The Poker Industry's Epic Rise

Before poker was thrust into the national spotlight with Chris Moneymaker’s epic World Series of Poker championship win in 2003, many regarded the game as an amusing leisure activity. If you asked the average American what came to their mind when they thought of poker, they’d likely describe a scene involving friends, cards, beer, and maybe a little cash, too. What many fail to realize, however, is that there is a large difference between poker as a pleasure activity and poker as a business.

One of the earliest references to poker confirms the notion of the game as a money making enterprise, describing the swindlers aboard Mississippi river boats and the commonplace act of cheating ignorant gamblers out of their money. Though the game is now nationally regulated and honestly run (in credible locations), this allusion verifies the assertion that poker is indeed a business. When an individual puts their hard-earned cash at risk, the expectation is that there will be a return on that investment.

Unlike many other casino games, poker is largely controlled by the decision-making of the players. It is possible to conclude that one player is better than another by looking at their respective careers. While there are moments of pure luck, the general flow of the game can be manipulated as a direct result of a player’s decision, and not strictly by the draw of the cards. Every year, the World Series Of Poker holds upwards of fifty events, with the winner of each event receiving a WSOP bracelet. Phil Hellmuth, widely considered one of the world’s best players, has garnered a record eleven bracelets, with other famous pros achieving multiple wins, such as Johnny Chan (10), Doyle Brunson (10), Johnny Moss (9), Erik Seidel (8), and Phil Ivey (8).

These players don’t just win because they’re lucky, they win because they’re good. Barring a run of bad luck, they are always in the hunt. The reasons that some of these players continue to do well parallel any other sport or profession: they make smart decisions and execute their talents properly. They are sound in their fundamental knowledge of the game and their understanding of their opponents, utilizing the latter knowledge to further their chances of winning. For many of these poker standouts, the bracelet chase is their primary motivation. But with every bracelet also comes a hefty cash prize. 

There is money to be made in poker. A lot of money. The Main Event at the World Series of Poker, widely considered the Super Bowl of the gaming industry, paid $8,944,138 to its champion in 2010. After factoring in the $10,000 buy-in, the champion will receive an 894.4% return on their investment. Tournaments typically pay out around the top 10% of the total entrants, and the 2010 Main Event paid out $19,263 to those who finished between 676th and 747th, the final place that was paid. This payment structure only reinforces the idea of poker as a business, as one must be focused and coordinated to make the cut.

Have you ever heard of a professional slots player? What about a professional craps player? Probably not. The reason they don’t exist is because the house edge on those games is around 8.2% and 4.3% on average, respectively. Blackjack gets a little closer, at less than a percentage point house edge, but a house edge nonetheless. The casinos run these games because they know that that over time they will always make money.

The law of large numbers can study the random phenomena that result from performing the same experiment many times. By averaging the outcomes, one can confirm or dispute their resemblance to the expected values. Casinos have run this theory against their games to confirm that they will hold an edge over time. Poker, however, presents no house edge. It is statistically impossible for the house to win money on a consistent basis over time.

This is why the dealer does not play a hand and instead collects a rake from each pot. Although players are losing some of the money wagered on each hand, the amount raked in by the casino is minute within that game. However, that minute rake, applied over many different tables, in many different rooms, amounts to large profits.

Players, just like casinos, cannot statistically guarantee that they will make money over time while playing poker. However, a player well versed in the game can and will make money consistently if they play the game right and enter into it with a business mindset. Phil Ivey, Daniel Negreanu, and a host of other players compete on the professional level. They do not have regular “9 to 5” jobs. Their only source of income is poker winnings.

While this income can be inconsistent, these players will end up making a profit over time, and this is why they can continue doing what they do. The two players mentioned previously, Ivey and Negreanu, are the two top lifetime earners in the professional poker world, earning $13,733,137 and $13,020,581, respectively (pokerpages.com). This is only their tournament winnings, discounting any money made in cash games or non-sanctioned events.

