October 17th, 2011

On day 1 of the 10k Euro split-format event at the WSOPE I randomly asked someone at my first table what he thought about the Occupy Wallstreet protests.  He had no idea what I was talking about and neither did anyone else at the table.  I was only a little bit surprised that nobody at a table of mostly live poker tournament regulars had heard of the worldwide protests for economic justice that were all over the news and all over my own twitter feed; but I was totally floored that even this player, a former Wallstreeter, himself, hadn't heard of them.  I have always known how isolated the poker community can be but this was one of those moments that really brought it home.  In light of that exchange I decided to post as a blog this email exchange I had last week with a friend of mine.  He had gotten into a discussion with his sister about this Paul Krugman column from the NY Times  (Confronting the Malefactors - NYTimes.com)  and decided to write what an op-ed piece of his own.  He sent it to a few people asking their thoughts and so I wrote him an email in response.  I think its an interesting exchange because though it's not overly profound it does address some initial issues/questions that I think are important.  My hope/goal is to spark conversation about some of these issues in a community that normally doesn't address them; these problems affect us all and its my belief that we each have a responsibility to be informed and engaged.

My friend's email:
I've never felt compelled to write an OP-ED piece before, but a discussion I recently had with my sister led her to send me a NYT article which I found infuriating.http://nyti.ms/qgp6YO   I ended up writing this in the middle of the night and am very curious if you agree or if you think I'm over-reacting and being too defensive of my former trade...

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Can I tell you something?  Wow.  I hadn’t even finished reading the article when I went to the office to begin typing… He had me fired up at his paragraph on the “3 act play.”  Now that I got to his suggestion that he wants “debt relief for working Americans” I realize that this guy isn’t worth my rant… Isn’t that AMAZING?  America doesn’t have a financially savvy younger brother to give it good advice or pay off its credit card bills… THAT’S what this author wants, but he ain’t gonna get it from my vote !!!!!!!


My response:

I actually disagree with you on a number of points here.   First of all one thing I've noticed in so many defenses of Wall Street and/or conservative responses to liberal/progressive points in general is this obsession with attacking the messenger.  Who Krugman is, what jobs he has had or wasn't able to get, is totally irrelevant in my opinion.  I don't care if he has a bias towards or against Wallstreet.  My concern is whether the content of his argument is valid or not.  When it comes to content, I think you're missing some of Krugman's main points.

I am the first to admit that I am not an expert on economics, the financial crisis or the housing market but it seems like you are giving too much credit to tax deductions for mortgage payments as a major factor in the housing crash (the tax credit on mortgage payments has been around for almost 100 years but this housing bubble is less than 10 years old).  I personally believe that this regressive (since most poor people don't own houses) deduction, like most deductions, shouldn't exist.  I agree that it is a reflection of a governmental policy that encourages home ownership and in so doing encourages over borrowing which is essentially an inefficient application of resources.  However, the idea that this is purely a political policy and that Wallstreet is merely a vehicle is incredibly naive.  This connects to the point Krugman was making at the beginning of his piece.  The fact is that Wallstreet owns Washington (remember Dick Durbin in 2009).  Over the past 30-35 years, Wallstreet has systemically influenced Washington to change the rules of the game to maximize its benefit.  That, after all, is the job of lobbyists and no lobbying group has been more effective in the past 30-35 years than the financial industry lobby.  Wallstreet isn't simply playing the hand that Washington deals it, its rigging the deck.  This is what he means when he says "they took advantage of deregulation to run wild".  If anything his language is not strong enough because he doesn't include the obvious fact that they didn't just take advantage of the deregulation of financial markets, they basically bought it.

The specific point he is making with regard to deregulation and housing has to do with engineering new financial products, especially being able to securitize debt.  Basically throughout our banking history there has been this relationship between lender and borrower where they were both incentivized to make sure the borrower could pay back.  Once the link between the lender and the borrower was broken, (when banks started combining mortgages and then offloading their risk) banks were no longer concerned with whether borrowers could pay their loans back and went on this lending binge focusing on getting as many loans through as possible. This general climate led to an insane amount of predatory lending, basically all of which was unethical and much of which I have little doubt was illegal.  Do people have a responsibility to make sure they are taking on loans that they can pay back?  Of course.  Are they wrong and should they be held responsible when they take on bad loans and can't pay them back?  Of course.  But we are not talking about a few bad apples who overextended themselves.  If it was 10,000 people, maybe; 100,000 people it's possible.  But we are talking about millions of people.

