Small Edges and Bankroll Growth

[bobbyi]

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Since only 10% of your bankroll is exposed to risk and 90% is riskless, a high variance for the 10% is perfectly ok. You should not be passing up +EV situations because of some risk to a small portion of your assets.

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That's some good analysis. When I have time over the weekend, I will come back and examine it more carefully because it is very interesting. You are probably right from a theoretical point of view. However, a big part of the reason I perfer low variance isn't about minimizing the risk to your assets. It's that large downswing are psychologically difficult and can often lead to poor play. In the thread about January downswings, I think there was discussion about how a big downswing can throw someone off their game. Since I main play live (I'm about to finally start playing online as well) and only play ten to twenty hours a week, a big downswing could last me weeks or months and I would find it hard to spend that long with that hanging over me. So I've decided it's safer to sometimes pass up some small edges and marginal hands to try to control my variance even if it means giving up a few dollars per hour in ev. However, from a theoretical point of view, you might be right that someone who manages things well can accept high variance and avoid going bust.

[Cheeseweasel]

tournament

blinds = 50/100
bankroll = t1000

You flop a gutshot. The pot is t2000. T100 to you. Call or fold?

Easy call, right? The pot odds are nearly twice that required for a call. But let's look at what Mr. Kelly has to say.

let
f* = the fraction of your bankroll that that you should bet to maximize your expected value
A = pot odds
p = win probability

f* = e/A where e = (A+1)p-1>0

Let's plug in some numbers.

e = (20+1)*(4/47)-1 = .79

f* = .79/20 = .04

Therefore, your optimal bet is t1000*.04 = 40. Easy fold.

There has been no correction made to f* due to the variability of the payoff so this is extremely conservative.

All of this "let's stop hating variance and learn to embrace it" nonsense is starting to piss me off.

[muck_nutz]

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I suppose it's possible. You need a damn large database, though... and so much of poker is situational that you'd have to be VERY sure that you aren't introducing systematic error into your results by using data with an unknown bias.

[/ QUOTE ]

I agree with you on this part.

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Given what I know about poker "scholorship," such as it is, I think it's quite unlikely that someone will do a good job of identifying these situations accurately in the next five years.

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I'm not so sure here. There are large databases in the world _and_ the amount of money in poker has increased dramatically in the last few years bringing smart minds to the table that wouldn't have been interested in the past.

[deepdowntruth]

Variance is not a problem if you are adequately bankrolled for your blind level and are in a ring game.

Variance is a problem in a tournament. In Sklansky's advanced tournament book he asserts it is probably best to choose a lower EV option if that option has a better chance to win. He's probably right about that.

[Ed Miller]

This is both irrelevant to the discussion and gravely in error.

[rmr1976]

I'm going to bookmark this for the next time I have a poker debate with a friend of mine, who in spite of his intelligence, plays from a weak/tight mindset.

Example: I asked him how he would play AA on the button with a flop of KQJ rainbow.

Pretend that you are in a game with a bunch of huge maniacs, who throw chips into the pot as if they had an unlimitted supply. Assume the betting was capped pre-flop and capped post-flop, and that it will be capped on the next 2 rounds. There are 5 or more people on the flop and you expect no one to fold.

Suffice it to say--this is going to be the mother of all pots.

Pot size at river: 60 BB ((5 players * 4SB * 2 rounds)/2) + (5*4*2)

Price to call thru river: 8 BB
Odds 60 to 8 or 7.5 to 1

My friend thinks folding is appropriate, because it is likely you are drawing to only 2 outs. I think it is essential to stay until the river.

Is it possible that my friend is correct, and that a fold is proper here?

[Ed Miller]

My friend thinks folding is appropriate, because it is likely you are drawing to only 2 outs. I think it is essential to stay until the river.

Is it possible that my friend is correct, and that a fold is proper here?

If you assume your opponents have truly random hands, and that they will always cap the betting and never fold, no matter what they have, then folding your aces is truly ridiculous.

Furthermore, with such simple (albeit unrealistic) assumptions, this becomes a math problem. You can calculate the EV of continuing versus folding exactly. So your friend doesn't have to take my word for it. He can do the math for it and find the answer himself.

BTW, I can't imagine why anyone would describe AA on a KQJ board as having two outs.

EDIT: BTW, go to http://www.pokerstove.com/ for software that performs these calculations.

[rusellmj]

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*shrug*

The only players better served by worrying about these situations rather than just maximizing their EV are people who already play extremely well. And those people aren't worried about it because they are more worried about how to spend their wheelbarrows full of cash.


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Funniest thing I've read this week. Great thread. Thanks for your contributions Ed.

Russ

[rmr1976]

Ed Miller wrote:
"BTW, I can't imagine why anyone would describe AA on a KQJ board as having two outs."

He would argue that all this action suggests your opponents have something better than a random hand, ie. KK, KQ, KJ, JT, or something like that.

Your odds of improvement are much lower with all of those people in the hand, and he feels the probability of winning is much less than what you would expect.

So he would dispute the idea that your aces are up against random hands.

[Ed Miller]

[ QUOTE ]
Pretend that you are in a game with a bunch of huge maniacs, who throw chips into the pot as if they had an unlimitted supply. Assume the betting was capped pre-flop and capped post-flop, and that it will be capped on the next 2 rounds. There are 5 or more people on the flop and you expect no one to fold.

[/ QUOTE ]

To me, this characterization says "random hands." You can't let him just go around changing the rules on ya... [img]/images/graemlins/tongue.gif[/img]