Poker: Skill vs. Chance

Those of you who’ve been reading this blog for a while, and especially those of you who play poker, may remember a research project called Pokernomics, which is meant to determine what makes a person a good (or bad) poker player.

Lately, the question has become more than an academic one. As explained in this morning’s Wall Street Journal:

The skill debate has been a preoccupation in poker circles since September, when Congress barred the use of credit cards for online wagers. Horse racing and stock trading were exempt, but otherwise the new law hit any “game predominantly subject to chance.” Included among such games was poker, which is increasingly played on Internet sites hosting players from all over the world.

There has since been a strong pushback from a group called the Poker Players Alliance, which recently held an exploratory conference at the Harvard Faculty Club — replete with Harvard faculty like law professor Charles Nesson, who hopes to, as he puts it, “legitimate poker.”

The article, written by Neil King Jr., is a very interesting one — although I do wish it explained the real dynamics of the online poker debate, which, as I understand it, primarily concern the lack of taxation and regulation. The luck vs. skill thing, in other words, is more of a fancy fig leaf than anything.

Anyhow, the article is well worth a read, even if you don’t know a thing about poker. In fact, the article assumes that you may not know a thing about poker:

Poker is at heart a betting game in which players compete against one another for a growing pot of money. Players win either by getting the others to fold their cards or by having the best hand, ranked according to a hierarchy.

(If I were a betting man, I would bet that those sentences were added or requested by King’s editor.)

King’s article also links to the blog written by Annie Duke, a poker champion and, let’s not forget, a rock-paper-scissors champion, too. Duke offers a simple but compelling argument (attributed to David Sklansky and Duke’s brother Howard Lederer) for poker as a game of skill and not purely chance.

The gist is this: forget about winning at poker, and think for a moment about losing. Is it possible to intentionally lose a poker game?

The answer is yes, of course. Is it possible, meanwhile, to intentionally lose a game like Baccarat or roulette or craps?

No, it’s not — which means that you have no control over the outcome, which means that they are entirely games of chance. And which means, in Duke’s argument, that poker, therefore, is not.


dix

While I agree that in the long term poker is a game of skill, one could also intentionally lose at blackjack (continue drawing cards) but it is still primarily a game of chance.

kentog

That argument is silly in that Blackjack, which is undoubtedly a game of chance, can also be intentionally lost.

egretman

Why do we even trust games of chance or games of skill over the internet? How do we know that the computer isn't dealing from the bottom of the deck?

frankenduf

I can intentionally lose at blackjack (I'm quite good at losing at BJ), but to win appreciably, I need some aces- but then there are some nerds for whom BJ is clearly a game of skill- I guess the courts may have to hash out which games are "predominantly" luck- really, the legal points are semantic- everybody knows poker is gambling- my question is: How much of Duke's skills are over-the-table? i.e. does her skill level drop for internet games (where it's harder to 'read' an opponent) and if so, isn't the argument stronger to ban internet poker?

j.a.s.o.n

What advantage to the sites gain from running a dirty game?

In poker, the operators make a tremendous amount of money just by collecting a miniscule percentage of each pot (online poker should be a case-study in economies of scale). Any site found to be dirty would lose its clientele and be pushed out of business. The sites have their algorithms independently tested and verified for approximate true randomness.

For non-poker games, the games are positive EV in favor of the house, so there is no reason for them to risk their entire business on rigging the game.

chancey

a wild guess: could this ban have anything to do with fighting terrorism? perhaps terrorists launder large sums of money through on-line gambling sites.

RandyfromCanada

l was involved in your stude poker players verus bridge players you did in chicago and play both ..

really the American government action have had little or no effect on on-line gambling . most on line gambling sites are low tax island banks to avoid taxes

also you just can't use a credit card you can send them cash or get a Canadian credit card {as easy as me getting american credit cards }

should the government step in , naw but anything that makes money and the government thinks they are not getting there fair share will be stopped , bet if the american government had a poker site they made the "juice" on all would be fine .....in Ontario almost every casino is owned by the government never seems to be talk of closing any of them .......also look at lotteries

middlepat

I tend to believe the basic principle of online poker being "outlawed" is primarily the fact that large sums of money are going offshore with no tax levied.