This is obviously a systemic problem and was strongly encouraged, influenced and in part, caused by the lending institutions themselves.  Irresponsible behavior occurred on all sides.  What people feel is unfair, and what a lot of the OWS movements are about is that free market principles were not applied fairly in these situations.  One side, the banks, was irresponsible and their irresponsible decisions had a massive impact on the financial system as a whole and hurt many real people in significant ways.  Many of the actual individuals who made a lot of these irresponsible decisions not only didn't suffer serious consequences but they actually got personally rich in the process.  The institutions that these individuals worked for were bailed out by tax payers and many of them now have rebounded very well while the rest of the economy still flounders.  The other side, main street, was also irresponsible but was left out to dry.  As a group, they were maligned in much of the media (remember Rick Santelli's rant on CNBC) and they were mostly treated with "tough love".  This is one of countless examples of "really existing free market theory"; (if Krugman gets you mad, I can't imagine what Chomksy does to you) that free market principles should apply to you but not to me.  That when I act irresponsibly, I need a bailout cause I might wreck the whole system but when you do it, you need some "tough love" cause of "moral hazard".  This inconsistency is the crux of the issue.  I mean look at Greece.  The majority of "serious" people are talking about simply writing down a lot of Greece's debt.  That seems pretty similar to what Richard Yeselson was advocating for, just on a much larger scale. Its not like this principle is not applied in many situations so why is it so outrageous that it be suggested to apply to poor Americans who were tricked into thinking they were going to pay 4% interest and then couldn't afford their mortgage payments when their interest rates jumped to 12%.

When you say that Krugman clearly shows his political bias you are totally taking his comment out of context.  He was talking about the OWS protests and the way the establishment media, especially in the beginning, was treating them.  In his quote, he's not saying he doesn't like wealthy people he's saying that when you compare two things, hes more offended by one than the other.  The thing that offends him more is also not simply wealthy people, but rather its "people who owe their wealth to government guarantees" (a hyperbolic stretch I admit) complaining about "mean things" Obama has said about them.  The point here relates to another point you make.  I'm not sure where you got this idea that Obama is hostile to Wallstreet but he is far far from it.  Some of his rhetoric has been slightly confrontational but I think it's pretty clear that this was merely shallow pandering to his base.  When it comes to actual actions, Obama has been super friendly to Wallstreet.  I'm not going to go into details about the myriad ways Obama has acted this out but just read Glenn Greenwald's piece on Salon.com from today 10/11/11 on the OWS protests.  From his cabinet, to his support for the bank bailouts, to the way he handled financial regulation and on and on, Obama has been incredibly friendly to Wallstreet.  This should also not be a surprise since Obama is the #1 recipient of campaign donations from the "securities and invesment" industry from 1989 to 2010 having received more than $16,000,000 in that time period.  

The last thing I'm gonna say is this.  What do you think about the financialization of our economy in the last 30 years?  From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.  There are tons more statistics relating to income inequality in this same period of time.  Do you think this trend is good for America?  Do you think that these financial titans "deserve" all this money?  Do you think they are that much smarter and hard-working than everyone else?  I mean look at the gap between financial sector compensation and say scientists or engineers?  Does that gap make sense in your mind? I mean are these people contributing to society, making our lives better, raising our standards of living on par with their compensation?  Are they innovating, inspiring and creating?  Are they producing?  Isn't that the goal/purpose behind economic growth?  I personally have no problem with people getting rich.  It's one of the best things about America and its a dream that I, myself, share.  But I do have a problem with a system that rewards people in warped ways; where social mobility is very low, the gini index is very high; and where incentives are so screwed up that someone can bankrupt their company and walk away rich.

