Thinking of life in terms of opportunity cost.

[whitelime]

For those of you who have never taken an economics course or heard of opportunity cost, it refers to the cost in terms of foregone alternatives. It's a good way to put things in perspective. For example if you skip work to go see a movie, not only should the cost account for the price of the movie ticket, but also that of the next best alternative, which in this case is foregone pay for work.

So here's my dilemma. I have started to live life almost exclusively on the principle of opportunity cost. It doesn't affect my social life since I am willing to give up poker income to party it up. However, I might order an expensive pizza that costs $20 only to eat three slices because it's more expensive to waste half an hour to cook something since I'd otherwise be playing poker. Another example is having an overdue Blockbuster movie out. If it is overdue past a week, they will force me to pay the $20-25 to buy the movie. The thing is, in the 20 minutes it takes me to return the movie, I will make more money on average, playing poker. Not to mention, poker is more fun than driving through NJ traffic.

This can lead to some weird decisions, but in the end I feel they are correct given that I ACTUALLY want to be playing poker at that time. What do you guys think?

[lehighguy]

Yeah I do the same thing anymore.

[Nigel]

[ QUOTE ]
Yeah I do the same thing anymore.

[/ QUOTE ]

I can't stop reading this sentence.

[greg nice]

$10k for a semester of college tuition + all those lost hours of poker...

[coopersmydog]

Put the left over pizza in the fride and eat it tomorrow and join netflix. All of your problems solved.

[balkii]

</font><blockquote><font class="small">In risposta di:</font><hr />
Put the left over pizza in the fride and eat it tomorrow and join netflix. All of your problems solved.

[/ QUOTE ]

nh

[ds914]

There's nothing suave to being a hustler. If you watch tape of the old World Series of Poker, you'll see magician [censored]. Doyle reading Johnny Chan's body language and folding a huge hand. Or Johnny sucking Eric Seidel into moving in when he had the nuts.

But that's not what I do. My gig is to be a drone. Some mindless ant worker. I have to play mechanically, not seductively. That's because I'm not there for a game. How I do on any one day doesn't mean [censored]. I'm playing in a year-long poker game. I can never get emotional. It's a total grind. There's no fun or variation in your play. You never act on a hunch. Everything is by the book. You're like a robot. Being smart or creative is actually a drawback. If you look at my poker log, you'll see that I have good days and bad days - good months and bad months. But in the end, as the number of hands increase, the variations really aren't that big.

But make no mistake, being a professional poker player is a job like any other. That's when you get in deep [censored], when you start to look at it as work. After awhile you look at your poker log and start to see the hourly wage. It gets you thinking about how much time you're wasting doing other things. You start to think of life as a poker game. That movie costs me fifty bucks because I could have been playing instead.

That's when you're [censored].


--Dicky Horvath

[TStoneMBD]

i think that early in the stages of a players professional poker career they start analyzing everything compared to opportunity costs. i went through this phase myself. its natural to view things this way when learning to apply concepts such as equity, especially when the excitement of making the kind of money many poker players are making begins to happen.

as your poker career grows you may start to see that opportunity costs are not nearly as applicable as you had originally thought. a more applicable concept is the value of time. if your time is valued at $75/hr and someone else's time is valued at $7/hr, it generally makes little sense to spend your time doing something that the $7/hr person could do for you.

it may seem that these concepts are the same, or very similiar, but there are very distinct differences between the two.

[cardcounter0]

[ QUOTE ]
I might order an expensive pizza that costs $20 only to eat three slices

[/ QUOTE ]

Why not order and eat three slices of an inexpensive pizza?

[ QUOTE ]
Another example is having an overdue Blockbuster movie out. If it is overdue past a week, they will force me to pay the $20-25 to buy the movie.


[/ QUOTE ]

Why not find a cheaper way to get movies, rather than overdue blockbuster rates?

[Redd]

So by that logic, didn't your post cost you at least 10 bucks to write?

And if so, are the replies that you've received thus far worth it?

[Sponger15SB]

[ QUOTE ]
So by that logic, didn't your post cost you at least 10 bucks to write?

