Poker is a Market...

[morphball]

This post started as a response to the North Carolina decision, where Skallagram argued that by admitting luck plays a strong role in the short-term, we are dooming the chances of winning the argument that poker is a game of skill. The bottom line is that Skallagram is right, and I decided to start a new thread so this doesn't get lost in the wayside.

First, and I have argued this before, comparing poker to craps from house's perspective not only fails, it is outright suicidal! This is because no one can argue against craps being a game of chance. The analogy fails because skill versus luck has nothing to do with EV, because if it did, than you could open craps parlors everywhere by saying "I ain't gambling, but the suckers who play in my parlor are." all of short-term versus long-term arguments I have read about poker since that gaywad Frist came about are nothing more than fancified versions of the argument my potential craps dealer has just asserted. If you guys are smart enough to beat poker, than you should be smart enough to see what I am saying.

The way to get poker out of the chance world, is to take the "game" out of poker. I buy and sell stocks. Deep down I do this because I think of it as another form of gambling, and the degen trait is in my blood. Betting on the market is just as fun for me as betting on the Superbowl, but not as fun as betting on the two, four or five cards in my hand. However, your average Joe Schmoe would never say that I am playing a game when I trade. No sir, to him, I am "investing." In fact, you can give the Joe Schmoe books like <u>A Random Walk Down Wall Street</u> and you can tell him about monkeys with darts, but he will never, and I mean never, think of trading as playing a game. (Ironically, his failure to see trading stocks and options as a game prevents him from ever being successful in the game.)

Now, lets get back to poker. <u>Poker is a market!!!!</u> (Although the poker market is more akin to an auction than a market like the NYSE.) Plain and simple, say it again. Poker is a market.

The rules of a poker market are seemingly, at first blush, a little different than what the average Joe Schmoe thinks of the stock market. For example, to him, in the stock market, information is supposed to be available and reliable. If you lie during a sale, all bets are off. Liars like Enron go to jail for cheating. To Joe, poker intrinsically is different and cannot be a market because here, all the players (market participants) hope the information they give is not reliable. Therefore, to Joe, poker has to be a "game" and not a "market" because all those bluffers are liars and they couldn't play like that on the NYSE. (Poor Joe, he just doesn't get it. They can and do.)

But let's get back to the argument and stop picking on Joe. One makes money in poker in the two following ways, and only the two following ways:

1. He gets his opponents to underestimate the value of their hand (i.e., he gets the best hand to fold); or

2. He gets his opponents to overestimate the value of their hand (i.e., he gets his opponents to call down with the second best).

When you trade the markets, you can only make money those same two ways, and the mechanics are only slighty different.

If you think some one feels something is worth more than it is, you sell it to him (i.e., the short sale).

If you feel some one thinks something is worth less than it is, you buy it from him (i.e., going long).

The reason the mechanics are slightly different is you generally accomplish your goals in poker by betting, checking and calling at the appropriate times. In other words, in poker, you only consummate a small fraction of the whole transaction (being the pot) at any one stage. Compare this to the market, where you usually buy or sell everything for the whole price at once, although this starts to become gray when we start to think of options, futures and shorts.

I think this matches everything Skallagram has been saying, and I think it needs to be fleshed out in a lot more detail, which I am happy to do as people respond to this thread.

I would also be very interesting in participating in writing a amicus curiae brief of this concept to the various courts that will be entertaining the skill versus chance arguments in the future.

But there does need to be a lot of fleshing. For example, when we address bad beats in poker, we find it easy to go to short-terms luck versus long-term skill explanations. But this argument is simply a different form of portfolio theory. No matter how much homework you do, some stocks will not go the way you want. So you balance this risk by buying a lot of different stocks. In poker, you can only play one hand at a time, so your "portfolio" is simply an extended time at the table.

Or another example, take the value approach endorsed by Graham, Buffett and their followers. Is this really anything different than having a tight starting hand criteria in poker?

[Skallagrim]

Not enough time right now to give this the kind of thought out response it truly deserves.

So I will say 2 things for now:

1) GREAT JOB! This part is really good and has to be of value:
"One makes money in poker in the two following ways, and only the two following ways:
1. He gets his opponents to underestimate the value of their hand (i.e., he gets the best hand to fold); or
2. He gets his opponents to overestimate the value of their hand (i.e., he gets his opponents to call down with the second best).
When you trade the markets, you can only make money those same two ways, and the mechanics are only slighty different.
If you think some one feels something is worth more than it is, you sell it to him (i.e., the short sale).
If you feel some one thinks something is worth less than it is, you buy it from him (i.e., going long)."

2) This is precisely the kind of thinking we need to have more of in order to win our "poker is mostly skill therfore not gambling (in the strict legal sense) fight."

Thanks Morphball!

Skallagrim

[morphball]

Sorry for mispelling your name Skallagrim. Thanks for the endorsement.

[Grasshopp3r]

The skill is in reading the relative strengths of your hand versus everyone else at the table, but acting in a way that is not necessarily the same each time. That is to say that you may slow play a strong hand or purposefully give off weak tells in order to maximize either your short or long term profits.

One pitfall to this approach is that you are only estimating the value of your hand. You never know for certain until the showdown, though I suppose that could be twisted into a skill in reading opponents. The potential for multiple lines of play is a key factor in assessing skill.

[Truthiness24]

nh sir