for 4-5 months at a time, then make 50-100 buyins in a 2 month span. If you're going to do this for a living, you have to have enough buffer to give yourself a chance to run hot.

Thoughts on the Economy...

Fri, 20 Aug 2010 23:48:26 -0500

I've been reading a lot of material lately about how to get out of the recession. I disagree with a lot of what's being written, and I think that the fundamental attitudes of a lot of people need to change.

The first article was here: Time for Super Taxes for the Super Rich? curiouscapitalist.blogs.time.com/2010/08/10/time-for-super-taxes-for-the-super-rich/

This article was pretty ridiculous because the guy formulates opinions by guessing and uses as datapoints: "A random blog on the internet, " while completely dismissing a guy with actual data ( Arthur Laffer online.wsj.com/article/NA_WSJ_PUB:SB10001424052748703977004575393882112674598.html ).

Here are some quotes from his piece (notice they're almost all just his personal opinions):

"I think the idea of a super tax rate for the super rich makes a lot of sense."

"So not only does all that money concentrated with the rich not help us, it actually makes our economy prone to booms and busts, and less stable."

"So are the rich paying too much? Probably not."

"For that reason alone, raising taxes on the super rich is perhaps more important than we think."

This article was super good: www.businessweek.com/magazine/content/10_33/b4191056654282_page_4.htm

The first idea that I see perpetuated over and over again is this tax the really rich mentality. Keep in mind that I'm not really rich. I'd probably be considered middle or upper middle class. There's a lot of debate about what constitutes the rich, and how tax burden should be spread out. I'd like to dispel a few misconceptions or offer some alternative viewpoints:

1. It's easy to think that someone who made 175k (top tax bracket) is rich because they make more than 95% of Americans. Well, what happens if you're a small business owner, you had one big year, and then your company goes out of business and you're stuck working at McDonalds for the rest of your life? What happens if you're a kicker in the NFL with no other skills and you kicked for one year? The assumption is that people in higher brackets will continue earning that…so, you know, tax them since they're making so much.

2. It's easy to ask a group that's in the minority to do something when you're in the majority. "I don't play online poker, so let's make it illegal since it's gambling." Would it be fair for everyone aged 20-50 to enact a huge tax on everyone older than 50 with the reasoning being "well they have more money than everyone else." Yeah, they have more money because they have been saving their entire life and it's their retirement savings. It's easy for a large majority to oppress a small minority, especially when everyone is looking out for their own self interests. It's very easy for someone who isn't rich to look towards someone else, see how well they have it, and then decide that it's "unfair". In the US, that's a horrible attitude because, in most cases, you had every opportunity they did to attain the same thing. The attitude should be "how do I elevate my position to their position?", not "it's so unfair that they make 100 times more than me!" People scream that CEOs make too much. Yes, it'd be unfair if CEOs were chosen at birth like royalty. But, you had every chance they had to become a CEO too!

3. Unlike what you've been led to believe, income disparity isn't necessarily bad. You keep hearing about the increasing wealth gap between the very rich and the average American. Here's a question: you work at a company and you make 30k and the CEO makes 50k. I run another company and offer you 50k but I make 500k. When you look at it from the perspective that I got a pay raise, and I'm better off than I was at my old company (assuming same working conditions, etc), then it's not so bad is it? Who cares if the rich are getting richer if everyone is better off as a result? This leads me into my 4th point…

4. People tend to think of the pie as "fixed" or zero sum - it's not. They think of economics as a fixed pie, where if someone gains, someone else loses. If an Indian gets an American job, that job is gone forever to an Indian and America gets poorer! If the rich have a disproportionate amount of wealth, that means the poor are getting poorer!

5. Since income disparity is bad, we should redistribute the wealth, through higher taxes on the rich - more government revenue does not mean higher standard of living for the poor. People like to argue that trickle down economics don't work…if the rich have money, it won't trickle down to the poor. So, why would "trickle down taxes" work? In and of itself, higher tax rates to not necessarily raise the standard of living for the poor. On the whole, it allocates a piece of the pie from a more productive private sector, and consumer market into the hands of a less efficient public sector. Yes, there are more social programs that benefit people on the whole, but most people's standard of living does not increase as the government collects more revenue.

