The Ceiling Concept
 

This is my first post in the Poker Theory Forum but i think it's the correct place to post my concept. This post is basically a copy of my recent post from NVG however I thought my idea was important enough to warrant it's own thread.

Beware it is long - but i have included my original summary for anybody that just wants a summary.

Also please note the second part was written on the NVG subject of pro's and why they go broke, so it's slightly geared in that direction.

This is an original idea so please if borrowed give the credit here.

Re: The Ceiling Concept
 

The short of it is that poker is a game of investing money or gambling depending on how you play. But if we assume that we are playing under the pretense to invest our money intellegently than the same principles of investing in the stock market apply, however the stock market trades at a much larger level. The reason the top pro's are broke is because they have reached the poker ceiling, its similar to the investment ceiling which goes by some name. A name that i don't know.

If you talk to really good investment bankers, the best ones, they will tell that they can basically make the same average returns year after year say 15% as an arbitary number. It takes hard work but its sustainable...however, when their portfolio reaches around 500 million dollars then it becomes much more difficult to keep that 18% return rate. So i would propose that this is what has occured to the current breed of poker players. Because the poker economy is much small than the US stock market the ceiling is much lower.
So i would conclude that investing your money is good but only until say your reach 3 or so million to give an arbitary number. After that point it becomes much better to invest your money in a the stock market.

Re: The Ceiling Concept
 

I realize that i didn't complete explain my concept of the market ceiling. The reason there is a ceiling in the stock market at around 500 million dollars is that when your principle amount of money reaches that much, it becomes to large to invest in smaller companies, because you either will end up owning the company or not allowing enough shares for the market to dictate the value of it, you also can't invest small portions in lots of companies because of the ammount of time involved in researching the companies, you'd need a very very large team of great investors looking in many different markets, which is impractical. This basically forces you into investing in large companies, though the problem with this is that, large companies are generally held by lots of people so the shares are generally very accurate in representing the company worth. Similar to sports betting on the NFL, unless your the very best, the lines are so close to the true chance of a team winning, that the average bettor can not make any money off them.

So when were discussing this in regards to poker, the pool of players obvs shrinks as you move up in limits. You can't take advantage of all the donkeys at the 10nl level when your playing but the possibility that a good portion of the 8 players you will play against at your 10nl table will suck is very high, well the proportion of donkeys at each subsequent level decreases probably to some percent, although there may be some random varation. So when you start to reach the 100/200nl (some random level i choose) then the probablity that you will sit with a donkey has dratmatically decreases, and your now happy if some of the players have even a couple of leeks. So obv everyone undstands that the variance increases as skill increases.

The next factor is that if your treating your money and time spent at poker as an investment, than you'll be looking at your entire bankroll as your principle to grow. Now lets consider a poker player who has 1 million dollars, he wants to grow it, well he plays 25/50plo table and wins $5 000 so now he has $1 005 000 dollars. Congrats he just increased your bankroll by .5% so obv its kinda pointless so he steps it up to the 250/500plo tables and win $50 000, you just increase your bankroll by 5% , he feels like he accomplished something now. However, now that 5% of his entire bankroll is on the table and when he looses it, well it works a lot different from winning obv... ever time he wins 50k 250/500plo he's not winning 5% anymore and when he looses well the next time he buy's in to the game he's risking more than 5% of his money.

(going to use smaller amounts to make it easy)
100nl $2000br
win $100 = 2100br +4.7% increase to bankroll
win $100 = 2200br +4.5%
win $100 = 2300br +4.3%

Now watch when you loose

loose $100 = 1900br -5.2% decrease in size of bankroll
loose $100 = 1800br -5.5%
loose $100 = 1700br -5.9%
loose $100 = 1600br -6.25%

So as can be seen the compounding works against you on the way up, you need to keep more money in play to keep the same size of returns, however, as you loose money you can't keep at the same level of play without threating larger and larger percentages of your bankroll each time you play.
I hope this helps answer the question at bit better though.

Re: The Ceiling Concept
 

[ QUOTE ]

This is an original idea so please if borrowed give the credit here.

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Not completely original (perhaps independent) - don't expect footnotes and royalties.

That being said, interesting analysis, I'll look a little more closely at it when I have a bit of time and Brain Bandwidth.

First thing that comes to mind is "Lose <> Loose"

Re: The Ceiling Concept
 

yah i know i got a little carried away with my whole

original idea part. but it is. well everything regarding the ceiling aspect in poker. i don't think that has ever been discussed before, i have by no means invented it in the investment sense.

i would like some feed back on this though because i think this could be a very important observation

Re: The Ceiling Concept
 

very interesting for sure!

