Wealthall: Futures

Wealthall: Futures

Tuesday, 4 December 2012

Nick Wealthall tries to predict the future

It’s a tough time to make money. There’s a recession on, which makes it hard to get a job; the poker games have got tougher, which makes it harder to avoid having to try and get a job; and nothing is returning anything, which makes it harder to make money make more money.

If I gave you £10,000 now, where would you invest it for a return? The banks are paying next to nothing in interest, the stock market has just gone up a tonne for no reason so it will probably dwindle back down later, and property is as bubble-icious in the UK as ever it was. Actually, giving it to an extremely competent SnG player, who can break-even at high stakes, and agreeing to chop up the rakeback and loyalty points probably beats all the conventional options.

The problem is, in the search for answers about where to make money, we look for information – information that, we hope, will allow us to predict the future. Problem is, the future is utterly uncertain. After all, the 2008 American banking crash was the result of betting on one construct: “American property value never falls”. Completely true, of course, until it did. It’s funny to me and, as poker players, it should be funny to you, too, when people use expressions like “historically the best return is in the stock market” and “over time you can’t go wrong with bricks and mortar”. When people make statements like this, all they’re doing is taking past performance and projecting it into a future where, as we’ve established, nothing is certain.

If I gave you £10,000 now, but instead of letting you choose where to invest it, told you you had to invest it in a tournament player’s future earnings, who would you invest in? Your first question should be: can I break it up and invest in a lot of them? That would be the best way to avoid variance; however, it’s my £10k I’m giving you (for some bizarre reason) so you have to play by my rules and you only get to pick one.

You could go for someone who’s won a lot of money in tournaments – kind of seems reasonable that such a player might have a clue what he’s doing. However, it’s probably true that if you know his name from big wins he’s run really well in his tournament career; does that mean he’s “due” to run badly in the future? Should you invest in whoever is “hot” right now – someone who’s confident and killing it at the moment? (Spoiler alert: it’s Phil Hellmuth so that’s a no, that one.) Or should you take the opposite view and look for someone who plays great but has run really badly up to this point and is “due” a big win?

All of these considerations are pretty dumb, of course, despite the fact that people make decisions with their money in stocks, gambling and so on based on exactly that type of thinking. The fact is, you should find the best tournament player, the one with the biggest edge over the competition in the long term and invest it in him. This doesn’t make it any easier, though. How would you define best? Results won’t help you much because variance constantly fiddles with them. Naughty variance. The player’s level of knowledge won’t help you much either – there’s a big difference between theoretical knowledge and executing the right play in the heat of battle. So there is no easy answer – except the correct one, which is to give it to Jason Mercier, because – well, you know – he’s really good at flips.

Let’s change the question a bit and, instead, imagine I gave you £10k to invest in playing poker, to use as a bankroll. Where would you use it? The answer will depend on what you want from poker. If you look at poker as recreation, your best bet will be to buy-in to a couple of big events, possibly the main, and hope to get lucky. If, however, you aim for more, then you’ll want to find the softest games, not just now but also in the future. There are two options in which I’d be investing – both in terms of time and money – if I were starting out now.

First would be PLO cash games. People play PLO horribly and always will. The closeness of equities pre- and post-flop means it can be extremely deceptive for losing players (or to put it in English: players lose their money slower and it more often looks like bad luck). It will always be fun enough and enticing enough for bad players to play and it’s a long, long way from being “solved”, meaning you can have an edge at higher levels. All these things make it a great option for the future. The second choice is MTTs. And I suppose these should be first, but I’m biased towards both cash and Omaha. MTTs now rule the poker world and will do for the foreseeable future. Not only do they offer your best chance of a big bankroll-changing score but also your best chance of additional money from sponsorship. More than that, there will always be dead money now and in the future. There will always be players taking a shot, playing for recreational reasons or players who have won their seats through a satellite.

I guess I should point out I’m not offering you £10,000. Sorry. Probably should have mentioned that. There’s no Nick Wealthall Academy bursary for aspiring degenerates. However the great news is you can go out and make it. Just fire up a couple of PLO cash tables or an MTT or two. Right, I’m off to short Facebook shares all the way to the bottom.

Tags: nick wealthall, futures