Beginner Series Part 10 - Risk vs. Reward
Making sure we are finding the proper balance on the felt and in life.
Editor’s Note: I must confess that poker shares a place in my game infatuated brain. Where poker is my infatuation, College Football is my paramour. As the season of this witch is upon us, it leaves me less time to write this newsletter. I hope you understand that even if posts are less frequent, I am trying to make quality the best that I can. I’ll ramp back up in January but expect at least one post a month in the meantime.
The Toy Game
Lets say I were to give you an honest die and tell you that you can pick 4 of the 6 numbers and I will take the remaining two. Now lets presume that I offer a game of chance to you with the winner of each roll winning a dollar from the other.
With you holding 4 of the 6 numbers, you would be foolish to not play this toy game against me for as long as I am willing - or can afford - to play it. Life doesn’t give us a lot of 66.66% winners.
Let’s say we can roll a round every 10 seconds. That would give us 360 rounds per hour. Of the 360, you would win around 240 of them with me winning 120. That would have you profiting $120 per hour in the long run. As long as you don’t make more than that in your profession, you should consider this game an upgrade to your ROI per hour from your regular employment. If you make more than $120 in your current job - good for you - you should only play against me to make some extra money if needed, have fun, or take money from me due to disliking my character.
In this toy game you are taking minimal risk for a good reward - an EV of over 33 cents per roll of the die.
Now lets change the game. Let’s propose that I am much wealthier than reality insists and I have a disregard for money. I offer you 5 numbers of the die but insist that we play for $25,000 on one roll but I refuse to play the game again afterwards.
Here, it appears, you get into a low risk high reward situation. It appears low risk because you will win over 83% of the time. The reward is relatively high compared to most peoples concept of “wagering money”.
However, here is where things get a bit muddy. The appearance of low risk is relative to outside factors having to do with your current wealth. If your entire net worth is $25,000 or so, this is probably a bad deal for you. Why? - It’s because your risk in the real world is extremely high.
I don’t want to go on a financial planning tangent but people should know that the last of a person’s dollars are much more important that those off the “top” of the pile. With the last of a person’s money, wealth can be rebuilt and earned upon much easier than starting from zero without a safety net.1
This is the “Risk Premium” of life. And so it is with poker tournaments as well.
There is the risk premium of “end game” poker tournament strategy that demands that you have more equity that EV requires to make a call for the rest of your tournament chips.
However, before we even get to that end stage, we face Risk vs. Reward scenarios from the first cards dealt. This risk / reward balance actually dictates GTO play.
Risk dictating our play.
Let’s take a hand like ATo. At 100 Big Blinds (BBs) deep - Most tournament start at around 200 BBs - this hand is a fold from Under the Gun (UTG). However, once we get to 80 BBs, it becomes an open raise / Raise First In (RFI). So what’s the difference?
The difference lies in the risk involved. Because of the UTG position, there is a better chance that someone behind wakes up with a better ace, you see a flop with an ace, and you lose a large chunk - or all - of your chips because your opponent had a better kicker. The larger the stack you have the more careful you need to be when picking hands that could be dominated like ATo, KJo, and QJo.
On the other hand, small pocket pairs like to be deep stacked. The idea here is to play a hand like 44 for cheap against your opponent’s AQo. If the flop runs A, Q, 4 or Q, Q, 4, you have a legitimate chance to stack your opponent (huge reward) for a small price.
The beauty is you won’t be strung along if you whiff. Let’s say the flop is A, J, 6. Once your opponent bets, you have an easy fold unlike the scenario when you played the dominated ATo. This makes the play low risk. These low risk / high reward scenarios are what you need to look for early in a poker tournament.
20 - 30 BBs
However, deep stacks don’t last too long. By the time you are an hour into a tournament, things have already changed. Two hours in, you may be doing perfectly fine and it turns out you are only at 30 BBs. Even if your opponents have around the same amount, you need to be playing different cards at this stage than you were when deep stacked.
For the sake of brevity, lets discuss some similar scenarios and look at the differences.2 At 20 BBs we are open raising with the ATo and folding pocket pairs 22 - 55 from UTG. What the heck happened?
Well the ATo is performing about the same as it was in the former scenario after seeing the flop so the reward is about the same. However, the risk has actually gone down. When you have 20 BBs and bust out of a tournament, it is simply not as catastrophic as when you bust out with 100+ BBs. Therefore when this risk dips, it makes the reward we are seeking more feasible to reach for.
Regarding the small pocket pairs, the risk is close to the same as it was before. We will only flop a set about 1 out of every 8 times we see the flop. This is true no matter how many BBs we have. What does change is the reward. In our earlier scenario, we had a chance to stack an opponent with 100+ BBs. Now, even if we double up, we are going to go from 20 BBs to 40 BBs. That’s not nothing. However, the reward of the same risk has dipped significantly. Enough to make playing 22 - 55 from early position unprofitable in the long run.
End Game (>10BBs)
At end game of a poker tournament some really wild things happen. While there is risk premium for busting the tournament. It waxes and wanes depending on the ICM pressure which usually peaks around the money bubble and the final table bubble. However, without getting too complex, lets stick with our ATo and small pocket pairs from early position scenarios.
When getting very thin on chips, it is never a bad idea to go all in with an Ace or a pocket pair. Sometimes that means ANY ace and ANY pocket pair. Although we flipped the importance of playing (and not playing) these two hands on the previous two stack sizes, they both converge to do quite well at end game. So what happened here? Are we widening our range?
What has happened with the ATo is we remove an ace from our opponents ability to have a better one and if we get called by a reasonable hand like KQs, we are ahead. We block AA and TT.
The small pocket pairs that we relied upon to flop a set deep stacked and completely gave up on mid game because of the pressure we would face on future streets, have now become strong enough to shove on their own merit.
We don’t expect to flop a set here. We simply want to hold up against AQo and double up. Once we go all in, we will see all 5 community cards and realize all of our equity without having to face pressure filled bets from our opponent(s). The risk of blinding out has simply surpassed the risk of busting on a shove in this scenario.
So did our range expand? Not really. Throughout all three of the BB stack sizes we have discussed, our RFI range has been about 17% of hands from UTG. For these hands we are adding to our range at end game by shoving our pet hands of the day, we are dropping hands like KJo3, K8s, JTo, QJo. These 4 hands are now open folds from early position. We lose these hands for the simple fact that an opponent with any ace can call us and be ahead. At 10 BBs, we simply don’t have enough fold equity (our opponents aren’t folding very often). This risk is higher than shoving the A6o.
The main takeaway I hope you glean is that when eyeing a reward of any kind - keep an eye on the risk involved. Know that these risks and rewards sometimes fluctuate by our personal biases and lot in life. So on the felt and in your checkbook, take a look at the risk. This may be worth it to you.
The only person that I would recommend this wager to would be a young person in her teens or early 20’s with a good job. She has the maximum number of years to rebuild her net worth and the reward may be worth the risk.
I encourage you to play with some preflop charts to explore this phenomenon.
KJo is actually a mix but prefers a fold from UTG at 10BBs