Why EV Only?

[MikeRand2000]

Hi all -

Quick question: why do all poker books focus on EV only?

Borrowing a bit from economics theory, people tend to focus on both returns (i.e. EV) and risk (i.e. the individual results and their respective deviation from EV). If I had a choice between a $100 bet with a $4 EV and a $25 bet with a $3 EV, I'd choose the $25 bet any day of the week, ESPECIALLY when I'm in a tournament (in which case ruin effects come into play and risk is a huge component of any decision).

When everyone is saying that I should focus on EV only, I think of two things:

1) It isn't a realistic view of how risk-neutral or risk-averse people (90% of us) think; and

2) If if we should be thinking only of EV, doesn't the tournament idea of capital preservation apply to non-tournament games as well, given that bankrolls are not unlimited?

Mike

[Rudbaeck]

But tournament books do focus on risk averse strategies, atleast the better ones.

And for regular ring games win rate plays a much larger part in calculating your bankroll than standard deviation does. (This even turns out to be doubly true, as risk avoidance tends to dramatically lower win rate.)

[mr_jmac]

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Quick question: why do all poker books focus on EV only?

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I have several books that discuss balancing EV with survival/risk. I'm pretty sure Sklansky's tournament book does.

Of course, if the book is about live play only than EV is the only thing that matters (assuming you have the bankroll necessary.) Every bet you make has an EV. Obviously you want to make choices that correspond the the highest EV possible if you have a sufficient bankroll.

[ QUOTE ]
Borrowing a bit from economics theory, people tend to focus on both returns (i.e. EV) and risk (i.e. the individual results and their respective deviation from EV). If I had a choice between a $100 bet with a $4 EV and a $25 bet with a $3 EV, I'd choose the $25 bet any day of the week,

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I would choose the $100 bet and in the long run I would make more money than you. Again, assuming I had the bankroll necessary.

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ESPECIALLY when I'm in a tournament (in which case ruin effects come into play and risk is a huge component of any decision).

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Tournament play is different than live play because you cannot reach into your pocket for more money if you go broke. So, proper tournament play is a balance between EV and surviving.

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When everyone is saying that I should focus on EV only, I think of two things:

1) It isn't a realistic view of how risk-neutral or risk-averse people (90% of us) think; and

2) If if we should be thinking only of EV, doesn't the tournament idea of capital preservation apply to non-tournament games as well, given that bankrolls are not unlimited?

Mike

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I don't think risk-averse people make the best poker players. When you sit down at a live poker game your goal is to make the most money. Period.

Bankrolls are not unlimited but using elementary statistics one can determine the bankroll necessary to play a certain limit with an acceptable risk of going broke.

[MikeRand2000]

My point was exactly that: tournament books show that standard deviation is an important concept, but only because you might run out of money. That being said, is ruin (i.e. running out of money) the only threshold that matters?

Is there a risk-free or low-risk strategy that outruns blinds? If so, the associated decrease in win rate might be offset by the fact that I've found a risk-free source of income.

Evaluating anything on expected returns alone assumes that people are indifferent to risk. I'm asking what happens if they're not.

[MikeRand2000]

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When everyone is saying that I should focus on EV only, I think of two things:

1) It isn't a realistic view of how risk-neutral or risk-averse people (90% of us) think; and

2) If if we should be thinking only of EV, doesn't the tournament idea of capital preservation apply to non-tournament games as well, given that bankrolls are not unlimited?

Mike

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I don't think risk-averse people make the best poker players. When you sit down at a live poker game your goal is to make the most money. Period.


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Your comment is akin to telling someone playing the stock market that they have to put all of their money into high-risk/high-return stocks.

I'll sit down at a poker table with whatever goals I choose, thanks. Am I correct in saying that "weak-tight" is a better way to win less money with less deviation in results? If so, that might be the strategy for me.