6. Bubbles are bad and we should do everything we can to avoid them. A bubble is just a market correction between the perception of the value of assets and the actual value of assets. Think of it this way…let's say your house's materials and land is worth 100k. Over the long run, it is expected to rise 3% per year and maybe be worth 150k in 10 years. During the bubble, your house was worth 300k. The market corrected and now it's worth 110k. Are you worse off than you would have been? No. There's just emotional pain tied to the fact that you thought you had a house worth 300k and now it's worth 110k. What if I said, in the long run, by embracing volatility and said asset bubbles, you'd be better off? You can have 5% returns with no volatility or 10% gains but deal with a bubble every 10 years? If you're smart, you'd take the increased volatility / variance. Great things came out of the .com boom, increased wealth, companies like Google and Amazon. The pie, and wealth was increased. Who cares if it was overvalued at one point and a correction had to take place??

7. Most people who believe that bubbles are bad are also proponents of wealth redistribution. This is kind of contradictory since, who do bubbles affect most? The most obvious is institutional investors like pension programs, government funds, etc. The second is THE RICH. They're the ones who buy assets, who own more property, etc. If you're poor and don't own a house, who cares if the housing market crashed? If you're rich and you own a ton of stocks and 5 homes, you lost a greater percentage of your wealth than a poor person did. You never see this mentioned.

8. We're in a recession because the Fed kept lowering interest rates, made money easy and cheap to borrow, and didn't regulate - this was a variable, but not the reason for the crash. First of all, low interest rates don't cause recessions. Recessions are the result of way too many variables, all working together to measure. Blaming it on one thing is pretty ignorant. The Fed lowered interest rates to maintain growth in a slowing economy. At some point, when US comparative advantage decreases, US standard of living has to decrease. Lower interest rates prolonged the correction and prosperity while delaying the inevitable correction (bubble). Now, if you were to place blame on the cause of the economic crisis, you could point to 2 separate problems. The first, and biggest problem, was the misalignment of incentives. People were compensated on volume and pushing through as many mortgages as possible, not quality. What's the second common theme in the subprime mess? Assets weren't valued correctly. If you really think about why junk bonds were rated as A and AAA bonds by the government ratings agencies, you come to a few conclusions:

1. The people at Moody's weren't smart enough to understand the products they were rating. If you're the best and brightest in your class, are you going to go to Moody's and rate bonds or are you going to go to Goldman Sachs and create these instruments and make millions? Again, mismatched incentives…in order to hire smarter people, the government has to be able to incentivize them properly.
2. Moody's made money and incentivized their employees to push through more volume, rather than correctly rate bonds. Again, it was a fundamental misalignment of incentives.
3. Since Moody's and other government agencies had always priced bonds, everyone worked under the assumption that AAA rated bonds were investment grade and safe.
4. The assumption of everyone involved, including the investment banks and institutional investors was that government ratings agencies were rating the bonds CORRECTLY. This was the fundamental problem…the assumptions everyone worked off of were WRONG!
5. If you were to blame anyone, it would be the ratings agencies who didn't rate the assets correctly, and indirectly, misaligned incentives in the WHOLE SYSTEM. But yeah, you know, low interest rates led us to where we're at now!

9. High unemployment doesn't necessarily mean a weak economy. The metric that should be used for measuring an economy's strength is total GDP and GDP growth. What if workers or employees aren't actually doing anything useful? For example, you have a business, it makes a million dollars a year with a headcount of 20. You reduce headcount to 15 and you still make a million dollars a year. Your company just became stronger. Likewise, GE used to cut the bottom 10% of their work force and they were a model of efficiency and innovation for years.

10. The belief that the government should solve your problems. Bad economy? Governments problem. High unemployment? Government problem. High cost of college? Government problem. If you're unemployed, you shouldn't be blaming the government or the bubble, you should be updating your skillset. When I see starting offers for nurses at 150k, I think to myself there's a supply and demand problem….the opportunities are there for people willing to seize them. If you look ta polls, when asked what the biggest issue facing America is, it's "the economy". Like the economy is the government's responsibility. The government can only provide good incentives. The economy, and your personal well being is related to your amount of production. Just like the money you can make in poker is related to volume. It's easy to blame tougher games for your failure to win instead of improving your game, learning new games, putting in more volume.

11. Examining a small sample size and deciding that a policy was incorrect without examining all the variables involved. Encouraging investment and saving by lowering taxes was incorrect, because look what happened, the bubble and a recession!

It's like a book report...