Tenet #1: The government wants their share.

egretman

What advantage to the sites gain from running a dirty game?

How about....more money! Your reasoning, Jason, sounds oh so reasonable for the broad demographic. But when I give my credit card to a site, how do I know they don't take a 25% cut of the pot instead of a "miniscule percentage"?

And more to the point, how many games would I have to play before I realized they are taking a 25% cut? Or even that computer isn't stringing me along at the beginning with small wins to keep me playing? All with my credit card on the line.

These sites must be cheap for organised crime to set up. Can't you see a world of algorithms not based on chance that would maximise profit for the site? Who in their right mind would trust an internet site? Hello?

ajkrik

Huh?
"No, it's not — which means that you have no control over the outcome."

While it's true that you can "intentionally" throw a hand of poker demonstrating the game has to do with skill, it is a bit simplistic to say you can't choose to "lose" at other games. If you're talking about one hand, the probability of losing is high enough to end up giving over all your money quickly if you want(say putting all your money on one number in roulette, or some low odds point in craps - I don't know Baccarat enough to say.

I think your conclusion is invalid. There is luck in poker, there are factors out of your control in poker. There are just more factors in the other games. They aren't fundamentally different.

j.a.s.o.n

"How do I know they don't take a 25% cut of the pot instead of a “miniscule percentage”?"

Because you can use the hand histories to keep track of the amount they take from every hand that you play. More importantly, statistics can be tracked on the millions of hands that are played daily to test for the slightest deviation from approximate true randomness. The tools to do it yourself exist.

"And more to the point, how many games would I have to play before I realized they are taking a 25% cut?"

One.

"Or even that computer isn't stringing me along at the beginning with small wins to keep me playing?"

See above.

"Can't you see a world of algorithms not based on chance that would maximise profit for the site?"

Yes, of course they can exist. But they will never survive in the market.

"Who in their right mind would trust an internet site?"

Hundreds of thousands of players do.

"Hello?"

Oh, hello there.

How do you "know" that the games in Las Vegas are legitimate?

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egretman

"How do you “know” that the games in Las Vegas are legitimate? "

The same reason that you trust IBM. They are audited. The slot machines are audited. In the card games you sit with real people. You see the deals.

Now IBM could be audited and still be crooked. Enron was! But you stand a chance with IBM.

What chance do you stand with Internet gambling? You don't know. That's what I'm saying. You really don't know your odds.

For instance, you enter a tournament on one of the poker sites. How would you know if 25% of the players are not virtual players playing for the house? Heck the game pay could then be honest but the house would win much more than a miniscule amount. Maybe 25%?

What person in their right mind would play internet games?

trueenuff

Um, Las Vegas is most definitely NOT legitimate. I mean, they banned those MIT blackjack-ers for counting cards. What kind of casino can claim to be legitimate but technically not allow counting cards; its well allowed within the [normal/non-casino] rules.

Alsadius

Yes, they ban card counters, because card counting is specifically banned by the rules of Vegas blackjack. If I set up a roulette table in my basement, it wouldn't have 0 or 00 on it - that doesn't mean Vegas is under any obligation to offer fair roulette. Casinos are businesses, and they'll never offer you a consistent way to win off of them.

Egretman: If doing things in person were a guarantor of safety, then there'd be about a thousand fewer ways of scamming with cards. For that matter, if you're in a high-dollar poker tournament in real life, how do you know that 25% of the players aren't just casino employees? Compared to a $10k buy-in, the costs of hiring them would be negligeble. The reason they don't do it is because having a player play for the house is a flagrantly idiotic idea - they don't bring in any money. When the casino is covering their buy-in, the casino doesn't make any moneyu on the rake. All they're doing is taking a perfectly secure business(the house *can't* lose at poker so long as they get enough business to cover their fixed costs), and exposing themselves to risk for no apparent reason. The only conceivable reason I can think of to do it is to drive up their player count for the purposes of advertising, and they can do that just as easily by a simple lie as they can by coding a poker bot and running ten thousand copies of it.

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furiousball

I'm an Old Maid man, and I'm always all in.

egretman

Well, Alsadius, it's only a "fragrantly idiotic idea" if they do it stupidly. If they do it smart with smart algroithms, then you don't know your odds. That's the point. As for scams in person, yes but you have some control. With the internet gambling how do you control your odds?

