Taking Care of Number OneI continue to be amazed by how many otherwise knowledgeable players manage to swallow some of the myths concerning money management hook, line, and sinker. Readers continue to inquire about when they should quit, and whether it pays to lock in a winning session, since continuing to play might send that day’s results cascading into the losing column. Another common inquiry deals with how large a bankroll is needed to insure them against the calamity of going broke. There’s really nothing mysterious about this, and many credible poker authorities have discussed these issues from a variety of perspectives. Either we’re shouting unheard into the wind, there’s a continuing influx of new readers, or the number of readers with short-term memory problems is expanding exponentially.
Before we go any further, let’s define our terms, since two very different concepts are involved. We’ll define “Money Management” as that absurd set of ideas promulgated primarily by people who are trying to earn a living selling “systems” that purport enable players to beat craps, roulette, baccarat, or other table games by quitting once some predetermined amount of money has been won, or by stopping the bleeding once a given sum is lost. “Bankroll Management” is a different breed of cat altogether, and has to do with managing your poker-playing stake. Bankroll management deals with how much of a reserve you need to keep from going broke, given the rather protracted runs of statistically predicable bad luck one can expect at the poker table.
Money management is easier to deal with than bankroll management, since all of the theories surrounding it are fallacious. Regardless of how much of your bankroll you put at risk, you’ll never be able to beat table games. The odds are fixed, immutable, stacked in favor of the house, and no betting system can spin straw into gold. Even if a casino is offering a million times odds at craps, it will only approach an even money bet; it will never swing the odds in favor of the player. And whenever a casino takes slightly shorter odds rest assured they will make it up in volume. Each time you take odds at some higher order of magnitude, you are wagering more money. As far as the casino is concerned, it’s “…heads they win, tails you lose.”
Some of these absurd money management theories have migrated from table games to the poker room, and take the form of advice that urges winners to quit while they are ahead or once they’ve lost some predetermined amount of money.
Unless losing some predetermined amount of money destroys your discipline and judgment and no longer allows you to play your best game, then quitting while you are ahead is of no benefit whatsoever. It’s not harmful, except if you’re in a juicy game and are favored to win even more money if you were to keep playing. If that’s the case, why would anyone in their right mind quit except for being tired, having other plans, or any other valid reason when they figure to win even more money by continuing to play? If the composition of the game changes, and all the weak players have gone broke and are replaced by better players, then quitting makes sense. But under those circumstances you’re not quitting because you’ve won some “trigger” amount of money; you’re quitting because it’s no longer a good game and if the game’s no longer good, you ought to quit regardless of whether you’re winning or losing.
When it comes to “Money Management,” fuggetaboutit; it’s a bankrupt concept with no validity at all. But “Bankroll Management” is a different story.
Poker is a game with a high degree of variance. The predictable swings are extremely volatile compared to the amount of money you can win. You might be a player who averages winning one big bet per hour in a $20 - $40 game that’s $40 per hour; not bad work if you can get it, but your variance per hour might be close to $200 per hour; or more. In fact, the better a player you are, the higher your variance might be. Why is this? Simple. The more skillful player might push every slight edge he has; hands that a less skilled player won’t even recognize as having a positive expectation in the long run, and therefore not play. While our skillful hero will undoubtedly win more money per hour, he will experience swings in his bankroll that may be significantly higher than his more cautious, less skilled cohort.
So how much of a stake do you need to keep form going broke? The answer isn‘t altogether clear, and, like the answer to so many poker questions, “it depends.” While I can’t give you a hard and fast, sum-certain answer, there are a few factors you should consider in making this determination for yourself.
For any of this to be applicable at all, you need to be a winning player. If your long terms results are negative, you will not be able to prevent yourself from running through your entire playing stake unless your life expectancy is shorter than the amount of time your bankroll will sustain, or you continue to infuse your playing stake with money from other sources. This is not as uncommon as one might think. There are lots of wealthy players who can’t play a lick, but have enough money to sustain their level of play through three or four lifetimes. Not only can’t these guys play well, they don’t have to. As long as they enjoy the game, their deep pockets will keep them afloat forever.
But what about winning players? The answer here is not precise either. I’ve always used the figure of 300 big bets as an appropriate stake for a winning player. Using this guideline which I think was first postulated by David Sklansky, though I’m not certain a winning $20 -$40 player needs a $12,000 bankroll to sustain himself through the predictable troughs he is bound to encounter at the table. That figure works for me, but it won’t work for everyone. Here’s why. Some winning players are a lot better than others. And some games are better too. Someone who wins two big bets per hour in a soft, passive game with very little volatility almost no preflop raising and reraising can expect a lot less variance than a counterpart who plays equally well, but plays in a game with maniacs who make it two and three bets to go almost every hand. A terrific player in a soft game can get by on a much smaller stake; maybe 200 or even 100 big bets will do the trick.
It’s also true that all winning players are not created equally, and some are still very close to the edge. Instead of two, or even one big bet per hour, they might win one-fourth of one big bet hourly. Marginally winning players also need a lot more in reserve to insure against their demise.
My advice to you is simple. Play your best game every time. Keep records to prove to yourself that you’re a winning player. Build as big a bankroll as you can for the game you play in. If you average winning about one big bet per hour and the game is not overly volatile, 300 big bets ought to do the trick. But if the game is more volatile, or you’re winning, but just marginally, you’ll need more in store than you think. Don’t pay attention to money management proselytizers who advise you to set “stop-loss” and “stop-win” limits by quitting once you’ve won or lost some predetermined amount. It won’t do a thing for you. If your bankroll is short, either step down in limits or tighten up significantly on your play. If you’re a winning player, you’ll eventually win the same amount of money it will just take a few more hours at the tables to get there.