Saturday, September 24, 2011

Ponzi Poker dot com

By now it shouldn't come as a total surprise that the FullTilt.com poker site was recently busted for stealing money from their customers. FullTilt, as it turns out, was not even a poker site, per se, it was just a global Ponzi scheme. But unlike other historic Ponzi schemes that used the investment model, such as the fairly recent Madoff affair, FullTilt was using the online poker façade. Of course the poker was just smoke and mirrors. In reality FullTilt was just in the business of collecting money from thousands of unfortunate players around the world and simply transferring the funds to their own pockets. But like any "successful" Ponzi scheme, FullTilt also had to create the illusion that any customer could withdraw any amount of money at any time. And also, like any other Ponzi scheme victims, FullTilt customers saw no need to withdraw their money, once they've established that it could be done, since they needed money on their accounts to continue doing what they all did best: play poker for a living. But there was a catch, as it tuned out: FullTilt didn't actually have enough money to pay everyone. That's because most of the money was already gone. Right now everything is at a standstill. The domain name FullTilt.com has been seized by the Feds, pending further investigation.

FullTilt Poker Cheating Ponzi scheme
By now it should also not come as a surprise that some "big names" in poker were implicated in the scam, namely, Chris "Jesus" Ferguson and Howard "The Professor" Lederer. Those were just two of the big names that somehow managed to convince the world (but not including me, actually) that they were somehow superior poker players and that they were able to somehow win in the long run by playing a good game. Give me a fucking break! Poker is not chess. Yes, you can win by playing a better game than the average schmo, but only as long as you play against peasants. And those pros don't seem to do that. They play in televised tournaments against players that are just as "skilled" as they are. And at those levels they really don't have much of a mathematical edge to guarantee they'll stay afloat for a long time.

There's a Darwinian law in poker: survival of the fittest. In nature, you don't see lions attacking tigers; in fact those two spiciest of cats live on two different continents, altogether. Lions go after four legged herbavors, often attacking the sick and old ones, because they are the easiest to catch and at the end all gazelle meet is the same. In poker, if you want to win on the square, you always have to be on the lookout for the clueless, because at the end, money is the same, no matter which sucker put in into the pot. So, in poker, there's absolutely no practical reason for some guy called "Jesus" to go after some guy called "The Professor," or the other way around; at least not if both of them want to fulfill the only objective of the game, which is to win. The only reason why the two of them would ever consider sitting at the same table is to put up a show for all the folks at home, watching TV. But let's face it, that's not really poker, that's just a TV show.

Please don't get me wrong; I am actually very fond of Howard Lederer. "Jesus" is not quite my type, but I still have no harsh feelings for him. So, I definitely don't want to give the impression that I am trashing them. I actually love what they do. All I'm saying is that I never believed that any of the so-called "poker stars" were players on the square that earn their livings solely by playing a good game.

What I'm trying to say is, if you want to win at poker you have to find a way to play with an edge. You have a couple of options to accomplish that. Option 1, you can learn a few basic rules of good play and find inferior players that don't know the same rules. Option 2, you can increase your mathematical advantage by implementing techniques and strategies that you won't find in your Hoyle Rules of Card Games book. If you go with option 2, you can still play against those inferior players or you can expand your pull of opponents by playing against those that only rely on mathematical advantages described in all the poker books that have been published in the past decade.

Speaking of poker books, those are just there to divert everyone's attention to numerous details that might be interesting to read but have very little practical value in the real world of consistent poker winners. Our popular poker stars have to learn all those ludicrous rules just so they can keep up appearances and hold up through numerous interviews. But they can't possibly rely solely on those rules to always end up at the final tables in televised poker tournaments. When you have two random cards and push your entire bankroll into the pot, against a few other players that have also been dealt two random cards, and then wait for five more random cards to hit the board, to complete everyone's hands, and when all the other active players do the same, you can flush all that knowledge about odds and probabilities down the toilet. I don't care how convincing the math is that tells us that you should win in the long run. Most people have absolutely no clue what it really means, when the mathematicians tell us that something should work in our favor, in the long run. Most players will not have what it takes to put themselves through a disciplined long run. Not to mention that the long run in poker is not the same as the long run in blackjack, where the house never makes irrational and/or reckless decisions. In poker you play against unpredictable humans. It has been said that in blackjack it should take at least 10,000 hands of perfect play in order to scratch the surface of the "long run." Any results below the 10,000 rounds threshold are indistinguishable from luck. So, if 10,000 rounds of perfect play is what it takes to reach the long run in blackjack, how many rounds of "perfect play" should it take to achieve the same in poker? The answer is, I have no fucking clue.

I also don't care. To be perfectly honest, I never paid too much attention to all the poker bibles that have been published in the past decade. Since I don't play poker publicly on TV I don't have to convince the public that I'm a skilled poker player, as I'll never be scrutinized through televised interviews. If you only play in private games, you don't really have to justify your play to others. You can simply keep your mouth shot and let others concoct their own theories about why you made certain decisions. All you really have to worry about is to never make a bad call that takes a big pot, and you should not get married to the same group of players. Because if you want to win consistently, and if you don't have all the time in the word, and if you don't like to put your bankroll through a rollercoaster ride, you'll just have to do a little more than just play the odds.