[Rudbaeck]

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Is there a risk-free or low-risk strategy that outruns blinds? If so, the associated decrease in win rate might be offset by the fact that I've found a risk-free source of income.

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No, tournaments are by their nature always very high risk.

Yes, weak-tight wins less with less deviation. Your significantly lower win rate will still demand about the same bankroll as a more risky style. (And at mid limits expect to break even or slowly bleed. At high limits expect to bleed.)

[Benman]

Well, you'd be wrong to sit down at a cash game with that strategy. Letting standard deviation affect your cash game strategy is tantamount to admitting one of two things about yourself: 1) you haven't chosen a game at which you're adequately bankrolled, or 2) if you are adequately bankrolled, then you just aren't an expert player because there's no excuse not to play optimally given an adequate bankroll (as the previous poster points out, the very definition of an adequate bankroll is one that allows you to disregard standard deviation in favor of maximum EV plays). Any possible counter-example you could come up with where you'd say, yeah but here you ought to play a little more risk adverse and I'd simply say you've by definition become underbankrolled.

[Brian462]

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Any possible counter-example you could come up with where you'd say, yeah but here you ought to play a little more risk adverse

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Example: There is a very very good 10-20 game and a not very good 5-10 game. You're slightly underbankrolled for the 10-20 but if you could reduce the variance by a certain amount you could play there and make what you estimate to be over twice the profit that you would at the 5-10 game.

Or, you simply play poker for fun and have MORE fun when you play a more risk-averse style. I'm making 0.02 BB/hand with QJs. Alot of people would prefer to simply give up that hand as well as all similar hands in exchange for a slight reduction in variance.

[Jerrod Ankenman]

[ QUOTE ]
Hi all -

Quick question: why do all poker books focus on EV only?

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Not all poker books do this, but one reason that most focus on that concept is because it's quantifiable and doesn't vary from player to player.

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Borrowing a bit from economics theory, people tend to focus on both returns (i.e. EV) and risk (i.e. the individual results and their respective deviation from EV). If I had a choice between a $100 bet with a $4 EV and a $25 bet with a $3 EV, I'd choose the $25 bet any day of the week, ESPECIALLY when I'm in a tournament (in which case ruin effects come into play and risk is a huge component of any decision).

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I know when you have a hammer, everything looks like a nail, but tournament stacks are not bankrolls.

There are two types of risk here - you're referring to risk as "the chance that I lose my tournament chips." But this is actually not a /risk/ measure but an /EV/ measure. You will eventually lose your tournament chips in the tournament; either by losing them all or by trading them in for the first place prize.

Now there are two reasonable reasons that you might pass up a +chip-EV situation in a tournament:

1) A desire to reduce cash volatility. This is stuff like farming into the money, trying to move up the payout ladder instead of trying to make the highest cash expectation. Doing these kinds of things decreases your expectation.
2) A desire to increase cash equity. This is stuff like "I'll pass up this tiny edge because I expect to get better edges later." Doing this kind of thing correctly (read: seldom) increases your cash expectation and has a very slight downward effect on your variance.

Bankroll theory is inapplicable to tournament stacks because of its assumption you will continue to play a defined game selection strategy forever.

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When everyone is saying that I should focus on EV only, I think of two things:

1) It isn't a realistic view of how risk-neutral or risk-averse people (90% of us) think; and

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Well, another problem is that you can't reduce the risk by that much without smashing your win rate. It's not a matter of "well I have a SD of 20/100h but I can make it 10 by sacrificing .001 BB/h." Generally speaking, trying to reduce your variance by in-play decisions doesn't really do that much. The inflexibility of the variance/expectation tradeoff is why bankroll theory is largely considered an metagame issue.

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2) If if we should be thinking only of EV, doesn't the tournament idea of capital preservation apply to non-tournament games as well, given that bankrolls are not unlimited?

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Well, yes. For example, you shouldn't play with your whole bankroll on the table at one time.