July 14th, 2011

I’ve wanted to write a piece about education for a while but just hadn’t gotten around to it until now.  I first felt the impetus to write this piece after reading a couple of blog entries from fellow poker player, Alec Torelli, where he essentially argued against people pursuing higher education.  He used a bunch of absurd reasoning and inaccurate numbers, which I won’t go into detail about and aren’t relevant for this discussion.  After reading those blogs, though, I immediately felt a tinge of anger because I thought he was being incredibly irresponsible towards young up and coming players who look to older successful players as role models for important choices in their lives; and I know that going to college is an incredibly important one that many young players struggle with.  I, myself, have had multiple conversations with people who are considering going to college or considering going back after having dropped out after a semester or two.  I personally feel that going to college is ultimately an individual choice (and could possibly not be the right choice for someone, Alec very well may be an example) but in my multiple conversations with young players, I have yet to encounter a single situation where I thought going to college wasn’t very clearly the right choice for them.

I was very lucky growing up in multiple ways.  I was lucky enough to attend Trinity High School in Manhattan, which in April 2010 Forbes Magazine named the best college preparatory school in the United States.  I was fortunate enough to be able to attend Cornell University and graduate without student loans.  Most fortunate of all though, in my opinion, is that I didn’t start playing poker until well after I had graduated from college.   I wasn’t forced to make some of the difficult choices that players are forced to make today.  I sympathize with, even if I can’t totally empathize with, the trade offs that these young players feel they are forced to make.  I can’t even unequivocally say that at the time, I would have had the maturity and foresight to make what I see now as the very obvious right decisions.  Having had the benefit of my experiences however, I want to strongly urge young players who have decided not to go to college or to drop out, to reconsider.  There are two main reasons why I think going to college is worthwhile and for the rest of this blog I’ll be speaking directly to those people who are considering whether or not it’s the right decision for them.

Personal development

Most 18-20 year olds don’t know who they are.  Most of you think you do, but you don’t. Your late teens and early twenties are a time when you will inevitably go through an enormous amount of change in who you are, what you’re interested in and what you value.  It’s a defining time in a person’s development and it is therefore crucial to fill that time with rich experiences, different types of people and new opportunities.  College can be an incredibly enriching experience and an enormous amount of fun in a semi-controlled environment where you are a little bit more free to make mistakes and a little bit less liable in dealing with the consequences.  College is about so much more than just going to classes.  It’s a social experience, a personality developing experience that you are uniquely able to enjoy in your late teens and early twenties when you generally have very little or no responsibilities.  It’s pretty commonly accepted that the best friends people make in their lives tend to come from their college days.

Many players tell me that they hated high school and therefore think they will also hate all forms of higher education.  However, college is not simply an extension of high school.  One big reason for that is choice.  You have so much more choice in where you go, what you study and whom you hang out with than you did in high school.   You can pick a major, a year later decide it’s not for you, and then switch to something totally different.   You’ll meet kids from all over the country, even all over the world and have a diverse group of people with different backgrounds, interests and abilities from which to pick your friends.  You can even travel while you study.  Many schools have great study abroad programs where students can live in a foreign city for a semester with like-minded kids their own age and study as well as travel.  This is very different from simply picking up on your own and traveling by yourself or with a group of friends.  There is much more structure and balance in a study abroad program and you are still being productive academically by earning credits towards graduation.

Ultimately, college is a transition period between living with your parents and living on your own, between being supported and supporting yourself.  You choose where, when and what to eat, when you go to sleep, and how to spend money.  Obviously, 17-22 year olds living at home have a wide range of freedom but the point remains, college can soften the blow for young adults of what is an inevitably difficult transition to the increased freedom and responsibility of the real world. For many young players who chose not to go to college, I’ve noticed a similar disturbing pattern.  Many of them end up insulating themselves from the “real world” spending a disproportionate amount of time playing poker, thinking and talking about poker, hanging out with other players, and just generally being consumed by the game.  Instead of being forced to mature into responsible independent adults, they end up partly wasting a critical time in their lives that should be used learning from their mistakes and developing their real character.

