Next Hand: Respect Money

When I was first typing this out, it was a bit longer until I discovered I could get to the point much faster. So, in an unusual display of productivity, I shortened it considerably. I could have kept the nearly duplicate sentences and the useless filler, but this isn’t a school essay, so to hell with the word count.

Money is a fun little concept. Everybody has to use it, but a lot of people don’t truly see its actual value at all times. Both novice poker players and the average person often forget the following very important rule, whether dealing with dollar bills, chips, or theoretical money you can’t smell. It’s likely not an original statement, but it’s the clearest way I know of saying it.

Money you win has exactly the same value as money you do not lose. Conversely, money you lose has exactly the same value as money you do not win.

Just read over that sentence again and let it sink in for about 15 minutes.

Done yet?

Liar. But I’ll let you get away with it.

To expand a little bit, currently I’m done with college and I’m now stuck in the exciting phase of repaying student loans. My mom revealed to me that she had a $5,000 savings bond that would double after a certain amount of time. The problem was, that time wasn’t up yet, and so if she cashed it in at the time she told me, it would only be worth about $6500. Curious, I decided to look up if there were any special college loans from the bank I use. I did the math to see if the interest accumulated would be less than the $3500 of remaining value left on the savings bond. Unless the rate was ridiculous (somewhere around 18%), the answer was yes. However, the first couple times I explained this process, she cut me off at some point saying she should just cash in the bond early because “it would be easier”. Eventually, I convinced her that going that route was exactly the same thing as withdrawing at least several hundred dollars from my bank account and setting all those bills on fire. This is a great example of an economic theory called “loss aversion”, which is when the human mind reverts to a primitive “WINNING GOOD, LOSING BAD” approach, not considering that something you didn’t lose had much less value than something you didn’t gain. I always ask myself what decisions I make will leave me the most money in 5/10/20 years. If that involves taking small losses now with potential great payoffs later, then so be it.

Poker players, when they first start out, often only ask for advice on hands they lose. This same loss aversion effect happens to them, where they only feel remorse in pots where they lost. The problem is, like I said before, winning or losing is not directly linked to how well you played the hand. Somebody may post a hand where they lost a decent pot, but they played it just like I would have, except maybe I wouldn’t call that $10 bet on the end.  However, perhaps I’ve gone through every hand they’ve played last night and I see a hand that they didn’t talk about, because they won. However, their bet sizing was incredibly wimpy (“I didn’t want to make him fold!!”) and the opponent was very loose passive and he would have easily called off $20 more at least. This hand cost him twice as much as the hand he talked about. And it should be very clear why if you really did think about that first statement for 15 minutes.

People have an interesting habit of treating money differently depending on how they got it. To a lot of us, money we work real hard for has more value than money we suddenly happen to run into. While it’s an okay lesson to teach kids, in reality it makes no sense. The method in which you get it makes no difference in how you should choose to optimally use it. To me, the question “if you got a million dollars, what would you do with it?” is VERY different from the question “if you got and were forced to spend a million dollars, what would you do with it?” (Super huge house with secret passages obviously)

And some people simply never give money the respect it deserves. For the longest time I repeatedly heard cautionary stories about people who won the lottery or a huge poker tournament and then proceeded to somehow donk it all away even though they were likely set for life. Sadly, this happens because those people are stuck in their poor lifestyle, and unless they undergo a major attitude change, they’ll be stuck in this mental state forever. They will usually complain constantly about money they’re not winning/earning while simultaneously ignoring what they’re using the money they do earn on. No amount of money they win will cure this. This is why big poker champions on average have much better success stories; they’re used to making profitable decisions. Wise investors and lottery players are pretty much the antithesis of each other. Do you see why?

Noticing a pattern where I haven’t given advice on how to actually play yet? This is because there are so many things that can doom you before you ever put a single dollar on the tables, and you need to be very comfortable with all those things first. Not an easy game anymore, is it?