Asymptotically Ideal Poker: An Esoteric Skeleton Key
This was a very difficult piece for me to write, and it will perhaps be a difficult read simply because I am not writing it to the proper audience for it. The people that would naturally understand and know of the references I will make are likely not going to read this for quite some time. But I have to get it out there because its very relevant to my argument about bitcoin fitting as the basis for John Nash’s proposal ideal money.
This means I will take unexpected side turns unapologetically. But the sincere reader should still benefit.
In 2011 the poker industry had a shock dubbed poker’s “black friday” in which the United States FBI and DOJ abruptly shut out the two biggest poker providers at the time from operating in the US. Operators outside of the US would no longer be allowed to serve the players residing in the US. This is when I got into the game, as a Canadian, a time when for a brief period the field was very soft since American online players were in general some of the best in the world and could no longer participate.
But soon the professional players from the US moved outside the US, and all that really happened was the recreational players (ie the net depositors or long term losers) were cut from the player pool. The fees sites charge, called rake, didn’t necessarily change, however the games got more difficult and the profitability began to decline.
In poker the best player with the best strategy doesn’t always win, however, they do win if given a long enough time frame. This is a reference to “variance”. If the variance is high, or there is not a large sample size of games or hands played, you can’t discern the better players from the worse players based on results. When poker went from lucrative for a few years to losing hand after hand and game after game I finally brushed up on some of the math involved in looking at the overall profitability of the games from a skilled player standpoint (ie long term).
I found out in the games I played, no one gets a big enough sample size such that you can discern the best players based on results. Players I that I KNEW were good pros were having losing years, and players I knew were terrible were at the top of the leaderboards.
I myself and many others played nearly every day for years and for many hours a day. You can look at stats for the players that played the most games-not even those players played enough games to have a proper sample size.
Many game variants are even more so like this; I’m not convinced any games are analyzable in this regard.
The players then are left with no defense in regard to judging the profitability of the games and it was only by near intervention by my family, which caused me to look at the data and question it, that I realized that the profitability had likely declined significantly over the years.
It is only years later since then that the general player field is starting to catch on.
I redefined the phrase “effective rake” to inject into the poker community’s lexicon so it might wake the collective of them up to this understanding. We can say poker site A and poker site B both charge 7% rake, but poker site A has really good players only and poker site B is full of really bad players-which would you rather play one? Poker site B is more profitable. It offers better poker from a professional player’s view.
Site A has higher “effective” rake.
The result of the court cases from black friday was that Full Tilt, the second leading provider, would essentially admit to being ponzi scheme and Poker Stars would be forced to buy it out and pay back the players that had bankrolls lost from Full Tilts insolvency.
The US effectively set up a monopoly for Poker Stars killing its biggest competitor.
Poker Stars then changed hands from a well known and liked operator Isai Scheinberg as it was sold to Amaya gaming. The policies shifted and the customer service diminished significantly and over time it become clearer that Poker Stars was run by share holders and a board that had no interest in preserving the integrity of the profitability of the games.
Many new policies and changes were implemented which were sold by the PR team as being good for the game when it was clear that the changes and marketing was actually designed to convinced unsuspecting players that they should want these changes (you have to understand effective rake in order to see through the marketing!).
Eventually one by one poker stars celebrity player reps started to come out and speak against the changes as their contracts with Amaya expired. It is impossible to truly know if the player rep really was virtuous in their stance or if they were being vindictive. What was obvious was that Amaya would be letting go of many such contracts.
There was a player run boycott that was organized across many national based and international poker forums in response to direct increases in rake and other unfavorable changes. But a boycott can’t really work in poker because only the informed players know about it and they are all intelligent enough to know that if everyone that is informed boycotts the games will get softer for the period of the boycott (the effective rake goes down). So there is a natural sticking point, a Nash equilibrium, in which no rational player will participate.
The problem is exasperated because poker sites are heavily restricted and regulated through payment processor restrictions since a poker site could launder millions of dollars if left unwatched (no doubt many early sites were doing this). So players often don’t have a lot of options and the merging of Poker Stars and Full Tilt gave Poker Stars an unfair advantage in this regard.