Many young players tell me that they can’t see themselves working at a desk, working for someone else, or in general working in any specific job they can think of.  They usually claim to be “entrepreneurs”, but inevitably have no specific plans beyond winning a live tournament and then “investing in a business”.   This in my mind generally reflects a spoiled, undisciplined and immature attitude that is generally in denial about some basic truths; one being no matter what you do in life, you usually have to spend a decent amount of time and effort doing things you don’t necessarily want to do, another is the two main keys to being successful in anything are planning ahead and being prepared, as well as being willing to work harder than the next guy.  Instead they bemoan the miserable life of “working in a cubicle” as if every non poker-playing job is some awful iteration of the movie “Office Space”.  This attitude, in my opinion, tends to reflect both an ignorance and naiveté about working life.  They might hear lawyer and think Law and Order but don’t know the difference between the daily lives of a corporate lawyer and a civil rights litigator.  They hear doctor and think House but don’t know the difference between a pediatrician and an orthopedic surgeon, or the difference between a sales trader and an investment banker.  How do you know if you want to be an electrical engineer, a graphic designer, a high school math teacher or even a nuclear physicist when you really don’t know much about what their jobs entail, what their lives are like, or even what you, yourself, are truly passionate about.  By deciding not to go to college, however, you can basically guarantee that you will never know if you like or dislike any of these jobs/lifestyles, not to mention a myriad of others.   This is the time to try something new, to fail at it, try something else, decide its not for you, and through this difficult and non-linear or textbook process, discover your true passions, your real interests and how you can pursue them in your life.  This is a time for opening as many doors as possible, not closing them and ultimately limiting your choices 5, 10 or 20 years from now.  If it seems like a difficult trade off at 20, imagine the trade off at 30 or 40.  What if you’re married, or have children? 

Financial

In a culture dominated by immediate gratification, consumerism, celebritism and greed, the “American dream” has been distorted to now mean getting rich while making the least effort possible.  Without getting into how absurdly fantastical and counter-productive this general notion is, let’s quickly explore its relevance in poker.  In the poker world, this idea manifests itself in numerous ways, not least of which is the idea that many young players believe that its easy to become a consistently (key word) successful professional player and/or that most professional players live a stress free life and are rolling in money; that all you have to do is run good for a little while and you’ll be rich.  Both of these ideas are nonsense and totally mythical.

One of the dirty little secrets in the poker world is that most professionals, (yes even famous ones) are much more broke than they appear.  For example, you might see a player’s headline number of $4 million in tournament earnings but don’t realize that the player in question has been playing tournaments for 8 years and has averaged $300k a year in buy-ins.  That comes out to $200k a year profit, which is no doubt a good living, but especially when you consider travel expenses, it’s a much different lifestyle than the headline number suggests.  Poker players, in general at least, are also notorious for making awful long-term financial decisions when they do have some money to spare (by a Jacob the Jeweler watch anyone??)  Its incredibly common for a player to win a million dollars or more in a tournament or 2 and then be broke a year later.  From staking other players to playing table games to spending too much money partying or playing stakes that are too high, there are a bunch of different ways that the professional poker player lifestyle can consume a player’s bankroll. I’m not arguing that it’s impossible to make money as a professional player, I’m simply saying that the same dynamic, albeit on a much smaller scale, exists in poker that exists in professional sports.  For every kid who thinks they’re the next Michael Jordan, the harsh reality is that only a tiny % make the NBA.  Similarly, the %s isn’t much better in poker and there is only one Jason Mercier.  I’m not saying this to call out or belittle any individual player, but because I think that the majority of young players who think that they are going to be rich from playing poker need a dose of reality. I’m also not arguing that going to college is going to guarantee a great paying job; that is almost equally as absurd.  However, there is very little value in pursuing poker as a career besides financial and lifestyle, and the financial part of that idea needs to be placed in proper context.

One of the biggest problems facing young people graduating from college today is student loans.  College has become more and more expensive and as the income pie has been more and more unevenly divided, middle and lower class families in America have in many cases become simply unable to pay for their kids to go to college.  These loans create financial and psychological burdens that stay with young people for years, influencing which jobs they seek, how old they are when they get married and have children of their own and so on and so forth.  A successful poker player can dramatically offset or even totally avoid this problem by using poker profits to pay for school.  One caveat is that for some players, this might add additional pressure when you play feeling that now you have to win to pay for school.  However, I think that this can simply be worked into an already necessary bankroll management framework.  If you can make 20-30k a year that can go a very long way to paying for your education and reducing your long term debt burden, and that is a reasonable amount for a young, talented player to make.