And if so, are the replies that you've received thus far worth it?

[/ QUOTE ]

Exactly.

In fact, anything that you that doesn't involve making money is a waste.

[whitelime]

Not true because I can play/type the post at the same time, and even if I couldn't there are times when I don't want to play poker. Opportunity cost doesn't only involve money, it also involves happiness/satisfaction, whatever you want to call it. You're mistaking my post as a purely about money.

[benkath1]

But you post was purely about money as I see it. How much did it cost you to drive to blockbuster and watch the movie you kept for so long? And why not pick up your pizza on the way home?

[lehighguy]

It applies to alot of things though. For instance, I could do my laundry or pay some kid on my hall to do it. In the 2 hours I'd spend doing my laundry (which I hate) I can make more then enough money playing poker.

Why do lawyers hire people to do their yard work. Because thier lazy, or because it makes no sense to do it themselves.

[TimM]

This is why I set an exact amount of time for me to play poker each month. I play no less, but also no more. It keeps me from being too lazy and not playing enough, and it also keeps me from thinking like this.

[bb88]

I used to think this way myself, and I don't even make that much playing poker. But I would think this to myself when reading or watching a DVD for fun instead of playing poker. I knew I could be making something in my leisure time instead of enjoying it how I see fit.

But you know what I figured out? Happiness and freedom is worth more than whatever I will make by always applying opportunity cost. Sure, it can be a very useful tool at times, but I wouldn't give up my happiness for any amount of money.

Once I finish this SNG, I'm going to read, and I don't feel guilty about missing out on whatever ROI I'll be missing out on.

[Jdanz]

this is pure truth

[autobet]

[ QUOTE ]
I ACTUALLY want to be playing poker at that time.

[/ QUOTE ]
You will most likely maximize your hourly rate by playing when you want to play, and not playing when you don't want to play. So don't worry about blowing a few bucks on pizza, and sign up for Netflix.

[whitelime]

From most of the responses, it appears like my original post wasn't very clear. I'll try to clarify it through a few examples. Assume for argument's sake that my hourly rate is $200/hr.

Decision 1: I'm at a computer store shopping for an Ipod. I find the particular model I want and notice that I can get it at another store for $50 cheaper. Going to that other store would cost me about 30 minutes of my time. Given that I would rather be playing poker than shopping for an Ipod, it would logically never make sense to save $50 and buy it from the other store.

Decision 2: I have an overdue movie out that will cost me $20 if I never return it. Given that at the time of the decision, I would rather play poker than drive in NJ traffic for 20 minutes, it would never logically make sense to return the movie.

Decision 3: My lawn needs to be mowed. Let's assume that this will take one hour and would cost $60 for me to hire someone to do it. Again, assuming that I would prefer to play poker at the time, I would never logically want to mow the lawn myself.

Decision 4: My lawn needs to be mowed. Let's assume that this will take one hour and would cost $260 for me to hire someone to do it. Again, let's assume that I would prefer to play poker at the time. This one isn't so clear cut. It involves balancing out $60 against my personal preference of playing poker over mowing my lawn.

Decision 5: My lawn needs to be mowed. Let's assume that this will take one hour and would cost $60 for me to hire someone to do it. In this case, let's assume that for some odd reason, I need the exercise and would prefer to mow the lawn rather than play poker. We have another decision that isn't clear-cut. We have to balance $140 against my preference to mowing my lawn over playing poker.

As you can see, using this philosophy of thinking isn't purely about the money. There's a reason I still go out drinking on Thu/Fri/Sat nights. I value my social life over that additional 4-6 hours of poker/profits. However, my main point with this post is that certain odd decisions like spending more money to save time can often be correct.

[Danenania]

Seems to make sense. Then again isn't there a vague feeling of satisfaction connected to living your own life? Doing your own laundry. Walking your own dog. Mowing your own damn lawn? Isn't this deeply rooted desire for independence and self-sufficiency one of the primary drives that brought you to poker as a profession in the first place?

If you can never find anything to do that's more interesting/fulfilling than on-line poker you will have a pretty boring life regardless of how much money you can make.