This is not to say that legitimate skilled poker play does not exist. At least in theory it does. And as we all know, in theory there's no difference between theory and practice, but in practice there is. And in practice poker players just want to take the money and hit the next game. Who's got the time to wait around for the long run? But for those that are still looking for legit winning strategies, they do exist. In fact, in some cases those strategies might be simpler than most people realize. But one has to understand which strategies work for which poker games. Because poker is not just one game, it is a family of games.

For example, the winning strategy for 5-card stud, the game that has been known as the granddaddy of all poker games, can be summarized in one short paragraph.

When dealt the first two cards, if you don't see a pair of 10's or better, fold. On any given round, when any one of your opponents' up cards beat your hand, fold. In any other situations you should either bet, call or raise. And most importantly, play this simple strategy only against gamblers that don't play this strategy, and don't stick to the same group of gamblers for too long.

That was the expanded version of the winning poker strategy, for 5-card stud. The short version is simply: play tight against bad players. If you do that, you will win in the (not so) long run. Before you jump out of your seat and call me a lunatic, please take into account that 5-card stud does not have the same betting structure as no limit tournament Texas Hold'em. In other words, it doesn't cost you a fortune to see two random cards, as the blinds escalate, before you even decide if you even want to play the round.

The obvious problem is, no one plays 5-cards stud, these days. The majority of poker "players" are just gambling at no limit tournament Texas Hold'em. And for that game, the winning rules are not as simple as for 5-card stud, which is a limit game. If you ask me, true winning hold'em strategies should (and in fact do) include some unorthodox strategies, for those that actually want to win, in the long run.

In the past, I've often been ridiculed for saying that poker sites are crooked gambling establishments. I was often called a conspiracy theorist. My answer was always the same: I'd rather be remembered as a paranoid skeptic than a naïve sucker. My reasons for stating that all poker sites were crooked were simple. For one, historically speaking, all illicit gambling establishments have always been crooked, in one way or another. There's really no reason to believe that poker sites, for whatever reason, should be any different. But many people did think that poker sites were on the square. The most common reasoning was that they have more to lose from any bad reputation than they stand to gain by cheating. Is that really so? I actually never subscribed to that philosophy. And again, my thinking was simple. Historically speaking, most people want more money, even if they already have more than they know what to do with. And now that money seems to be gone.

One may ask, where did all the money go? I really can't say that I have a definitive answer to that question, but I have a fairly good idea.

When a poker "champ" sits down at a poker table and makes a humongous raise on a couple of lousy cards, some people have been known to think, "Wow, this guy has some balls." Some have even been known to say, "Wow, this guy really knows what he's doing." And if the guy did end up winning the pot, that random event would commonly be accepted as sufficient proof that he must have known what he was doing.

Of course there are other possible explanation for poker "champs" pushing all that money into risky pots. For example, "That can't possibly be his money," could be a reasonable explanation.

In the case of Jesus and The Professor, we now know that was exactly the case. Money "donated" by thousands of online poker players from around the globe ended up in all those live games that the pros like to show off on TV. And it would be reasonable to say that all that money was just blown away, by those pros, in the exact same way as money has always been blown away by reckless gamblers. Again, I'm talking about what historically happens to money, when it ends up in the hands of gamblers. It would take a lot of convincing to make me believe that poker stars are any different.

When the Madoff affair broke I remember catching a New York Times article titled along the lines of, All Ponzi Schemes are Doomed, So What's Your Exit Strategy?

All Ponzi schemes are in fact doomed, but again, historically speaking, most of the schemers fooled themselves into thinking that there would be an end to it and that they could somehow turn the thing around, balance out the books and still end up with a nice chunk of change.

Since I don't have a crystal ball I have no idea what FullTilt schemers were thinking, but there's nothing to stop me from speculating.

I believe they fooled themselves into thinking that the poker "pros" would just "borrow" the money and turn it around at the live tables, then return the borrowed funds and no one would ever know the money took a walk around the block. Of course that thinking is quite naïve, to put it mildly. Things just never work out quite that way and to think that a bunch of gamblers might somehow be able to double, or triple, or quadruple some "borrowed" funds is just nonsense.

So, what's the conclusion of this rant?

Poker has always been a cheating game. Unlike true games of skill, consistent winners cannot solely rely on strategy to beat their opponents. If you want to be a consistent poker winner, you have to do more than play the odds, which is what everyone else seems to be doing. And if you want to be a consistent poker winner on TV, it is mathematically impossible to be seen at the final tables too often, without doing something other than what's described in poker strategy books, especially in reckless tournament play. Stories about poker champs always ending up on top, under televised tournament circumstances, are stories for little kids.