The Administrivia of Serious Poker
If all you know about poker is what you learned from watching Rounders, you’re probably not a serious poker player. By “serious,” I mean someone who’s committed to winning more often than not. In this context, “serious” is a synonym for “profitable.”
Not everyone is cut out to be a profitable poker player. If you’re strictly concerned with playing poker for entertainment, and you don’t care how much money you lose, there’s not need to change what you’re doing. In fact, you’re the lifeblood of the game for serious players.
Also, you don’t need to be a professional poker player to take the game seriously. Just because you’re not making your living from poker doesn’t mean you can’t commit to being a profitable long-term player. In fact, playing profitably makes poker more of a challenge and more fun.
I used to play poker with a college buddy of mine who took the game way more seriously than I did at the time. But he wasn’t a professional. He worked during the day as an IT guy at some nameless corporation in Dallas. Eventually he was making enough money that he felt like he could make the transition to poker pro, but he was only a pro for a few years. As I write this, he’s a sojourner in corporate American again.
I learned a lot from him about how to take poker more seriously and have more fun at the same time. I cover most of what he taught me in this post.
What Is Money Management?
How Does Money Management Work for Serious Poker Players?
I don’t just write about poker. I also write a considerably amount of material about casino games. When one writes about money management as it relates to casino games, it’s tempting to do so with a sneer.
That’s because it doesn’t matter how well you manage your money when you play casino games. The house has an edge, so it doesn’t matter how well you manage your bankroll. If you play a negative expectation game long enough, you’ll eventually go broke.
There are exceptions in the casino game business, of course. If you’re counting cards in blackjack, you’re playing with an edge over the casino. Money management in professional blackjack isn’t too different from money management in poker—your goal is to avoid going broke in the short run, so that you can profit from your edge in the long run.
Money management proponents in the casino game side of gambling writing encourage you to divide your bankroll into multiple smaller bankrolls. They then encourage you to set win goals and stop loss limits. You’re supposed to quit when you’ve won the amount of your win goal or when you’ve lost your stop loss limit.
The idea that this kind of money management changes the probability that you’ll win at negative expectation games is ludicrous. You can only win in the long run at games where you can get an edge.
Luckily for us, poker is one of those games.
But don’t think that this means you’re supposed to quit when you’re up a certain amount or down a certain amount. In the context of poker, this is not what money management is all about. You should think of poker as mathematically being the equivalent of one long game that lasts the rest of your life, regardless of the breaks you take during that game.
It doesn’t matter if you take a break when you’re ahead or behind. It’s still one long game, and at the end of the game, your skill level determines whether you’re ahead at the end of the game or behind.
With that in mind, unless you’re tired, the only time you want to quit playing is when the game’s no good. If you’re at a table where you can play profitably, the correct mathematical decision is to keep playing. You’d only quit if the game was no longer good.
Whether you’re ahead or behind has no bearing on whether you should continue to play in that game. The only thing that matters is whether you think the game is potentially profitable. This might mean you’re the strongest player at the table, or one of the 2 or 3 strongest players at the table.
In practical terms, there are other reasons to quit. You might be tired. If you’re weary, your skills will dull, and you might lose money by making bad decisions. You might be bored. It’s hard to make money if you’re not paying attention because you’ve lost interest in what’s going on. You might be sick. It’s hard to make repeated mathematically correct decisions when you’re feeling ill, too.
You should always quit playing when you start getting emotional or angry. This is also called going on “tilt.” No one plays strong poker when they’re too emotional.
But mathematically speaking, you should only play when you have a positive expectation. You should also avoid playing at stakes that are uncomfortable for you. If you’re worried about losing the rent money, you’ll play too conservatively, passing up profitable moves just because they’re too likely to lose.
If you can’t afford to lose your buy-in, you’re playing for stakes that are too high. And the first rule of money management in poker is to only play with money you can afford to lose. In the short run, anyone, even the most skilled player, can lose money.
Why It’s Important for Serious Poker Players to Keep Written Records
When I was just getting started at playing poker, I read a book by John Vorhaus called Killer Poker. He made an observation in that book that I’ve never forgotten:
All serious poker players keep written records.
That was a defining moment in my poker career. I knew that there was one solid, concrete step that I could take toward becoming a serious player. I could check it off my list. All I had to do was start keeping written records of my results at the poker table.
This took more effort than I thought, but I eventually got good at it.
Here’s why you need to keep written records:
Not only do you need written records, they need to be accurate and reasonably detailed. Imagine running a business of any kind without keeping written records of your sales, profits, and losses. Without those records, you’d have no way to know if your business were profitable or not.