Fri, 13 Aug 2010 11:29:49 -0500

A lot has been happening lately. I've spent the whole summer traveling, first to Cancun, then to Tennesseee for Bonnaroo, then Vegas twice (decided to play in the Main Event), and finally Europe (Scotland and Greece). I may write longer trip reports about individual trips, but I have a lot to write about and I don't feel like I can do any of them justice.

I've done a fair amount of reading lately...which has spurred some interesting thoughts, etc.

Jeff Ma's The House Advantage - This is the guy that the movie 21 was based around. This book should have been named "+EV Decision Making for Non Gamblers" I thought it was interesting and really did a good job explaining concepts such as making +EV decisions, not being results oriented, asking the right questions, bankroll management, etc. A lot of you who have read this blog will find many of the examples he uses familiar (Nate Silver, Belichick decision, sports analytics, some of the Kelly criterion and sports betting stuff I've posted). His background looks a little similar to mine: engineering background, gambled pretty successfully, got into sports analytics and started an internet company. Anyways, I thought it did a great job of articulating and making concepts I've understood because of poker and sports betting more concrete...I knew the concepts and still learned something from it. A definite read for friends, parents, etc who don't understand poker in general.

Viktor Frankl's Man's Search For Meaning - I was traveling with a friend and she was reading this and telling me about it and it sounded like something I'd be interested in so I read it. The book is both eye opening, moving, and even life changing. It's about a psychologist who survived a concentration camp, some of his stuggles, and then introduces his ideas on logotherapy (healing by introducing meaning into someone's life). The basic premise of the book is when people are reduced to nothing, and have no future to look forward to, they lose the will to survive. The difference between animals and humans at that point becomes internal freedom of choice (how we deal with situations), and having a higher meaning in life to give the day to day struggle a purpose (weather this be some unfulfilled duty, religion, etc). I found this applicable because I read so many blogs of poker players where they have made a lot of money and feel kind of empty, don't really feel like they contribute to society, or in general lack purpose. It also explains a concept where the jobless fall into depression (something I experienced right out of school and I really don't get depressed) and that a lot of that is due to 1. feeling useless 2. living for and looking toward the future, and 3. having no work or nothing to occupy time and no meaning, there's no sense of purpose. The solution is to provide services for free, volunteer, create meaning in life that's disaggregated from work.

Clayton Christensen's The Innovator's Dilemma - I'd recommend anyone in technology or software to read this. If you're a poker player, it's not all that relevant but still an interesting business / thought provoking read. It's an older text that was pretty groundbreaking at the time. A disruptive technology is a product or innovation that is usually a derivative of an existing product, that initially creates a new market due to performance not being adequate to meet the needs of an existing market. Sustaining technology, by contrast, is incremental improvements in performance to existing products. Successful companies don't recognize disruption of these new technologies as 1. they're listening to their customers and their customers don't have a demand for it, and 2. the new markets don't offer large enough margins.

I was thinking more about this book's hypothesis and whether the iPhone was a disruptive technology. It's obvious that the iPhone and ther smart phones have been a disruption to Nokia's business. However, it doesn't fit Christensen's model where a new niche market is targetted, and eventually performance increases to satisfy the incumbent's market and the disruptive technology, due to cheaper price, takes over the market completely. Where the iPhone fits the classic disruptive definition is when compared to PCs and laptops. The device is now powerful to be a stand alone computational device. I think that it is possible to be disruptive both by targetting both the high end of the market or the low end of the market. Specifically, disruption is based on innovation itself, not based on a particular model of innovation. Innovation creates new markets and it is these new markets that have the ability to disrupt older markets.

If you made it this far...those of you who know me know that I've been dissatisfied with poker as my main income. It's stressful, not necessarily sustainable, and I'm not sure about its long term prospects. To that end, I've been putting feelers out in the job market and have decided to accept a job. It's back to the real world for me...poker will be a nice side stream of income...which I'm more comfortable with.

Things That Suck...

Wed, 14 Jul 2010 19:21:25 -0500

Lately, I've had the pleasure of experiencing things on opposite ends of the spectrum and due to the contrast between the two things, it makes the horrible things seem extra horrible.

For example, 3 weeks ago when I was in Vegas we stayed at the Venetian, which is a nice experience. The rooms are nice, the internet works and is complimentary, the Grande Lux Cafe is super awesome. This time when I was in Vegas, we stayed at the Rio. I won't ever stay at the Rio again...it's just so crappy.