[Punker]

Wrong. If you have time to post, you have time to open more tables.

[stigmata]

Yeah, I'm gonna hire a cleaner later this week, and I get my groceries delivered, but I still like walking the dog and going out for a meal. This way of thinking is pretty normal for people who earn a decent salary. Money does give you some extra freedom to make choices about your time.

[cursha]

So, whats the problem here.... well as far as I can make out, unless it provides more than $200 an hour then it clearly isnt worth doing.... logical conclusion.... play bigger tables...

if you up your games then you'll find there are even more things in life you are not worth doing for yourself...

In my 16 years as an online professional I have managed to get myself to a situation where I no longer do anything for myself. I am not even typing this, in fact, the tables I play on now make it not worth my while playing on the lower stake tables. I pay people to play for me, it would cost me far too much of my big table income to play on the lower tables....

I hope one day to not have to play at all, I feel that once I have everyone working for me on the tables, then the rakeback will keep me in the life to which I've become accustomed... ie sat on my solid gold throne, barking orders at minions.... I love my life... keep it going...

[stigmata]

[ QUOTE ]
So, whats the problem here.... well as far as I can make out, unless it provides more than $200 an hour then it clearly isnt worth doing.... logical conclusion.... play bigger tables...

if you up your games then you'll find there are even more things in life you are not worth doing for yourself...

In my 16 years as an online professional I have managed to get myself to a situation where I no longer do anything for myself. I am not even typing this, in fact, the tables I play on now make it not worth my while playing on the lower stake tables. I pay people to play for me, it would cost me far too much of my big table income to play on the lower tables....

I hope one day to not have to play at all, I feel that once I have everyone working for me on the tables, then the rakeback will keep me in the life to which I've become accustomed... ie sat on my solid gold throne, barking orders at minions.... I love my life... keep it going...

[/ QUOTE ]

Unfortunately, you describe the type of world we live in.

[sfer]

[ QUOTE ]
I have started to live life almost exclusively on the principle of opportunity cost.

[/ QUOTE ]

You're aware that economic theory presumes that everyone behaves this way?

[tek]

Everyone should have balance and variety in their lives. There is only so much ability to play your "A" game each day. Playing 18 hours a day will lead to high variance and burn out.

Negranau played noon-8 for many years and made enough cash and gained enough playing experience.

My car mechanic (and I've noticed other businesses) are starting to restrict their hours of operation, such as closing at 8PM and not working on weekends. The mechanic said if his shop can't make enough working 5 days a week, then screw it. There's other things to do than fix cars every single day...

[Evan]

[ QUOTE ]
[ QUOTE ]
I have started to live life almost exclusively on the principle of opportunity cost.

[/ QUOTE ]

You're aware that economic theory presumes that everyone behaves this way?

[/ QUOTE ]
Haha, I almost wrote exactly this post but I decided to check just to make sure no one else had. I got all the way to the end of the thread and you ruined my fun. /images/graemlins/frown.gif

[hockey1]

I'm not an economist, but I believe your decision is incorrect because it does not accurately consider the full range of choices at issue. That is, you seem to be calculating everything in terms of poker winrate, but the trade-off isn't always X vs. poker. For example, it may be that you're deciding whether to spend $20 on a pizza versus cooking a meal that takes 30 minutes and costs $5. The trade-off isn't $15 vs. 30 minutes of poker, it's $15 versus the 30 minutes of time at the margin -- the least valuable 30 minutes of your day. That may be 30 minutes spent sleeping or vegging in front of the TV or whatever that you'd forego for $15. That's the opportunity cost (I think).

[aargh57]

In each of these examples (going to the video store, mowing your lawn, etc...) you always make the disclaimer that you "prefer to play poker at this time". Well, when you finally decide to sit down and veg in front of the T.V., listen to your radio, or whatever, you've made a decision that costs as much as your previous ones. I know, I know, you said that you still value your social life but that's the point. When you do something like turn in your movie or go to a different store to get a bargain you're actually making that $X.XX/hour that you would've missed on opportunity costs because at that time you don't feel like playing poker. This saves you doing it when you do feel like playing. Also, ask yourself if you actually do play extra by not doing these things.