You also wouldn’t know how to manage the business moving forward. You don’t know anything about the business if you don’t have written records related to profits and losses.
Treat poker like a business, and you’ll instantly become a serious poker player.
The most important statistics you care about as a poker player are your “win rate” and your “standard deviation.”
Your win rate is just how much money you win or lose on average per hour when you’re playing poker.
Your standard deviation is how much your win rate fluctuates in the short term. It’s another word for “variance.”
The easiest way to keep these records is to just write everything down in a small spiral notebook. My college buddy did this, and I was fascinated to see his notebook. He would update it in his car after every game before we went to Waffle House for breakfast.
Here are the records you want to keep:
- The date
- What game you were playing
- What limits you were playing for
- How much money you won or lose
- How long you played
You can then keep weekly, monthly, quarterly, and annual records of how much money you’re winning or losing per hour at the tables. You can even break that down by game and limits. Your win rate is just the total amount you’ve won or lost divided by the number of hours you’ve spent at the table.
Your win rate is just the amount of money you win (or lose) per hour on average.
Your standard deviation, though, measures how big the fluctuations are in your win or lose rate. Since your win rate is an average, there are several ways to achieve it.
If you’re a conservative player, like my college buddy, your average win rate is probably close to what you’re actually seeing in any given hour.
If you’re less disciplined, like I am, your average win rate represents some hours with big losses and other hours with big wins.
Keeping these records requires a certain amount of mental toughness and self discipline. It’s hard to record the results of a bad losing session. It’s like tracking your weight after knowing that you’ve been overeating. Sometimes it’s easier to just not step on the scale.
But if you don’t keep records, you’re not facing the reality of your career. You’re embracing a fantasy.
I’ve told many girlfriends that I’m a “break-even” poker player. This is close to the truth, actually.
But the truth is that anyone who tells you they break even at poker is losing money. I don’t lose a lot per hour, but I’m not consistently profitable, either.
Standard Deviation, Lucky Streaks, Losing Streaks, and the Element of Risk
Another way of thinking about standard deviation is to think about how big the swings are from one session to another. I’m a conservative player, even though I’m a slight net loser, so I don’t see a lot of big swings. I have a friend who’s a loose aggressive player, and he has big swings, even though he’s a net winner for the year.
Let’s say you play $3/$6 limit holdem most of the time, and you win an average of $6 per hour. If your standard deviation were 0, you would literally see no difference in wins or losses each hour. Every hour would show a win of $6.
Of course, that’s a hypothetical example. In real life, no poker player has a standard deviation of 0.
If you want to get a feel for the standard deviation, list how much you win or lose per hour. Then subtract your average hourly win from that amount. The bigger the difference, the higher the standard deviation.
Using that $6/hour figure, here’s a hypothetical set of results by hour:
- $9 won
- $3 won
- -$6 won
- $18 won
- $4 won
- $8 won
The deviations here are as follows:
- $9 – $6 = $3
- $3 – $6 = -$3
- -$6 – $6 = -$12
- $18 – $6 = $12
- $4 – $6 = -$2
- $6 – $6 = $2
Of course, if you add up all the deviations, you’ll wind up with 0. Otherwise, your average wouldn’t be $6/hour.
To eliminate the negative numbers, you square each of the deviations. This eliminates the negative numbers, because a negative number squared yields a positive number, as follows:
- 3 squared = 9
- -3 squared = 9
- -12 squared = 144
- 12 squared = 144
- 2 squared = 4
- -2 squared = 4
Average all those together and you get the “variance.” In this case, you’re looking at 9 + 9 + 144 + 144 +4 + 4 = 314, which is then divided by 6 to get an average of 52.33.
Of course, that’s not accurate, either. Your standard deviation isn’t really $52.33/hour, because you were dealing with the squares of those deviations. Now you convert that back into a real dollar amount by taking the square root of 52.33, which is $7.23.
Finding the square root of a number is easy nowadays, even if you don’t have a calculator. You can just type “square root of xx.xx” into Google, replacing the xx.xx with the number in question.
If you’re really serious about poker, you can set up a spreadsheet to keep up with your win rate and standard deviation, too.
You have 2 goals as a poker player, but one is more important than the other. The first goal is to increase your average hourly win rate. The 2nd goal is to reduce your standard deviation.
The higher your standard deviation is, the more likely it is that you’ll go broke. With a large standard deviation, you need a larger bankroll to handle the losing streaks. A high standard deviation doesn’t make you a bad poker player, it just means you have a higher risk tolerance than many other poker players.