The internet didn't work the whole time we were there. What kind of hotel, with some business travelers, has non working internet for 7 days?
We booked a non-smoking room with 2 queen beds. They decided they were out of such rooms and gave us the option of 2 queen beds in a smoking room, or 1 king bed in a non smoking room. We opted for the 2 queen beds in the smoking room, hoping it wouldn't smell like smoke. Well, it was horrible. So we decide to call down and get it switched, and no one picks up at the front desk for 20 minutes. We finally get down there, and they magically have a non smoking room with 2 queen beds. FU RIO.
There are literally working girls everywhere in this hotel. At one point, my buddy and I were playing guess the over under on # of working girls we'd see on the way to our room.
The food is absolutely terrible. Literally, the poker kitchen had the best food at the Rio. The first day we ate at the Mah Jong asian restaurant and my Mongolian Beef was normal stirfry with some random red peppers thrown in to make it spicy. My buddy said he had the worst tofu he'd ever had in his life. We promptly went over to their bar and grill restaurant where he paid 30 bucks for a salmon dish that was dry, overcooked, looked terrible, tasted horrible, and their idea of "peppercorn glaze" was gravy. By contrast, the Miso Salmon dish at the Grande Lux tastes awesome, is perfectly cooked, and costs the SAME PRICE.
Room service took an hour and a half.
Our safe was locked in our room. Imagine what has to happen for this scenario to occur. The person who was in the room prior to us decided to take their goods out of the safe, then relock the thing, acting like they had something in it. That took an hour and a half waiting for the guy to come up to our room and unlock it.
The room was the same price as the Palazzo.
The line to check in the first day took forever.
No DVD players and TVs that are 100 inches, have fishbowl screens, and make it seem like it's 1985.
The Rio sucks....move the WSOP to Ceasers.

The other thing that sucks is Citibank. I have had this card with Citibank with a decent sized credit line that I just leave in a drawer because canceling it would be bad for my FICO score (both because of the length of time i've had the card and because it'd increase my usage of my available credit). Anyways, apparently, due to inactivity, they decided that they were going to leverage a 60 dollar annual fee on the account, not notify me they were going to do this, and start charging it in April. So, since April, since I assumed the card had no balance, I've been paying interest on this 60.00 annual fee...and the account has become delinquent. They finally waived the fee after some hassle, but if i don't spend 2500 on the card in the next 12 months, they charge me the fee again. So, my choices are 1. spend 2500 on a card with horrible rewards to eliminate the annual fee, or 2. take a ding to my credit score. To top it off, you used to be able to consolidate credit lines...so I could transfer my credit line and history to another card with Citi that has worthwhile rewards, and spend 2500, but apparently the US Government decided to protect us from ourselves and disallow CC companies to do that. By contrast, American Express has superior rewards, superior customer service, superior benefits, a better login portal, better everything.

Things that suck: The Rio Hotel, Citibank, The US Government

Thins that don't: American Express, The Venetian, the Wynn

Oh, and I guess I was completely wrong about the LeBron situation. I should have paid more attention to the part where he liked playing with his friends rather than the part where he was loyal. Apparently it's not loyalty to organizations, it's loyalty to his buddies and to the comraderie playing with a good team.

I know everyone hates the decision, but I love it. Mostly because I hate the Lakers, more than any team in any sport. I loathe Kobe, I loathe their fans, the celebs in the audience, the fact that they stole Pau Gasol for nothing. Can't stand anything about hte Lakers. DWade has also been my favorite player in the league. So, if that team can combine forces to take out the Lakers, I'm all for it. Anything to beat the Lakers. That and they're going to be super fun to watch.

Final thoughts: people in Cleveland thought LeBron understood their pain being one of them. I have news for you people, LeBron was never one of you. He always thought he was better than his peers, he was a frontrunner, associating with teams like the Cowboys, the Yankees, the Bulls, Nike, etc. How can you expect him to understand the pain of Cleveland teams if he was never a fan of Cleveland teams???

LeBron...

Fri, 02 Jul 2010 12:43:42 -0500

I may be the only person who thinks this...but I really think LeBron is staying in Cleveland. If you've seen the documentary "More Than A Game" you'll see how much camraderie, friendship, and team mean to him. He wants to be loved, he wants to be close to his boys on the team, and he wants to be loyal.

