Poll on risk aversion: a continuation of the Bankroll on AA thread
 

I started a different thread, but Sfer had a great idea, which I decided to make into a poll. Assume the following:

Your entire bankroll must be at stake. If you lose it, you will be unable to continue to play poker at the level you are accustomed to, and must rebuild.

Bill Gates offers you a proposition bet. You think of a whole number between 1 and X, inclusive. Gates guesses. If you win, you double your bankroll. If you lose, you wait for July's rakeback and start over. How big does X have to be? (The question essentially asks you to define the odds you require to risk your bankroll.

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

Anyone who answers "2" should seriously consider Gambler's Anonymous.

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

Nice, I picked 3 as well.

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

Anybody who picked 3 should be in the NL forum instead of SSH.

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

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Anybody who picked 3 should be in the NL forum instead of SSH.

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NH.

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

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Bill Gates offers you a proposition bet: You think of a whole number between 1 and X, inclusive. Gates guesses. If you win, you double your bankroll. How big does X have to be?

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Since I only have to "think" of the number, I pick 2 and plan to cheat.

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

I said ten as that is a great bet, but I am tempted to do more. The reasoning that I want an even better bet, and more than 20 times my bankroll might not be negative EV for him. So I want him dropping as much as possible, as its all peanuts.

After all, this is a guy who loses $ if he takes time to go out of his way and pick up a twenty. He's gonna have to cough it up. That's why I'm gonna get him wasted before making this wager.

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

Are you guys just curious as to how risk adverse the poker community is, or is there another reason for all the interest on this topic?

Don\'t Do It
 

This bet makes no sense. If you could simulate repititions where you'd win 17 times out of 100, one could say that the odds would have to be 6-1 in order for the payoff to make sense.

Except, unlike hands we play over and over again in limit, this one is for your *whole banroll*. You don't get another chance (or 4) to make the odds balance it out (unless we're saying I have unlimited opportunities to take Bill up on this bet. And still I'd need another year to build the BR up again).

It's like playing russian roulette. Sure I have great odds to not get shot, but when I do, I never get to play again.

There should be a choice in the poll for "I'd never take this bet. Period."

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

I think it is particularly interesting to think about risk seeking/averse thinking among poker players. Compared to the rest of society, poker players should think more clearly about risk than others.

At the same time, there has been a lot written recently--in this forum, in Barry G's book, in the Stu Ungar biography, in the Professor, Banker book, etc--about the need to have "gamble" in order to succeed as a poker player (at least at the highest stakes).

I also find it interesting to ask the question here, in the SSH forum, because limit players are almost by definition more risk averse than no limit players. We are, in the structure of the game we play, unable to take the most non-self weighting betting strategy available to us. Let's face it, in the current WSOP/WPT environment, if you're not playing NL games, you're deliberately avoiding that action.

Finally, on a personal note, it is helpful for me to think about my own risk aversion. As some here would quickly tell you, I am a nit. I play way overbankrolled, and move up so deliberately and slowly, that you'd think I had to rely on my bankroll to eat. Oddly, the opposite is true--my bankroll is of no material financial consequence to me.

My aspiration is to move up and eventually play in big games, both live and online. I suspect that at some point, my severe risk aversion will present a barrier to continued progress. (Oddly, I dont think I usually play weak-tight--I just avoid limits that make me feel uncomfortable.)

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

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Anybody who picked 3 should be in the NL forum instead of SSH.

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but i'm currently better at limit...

i sort of understand your logic, but not entirely.

the reflection of my choosing 3 is that i am willing to take shots above my bankroll when games look good.

i am young, i have a job, and actually i'm young enough and lucky enough that my parents will still bail me out if i really [censored] up. losing my poker bankroll will make me cry but not jump off a bridge.

but i mostly play limit because that's where i win more right now.

Re: Don\'t Do It
 

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There should be a choice in the poll for "I'd never take this bet. Period."

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This is clearly untrue. If X were 1 billion, you would take the gamble.

Re: Don\'t Do It
 

The bet makes all the sense in the world unless you would kill yourself upon losing. There is some probability of winning at which you are willing to wager a huge some of money. Period.

Re: Don\'t Do It
 

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There should be a choice in the poll for "I'd never take this bet. Period."

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This is clearly untrue. If X were 1 billion, you would take the gamble.

