by Pete

The Theory

I’m sure I’m like many of you out there. When I finish playing poker for the day, or the session, I’ll look at my results to see how I did. Did I win? Did I lose? Should I be happy? Should I be sad? Did I do better than I thought I was doing? Did I do worse?

Nassim Nicholas Taleb wrote a popular bestseller entitled, “Fooled by Randomness”, and one section talks about investing, returns, variance, and human nature and it appears to be really relevant to poker and the tracking of results. And it suggests that what a lot of us do amounts to little more than masochistic self-torture.

If you have the book, I’m going to discuss the section entitled, “ Philostratus in Monte Carlo: on the difference between noise and information” near the end of Chapter 3, “A Mathematical Meditation on History”. If you don’t have it, don’t worry; read on.

Taleb gives an example of a man that plays the stock market and achieves a return of 15% per year (yeah, right). His returns have an error rate of 10% per year (volatility), which is the standard deviation. In other words, 68% of the time his yearly return is between 5% and 25% (68% is one standard deviation in a normal distribution). His expected return within two standard deviations is then –5% and 35% and results within this range occur 95% of the time.

Basically, this investor averages a 15% return a year and it varies, but most of the time it’s around that percentage. It would be very unusual for him to lose over 5%, or earn over 35%.

His stocks go up and down, but the overall trend in the long run is upwards at 15% per year.

That’s the setup. Here’s the key – the more often he checks on his stocks, the more he is seeing the variance in the prices, and less the actual return. If he ignores his investments for decades, and only checks on them at 65 when he retires and cashes them in, there is a 99% chance he will happily find he’s made a profit. If he checks his investments only once a year on December 31, there’s a 93% chance he will see he made a profit over the period. If he checks at the end of each month, there’s now only a 67% he’ll see a profit over the month previous. He is looking more at variance in his investment than the expected return.

But if he checks every second of every minute of every hour of every day, there is only a 50.2% chance he will see a profit. Essentially, it becomes completely random whether or not he made a profit or suffered a loss over the previous second.

The more often he checks his results – the more he sees not his expected 15% yearly annual return, but the variance or volatility of his investments. If he still has an expected value (EV) of 15% profit per year, but his volatility is higher, then the effect if even worse.

So how does this apply to poker? Playing winning poker is similar to having a profitable investment. There are swings up and down, but if you continue to make +EV decisions, in the long run you will make profit. The most often you check your results; the more you are just seeing the random variance inherent to your poker game as opposed to your skill in playing profitable poker.

In another way of phrasing, the more you check your results, the less meaningful the results are. It’s essentially just a waste of your time.

But it’s more than a waste of your time. It actually hurts you mentally.

Taleb goes on to explain that when you experience a loss, you feel some minor emotional pain. When you see that you are winning, you experience some elation. I’m pretty confident in saying we all experience some of these emotional roller coaster up and downs as most of us play poker to try and win money - even if we are only playing for “fun” as a hobby.

Now, here’s the rub. Taleb writes that psychologists have determined that a negative hit is not offset by a similar positive hit. You may not admit it, but a loss hurts more than a win satisfies. They estimate that a negative hit is 2.5 times the magnitude as a positive one. A loss hurts 2.5 times as much. And the more often you check your results, the more the results move to a 50/50 distribution between wins and losses. The net result is unnecessary emotional stress caused by the random variance in the game.

The more often you check your results; the more emotional pain and stress you incur.

Here’s my addition to Taleb’s example. People experience disappointment or elation based on expectations. The better you expect to perform, the worse you feel when you have a bad result. Consider a low-ranked tennis player who gets to the finals versus a Federer or Nadal - who’s the pressure on? Of course, the favourite. The low-ranked player has much smaller expectations of victory; a loss in the finals will not hurt nearly as much as Federer losing when he has a much higher expectation to win.

So the divide between a “loss” or a “win” I don’t think is necessarily at $0, I think it’s at whatever dollar amount you consciously or subconsciously you “expect” to earn during a session - how we did compared to our expectations of how we should have done.

For example, playing a cash game against what we think were inferior opponents, we certainly would be more disappointed having a small winning session than if we managed to only lose a little money if our table instead consisted of Iveys, Antonius’, Durrs and Brunsons.

Anyway, what’s the point?

It would suggest that we, as poker players subject to high amounts of variance in results, should strive to minimize the amount that we check our results. I’d bet most of us check our results daily, if not after each session. I know I’ve often checked my results during a session, probably sometimes dozens of times an hour. It’s easy with Pokertracker right there when playing online, or stacks of chips to count during the downtime in between hands when playing live.

And all you are doing by frequently checking your monetary ups and downs is just causing yourself emotional pain and added stress. The more often we check our wins and losses paradoxically the more we are instead looking at the random variance and swings in our game in some sort of self-torture instead of at the profitable returns we can expect after a long period of playing profitable +EV poker.

Okay, great, I’ve certainly convinced you to stop tracking your results session-by-session. Better yet, don’t even track your daily results. It would be better for your mental health to ignore your results until the end of the month. Hell, if you could completely ignore your bankroll’s swings over an entire year, that’d be ideal.

The Reality

But unfortunately, bankroll management is a huge part of playing winning poker. How can I properly manage my bankroll if I’m trying to avoid seeing results? Another very important reason to track your results methodically and often is to make sure you keep a good eye on your money. If you don’t notice the extent of a downswing that means you should drop down in stakes it could be disastrous. How can you manage withdrawals to pay your bills if you are trying to ignore results? What if the taxman requires that you keep detailed records of your play and your subsequent wins and losses?

I put these questions out to you guys. I think that we all probably suspected that trying to ignore our results is good for our mental well-being, but we have to weigh that with the necessary oversight needed as we properly manage our bankroll for the reasons above. So I ask you, how do we balance these two competing interests?

Does this mean we are better off with an even larger bankroll than we currently think we need? Perhaps combined with a strict, pre-planned withdrawal schedule? Maybe get someone else to track our daily/weekly/monthly wins and losses?

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