For example, in the movie, the starting PG on his youth league team, the team he had played with since he was 10, was too short to play at the local high school, so he decided to transfer to St Mary's Academy (a primarily white high school in Akron). James and the whole team followed him there so that they could keep the team together and finish what they had started. Keep in mind it wasn't just switching high schools...it became a community issue that these kids who were supposed to go to the local black high school and become local heroes, had basically spurned the community and gone to an all white high school.

What does this tell me? It tells me that James is fiercely loyal. If you saw him and the interaction with his teammates last year, he loved them and they loved him and would play harder to try to impress him. The team was the best team in the Eastern Conference for most of the year...I just don't see him leaving.

In other news, I'll be playing in the Main Event this year...wish me luck!

iPhone 4 Face Chat

Thu, 17 Jun 2010 21:33:09 -0500

I'm going to be the first one to say it, so don't be surprised when this gets brought up in the media.

Everyone is asking if Face Chat is going to work or not. Personally, I don't think too many people are going to want to make face to face calls. What you're going to see is a whole generation of kids growing up having video sex under the covers. Remember the whole debat over sexting? Forget sexting...a whole generation of kids is going to use their next gen iPod touches, iPads, and iPhone's to have video sex.

Also, another random thought: you know you're making good bets when there are tons of hedge opportunities available.

LA / PHX series...

Wed, 12 May 2010 04:16:05 -0500

PHX at +320 is ridiculous...they only have to win that 23.8% of the time to be profitable. It's like free theoretical money.

LA should be a slight favorite, but not that much of a favorite.

Bankroll Management Part 1...

Mon, 10 May 2010 13:55:47 -0500

This is goign to be part 1 of a multipart series I'm going to get into on my thoughts on Bankroll management in life, poker and sports betting. The first post will probably be some background information, the second will be my personal strategy and expected growth, and the third will probably be implications. Hopefully most of you will find something useful in these posts.

I recently took a look at the following HSNL thread: http://forumserver.twoplustwo.com/19/high-stakes-pl-nl/what-do-you-do-your-money-778439/index6.html

The premise was what do people do with their money earned in poker, specifically investments. A couple things about the thread are cool to me. The first is that the once famous Jason Strasser (strassa2) makes an appearance in the thread and offers up his experience after essentially quitting poker and taking a job on Wall St. The second is how many different ways people invest their money and to see the opinions of Taylor Caby and Cole South on what they're doing with their money. I thought this advice was really good:

Risk tolerance and age depends on risk of ruin and someone's ability to replenish their capital. The general advice for younger people is to be more tolerant of risk since they have their prime earning years in front of them and have time on their side to stomach some volatility.

For most successful HSNL players it is unlikely that their prime earning years are in front of them. I seriously doubt that most will earn the sort of money in the future that they currently make or have made in the past playing poker. A few will, but most won't. IMO preservation of capital for someone in our position has a higher precedent than common advice/standard advice would dictate.

I have about 65% of my net worth in various investments, which is probably a bit too much but I am fairly comfortable with it.

A few things came up in the thread that I'd like to touch on:

1. One guy aregues that the market will consistently go up 7% over the longrun, and as poker players, others argue this: "your sample size is tiny (which I agree with). with S&P@ 650 that 7% basically dissapears. we touched 666 last year. not advocating one view or the other, just presenting the argument." He's basically saying that the sample size of the US stock market (150 years or so) is pretty small, and just because it went up 7% in that time period, doesn't mean it will continue to do so. I think this is a great point, and I thought about it more, and I think I disagree. The stock market can be thought about the total output of an economy or total value created throughout history. If you look at the history of man, output, value, and raw goods and services have increased by a percentage throughout history, dating back to even Roman times. The premise of the stock market going up depends on man's ability to innovate and to increase production...or GDP growth.

2. The second point which I thought was interesting is that everyone seems to advocate diversifying your portfolio because that's traditionally been the best advice (either via buying a variety of stocks, or a mixed strategy of real estate, stocks and bonds). I'm not too experienced with this, so feel free to correct me if I'm wrong. It seems really stupid to me to diversify...a +EV bet in the market is a +EV bet. I think that your investment money should be treated as a BR just like you treat your poker BR. You should be investing amounts of your BR that are proportionate to your chances of success. If you're investing small enough portions of your BR based on probability of success, then you shouldn't worry about diversifying...ever - you're managing your BR correctly. Just like if you're a winning poker player and you're playing with 500 buyins, barring some change in fundamentals, you probably won't go broke unless you take shots in really big games that you're underrolled...or in the stock market, bet the farm on a few stocks (I'll get more into this in the next post). The lone argument is if you're going to retire soon, and you don't have the time table to handle a catastrophic event that wipes out your retirement money...but I'd argue that your unit size in the stock market is too big if that catastrophic event would wipe you out.

