Theoretical question regarding poker skill vs investment prowess.

[Alex/Mugaaz]

The question is intended for a player who is not capable of playing at a world class level. (Though what this means is somewhat murky)

At what combination of:
Stakes
BB/100
# of tables

Do you think that working on improving your game shows less expectation then learning how to invest your winnings? (Let's say at 7.5% / 10% / 12.5% per year)

I know I may be missing some critical information, but I'm interested at hearing peoples thoughts on this.

[AaronBrown]

I may be completely misunderstanding your question, but I think you're asking whether you'll get rich faster working on your poker or your investing.

For example, suppose an hour's study could increase your expected poker winnings by a penny per hour, or your investment performance by 0.01% per year. Which would leave you better off after, say, 30 years?

This is a standard finance problem. The approximate answer, applicable in most cases of practical interest, is to multiply the rate change by the number of years times your annual winnings times 1 minus the interest rate divided by 1 plus the interest rate, and compare it to the dollar change. In this case, 0.01% = 0.0001, multiply by 30 to get 0.003. If you make $5,000 per year playing poker, 0.003 x $5,000 is $15. If you invest at 7.5%, you multiply that by 0.925/1.075 = 0.86. 0.86 x $15 = $13. So increasing your annual take to $5,013 (the exact answer is $5,010) is about the same as changing your investment return from 7.5% to 7.51% per year.

However, the investment rate applies you your entire savings, not just your poker winnings. That increases the value of improving your investments.

This takes no account of uncertainty, which could change the answer.

[Jerrod Ankenman]

[ QUOTE ]
The question is intended for a player who is not capable of playing at a world class level. (Though what this means is somewhat murky)

At what combination of:
Stakes
BB/100
# of tables

Do you think that working on improving your game shows less expectation then learning how to invest your winnings? (Let's say at 7.5% / 10% / 12.5% per year)

I know I may be missing some critical information, but I'm interested at hearing peoples thoughts on this.

[/ QUOTE ]

I'm going to try to clarify your question based on what I think you mean.

You play some game G with a utility win rate* W and you can continue to play games at approximately this level for a while. You are going to play a fixed amount of time, such that the decision between studying poker and studying investing is not clouded by the possibility of playing poker during that time.

Assume P' is the marginal value per time unit by which you can increase W by spending time studying poker; assume I' is the marginal value per time unit by which you will increase the return on investment for your entire portfolio of poker money that is currently not in play.

Your question is: For what values of P' and I' should you spend this "study time" doing one or the other?

The answer for most players is probably:

Spend a little time doing I, then either
a) hand it off to a professional or
b) put your faith in efficient markets and buy diversified stuff.

Most poker players could benefit from studying a little bit of stock theory anyway though.

Jerrod Ankenman

*utility win rate = your personal utility (for example log utility if you are a portfolio manager) for a game with a specific win rate, variance, and bankroll

[Alex/Mugaaz]

Thanks for the input so far, especially last post.