Think of that in poker terms. To get the biggest win rate, sometimes you must make calls which are “close.” The probability of winning in those situations–compared to the payoff–aren’t as good as in other situations. Ma
The texture of the games you’re playing in can also affect your standard deviation. If you’re playing at a table with a lot of calling stations, for example, you might lose more often than you’d normally expect to. With more players calling more hands, the probability of getting drawn out on increases. You’ll see more bad beats.
Bankroll Requirements for Serious Poker Players
If you’re a losing poker player, it doesn’t matter how large or small your bankroll is. If you’re a net loser, you’ll eventually go broke.
Bankroll requirements only matter if you’re a profitable poker player. Then you need to take your standard deviation and win rate into account. The goal is to have a bankroll large enough that a losing streak doesn’t force you to go broke. A bankroll large enough that you don’t have to move down in stakes is also a good thing.
You’ll see plenty of variations of bankroll requirements, and those depend on which games you’re playing in and how skilled you are. A rough guideline I can offer is 300 bets. This means if you’re playing $3/$6 limit holdem, you need a bankroll of $1800 if you want to be confident that you’re not going to go broke.
It’s possible to play with a smaller bankroll, especially if you’re willing to play conservatively, but it’s hard to make any kind of meaningful money on an hourly basis if you’re playing for such low stakes conservatively.
If 300 bets sounds high, consider that losing streaks happen all the time, even to the best of players. The streaks can be bigger and more devastating than most people think, too.
Even that is just a guideline. If you’re a far better player than average, with far weaker competition than average, you might be just fine with a bankroll of 200 bets instead—or even less. On the other hand, if you’re still learning, and you tend to play in games with a couple of stronger opponents, 300 bets might not be enough.
The average poker player only earns 1 or 2 big bets per hour. This means that if you’re playing $3/$6 for a living, you’re probably making between $6/hour and $12/hour. A likely average is closer to $9/hour.
You can increase this amount by playing online, where you can get in twice as many hands per hour. Also, if you’re able to play multiple tables at once, you increase your hourly earnings that way, too. You might be able to make $20 or $30 per hour playing multiple tables online.
Being aware of your hourly win rate can make a big difference over the life of a poker player. Let’s assume you’re playing $3/$6 holdem, and you’re losing an average of a big bet per hour, or $6/hour. If you play an average of 5 hours a week over the course of 40 years, you’ll get in close to 10,000 hours at the tables. That’s a lifetime loss of $60,000.
If you invested that money over the course of 40 years instead, compound interest would grow that $60,000 to a small fortune.
I like the idea of having a hobby where I make money instead of a hobby where I spend money. With poker, you have that chance. The numbers in that example are conservative, by the way. I know many retired people and semi-professional players who get in many more hours per week than 5.
If you’re playing for a living and want to move up in stakes (and earnings) you also need to consider that some of the money you win must go towards your living expenses. If you can take some of your winnings to grow your bankroll, you can move up in stakes and eventually have a bigger income. But if your winnings only cover your living expenses, you’ll be grinding out a living at those lower stakes for the rest of your life.
You do have other options when it comes to building a bankroll, though. Most people already know that they can work a part time or full time job to supplement their poker income. Another, more interesting option, is to find a backer.
A backer is someone who bankrolls your poker game in exchange for a percentage of your earnings. You’d probably be surprised at how many poker players have financial backers. I’ve even seen some reasonably famous pros looking for multiple backers for their tournament action. Just last year, Greg Raymer was looking for investors for his entry into the World Series of Poker. I almost bought a piece of that action myself, in fact.
Bankroll requirements change when you get into pot limit and no limit games. Tournament bankroll requirements are different, too.
With no limit bankrolls, you should have 100 buy-ins—not bets—buy-ins. That’s because on any given hand, you might lose your entire buy-in. If you’re not risk averse, you might take a shot with as few as 50 buy-ins, but don’t come crying to me if you go broke.
Tournament bankrolls vary based on the size of the tournaments you’re playing in. If you’re playing small tournaments, like the single table tournaments you’ll find online, you need at least 40 buy-ins. With bigger tournaments, your standard deviation will be larger, so you’ll want to aim for more like 100 buy-ins.
The Administrivia of serious poker refers to the record-keeping and bookkeeping necessary to win consistently without going broke. Some of the principles involved in keeping up with that Administrivia include your win rate and your standard deviation. When you understand those principles, you can decide what kind of bankroll you need.
But remember—none of that stuff matters unless you’re a winning player. 80% of the players at the tables are net losers, so if you’re a winning player, you’re already in the top 20%. Don’t blow it by ignoring the Administrivia that serious players handle.