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Great article with many insights that I never would have expected! This quote in particular gave me an interesting thought: >> Trust everyone, and people will

by MR4D 8y ago

Great article with many insights that I never would have expected! This quote in particular gave me an interesting thought: >> Trust everyone, and people will take advantage of you. >> Distrust too much? That’s just as bad — you’re going to be the one calling every hand, thinking everyone’s always bluffing you, out to get you. >> You need to figure out when to distrust and when to trust. That last line is interesting, especially when compared to mutual funds. I wonder how comparable poker outcomes at a tournament (or many tournaments over time) compare to an active fund manager? And then that leads me to wonder what a simple ETF comparison would be in poker - someone who always calls? It would be interesting to see how that "ETF" poker player would compare the the rest of the people in a tournament. Obviously a top poker player will not fail out early very frequently, so that's one difference, but on average, what does the "average" poker player at a tournament look like number wise?

MFLoon 8y ago
I'm not super familiar with how ETFs work, but I'm guessing the parallel would be ETFs as ABC players making safe, low variance plays, while the actively managed funds would be a pro looking to capture all of their equity edges, regardless of the assumed variance. It is well known how they respectively fare in tournaments - the ETF players make it into the money at a somewhat higher rate, but will typically have a middling to low stack with little hope of making a deep run, so they have a lot of low but positive ROI results - a mincash will typically be around 50-100% ROI. However they still may not eke out enough cashes over the long run to be +ROI. The Hedge Fund players on the other hand tend to bust out earlier but when they do run well will amass a huge stack and be well positioned to make a run at winning the whole thing - most of their results will be losses, but because of the super steep payout structures of tournaments, a single big-field victory can be well over 10000% ROI, so a single "bink" can overcome dozens of losses.
- MR4D 8y ago
  Sounds like you just described "MoneyBall" :) Seriously, though - thanks for the insight. Hadn't thought of comparing to a hedge fund, and after reading your description, it seems obvious. To add some color to an ETF analogy, an ETF in the financial markets is basically just following an index, which is often created by a firm like S&P (and there are over a thousand of those indices). So, one index may just be "buy all the companies that have dividends", or "buy all companies that have a price to earnings ratio greater than average", or "buy all companies listed on the US stock market". I guess in poker it could be "call on everything", or "fold unless you have at least a three-of-a-kind". Basically, it would be mechanical. Of course, you can have reasonably complex ETF algorithms that have multi-pass filters (such as P/E ratios, Debt/Equity ratios, Dividend minimums, etc.) all in some combination. So maybe there could be something complicated like "bet 1% of your holdings whenever you had a pair, and bet 2% if at least one player folds." This is just a made-up example, but the rules could probably get intricate based on the math and different situations.

by MR4D 8y ago

MFLoon 8y ago

I'm not super familiar with how ETFs work, but I'm guessing the parallel would be ETFs as ABC players making safe, low variance plays, while the actively managed funds would be a pro looking to capture all of their equity edges, regardless of the assumed variance. It is well known how they respectively fare in tournaments - the ETF players make it into the money at a somewhat higher rate, but will typically have a middling to low stack with little hope of making a deep run, so they have a lot of low but positive ROI results - a mincash will typically be around 50-100% ROI. However they still may not eke out enough cashes over the long run to be +ROI. The Hedge Fund players on the other hand tend to bust out earlier but when they do run well will amass a huge stack and be well positioned to make a run at winning the whole thing - most of their results will be losses, but because of the super steep payout structures of tournaments, a single big-field victory can be well over 10000% ROI, so a single "bink" can overcome dozens of losses.

MR4D 8y ago
Sounds like you just described "MoneyBall" :) Seriously, though - thanks for the insight. Hadn't thought of comparing to a hedge fund, and after reading your description, it seems obvious. To add some color to an ETF analogy, an ETF in the financial markets is basically just following an index, which is often created by a firm like S&P (and there are over a thousand of those indices). So, one index may just be "buy all the companies that have dividends", or "buy all companies that have a price to earnings ratio greater than average", or "buy all companies listed on the US stock market". I guess in poker it could be "call on everything", or "fold unless you have at least a three-of-a-kind". Basically, it would be mechanical. Of course, you can have reasonably complex ETF algorithms that have multi-pass filters (such as P/E ratios, Debt/Equity ratios, Dividend minimums, etc.) all in some combination. So maybe there could be something complicated like "bet 1% of your holdings whenever you had a pair, and bet 2% if at least one player folds." This is just a made-up example, but the rules could probably get intricate based on the math and different situations.