There is another obvious but still worth mentioning aspect to all of this, which is that going to college and playing poker can be done together.  You don’t have to choose one or the other.  It is surely difficult to manage both successfully but it’s definitely doable.  It requires motivation and organization but is well worth it on multiple levels.  Furthermore, this might be counter-intuitive but I also think that going to college can help someone be a better poker player and even to make more money.  You might end up playing less hours but I think your win rate can improve.  There are two main reasons for this.  One is that depending on what you study, college can help develop and improve critical thinking and reasoning skills - this is actually the main academic function of college in my opinion.  The ability to construct and deconstruct arguments is an essential skill not only for navigating life successfully but I also think it is specifically relevant for poker, especially online poker where range balancing and therefore higher level theoretical poker is so much more important.  The other and probably more important way college can help you become a better poker player is by helping you to achieve life balance.  Balance is one of the most important and necessary elements in a successful poker player’s life.  Going to college will help create other priorities, both social and academic that compete in your life with poker.  This will help to make poker a less dominant force in your life and give you better perspective.  One of the biggest problems I see young players make is playing too much.  You play when you’re tired, when you’re hungry, when you’re losing and you usually play sessions that are too long.  You play well for a while but eventually your play drops off.  Poker is so competitive that you have to make sure you play only when you are at your very best.  Having other priorities hopefully will help force your sessions to be shorter and more focused, and therefore more profitable.  It will also make dealing with variance easier because winning and losing won’t be the only or even main sources of joy and/or sadness in your life.  I know that not everyone has the same issues with poker but from both my own experiences and conversations I’ve had, I have noticed some obvious patterns in the problems people deal with while playing poker so I am trying to speak to those.

I have purposefully waited until the end of this very long blog to discuss this subject in the context of Black Friday.  Like I said earlier, I’ve wanted to write about this for a long time (way before Black Friday) and want it to have resonance regardless of the online poker situation in the US.  I genuinely think that the current black out of online poker from the US will only last a matter of months.  I think that it’s a perfect time for young players to reassess their priorities and reorganize their lives.  My hope is that this temporary hiatus can serve as a much-needed wake up call for many of you.  It is very easy to get wrapped up in poker and never stop to think about your long term prospects, from every point of view, financially, socially, spiritually, etc.  Sometimes it takes a jolt to your system to ask yourself some important questions about the path your headed and where it eventually leads or should lead.  A college degree doesn’t answer those questions but it serves to open many doors that increase the likelihood of one day finding fulfilling answers.

I’m not trying to glorify college life or universities in general.  I have a number of problems with our current higher education system.  I know for example that while grades have not gone down in the past 30 years, kids are graduating from college with severely worse cognitive skills.  College students are basically working less, partying more and getting the same grades.  I think this is mainly a cultural problem though and related to a number of factors, among them discipline and motivation.  However if a poker player chooses on their own to attend college even when they have a potentially lucrative “job” waiting for them in the poker world, that should immediately put the issue of motivation to rest.   I do think, though, that like many things in life, college will ultimately be worth about as much as you put into it.  Is it possible to go through school without making much effort academically, socially or spiritually (or whatever word you want to use to describe emotional and psychological development) and therefore waste both time and money?  Yes.  But it’s also possible to go to college and learn a ton of worthwhile things, develop essential life skills, meet and make great friends and grow tremendously as a person.  Ultimately the choice is yours.  Good poker players pride themselves on being long-term theoretical thinkers.  If you really have what it takes to make it in poker, then try applying the concepts of Sklansky dollars or G-bux to your life and you will quickly realize that the long term optimal play is to go to school, that to maximize your happiness and fulfillment equity means to plan ahead and make some short term sacrifices.