Re: The Ceiling Concept
 

[ QUOTE ]
yah i know i got a little carried away with my whole

original idea part. but it is. well everything regarding the ceiling aspect in poker. i don't think that has ever been discussed before, i have by no means invented it in the investment sense.

i would like some feed back on this though because i think this could be a very important observation

[/ QUOTE ]

It is interesting, but not akin to the stock market at all. All the big boys in the market are/could act independently without any of the others, in fact the Quants would do much better without other Quant funds since they pretty much end up owning the same stocks. In the large game poker market they all need each other.

Perhaps I missed your main point, if so Sorry.

Jimbo

Re: The Ceiling Concept
 

Jimbo could you explain your argument a little bit more. I don't have a business background so your reference to Quant is a little over my head.
And when you refere to
" All the big boys in the market are/could act independently without any of the others"
I don't understand were i discussed investing independantly or not.

(note i was going to write some sort of a response to Jimbo but it turned out as another summary of my previous points. But i love it to much to delete it)

My point originally was about earning such a large amount of money that it become difficult to invest it properly in a given market. So for some arbitary ceiling's i would say that if you were investing your money (i'm from canada) in the Montreal stock market, once the amount of money that you managed grew to, say 100 million dollars, you have basically outgrew that market, but you could move to the NYSE and begin to invest your money there. Because there are more people and larger companies, your investment becomes much smaller as a percent of the entire exchange, thus its easier to make 'smaller' strategic investments. But when the money your investing excedes 500 million dollars then you run into problems again. Not to say you can't still make the same returns as you did with 100 million dollars, it just become much more difficult. You have to be even better at investing that money and your going to be looking at companies that generally will generate smaller margins because there so large and heavily traded.

Tying this back to poker though, the point i am making is that the same principle that occurs in the stock market, occurs in poker aswell. Obv. the poker base is much much smaller than the stock market, so the ceiling becomes much lower because of that.

I think you are wrong if you think that the stock market and poker are different. I think they are very much the same, obvs they have huge differences but the principle of both is similar. Very similar

Re: The Ceiling Concept
 

[ QUOTE ]
I think you are wrong if you think that the stock market and poker are different. I think they are very much the same, obvs they have huge differences but the principle of both is similar. Very similar


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versa but not visa, in other words stock traders seem to be able to become good poker players, wheras there is a lot of evidence that the converse is not as true.

I think you skipped my main point. If there was only one Warren Buffet type guy in the stock market he could make all the money he would ever need, if there was only one Doyle Brunson who would play in the big game he would be lonely and make nada.

Quant funds buy and sell based on math formulaes, unfortunately it turns out most of them using different formulaes come up with the same stocks to buy and to sell at about the same times. So they drive prices up higher for each other when buying and drive them down faster and lower than normal when selling. So they would rather be alone thanhave others at the big boys table and like I said in Poker this will not work without other major players in the game as well.


Just one more thing, a billion dollars is small these days, so 400 million isn't hardly noticed on the major exchanges. This doesn't change your point, just your decimal places.


Jimbo

Re: The Ceiling Concept
 

I will disagree with you again Jimbo, that poker players cannot or have trouble becoming good stock traders. I don't mean to be some sort of arse, but i would like to hear what sort of evidence you have to prove 'the converse is not as true'

I could easily write a couple of paragraphs stating why attributes developed in becoming a winning poker player would help in becoming a successful investor. Obv. you can't step right from one to the other, and the 'base' knowledge needed in investing is much larger than poker. however to be a winner at poker there is so many special qualities that must be developed that would help with investing you money in the stock market, something that i don't think all stock investors have mastered but which need to be mastered by a poker player so they don't become a major leak. (I might go into more detail later)

but to summarize the point - distancing yourself for you investment, for a poker player to bluff and play aggressively they must not look at they money as that but rather as a tool or chips used to make more money. This pertains to basic investing in that if you have made the correct choice and you believe the stock still can make money you shouldn't be concerned in a drop in stock price. Or if they need to they can sell the stock and not be concerned with a loss. many good investors have a lot of trouble taking a loss and get to attached to their investments. Poker players learn quickly when you drop a poor investment, be it a bluff or a 3rd nut hand.

Attribute 2: Making the corrected decision, in both poker and investing you can make the correct descion and still loose money, lots of money. But as a good poker player knows, i doesn't matter if you loose money (obv to a point and within your bankroll) so long as you made the correct descions along the way. because so long as you continue to make the correct decisions you will make money in the long run.

Poker players are concerned with long term results not short term results. playing poker you learn extreme displine, you can't or the better people don't play drunk or tired.

anyways i feel like i'm beating a dead horse here. you get the point. i'd love to hear a counter point to this, but i think is pretty comprehensive my argument. obv it riddled with spelling and grammar errors but hey not everyone a broker.