[hockey1]

You keep saying "let's assume that I would prefer to play poker at the time." But that misses the point. The point is how much would you be willing to give up to shift your poker playing hours to another time? See my earlier post.

[bicyclekick]

[ QUOTE ]
i think that early in the stages of a players professional poker career they start analyzing everything compared to opportunity costs. i went through this phase myself. its natural to view things this way when learning to apply concepts such as equity, especially when the excitement of making the kind of money many poker players are making begins to happen.

[/ QUOTE ]

This is pretty accurate. I used to do this a ton, but after awhile it just gets less in the front of your mind. I don't really ever compare fun activities to making money anymore...like when choosing to go out with friends my brain doesn't even think "damn i'm giving up tons of money to go out." but when those dishes need cleaning and I don't want to do them, my mind quickly thinks of how i'd love to pay somebody to do it so I don't have to and can play poker.

I used to think about it with friends and that's not cool. You'd be suprised how much more 'peaceful' of a pro you'll be when you don't really care. Probably getting in way less hands this way though hehe.

I think another key thing is if you are actually playing poker instead of doing the things you say. If you're just sitting on your ass, well then you really aren't doing yourself any good, unless of course you would have sat on your ass that 30 minutes anyhow including the time spent doing the other activity...well then it is saving you time and money.

You only begin to touch on it. I am an economist and opportunity costs is a lot more than just the money.

What about the cost to the tendons in your arm from playing poker all the time (tendonitis). What about the cost of eating a pizza instead of a home cooked meal that tastes good? Maybe you feel like eating pizza and not a home cooked meal, but taste is a part of opportunity cost. How about the electric bill and the cost of going online? What about the cost to your social and love life? what about the cost to your social interaction skills, which diminish through lack of use? What about the cabin fever which will inevitably develope from remaining indoors too long?

None of this is meant as an attack, but just looking at the cost based on money is so erroneous(?) it's actually quite funny. The original poster hasn't even come close to understanding the term "opportunity cost".

opportunity cost involves everything that may be effected by the decision, not just the financial imlpications.

[Dov]

I was going to post exactly this.

nh

[whitelime]

This is a good point.

[SL__72]

I think its important to realize why you need/want the money you are trying to win/make. As I see it I work so that, first I can live (pay rent/eat etc.) and then so I can enjoy life. That said, I think working to make money IS the "opportunity cost" as it is getting in the way of me doing things I would enjoy more... not the other way around. Obviously you need to make SOME money, and more might be better, just not at the cost of getting enjoyment out of the life you already have.

[cardcounter0]

[ QUOTE ]
Why do lawyers hire people to do their yard work.

[/ QUOTE ]

This is true. But they don't hire people to do their yard work at $450 an hour, and justify it by billing clients $500 an hour while the grass is being cut.

[TiltsMcFabulous]

The OP is a classic example of someone who learns a little bit about a very complex concept at university and then proceeds to overuse that tiny grain of incomplete knowledge beyond all reasonable proportion. Usually this sort of thing happens with proofs/disproofs about God or ethics, but opportunity cost is another popular choice. He'll soon either get bored of his new intellectual toy or he'll actually read the manual that comes with it and use it as intended.

~ Tilts

[Exitonly]

[ QUOTE ]
The OP is a classic example of someone who learns a little bit about a very complex concept at university and then proceeds to overuse that tiny grain of incomplete knowledge beyond all reasonable proportion. Usually this sort of thing happens with proofs/disproofs about God or ethics, but opportunity cost is another popular choice. He'll soon either get bored of his new intellectual toy or he'll actually read the manual that comes with it and use it as intended.

~ Tilts

[/ QUOTE ]


Way to bite his head off, he posted something mildly interesting that he was thinking about. He never claimed to know everything, or much at all about opportunity cost.

Anyway, I agree with the response that said that it's not a direct comparison to the money that you could have been making, but rather how much money would it take you to shift your schedule by 15 or 30 minutes. For $20 i'd gladly start working 15 minutes later.

[Huckle]

Just a little something that came to my mind, pretty offtopic.

