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May 10, 2007
Pokernomics
The guys over at Freakonomics have been talking a lot about poker lately. Unfortunately, a lot of what they are saying is just plain wrong. They blogged on the topic of whether poker is a game of skill or chance which, as you know, I think is dumb because it's obviously both. And so are most games at a casino.
There's this passage that really made me laugh:
The gist is this: forget about winning at poker, and think for a moment about losing. Is it possible to intentionally lose a poker game?
The answer is yes, of course. Is it possible, meanwhile, to intentionally lose a game like Baccarat or roulette or craps?
No, it's not
Umm, yes it is. Take roulette. I can make a wager that would be 100% likely to lose. All I have to do is bet 18 on red, 18 on black, one on zero, one on double zero. No matter what happens, I lose 2. No luck involved whatsoever.
In craps you could just bet pass and don't pass, and you'll either tie or lose. I suspect there's a combination whereby you'd lose every roll, but I'm too lazy to figure it out. In baccarat you could bet both player and banker if they let you play two hands. I'm not sure if that's ever done, but I'm sure they'd be more than happy to let you.
Craps, and baccarat both have a skill element anyway, in that some bets are better than others, just like poker. How you play does, in the long run, affect your results, just like poker. It's a hell of a lot harder to sort the good bets from the bad in poker, so I won't argue that the other games have anywhere near as much skill involved, but they do have some. I'm not sure how the mark of a game of skill could be the ability to intentionally lose, and I smell a logical fallacy there, but even if it were, that doesn't separate poker from most games in a casino.
And then there's the Freakonomics Poker Stocks, on StockPickr. The idea of that one seems to be to make a portfolio that will make money if poker should be exempted from the UIGEA. I like it for the most part, except for the hate list, which they presumably recommend shorting. They include MGM because "more people playing online poker means less people playing in the Bellagio." Obviously whoever wrote that hasn't been to the Bellagio in a few years. You can't get a seat there during prime hours, and couldn't even before the UIGEA.
How many thousands of people went to the World Series last year because they won their way in online? That's a cash cow for Harrah's. Between the hundreds of dollars in juice and the thousands in hotel, restaurant, and merchandise expenditures, Harrah's is undoubtedly making a small fortune off of the main event alone, due largely to PokerStars and company. MGM has the WPT events, which, while not as big, are still doing well and still have plenty of online entrants. They've proven in the past that they want in on online gaming, as soon as they have the chance they'll do it again.
MGM and their competitors would start their own online poker sites, which are enormously profitable. Party Gaming was pulling in nearly a billion a year in profit, and MGM would have tremendous advantages over them. They could comp online players, advertise the website in their casinos, allow you to add or withdraw funds from the casino cage, etc. The opportunities for synergy are tremendous there. Just as the advent of Atlantic City only drove more New Yorkers to Vegas for vacations, online gaming would be a tremendous boon for the brick and mortar gambling outfits.
And as for their buy list, I'm not so sure that WPTE (and therefore Lakes Entertainment) stands to gain much from online poker being legalized. They'll get some more entrants in their tournaments, but I'm pretty sure the casinos keep all of that profit so I'm not clear as to how WPTE would benefit from that. They seem unlikely to gain any traction at an online card room of their own, given that they'll be facing competition from much better funded, more established players. Party poker has a market cap of over 18 times that of WPTE, and will use their enormous advertising budget. So will PokerStars, Harrah's, MGM, etc. WPTE is just a poorly managed company that has upset pretty much everyone who has done business with them (players, television networks, and casinos). I didn't like their long term prospects long before the UIGEA, and I definitely don't see how legal online gaming will help them in any way.
Posted by themaroon at May 10, 2007 9:26 PM
Comments
On the roulette thing, you are talking about variance; they are talking about expectation. There's no way to increase or decrease your expectation (as a percentage of the amount you wager) in roulette, but there is in poker.
In craps you can slightly increase or decrease your expectation, but not nearly to the extent that you can in poker (per unit of time, as a percentage of the amount wagered). This suggests that the luck-skill ratio is higher in craps than in poker.
Posted by: maurile at May 11, 2007 12:13 AM
Of COURSE it's possible to intentionally lose at craps or roulette...all you have to do is play for long enough!
The difference between those games and the casino's "skill" games (poker, Blackjack, sports betting) is that it's possible for skilled players of the latter group to profit by identifying and making a large number of +EV wagers.
I think skill vs. luck in poker (and most other things in life) depends on your time frame. In the short term there's an incredible amount of luck and any jackass can win. Over the long run there's very little luck and good players will win money from craptastic players. (That's luck in terms of overall results. Of course luck will cause varience within that longer time frame.)
Posted by: fun160 at May 12, 2007 9:37 AM
It's true, there is no way to intentionally loss on Roulette. You loss on average the same percentage (depending on type of roulette game) no matter what bets you take. You EV is absolutely the same if you bet on red only, or take every bet available.
For craps, it is the same. The game of craps is actually a bunch of mini-games wrapped into one. The EV of each bet (or mini-game) can be different, but every single one of them have a fixed EV, and there is no way to change that, the only decision a player has is whether to play that particular bet (mini-game) or not. The only mini-game that you cannot intentionally loss in craps is if you take the odds on the come or no come bets.
Posted by: Pokerdogg at May 12, 2007 1:55 PM
A guaranteed losing bet combo in craps is $50 pass, $50 don't pass and $1 12. If you hit a 12, you lose $20, if not, you lose $1 as long as you don't take any more bets.
Posted by: Paul at May 17, 2007 11:44 AM