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Well... if you were a professional, living off of your bankroll, with no parents, no other job, bad credit so you can't take out any loans, and no friends to stake you, then you'd still have to think very long and hard to take even 1 billion : 1 odds.

just saying. [img]/images/graemlins/tongue.gif[/img]

Re: Don\'t Do It
 

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The bet makes all the sense in the world unless you would kill yourself upon losing. There is some probability of winning at which you are willing to wager a huge some of money. Period.

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The poll is about risk aversion. Yes there is "some" probability of winning, but not one good enough for me to risk what has taken a long time to build on a one shot deal. Again, we have no way to repeat this bet for statistical purposes, so once you lose (and most of the time you will), you're back to zero with no way of repeating the bet.

If I could be guaranteed the ability to have Bill give me these odds anytime I wanted for my entire BR, we'd be talking about a different scenario.

But in a practical sense, trying this once makes little sense, regardless of the odds.

Re: Don\'t Do It
 

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[ QUOTE ]
There should be a choice in the poll for "I'd never take this bet. Period."

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This is clearly untrue. If X were 1 billion, you would take the gamble.

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Not if I only get one time to try this and it's for my entire roll. I wouldn't. I guess everyone is smarter than me.

Re: Don\'t Do It
 

You would not take a one-time gamble to get paid 2:1 on your money, where the odds of losing were one trillion factorial-to-1? Come on.

Re: Don\'t Do It
 

Now as a certifiable nit, let me ask: why do you play poker at all? You should stick to chess.

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

I really don't have that much interest in doubling my bankroll for poker purposes. money is cool, so there has to be some number, but there's definitely diminishing marginal returns, or whatever that term from freshman econ was. at this point if you said I have a 50/50 chance fo winning $20,000 or losing $15,000 I wouldn't take it.

I guess it's gotta be the point where EV = opportunity cost if you go broke. If I can make $250/hr at 10/20 and $50 an hour at 3/6 (off July rakeback of $1500), for 50 hours, then play 5/10 for $120/hr for another 50 hours, that gives me enough to play 10/20 again, and that gives me $8500 for 100 hours. I would've made $25,000 at 10/20, so it cost me $17,000. in addition, that $25,000 from 10/20 will put me in position to take lots more shots at 30/60, which is what I gain from winning the bet, so that's almost a wash. so if I lose, I lose my roll + $17,000. if I win, I win the amoutn of my roll.

so 17,000 has to equal the EV for me to do it
EV = my roll*((x-2)/x)
17 = r - 2r/x
2r/(r-17) = x

and more generically, x = 2 times your bankroll divided by the difference between your roll and the opportunity cost

round it up for the annoyance and loss of potential growth as a player from having to play 3/6 again, and I'm looking at x=5


now, clearly your EV can't be larger than your actual bankroll. so if the opportunity cost of losing (say you have a $400,000 roll and are playing 300/600 for $700/hr) is greater than your actual bankroll, then there are no odds that can make it worthwhile. this doesn't really make sense to me so someone point out my flaw please.

Re: Don\'t Do It
 

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There should be a choice in the poll for "I'd never take this bet. Period."

[/ QUOTE ]

This is clearly untrue. If X were 1 billion, you would take the gamble.

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Not if I only get one time to try this and it's for my entire roll. I wouldn't. I guess everyone is smarter than me.

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If I thought of the number 374,992,114 and Gates picked that exact number out of a billion numbers, not only would I give him my entire bankroll, I'd probably blow him.

I picked 3.

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

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I said ten as that is a great bet, but I am tempted to do more. The reasoning that I want an even better bet, and more than 20 times my bankroll might not be negative EV for him. So I want him dropping as much as possible, as its all peanuts.

After all, this is a guy who loses $ if he takes time to go out of his way and pick up a twenty. He's gonna have to cough it up. That's why I'm gonna get him wasted before making this wager.

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it's all gonna be -EV for him unless you pick two, the question is variance for you.

Re: Don\'t Do It
 

There aren't too many responses yet, but interestingly, there seems to be a trifurcated (non normal) distribution: (1) those who require odds of 3-5x, those who require 10-12x, and those who require 20x (or likely would never take the bet or only take it with insane odds).

It would be an interesting followup to find out what types of players, backgrounds, etc. comprise these three discrete groups. Im not sure whether it is a socioeconomic variable, an age variable, a limit/skill variable, or what, that is driving this clustering.