Say you had the hots for this girl, but figured out dating would cost you $200/hour plus expenses. Where would breakeven point be for girlfriend/hooker, considering everything?

A girlfriend will probably be around the house, so you don't have to worry with logistics, but she might complain about you always being at the computer.

Hookers don't want you to cuddle, go for walks, have deep talks or anything else that demands time away from poker, and you can even pick different ones every time for that extra variation.

Tough question really.

Oh, and by the way, why would you even want to make a lot of money if you don't spend it on having a good time? More money=less poker for me.

Great post. I think the important thing to do here is separate work from entertainment. (Money only becomes valuable to you when you spend it, so it doesn't make send to work all your waking hours). If you set aside 60 hours per week to playing poker for profit, the remainder of your week is left for things like watching movies, eating meals, mowing the lawn, sleeping with hookers, etc. It may even be the case that some of your entertainment comes from playing more poker (although this would be entertainment poker and not work poker). You should include in your work poker schedule time for research, study, and professional development. When I played regularly in a B&amp;M, I factored the cost of tipping and eating into my hourly rate. These were considered business expenses. Once you are able to budget your time and money, the line between working and living becomes much more defined.

[ QUOTE ]
From most of the responses, it appears like my original post wasn't very clear. I'll try to clarify it through a few examples. Assume for argument's sake that my hourly rate is $200/hr.

Decision 1: I'm at a computer store shopping for an Ipod. I find the particular model I want and notice that I can get it at another store for $50 cheaper. Going to that other store would cost me about 30 minutes of my time. Given that I would rather be playing poker than shopping for an Ipod, it would logically never make sense to save $50 and buy it from the other store.

Decision 2: I have an overdue movie out that will cost me $20 if I never return it. Given that at the time of the decision, I would rather play poker than drive in NJ traffic for 20 minutes, it would never logically make sense to return the movie.

Decision 3: My lawn needs to be mowed. Let's assume that this will take one hour and would cost $60 for me to hire someone to do it. Again, assuming that I would prefer to play poker at the time, I would never logically want to mow the lawn myself.

Decision 4: My lawn needs to be mowed. Let's assume that this will take one hour and would cost $260 for me to hire someone to do it. Again, let's assume that I would prefer to play poker at the time. This one isn't so clear cut. It involves balancing out $60 against my personal preference of playing poker over mowing my lawn.

Decision 5: My lawn needs to be mowed. Let's assume that this will take one hour and would cost $60 for me to hire someone to do it. In this case, let's assume that for some odd reason, I need the exercise and would prefer to mow the lawn rather than play poker. We have another decision that isn't clear-cut. We have to balance $140 against my preference to mowing my lawn over playing poker.

As you can see, using this philosophy of thinking isn't purely about the money. There's a reason I still go out drinking on Thu/Fri/Sat nights. I value my social life over that additional 4-6 hours of poker/profits. However, my main point with this post is that certain odd decisions like spending more money to save time can often be correct.

[/ QUOTE ]

It seems clear to me that you did not pay attention in all your economics classes - if you had, you would have learned about the Law of Diminishing Returns.

Take an ice cream cone for example.

You buy an ice cream cone for $2 - you eat it and get immense satisfaction from doing so.

As a result of your enjoyment, you decide to buy another ice cream for $2 - and you still enjoy it - so much so that you decide to buy a 3rd ice cream cone - but now you are starting to feel full and as much as you enjoy the creamy deliciousness, it is somehow not as enjoyable as it was before. Nevertheless, you soldier on and, assuming that your deliciousness returns will remain, at worst, constant, you purchase one more. You then throw up all over the place and spend the rest of the night feeling disgusting.

Thus, even though you are still purchasing the same ice cream for the same amount, your returns are diminshing - and if you continue, your returns can actually diminish so much that you start to LOSE the benefits of the previous purchases - that is the throwing up and feeling sick.

So to go back to your example, you are making one faulty assumption - which is that you would ALWAYS rather be playing poker. You are placing poker as your #1 activity at all times at all days - when clearly, this is not the case.

Your problem is not one of opportunity cost - rather, it is a failure to efficiently plan.