I had this conversation with my father the other day on the topic of investment and risk. He said that when he made a certain amount in the market, he'd take out 75% and put it in a savings account, and then use the other 25% to continue to invest. This seemed really wrong to me and I tried to teach him about bankroll management Kelly Criterion. My argument was that he should treat all the money in the market as his "investment br" and manage it like a BR, especially since he doesn't need his money right now. If he's worried about losing his principal, he can mitigate risk by using Kelly units proportionate to risk and probability of success on stocks that he wishes to purchase. If he wishes to further mitigate risk, he can just reduce his Kelly unit sizes. Therefore, to be conservative with your money and not lose it, he should just risk less of his total amount, rather than pull most of it out and put it in a safe place, and then risk 100% of his remaining capital on stocks at arbitrary unit sizes.

The reason why people advocate diversification is because most people don't know how to manage a bankroll! What's the enemy to bankroll growth? Committing too much of our BR in poker (taking shots underrolled), and overbetting in the stock market / sports betting. Why does conventional advice advocate diversification? Most people have no idea how much to risk on a specific event / stock and so they OVERBET. Diversification protects the casual investor from making catastrophic BR mistakes, although not theoretically optimal.

Interestingly enough, Jason Strasser, the guy who I think is probably best qualified to comment in the thread, says to find a hedge fund and invest most of your money with them, or a more focused strategy.

Poker Content

Fri, 07 May 2010 02:22:10 -0500

Took 8th in the Sunday Mulligan this past week. Was playing out of my mind and was chip lead with 32 or so to go. Made some really big laydowns and also ran hot (JJ > QQ and AA).

Going to try to play tournies on Sundays as often as possible.

The Well...

Tue, 04 May 2010 01:41:29 -0500

I love the 2p2 "The Well" posts and always found them to be one of the more interesting things to read on the site. You're basically getting a question and answer session with some really successful and interesting people and get to ask them anything. Anyways, I recently stumbled upon the ultimate time sink...it's the Reddit IAmA section or "I am a", people can start their own threads, and then everyone else on Reddit asks them questions. It's a series of "The Wells" about things other than poker and sports betting.

I won't ruin all the surprises, and there's probably something of interest to most people and you'll probably spend hours reading random threads. If you're bored, wander over there and prepare to be sucked in for a day. Here is one that I found super interesting: www.reddit.com/r/IAmA/comments/bs8bs/iama_professional_concealment_designer_i_make/

The guy basically started off building hidden compartments, hiding things in books, became really good at it, and now makes a really ridiculous living creating concealment devices, rooms, objects for hiding valuables. Here is a quick example:

How much would you charge to make, say, a 3'x3'x3' hidden safe anywhere in a bedroom?

It's not the size, it's how hard you want it to be to find it. Do you want it concealed from casual inspection? A junkie thief? A professional thief? A forensic team?I started doing this type of work years ago with the simpler, less expensive projects (a few thousand dollars), but with limited bandwidth, it now only makes sense for me to do the big budget projects. These involve a discovery process that costs more than the old projects cost in their entirety. A lot depends on the building itself, what we're concealing, and from whom. The first thing I'd usually do is install a fairly well concealed decoy safe with something valuable inside.

Anyway, to answer your question, a project could run anywhere from $20K - $250K. At the higher end of this budget, professional searchers would not be able to find the concealment without doing physical damage, and even then, it would take them days.

Moral of the story is do what you want to do and become really good at it. If you're really good at something you're going to love your job and get paid really well.