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

ok starting over


r = bankroll
x = x from the original question
p = opportunity cost


EV = [(x-1)/x]*r - (1/x)*(r+p)
= (rx - 2r - p)/x

has to be >0.

so rx-2r-p > 0
so rx-2r > p
so r(x-2) > p
so x-2 > p/r
so x > p/r + 2

so it is the poitn where x = p/r + 2, which for most people would lie around 3. the higher bigger the game the person plays, the more the opporutnity cost, and the more you'd need to do it.

it's also relatively insensative. as long as the person's opportunity cost is less than or equal to his roll, he should take it at x=3, which probably describes most low and middle limit players

??

Re: Don\'t Do It
 

Derek,

I can tell you right now that two of the players who voted for 3 are non-professional players, full-time students, under the age of 25, who likely do not plan on relying on poker for primary income for any significant period.

I think that clearly is a big, big part of the issue.

Re: Don\'t Do It
 

[ QUOTE ]
You would not take a one-time gamble to get paid 2:1 on your money, where the odds of losing were one trillion factorial-to-1? Come on.

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Did I say that I wouldn't?

I just don't understand a one time risk of your roll when you're a huge underdog just because the potential to make a huge payout is there. I say again, if this is a bet I could repeat over and over, yes I would take 6-1 odds. But this poll has been presented as a one time deal, in which case I decline.

Re: Don\'t Do It
 

[ QUOTE ]
There aren't too many responses yet, but interestingly, there seems to be a trifurcated (non normal) distribution: (1) those who require odds of 3-5x, those who require 10-12x, and those who require 20x (or likely would never take the bet or only take it with insane odds).

It would be an interesting followup to find out what types of players, backgrounds, etc. comprise these three discrete groups. Im not sure whether it is a socioeconomic variable, an age variable, a limit/skill variable, or what, that is driving this clustering.

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Sup D,

FWIW, I chose more than 20. I built my 5/10 bankroll up from .10/.20 cent limit, and I've never put a dime in beyond my initial start up cost of one 50 dollar PP deposit and one 60 dollar Absolute deposit (my 10 cent 20 cent bankroll). I'm really proud of that. I've also never had to move down a limit once I've jumped up (I usually over-roll myself slightly before moving up). The negatives from that don't outweigh the positives of doubling my bankroll at any odds below 20 really, since I make plenty of $ in my real job (but will not invest any more of it in poker). Also, I wouldn't even play the next limit (10/20 6max) with my newfound bankroll because I'm still learning the ropes at 5/10 6max after 16K hands. That said, 5K is 5K and it would be nice to make a sweet cashout AND have a huge cushoin in the BR to handle the swings better.

just some thoughts from the pussy end of the spectrum.

Peace,
DMBFan23

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

Cool post. I used your equation and got 3, which is what I just randomly felt was a comfortable number. Nice to see some reasoning behind it.

Re: Don\'t Do It
 

Define huge underdog. you're actually a huge favorite. you just have a risk of ruin (depending on N) that has a limit at which it becomes tolerable.

Interesting Followup number 2: we could calculate risks of ruin from this (pretty easy - there's a pretty obvious chance you go broke), then calculate risks of ruin from a poll titled "What is the minimum number of BB you'd need to permanently play X$/2X$ limit poker? and never drop down" and compare the associated risks of ruin. Actually that would be unintersting because people couldnt conceptualize "not drop down" correctly. I know I couldn't. that would lead me to overestimate. but it's an interesting thought.

Re: Don\'t Do It
 

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[ QUOTE ]
You would not take a one-time gamble to get paid 2:1 on your money, where the odds of losing were one trillion factorial-to-1? Come on.

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Did I say that I wouldn't?

I just don't understand a one time risk of your roll when you're a huge underdog just because the potential to make a huge payout is there. I say again, if this is a bet I could repeat over and over, yes I would take 6-1 odds. But this poll has been presented as a one time deal, in which case I decline.

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then you should move to Africa or something, because completely eliminating risk is not how we become successful in this country

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

i never took econ. what's opportunity cost and how could it be a number greater than your bankroll?

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

Peter,

Opportunity cost is basically earnings you forgo because of some decision you make. What you are losing is the opportunity to make money.

Sthief's clever idea here is to actually calculate this opportunity cost with relation to poker. The idea is that if he loses his bankroll, he will also lose the opportunity to play at the limits that are most profitable for him. He calculates this opportunity cost by comparing how much he would be making if he still had a bankroll (playing 10/20) to the amount he would be making without a bankroll (playing 3/6).

Clearly, opportunity cost could be greater than your bankroll if you anticipate that you would have more than doubled your bankroll in a given period.