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the rest of your argument.
'I think you skipped my main point. If there was only one Warren Buffet type guy in the stock market he could make all the money he would ever need, if there was only one Doyle Brunson who would play in the big game he would be lonely and make nada. '

the point above is a little crazy. i mean if there was only warren buffet. he would be just as lonely as doyle brunson. and the funny part about that is they would both be old people clinging to pieces of paper that basically mean nothing. Stocks and cards really are nothing, they both get their power/value from everyone agreeing they have value. just like money. So if only warren buffet owned shares they won't be worth a dam thing, unless they were voting shares but you knwo what i mean.

And when i was talking about 500 million, that number may have increased by a couple hundred million, but the problem isn't exactly getting noticed on the market, its the fact that companies that are traded in the $15-$40 dollar range (obv take into accound the multiple the companies traded at) - in and around that value. are generally the juicest stocks to be trading with
because at that level they are established companies so their is less risk of them going to zero but there is also a larger high side too because there is still lots of room for them to grow into zadda zadda zadda. but when you reach around the 500 million dollar mark. your not really able to trade in these companies because you need so many of them to soar for it even to influence your bottom-line. so your forced to trade in the larger companies.

4 cents?

Re: The Ceiling Concept
 

In other words the games get harder as you move up?

Re: The Ceiling Concept
 

yes and no.

no because its no just the games getting harder but there are less places you can invest your money at a higher return

Re: The Ceiling Concept
 

[ QUOTE ]
the point above is a little crazy. i mean if there was only warren buffet. he would be just as lonely as doyle brunson. and the funny part about that is they would both be old people clinging to pieces of paper that basically mean nothing. Stocks and cards really are nothing, they both get their power/value from everyone agreeing they have value. just like money. So if only warren buffet owned shares they won't be worth a dam thing, unless they were voting shares but you knwo what i mean.


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After reading this I give up on you. Too stubborn to even try to understand. My last effort and as simple as possible. Doyle cannot make money playing poker by himself, Warren can make a fortune investing by himself. You are constructing a ceiling based on percentages not in absolute dollars so I see no value in that statistic. I can spend dollars, I cannot spend percentages.

Jimbo

Re: The Ceiling Concept
 

[ QUOTE ]
yes and no.

no because its no just the games getting harder but there are less places you can invest your money at a higher return

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Isn't this why that bryce dude is quitting poker?

Re: The Ceiling Concept
 

The ceiling concept could apply at different stakes - you can only win so much playing 100NL. You could increase this if the stakes became 200NL so you should move up (this assumes your skill in relation to opponents is the same which it wouldn't be). You should therefore increase stakes. If you get to the highest stakes and are still constantly winning, there is no way to make more money per hour (aside from eveyone agreeing to increasing stakes).

However, your argument to then do something else is short sighted. Garbage Men don't get paid as much as Doctors but they don't go 'I want more money, i'll be a doctor'. Poker Players can't suddenely be good on the stock market. Even if they could they may prefer to dedicate their time to poker as they enjoy it more.

Re: The Ceiling Concept
 

Interesting argument
'However, your argument to then do something else is short sighted. Garbage Men don't get paid as much as Doctors but they don't go 'I want more money, i'll be a doctor'. Poker Players can't suddenely be good on the stock market. Even if they could they may prefer to dedicate their time to poker as they enjoy it more.'

I am advocating taking there money out of poker and putting it into the stock market. But I don't mean that they should do it themselves. I look at poker as an intellegent way to invest time and money in the hope of making more money. So i think the ultimate goal of a poker player is to take his 10k dollars or whatever and increase that by a percent, with a limit risk of going broke.

If we can assume that is true, then the concept of reaching the top of the market, so that investing your money either becomes to much of a risk or involves to much time without the same reward then you have to look for different avenues to make money. I would suggest that investing in the stock market would be one of them.

I would not suggest that David Benyamine when he had 4 million dollars start to look at stocks all day, however when you have that much capital, good investors and money managers will happily accept your money into their investment pool, and treat it well.

When you have 50k and try to get a money manager/investor you have a much smaller selection because all the best ones are handling large accounts.

This is all obvs. stuff but what i'm trying to say is that...earning a sold profit in poker at 600nl tables with a low chance of going bust-o should be farely easy for an exeptional poker player, however when playing the highest limits there is very very little selection in your games and your either risking to much of your bankroll or to little to see a noticable profit. So when that becomes true, your money is better spent in the hands of a top notch investor, rather then you.

You've basically out-grown poker as a forum of investment.

Re: The Ceiling Concept
 

what really happens is that as you move up you have a smaller edge each time but make more money as you bet more. and since players spend so much time playing they accumulate so much more money than they can ever spend so no need to make more. but you can continue to move up thru other gambling investments when you reach your level of play or there is no higher game.
yes once you make mega millions it is now not playng bankroll but investing bankroll.