The next year Poker Stars would incite another boycott from the players. Some sites have a “rakeback” system which is like player loyalty reward points. On Poker Stars they were redeemable for not only physical items in the online store, but also for actual cash to be cashed out. The agreement with the awards system for Supernova Elite players (the highest level) is that if they played enough games in the previous year, for the subsequent year they would receive higher points multipliers and cold hard cash bonuses for the entire year.
So you qualify in one year the next year you get the benefits. For an entire year many players raced and played as much poker as they could to make sure they would qualify. It was in November a month before the end of the year that it was leaked that the program would be canceled.
Amaya literally ripped their customers off.
They used Daniel Negreanu, one of poker’s biggest celebrities, to convince the players that increasing the rake is good for the game. He repeated this and argued it and it was all an easy sell to the players that didn’t understand effective rake. The idea is that you take from the winning players and give it to the recreational players thus making the game more fun for them. Robin Hood morality. Communism. The Road to Servitude.
The money never goes to the recreational players. Amaya takes the money and the profitability of the games declines further. Sure “good players” leave but this doesn’t make the game more fun for everyone else, it just sets the stage for a jackpot type of poker in which ever the most skilled players can no longer expect to make profits. And yes Amaya introduced more jackpot games and claimed it is what the recreational players want. For the last 5 or so years Poker Stars trended to offering games that are fake poker. They are exploiting the brand name and making people, that think they are playing a game of skill , lose their money to a game that is rigged to house.
In the second boycott some players that had a louder voice in the community joined the efforts. Poker Stars offered to have a few player representatives come to their headquarters to discuss the changes. One super irate player who’s not worthy enough to name and a couple others flew out and had dinner and wine and talks. When they came back they admitted that nothing got accomplished and they can’t talk about it because they signed non disclosure agreements.
Fast forward to today and the players are still begging for an alternative option which has enough player liquidity to have profitability and enjoyable games again. They do this as they slowly realize that Amaya has them like frogs in a pot of already boiling water.
One such option the players feel is promising is Phil Galfond’s Run It Once Poker. Phil is a well known online and live player and has an incredible talent for playing and teaching the game. He runs Run It Once online poker coaching which houses many of the best coaches and players in the world.
But there is a problem and I’m banned from all of the poker communities so I cannot communicate it to anyone that needs to hear it.
To understand the problem we have to understand Mason Malmuth’s concept he calls the “sweet spot”. Malmuth is an old school poker celebrity that owns and operates the world’s most widely known and used poker forum twoplustwo (there have traditionally be very intelligent and talented people and players that frequent that forum. Game theorists and the like).
Mason explains that some games have higher attainable skill edge for the better players such that the losing players loose too fast. Too fast means they don’t have enough fun to want to reload when they lose their money. It’s also a suggestion that the games will die if players are losing their whole bankrolls faster than they can reload (ie if they have to wait for their next paycheck and so the games die in the meantime because the pros won’t battle pros). You want sustainability in both short and long term and this sustainability, Malmuth argues, can be targeted by the parameters chosen by the operator (we can note there is never any real talk about where this sweet spot is or how to empirically find it which to me is dangerously arbitrary).
Anyone that follows my writing or is well read on Austrian economics already knows my contention with this sweet spot targeting-and its a serious one.
Galfond recently announced the initial conditions of his poker site and to the player’s surprise he admitted he is inline with Daniel Negreanu’s views on how a poker site should serve its customers.
To understand the significance of this choice of perspective we have to understand that a poker site faces a x-lemma problem which is also further complicated by the conflict between players and site operators. I can’t label it a trilemma or dilemma etc. because its really as many lemmas as you divide the problem into.
There are problems from a customer (player) view and many of them are only solvable by taking away certain skill edges the players might have, or the profitability, or the freedoms and rights to privacy of playing in ones own home etc. (ie you could enforce no collusion or bot software perfectly IF you forced players to use webcams).
For example, it can be difficult to stop players from having scripting software that instantly auto sits them with weaker players when weaker players sit at an online table. This is unfair for players that don’t use such software and it effectively costs the honest players. One solution is to have only random seating where no one gets to choose their seat. But this takes a way a very significance skill set that many players have which is choosing who you play with and where you sit in relation to other players on the table.
So sites send up solving one problem from a surface perspective but the cost from the players view isn’t saved at all (and often ends up costing the players more).
Moreover depending on which solutions to these problems that sites choose, and the policies that extend from the axioms, a certain direction for the site is implied in which there is no changing course from.