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

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i never took econ. what's opportunity cost and how could it be a number greater than your bankroll?

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imagine 2 scenarios:
1. you don't take the bet. what are your future profits from this point into the future? say they are $100,000
2. now say you take the bet and lose. what are your future profits? say they are $75,000 due to the time spent building back up, loss of motivation to play, loss of growth potential from playing bigger games

take the difference between the 2. it's $25,000. that's your opportunity cost of losing the bet. you missed out on $25,000 of future profit

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

opportunity cost is the utility you lose (in this case, money) by doing something because if didn't do it, you would be doing something else instead that provided you some other amount of utility.


For instance, if you get a girlfriend, and we define utility as sex, then your opportunity cost is all the future bitches you would be bangin if you had stayed single.

in sthief's case, he needs to consider what would happen if he never took the bet. in that case, he'd still be playing 10/20 and he needs to factor in the money he would have made playing 10/20 should he take the bet and lose it.

it can be bigger than your bankroll because it is time dependant. If I marry Katie Holmes but she never lets me play poker again, then my opportunity cost would be all the money I'd ever make form playing poker - certainly bigger than my current BR.

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

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For instance, if you get a girlfriend, and we define utility as sex, then your opportunity cost is all the future bitches you would be bangin.



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This is the single best definition of opportunity cost I have ever heard.

Very well played.

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

I'm unlike those who are even worried about a billion-to-one shot at losing their roll. In fact, if X=1 billion, I would propose this: if I win, I get $10 million (still pocket change to Gates). If I lose, I will not only give up my measly roll, but I will literally take a bullet to my brain, ending my life.

I mean, come on. I'm not ready to die, I have a lot to live for, I'm scared of death, etc. You only live once, life is precious, etc. But a 1,000,000,000:1 shot to win an amount of money that would change the quality of my life and my family's life for good is TOTALLY worth it. Every time I get in a car or on an airplane, or even step out of my house, I have a 1,000,000,000:1 chance of dying. You cannot live your life that safely. It's impossible. Take the gamble.

For just doubling my meager roll, though, which took me 10 months to build, I would set X at 8. [img]/images/graemlins/smile.gif[/img]

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

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For instance, if you get a girlfriend, and we define utility as sex, then your opportunity cost is all the future bitches you would be bangin if you had stayed single.


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HAHA

thanks guys, makes a ton of sense.

...i think. so if i understand this correctly, then here the opportunity cost would be the $$ that you expect to make at your current level in the amount of time that it would take you to rebuild if you lost the bet?

Re: Don\'t Do It
 

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You would not take a one-time gamble to get paid 2:1 on your money, where the odds of losing were one trillion factorial-to-1? Come on.

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Did I say that I wouldn't?

I just don't understand a one time risk of your roll when you're a huge underdog just because the potential to make a huge payout is there. I say again, if this is a bet I could repeat over and over, yes I would take 6-1 odds. But this poll has been presented as a one time deal, in which case I decline.

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then you should move to Africa or something, because completely eliminating risk is not how we become successful in this country

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Thanks for the advice.

Re: Poll on risk aversion: a continuation of the Bankroll on AA threa
 

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Every time I get in a car or on an airplane, or even step out of my house, I have a 1,000,000,000:1 chance of dying. You cannot live your life that safely. It's impossible. Take the gamble.

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this is a really good point and it shows exactly why jskills is being retarded

Re: Don\'t Do It
 

[ QUOTE ]
[ QUOTE ]
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You would not take a one-time gamble to get paid 2:1 on your money, where the odds of losing were one trillion factorial-to-1? Come on.

[/ QUOTE ]

Did I say that I wouldn't?

I just don't understand a one time risk of your roll when you're a huge underdog just because the potential to make a huge payout is there. I say again, if this is a bet I could repeat over and over, yes I would take 6-1 odds. But this poll has been presented as a one time deal, in which case I decline.

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then you should move to Africa or something, because completely eliminating risk is not how we become successful in this country

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Thanks for the advice.

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might want to go to mars just in case

either way you're being completely irrational

Re: Poll on risk aversion: a continuation of the Bankroll on AA thread
 

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For instance, if you get a girlfriend, and we define utility as sex, then your opportunity cost is all the future bitches you would be bangin if you had stayed single.


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...i think. so if i understand this correctly, then here the opportunity cost would be the $$ that you expect to make at your current level in the amount of time that it would take you to rebuild if you lost the bet?

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DING DING DING!