Browning Mummery
Poker: A Game of Money and Economics
Jeff Yass, founder of Susquehanna International Group (SIG) is the 48th richest person in the world. Yass studied a Bachelor of Science, majoring in mathematics and economics at Binghamton University, and met the other cofounders of SIG through a local college poker game. After finishing university, Yass and his friends rented a room in Las Vegas, attempting to turn poker into a career. Other opportunities arose, and Yass opted to enter the financial world shortly after, moving to Philadelphia and starting SIG, one of the most successful quant trading firms in the world. He didn’t fully leave Vegas behind, however, as poker tables are scattered throughout the Susquehanna offices worldwide. To date, 3 employees of SIG have won the World Series of Poker, reinforcing the key characteristics necessary to succeed in such a game. Poker is a game of greed and money, deceit and lies, and ultimately-economics.
Game theory refers to a branch of microeconomics where decision-making within multi-choice scenarios are explored. Rooted in self-interest and optimization, game theory attempts to make an optimal choice which yields maximum personal gain. A common example of game theory is the "prisoner's dilemma," which depicts two prisoners devoid of communication, each facing the choice to remain silent, or betray their partner in crime. This setup yields three outcomes; mutual silence results in one-year sentences for both prisoners, mixed choices result in freedom for the traitor, and a three year sentence for the other, whilst mutual betrayal condemns both to two-year sentences. The prisoner’s dilemma demonstrates that regardless of the opposing party’s action, personal payoff is inevitably maximised by betrayal. This results in both prisoners inevitably receiving two-year sentences, demonstrating an optimal choice which either prisoner cannot vary from.
"GTO poker" is a term coined by a research team from the University of Alberta. GTO stands for Game Theory Optimal and refers to the best choice you can make to maximise your own benefit. Through trillions of hand matchups, computers learn from mistakes to deduce strategies of optimal decisions with the highest expected value, developing an optimal strategy. GTO actions are unexploitable by opponents, ensuring maximal returns. By utilising the GTO choice when faced with the decisions to check, call and fold, it maximises the expected value of your hand. Essentially, by perfectly applying GTO theory, you will reach a deadlock with an opponent also playing their optimal choices, and win against any opponent deviating from this strategy such as the silent prisoner from the example above. Therefore, a background in economics and an understanding of game theory can assist in decision making at the table.
So that’s it, poker is solved – simply memorise the optimal choices developed by computers and apply these theories in game, right? Unfortunately, it’s not that simple. Factors such as stack size, player positions, and hand strength, yield a near-infinite array of scenarios in No Limit Texas Hold’em. Just as chess entails an astronomical number of potential games, poker's complexity remains beyond both human and computational capabilities. While a 2015 poker bot named Claudico was outmatched by human players, a revised version in 2017 utilised advanced algorithms and computational power to dominate four professionals, demonstrating GTO poker's prowess.
Whilst playing a perfect GTO game will always prove elusive for humans, it can serve as a foundational template. According to interviews conducted by Pokernews.com, professionals often amalgamate exploitative and GTO strategies. Like chess, professional poker players seek to reach the summit established by top super computers. Until that elusive point however, exploitive, and reckless strategies will continue to be intertwined, and there can be no doubt that the competitive scene will constantly evolve over the next years, despite the appearance of GTO poker.
Poker is more than just another card game. Poker is a fierce competition of the mind, intertwining a range of sciences and disciplines from all over the world. Yass' trajectory attests that an understanding of economics can be an extra card up the sleeve and suggests that perhaps Wall Street and Las Vegas aren’t so far apart, after all.
References:
[1] Jeff Yass (2023) Wikipedia. Available at: https://en.wikipedia.org/wiki/Jeff_Yass (Accessed: 22 August 2023).
[2] Real time billionaires (no date) Forbes. Available at: https://www.forbes.com/real-time-billionaires/ (Accessed: 24 August 2023).
[3] Game theory optimal solutions and poker: A few thoughts on GTO poker (no date) PokerNews. Available at: https://www.pokernews.com/strategy/game-theory-optimal-solutions-and-poker-a-few-thoughts-22654.htm#:~:text=GTO%20 (Accessed: 22 August 2023).
[4] Staff, P. (2017) How much do the Pros actually play a ‘game theory optimal’ style?, PokerNews. Available at: https://www.pokernews.com/strategy/how-much-do-the-pros-actually-play-a-game-theory-optimal-sty-29062.htm (Accessed: 24 August 2023).