April 17th, 2011

Two days ago on Friday April 15th, the FBI indicted 11 people including the founders of Pokerstars, Fulltilt Poker, and Absolute Poker.  They were charged with money laundering, bank fraud and illegal gambling.  Restraining orders were also issued against more than 75 bank accounts used by poker companies and payment processors.  Finally 5 Internet domain names were seized.  In response, the poker websites, including Pokerstars and Fulltilt suspended real money play for their American customers.  I, like many of my friends and peers, suddenly saw my day-to-day job, the main source of my livelihood and a decent amount of my financial assets frozen indefinitely.  Very little information was available.  Many people, not surprisingly, panicked.  They went into crisis mode about having to work at a fast-food place, about losing all their money, about moving to different countries and generally about their lives as they knew them being over.  Speculation abounded with many people giving doomsday predictions and extreme points of view dominating the discourse.  There have been a few voices of reason trying their best to understand the situation and explain it to the frightened and anxious majority.

 

In the first couple of days I was bombarded with people desperately asking me what I thought was going to happen.  Obviously I have no more information than the next person and I am not a legal expert so I can only speculate along with the majority of others.  I, however, seem to have a different point of view about this situation then most, and am much more optimistic than almost anyone I have spoken with.  I decided to wait a couple days before writing this because I assumed that a little time would allow cooler heads to prevail.  My point of view is relatively simple.  First of all, very little information is available; therefore jumping to conclusions is illogical and not helpful.  Reacting emotionally isn't constructive and can only lead to making poor decisions and/or stressing unnecessarily.  Is it possible that online poker is over for Americans?  Yes its possible but I don't think it’s very likely.  My prediction is that the lawyers will meet first thing Monday morning and start negotiating.  Within a week or two, they'll agree to a number for the sites to pay in penalties and while the rest of the legal issues are worked out, play will be allowed.  I think the government is going to have a really tough time proving the illegal gambling charge in court but regardless, I think there will be a decent amount of time before that question is answered; and in the interim I honestly believe that we will be allowed to play. In terms of people’s deposits, these websites are large companies that are legal in other countries and have wide customer bases that they continue to support.  So it seems incredibly unlikely that they will endanger their entire business model by not honoring our current cashier value.  In short, I am very confident that our money is safe.  Again I have no more information than anyone else and I am merely speculating.

Rahm Emanuel, the former chief of staff for Barack Obama and the recently elected mayor of Chicago famously once said, "Never let a serious crisis go to waste".  I think that concept can and should be applied to this situation with online poker.  For anyone who suddenly has a lot more free time than they have had in a long time and is not sure what to do with it, here are some suggestions....

Do some poker homework - Spend some time objectively thinking about how you play.  What are your strengths?  Leaks?  How can you improve overall?  What are people who you consider better than you doing that you're not doing?  Are you at the right limits?  Are you playing enough?  Are you playing too much?  Too many tables?  If you have poker tracker or anything that tracks your performance, (or even if you don't) spend some time analyzing yourself.  Everyone can get better and sometimes we need to take a step back from playing before we can understand exactly what we need to do to improve.

Call a friend - This obviously isn't true for everyone but some people have a hard time balancing poker with other things in their lives.  As a result, because of poker, occasionally people struggle to develop and/or maintain personal relationships with people they care about.  Go through your phone.  Find a person that you haven't spoken to in a while that you miss and give them a call.  Make an effort to see them.  This will help take your mind off of poker while you are waiting for more information and can be a great opportunity to reconnect with someone that is meaningful in your life that you have been neglecting for too long.  For some players, you might find this list of people to be much longer than you realized.

Learn something new - Along the same balance theme, poker can be so consuming that many people also forget some basic life skills or neglect doing things they wanted and/or planned on doing for a long time.  Did you want to start exercising regularly but just never did?  Did you want to learn how to cook?  How to play an instrument or speak a foreign language?  Was there a book you've been meaning to read but just haven't gotten to? Have you been sleeping crazy hours?   Use this extra time to get onto a healthier and more productive schedule or learn something you've been meaning to learn.  I think most players would be amazed at how much non poker-specific things like nutrition, exercise, sleep and overall balance can affect their happiness, productivity, clarity of mind etc.  I also firmly believe that when online poker comes back, if you have started to incorporate some of these healthier aspects into your life, that they will also help your overall poker game as well.

My main message is that people shouldn't despair.  Things are rarely as great or as bad as they initially seem.  This online poker freeze is assuredly an example.  Use some time to re-evaluate your life and how poker has been fitting into it.  Use this forced hiatus productively and it will surely pay dividends when online poker comes back, if it ever does...