Jerrod

[mr_jmac]

Listen, you can play with whatever strategy you want.

But you asked why most poker books focus on EV only and the reason is that most players want to know how to make the most money possible playing poker. I'm sure you can understand that.

BTW, I'm curious when you play poker how exactly do you limit the deviation of your results?



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I'll sit down at a poker table with whatever goals I choose, thanks. Am I correct in saying that "weak-tight" is a better way to win less money with less deviation in results? If so, that might be the strategy for me.

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[mr_jmac]

I understand what you are getting at but there is no such strategy.

Although you could win 1 big bet per hour playing optimally with some amount of risk imagine a strategy that would let you win 0.25 big bets per hour with no risk (i.e guaranteed winning session every time.) Some people would choose to play this way becausethey would never have to worry about a losing session or fluctuations in their bankroll.

But it doesn't exist. If you started passing up all slightly positive EV decisions you would theoretically reduce your standard deviation but hardly enough to make the swings noticeable.



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Is there a risk-free or low-risk strategy that outruns blinds? If so, the associated decrease in win rate might be offset by the fact that I've found a risk-free source of income.

Evaluating anything on expected returns alone assumes that people are indifferent to risk. I'm asking what happens if they're not.

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[Cerril]

There have been a couple posts on here about the value of passing up gambles both in tournaments and in ring games. I'm only going to be able to reiterate some things here but I'll try to sum it up:

Tournaments - successful tournament play is a combination of +EV moves and risk averse moves. You want to avoid going broke but you need to build your stack. So you sacrifice high variance low +EV situations and don't push every small edge. Tournament Poker for Advanced Players covers this sort of thing in detail.. Most books that focus on tournaments would, I imagine.

Ring Games - Here it's all about your hourly winrate. If I'm making 20 decisions an hour that are +$4 but have a high variance, 20 decisions that are +$3 but have a moderate variance, or 20 decisions that are +$2 with a low variance, I'm going to make $20 more an hour playing the high variance way than moderate, and $20 more playing moderate than low variance strategies.

This corresponds to pushing small edges whenever they come up. Interestingly, it also reflects certain circumstances at different limits. In both cases, the primary difference shouldn't be in your game but your bankroll.

It has generally been agreed that while you'll make more pushing every +EV circumstance, there are some rare situations where you might want to pass up small edges in ring games as well. Mostly these come up when you're underbankrolled at a higher limit that happens to have a far softer field (i.e. your competition is weaker, but you still need to avoid too drastic a swing)

[Cerril]

I should also mention that certain no-limit strategies and even limit strategies are more risk averse than others.

Mostly these come into play when you find people with (seemingly) absurdly low VP$IPs who are still substantial winners. They can play well postflop but prefer to pass up small winning hands either through rote or consciously to avoid variance. Most of the time it's pretty obvious or even can be proven that they're 'leaving money on the table,' but the added security of a lowered variance can help a volatile player remain stable.

[DesertCat]

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Your comment is akin to telling someone playing the stock market that they have to put all of their money into high-risk/high-return stocks.

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First, you should never "play" the stock market. Secondly, do what I do. Put all your money into low risk-high return stocks. It only makes common sense...

[niin]

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I would choose the $100 bet and in the long run I would make more money than you. Again, assuming I had the bankroll necessary.

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And this is exactly the point. Ring-games focus on 'EV only', simply because people should have the bankroll to cover losses.

[BillC]

The reason that SD is not considered usually is that if you are adequately bankrolled (e.g. >300 BBs) then the variance considerations are small. If you have less than 300 BBS, then variance can influence marginal +EV situations signifigantly. Example: You have barely enough odds to call a longshot draw. Don't do it if you have a "small" BR. I actually calculated pot the excess pot odds you need to make up for variance for various draws at k=1/2 Kelly. There is a closed formula for this ...

Another reason is for slighting variance that the math is more advanced, requiring the concepts of utility and Certainty Equivalence.