I googled "online poker rigged" and got 219,000 hits. With some really interesting observations. It's either a real problem or a perceived problem.

Regardless, it seems to be such a big problem that many poker sites have to address it. But their reasoning is overall pretty vague. Meant to reassure without any substance. For instance this,

Now, the whole idea that poker rooms reward new depositors, and hurt people who are withdrawing money, is a little far-fetched for me. I have a hard time imagining any computer software package complex enough to take all of this into account.

Now if this idiot doesn't realize how easy a programming job that would be, then....well...he's an idiot.

Which brings up another interesting question. How does an honest site stop from being labeled "rigged"? After all, even honest poker play results in some odd occurrences from time to time.

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j.a.s.o.n

"The same reason that you trust IBM. They are audited. The slot machines are audited."

So are the major online casinos.

"In the card games you sit with real people. You see the deals."

These days, most casinos use auto-shufflers. How do you know that they aren't rigged?

"What chance do you stand with Internet gambling? You don't know. That's what I'm saying. You really don't know your odds."

What distinguishes brick & mortar casinos from online casinos, with respect to the issue of game integrity?

"For instance, you enter a tournament on one of the poker sites. How would you know if 25% of the players are not virtual players playing for the house? Heck the game pay could then be honest but the house would win much more than a miniscule amount. Maybe 25%?"

Poker is not a zero-sum game because of the rake (the miniscule percentage that the house takes from every pot). Therefore, the average player must be a loser. (In fact, around 8% of online players are winners. We know this because we can analyze the billions of hands that have been played online and state such statistics with a high level of confidence.) As such, the gains from programming a bot to play for the house would be small (if any at all, given the difficulty in programming a winning bot). There is no incentive to do this, and a large incentive to not.

"What person in their right mind would play internet games?"

Hundreds of thousands of players do.

Planet Poker is a famous example.

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j.a.s.o.n

"The same reason that you trust IBM. They are audited. The slot machines are audited."

So are the major online sites.

"In the card games you sit with real people. You see the deals."

These days, most brick & mortar casinos use auto-shufflers. How do you know that they aren't rigged, and that the house doesn't have shills playing for it?

"What chance do you stand with Internet gambling? You don't know. That's what I'm saying. You really don't know your odds."

What distinguishes the brick & mortar casinos from the online casinos, with respect to this issue?

"For instance, you enter a tournament on one of the poker sites. How would you know if 25% of the players are not virtual players playing for the house? Heck the game pay could then be honest but the house would win much more than a miniscule amount. Maybe 25%?"

Poker, as played in brick & mortar casinos and online is not a zero-sum game because of the rake (the miniscule percentage that the house takes from every pot). Therefore, for the average poker player, poker is a losing proposition. (In fact, around 8% of online players are long-term winners. We know this because we can datamine the billions of hands that have been played online and compute such statistics with a high level of confidence). Consequently, there is very little to be gained from programming a bot to play for the house (and, arguably, there is none because of the difficulty of programming a winning bot). So there is little incentive for the house to cheat, and a ton of incentive for it to not.

"What person in their right mind would play internet games?"

Hundreds of thousands of players do.

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erikemery

People are right on when they say that you can intentionally lose other games (like blackjack) and that doesn't make those games "games of skill."

Poker stands apart from other gambling games for a couple reasons.

First, you can choose when to play before you put your money down. This fundamentally sets the game apart from other gambling games. Unless you are one of the two blinds on the table, you can fold any hand you don't like without putting a cent on the table. You can't do that with blackjack or craps. Which means just deciding when to play takes a certain skill.

Second, you are not directly playing the casino, you are playing other people. Because of this, the odds are not statistically stacked in favor of the casino. Rather they change constantly, implying a certain skill of play in understanding the math involved and knowing whether the odds are in your favor or not. And, since you're playing against other people, there's a skill in understanding how they play and what cards they are likely to have.

All of this is just as true on-line as in real life over the table. It takes enormous skill to evaluate your chances when you play poker.

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pdq1365

Excellent article. As one of the original contributors to your Pokernomics study (love the t-shirt, gets great comments). I was just wondering if you have an update as to when your study may be complete. Thanks and keep up the good work!