Denver Broncos Draft and Tebow

Thu, 29 Apr 2010 18:12:39 -0500

We were watching the NFL draft a week or so ago, and the Denver Broncos drafted Tim Tebow in the first round. All my friends were immediately sad, dissapointed, or livid or a combination of the three, while I was ecstatic. I'll be the first to admit that I wasn't the biggest Tebow fan in college as I thought the things he did wouldn't translate well, but I've changed. Here is why I think the pick was genius:

Tim Tebow is left handed. Think about the implications of this for a second. First of all, you devalue the 2nd most valuable position in the NFL, left tackle. Teams expend high 1st round draft picks to secure great left tackles, you've just decided that you don't need one. You don't have to waste that draft pick, you don't have to over pay for a left tackle, and if you have a great left tackle, you can trade him for more value than you initially paid. The second major advantage is how you run your offense. If you practice week in and week out with your progressions in the opposite direction and your routes mirrored, that's a huge advantage. NFL defenses emphasize the pass rushing right end, they defend the side of the field in which the right handed QB looks first. Imagine, 15 weeks out of the year, prepares one way, then the one week out of the year they play you, everything is switched. That's a huge advantage.
Game theory. Think about the play distribution of a normal NFL team with the goal being balanced 50% runs 50% passes. For obvious reasons, teams pass more often on 3rd down due to down and distance considerations. On first down, they're more likely to run, to keep their play distribution at 50/50. Here is a breakdown of a typical team's playcalling by down:
- 1st down: 65% runs, 35% passes
- 2nd down: 60% passes, 40% runs
- 3rd down 75% passes, 25% runs
Think about how unbalanced teams are in those situations. The proper way to balance your playcalling is to go 50/50 on first down, 60/40 on 2nd down, and probably 60/40 on 3rd down. In order to get a 50/50 run pass balance most teams are unbalanced on first down. What Josh McD and the Patriots figured out was that if you balance first down, your offense becomes more unpredictable, and your overall play distribution is more slanted towards the pass since you have to pass on 3rd and long. A balanced NFL offense should be 60% passes and 40% runs!
How does this relate to Tim Tebow? If you have a QB that is a threat to run, your offense becomes way more hard to stop. If a defense is trying to cover receivers and your QB can run for 3 or 4 yards on 3rd down, that's huge.
Which brings me to my next point that it's really obvious what the Broncos are doing. They're acquiring a bunch of flexible, smart, high character football players that can do a lot of things. A RB isn't good if he has to come out in obvious passing downs, a QB should be able to play in the shotgun, out of a traditional pro set, run the wildcat, etc. Every player we've drafted is smart, flexible, and does many things well, although none great.
The biggest knock on Tebow is where he holds the ball when he drops back, and his throwing motion, which he's already made huge corrections to in the past 3 months.
The guy has ridiculous work ethic, anyone who has ever coached the guy has nothing but praise for him, John Gruden loved the guy in all the draft coverage.
He played in the spread in college, these guys broke down the spread and how McDaniels used it successfully with Cassel: www.milehighreport.com/2010/4/28/1442927/why-draft-tebow-lips-like-sugar-or
Watching tape of him in college, he immediately does things Kyle Orton can't. I wouldn't be surprised to see him starting at the beginning of the season, because, hey, it doesn't take much to be better than Kyle Orton. We weren't ever going to win anything with a QB that can't make a play.
All Super Bowl winning teams have something in common, a QB who makes a play when there's not a play to be made or when no one is open either with strong throws, or by extending the play with his feet. Kyle Orton doesn't do this.
He gives you another option on 3rd and 1 and 4th and 1. The Patriots were the most successful team on 3rd and short and 4th and short in recent years. Their favorite play was a Tom Brady QB sneak. We had a huge problem picking up 3rd and 1 and 4th and 1 last year and the threat of a QB who can power it up the middle and also pass is huge.
I think he's better than both Orton and Quinn.

It's Amazing...

Sat, 24 Apr 2010 14:42:21 -0500

It's NBA playoff and NFL draft time at that means the stat geek in me comes out. I deliberately waited until after the playoffs have started to post these, some of you might think it's past posting, but I didn't want you guys to go out and bet these games before I could :)

Here are each team's odds of winning the Eastern Conference:

CLE	38%
ORL	48%
ATL	7%
BOS	4%
MIA	2%
MIL	.36%
CHA	.21%
CHI	.17%

Western Conference:

LAL	17%
DAL	8%
PHX	22%
DEN	11%
UTA	16%
POR	2%
SAS	16%
OKC	7%

Without going too much into our methods, we took our system and simulated every home and away playoff game and came up with odds for each series.

I'll say that Orlando at 3-1 to win the Eastern Conference is a great bet..