The numbers are eye popping, but those amounts are not necessary to be a professional, or indicative of all other professionals. By drawing out a clear plan of living expenses, retirement plans, and benefit issues, one can map their lifetime winning percentage and expected earnings against those figures to determine if it is possible to rely on poker as the sole source of income.

The obvious goal each and every time one sits at the poker table is to make a profit. This becomes increasingly more important for those who rely on poker as their source of income, but it is important for anyone who is risking their money. Part of this decision to treat poker as a business means blocking out any personal or emotional ties to the other players at the table. Regardless of whether the other competitors are friends, family, or lovers, one should always play the same way.

Your primary goal is to make money, not to have fun. If fun is the intent, the stakes should either be nonexistent or miniscule. This is probably the toughest aspect for any poker player to overcome, as most of the games you initially participate in will contain friends or family. As pointed out by Topher Grace in the 2001 film Ocean’s Eleven, one should “leave emotion at the door.” This is the cardinal rule of poker, and doesn’t just pertain to bluffs and tells, but to your competition as well.

One should play a hand the same against their best friend as they would a complete stranger. Not only is the best business decision, but it keeps the other players at the table from thinking that there is collusion going on. If one does not wish to compete in this manner with a friend, then they should not be playing against that person.

As with any business, one must understand that revenue may not always come out in the green. You are no longer an employee collecting a guaranteed salary. You are the owner of an enterprise that will have its ups and downs. You must account for the fact that not everything is in your control and there will be times that you lose money. A lot of money.

These occurrences are sometimes unavoidable. The only thing you can do is try your best to prevent a sour situation from surfacing. If you go into a hand ahead and your opponent catches a card to win the hand, there’s not much that you can do about it. You just have to accept that fact and move on, knowing that hand was played to the statistical probability, and that in this trial, the expectation did not hold up. The idea is that over time those probabilities will hold up, and given the proper betting structure and execution, profits will go up and stay afloat over the long haul.

Another essential key to any business is an understanding of identity and competition. For a company to succeed, it has to recognize its own strengths, weaknesses, and goals, as well as those of the competition. By pointing out one’s own flaws, it allows for a personal growth and eventual recession of those flaws. As mentioned earlier, pointing out an opponent’s flaws and utilizing that information can significantly increase the chances of winning.

If you know what the competition is going to do before they do it, you can plan your counter attack much more effectively. This will help any player maximize their profits in the long run, because even though money can be made by playing rudimentary, statistically sound poker, it will be a small margin over a longer period of time. If a player wishes to increase their overall profit margin, they must capitalize on the weaknesses of the other players.

There is nothing wrong with kicking back a few beers amongst friends while engaging in a low stakes game of poker, but any serious player should realize the difference between business and pleasure. Poker can be fun regardless, but this separation is imperative to anyone that wants to make money while playing the game. Sound fundamentals, smart brains, and pure guts are all essential to becoming the best player possible and maximizing profits. At the end of the day, nothing matters but the margins, and the goal is come out ahead. It is a business, after all.

Works Cited

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<http://www.insidervlv.com/casinoodds.html>.

“The History of Poker.” PokerPages : Poker Information, Tournaments, Players, Poker Rules and Strategy, Learn Poker. Web. 02 Nov. 2010.

<http://www.pokerpages.com/pokerinfo/history.htm>.

“Poker Players Worldwide :: Top Money Winners.” PokerPages : Poker Information, Tournaments, Players, Poker Rules and Strategy, Learn Poker. Web. 09 Nov. 2010.

<http://www.pokerpages.com/players/lists/worlds-top-players.htm>.

“World Series of Poker Bracelet.” Wikipedia, the Free Encyclopedia. Web. 02 Nov. 2010. <http://en.wikipedia.org/wiki/World_Series_of_Poker_bracelet>.

“World Series of Poker – Official Tournament Coverage and Results.” Official World Series of Poker Online. Web. 09 Nov. 2010.

<http://www.wsop.com/tournaments/payouts.asp?grid=764&tid=10878>.

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