Galfond chose to offer anonymous poker in which your profile changes periodically. You can’t know who is who from one day to another. This has the same effect as random seating.
Then Galfond took a step to make HUD’s less effective by adding a basic ingrained HUD all players get. A HUD is a ‘heads up display’ which is a window or box that keeps track of the hands you have seen and collects data and display statistics on the way your opponents are playing.
When pros play each other they often use heads. It becomes a game of doing homework off the tables using data you collected and then testing it out versus different players you might or might not also have data on. Phil’s idea is that HUD scare recreational players and so they will try to ban them. Their idea is to give each player you are playing against a avatar with a specific emotion based on how they are playing. So even recreational players that don’t know what a HUD is, will have access to information they might not be able to realize otherwise. If a player is playing too loose this will show in their expression of their avatar (to me its a narrative spin for a bad policy from the players view. What recreational player wants their stats being displayed in an easy to view basic HUD to each of their opponents?).
Phil has leveled the playing field significantly (admittedly) and this is inline with Mason’s “sweet spot” theory that sites have to police the attainable skill edge of the games. And so this is the direction that initial axioms will hold the course of the site to.
The whole direction of the industry which is well supported by the degrading intellect of the collective poker community (as talent and intelligent leaves for better non poker opportunities) is that the game is tending towards losing the skill and probability aspect. Players are sold the idea that poker needn’t be profitable or skill based and that it is greedy to expect it to be.
But to someone knowledgeable about Bitcoin there is something inherently flawed with this kind of argument. Bitcoin makes it possible to have money be printed but not by any central authority which decides the long term quality of it. There is no argument from an authority that the money must be degraded for the better good of the general public. This technology therefore has dampened this socialistic and communist style argument.
Understanding what bitcoin makes possible, from a rational standpoint one starts to see that poker could be served in a radically different fashion and this makes one think about the game differently.
It was in fact such an observation that was inspired by John Nash’s Ideal Money when I had changed his writing to reflect poker’s problem. I changed all the words like money to chips and banks to poker sites and read the resulting essay over and over until I fit it to the poker industry.
And it fit perfectly which I later showed in writings and a small amount of research to be quite a natural parallel. Our games arise in relation to the institutions and cultural norms that form. Poker inherited the problem of our global financial system as if it was a simplified model of it. This means that a solution to our global financial system could be tailored to address the problem of poker from the players’ perspective which is that legacy operators are increasing the rake with impunity.
To do this we would turn to a new poker site model that is arising with sites like “Coinpoker”. These sites offer some equivalent of tokenized poker chips or tokenized rakeback points in their crowd sale and have certain contract conditions of how such tokens will be issued and distributed.
It is a very wild west environment that THESE axioms set a course towards. But there is something special about a project like Coinpoker, for example, that offers a finite amount of token chips for the players to use on their site. Since the tokens are available on different exchanges they will have an associated value trend signaled by the exchange price.
This price signal, among other factors, will signal the effective rake, or in other words the trustworthiness and profitability of the respective poker site.
So in the near future there will be a whole fleet of new poker sites that arise with this new model and each of them will have an associated price to their token and players will be able to immediately judge the value of each project.
Since they will no longer be subject to payment processing restrictions and players can flee bad policies from poker sites instantly and costly this will put great pressure on the operators to tend to the skill edge and profitability of the games.
Galfond is choosing axioms that will block RIO poker from being able to have these signals for the players to use. They are choosing to comply with regulatory bodies that cannot possibly catch up to the technology fast enough to understand the benefits of it.
While the players get used to having a new metric for judging the profitability and security of their games RIO poker and any emerging or existing site that doesn’t utilize such technology will be viewed, at the very least, as not necessarily being trustworthy.
Much like Nash predicted in regard to the advent of an international e-currency with a stable supply, we can expect an observable and powerful shift to occur once a few of these new sites have tokens that gain reasonable stability in relation to bitcoin (and as bitcoin gains its own stability in relation to national currencies that in turn gain there stability in relation to each other). As these tokens stabilize there will be an asymptotic trend towards lower rake.
I can’t yet speak of the profitability of the games but we can see as new protocol solutions are implemented (ie mental poker) there will be a time when a 3rd party operator is no longer needed. Here we can resolve the idea that rake will asymptotically decline and note that at the asymptotic limit the 3rd party operator becomes irrelevant.