There is a lot of mathematical literature on this subject. If you are interested, one place to start is bjmath.com for various articles. In our one article there, we show (amoung many other things), that the parameter to focus on is the ratio EV/SD. We also recommend that you start with a BR of at least 100 BBs and probably a lot more.

[Izverg04]

The reason that variance is not considered for individual playing decisions is that you very rarely have a choice between two plays with delta(Var)/delta(EV) smaller than the globar Var/EV for the game. You are not good enough (nobody is) to recognize these rare toss-up situations and take the lower variance route.

That's all there is to it, at least where limit poker is concerned.

[JoshuaD]

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The reason that variance is not considered for individual playing decisions is that you very rarely have a choice between two plays with delta(Var)/delta(EV) smaller than the globar Var/EV for the game. You are not good enough (nobody is) to recognize these rare toss-up situations and take the lower variance route.

That's all there is to it, at least where limit poker is concerned.

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Like one player pointed out already, starting hand requirements is one of the best/easiest places to do that. Avoid the marginally profitable hands and you will reduce risk.

That said, I think it's silly to try to reduce risk at the cost of EV in a poker game. Like everyone's said before, become properly bankrolled for the game, or don't move up.

In the case of a very profitable 10/20 with a 5/10's bankroll, just play tighter preflop(less hands, play them as aggressively when you do play them), and play post-flop the same way. I imagine you'll reduce your variance a decent amount, and it's the only way I can think of to guarantee you're trading EV for less swing.

[Izverg04]

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Like one player pointed out already, starting hand requirements is one of the best/easiest places to do that. Avoid the marginally profitable hands and you will reduce risk.

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This is probably right, since you might have the best handle on EV vs Var preflop. The easiest one should be AJ utg in 10-handed game. Still, can you really tell in every game, that EV of AJ utg is 0.03 BB (you should probably fold to reduce risk) or it's 0.07 BB (folding these will probably increase your swings)? If you can, you are probably a world-class player. Make situation a little more complex, like utg limps, mp1 raises, you are in co with 88, and it's already much harder to resolve EV with precision required to make +EV laydowns based on variance arguments. Take an average postflop situation, and it's harder still.

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In the case of a very profitable 10/20 with a 5/10's bankroll, just play tighter preflop(less hands, play them as aggressively when you do play them), and play post-flop the same way. I imagine you'll reduce your variance a decent amount, and it's the only way I can think of to guarantee you're trading EV for less swing.

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How can this be right? First of all, if you act rationally and enter a "very profitable 10/20 with a 5/10's bankroll", you are properly bankrolled, it's just that the required bankroll is smaller than for average 10/20. "Very profitable" also means that previously marginal hands become non-marginal, and you don't reduce swings by folding them. Even if you are acting irrationally and playing over your risk tolerance, folding +EV hands based on erroneous variance arguments will only increase your swings compounding your initial blunder of entering the game in the first place.

Making +EV plays is hard enough for non-world-class players, so forget about trying to resolve EV to 0.01 BB and making laydowns based on reducing swings.

[Cheeseweasel]

Kelly criterion bet sizing will give you optimal bankroll growth.

[JoshuaD]

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How can this be right? First of all, if you act rationally and enter a "very profitable 10/20 with a 5/10's bankroll", you are properly bankrolled, it's just that the required bankroll is smaller than for average 10/20. "Very profitable" also means that previously marginal hands become non-marginal, and you don't reduce swings by folding them. Even if you are acting irrationally and playing over your risk tolerance, folding +EV hands based on erroneous variance arguments will only increase your swings compounding your initial blunder of entering the game in the first place.

Making +EV plays is hard enough for non-world-class players, so forget about trying to resolve EV to 0.01 BB and making laydowns based on reducing swings.

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Good point. Like I said earlier, I think any level of risk reduction in poker is just dumb, but I was trying to craft a simple way to accomplish it.