Sunday, June 29, 2008

The 80 / 20 Rule And Poker

Quick Thought time... the pareto principle is common knowledge these days and has a great number of applications. Reminded of this in the 'Black Swan' which I just finished up, and would like to relate this to poker - or more specifically the percentage of winning players and (importantly - the proportion of their winnings)

What Taleb did in the Black Swan book was simple yet beautiful... he said that the 80/20 rule must, by definition, also be the 50/01 rule.

Here is why - and how I see this working as a player, observer and businessman in the online poker world.

1st Level: 80/20 - 20% of the players make 80% of the money... no big leap of imagination required to see why this is the case, maybe its more like 90 or 95/20, but this is not important for this thought experiment.

2nd Level: 80/20 now we take our population of profitable players sharing the money and look at the distribution of poker cash between them.... its something like 80/20 again - that is of the profits made by the 20% of all players, 20% of those players are taking most of it.

3rd Level: 80/20 we are now looking at the top 4% of profitable players, and of course there are still many 1000's of them... yet 20% of these 'top rank' will be taking 80% of the profit.

And so on....

It is bound to stop somewhere soon - after all there is a finite pool after a certain point in buy-in levels... I liked the simplicity of the thought process - it is easy to see how the top 1% are sharing 50% (or more) of the cash while the average player struggles for the rest.

GL at those tables, Mark

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