There are a couple of possible meanings to the word ‘partner,’ and I want to be clear at the start how I am using the word. I’m talking about a life partner. Male, female, same sex or not, married or not. It’s somebody you are emotionally and financially connected with.
I’m going to be using the term ‘gambler’ to represent the one who is the player and ‘partner’ to represent the one at home. Sometimes you’re both gamblers of course, and we’ll talk about that some other time.
Some people prefer the word ‘player’ to ‘gambler,’ because they see the first term as playing with an advantage and the second term as playing without. I’m using the term ‘successful gambler’ as someone who gambles with an edge.
If you want to be successful at gambling, your partner MUST be able to put up with financial and emotional swings. If the gambler loses $xxx and the partner goes on tilt and stays there, the gambler is possibly down to the choice of giving up on the dream of being a professional gambler and/or giving up on that particular partner. If children are involved in the picture, that adds complications to the decision.
It often is the case that the non-gambling partner doesn’t really understand the math and variance of the games. This person is forced, generally, to “have faith” in the gambler. This isn’t easy, and certainly many gamblers aren’t deserving of that faith. Most gamblers are net losers. A whole lot more people would like to be successful gamblers than actually are successful gamblers, and it can be very expensive to find out for sure.
I, for one, would probably not be a good candidate to be a partner for somebody else’s dream, unless I understood it a LOT better than many partners do. As a partner I would be looking at such things as:
- What have the results been like so far?
- How serious is the gambler going about getting to be a better player and only playing in good situations?
- Who is the gambler associating with? If the people around your gambler are generally successful and seem to believe in the future of your gambler, that says a lot. If your gambler surrounds himself with non-successful people, there’s a good chance he’s also going to be unsuccessful.
- How bad are the emotional swings of the gambler when he is losing?
- How much of a financial cushion do you have between the two of you?
- What kind of marketable skills does the gambler have outside of gambling?
- As far as I can tell, is the gambler honest with me?
- Is this gambler, over-all, worth having faith in?
- What are my options should I leave?
(Please note, I have never expected perfection out of a partner — or anybody, for that matter.)
Even with these questions, however, I could be satisfiable. That is, if the gambler appears to be going about it seriously and intelligently, and I really believed I loved her, well, that might be all right.
Some partners aren’t satisfiable. Every loss causes significant worry and stress — and then the fights start. I’m not a psychologist or psychiatrist of any sort, but it appears to me that some people are prone to be worry warts. Some people are so results-oriented that they can’t handle the financial swings.
In addition to being satisfied with the gambler, the partner must be able to support the partner emotionally and possibly financially through the down periods, which will definitely occur. The partner must be able to share the same goals of the gambler. If, for example, the gambler wants to build up a bankroll and the partner wants to spend all “extra” money on (pick one or more: house, vacations, clothes, jewelry, etc.), the two of them must be able to have a serious discussion that leads to an understanding.
I’m not saying the gambler’s goals should necessarily take precedence. I’m saying that if you’re not on the same page about the goals, it’s very difficult for either party to end up satisfied with the partnership.
Excellent set of questions there. Personally I’ve had to deal with:
“How bad are the emotional swings of the gambler when he is losing? ”
I did not take my first “major” loss well at all. I later got CVData which did much to alleviate that issue. I had taken it personally, when it was clearly the math working out. And it works out….in both directions. I now call my losing sessions “variancing out”. Helps me keep the math in mind.
I considered video poker to be a hobby and did not quit the day job until the family was financially secure. Now, I play as much as I want and have had positive results for 25 years. My spouse does not play but trusts me totally to make the right decisions.
That’s commendable. Speaking of advantage play, is everyone aware that the Downtown Grand has .50 and 1.00 denomination full pay Deuces? How long do you guys think it will last? Apparently they had 2.00 full pay and just removed it.
According to someone on another site, all FPDW games are now gone from there. I’m not there, so I cannot verify this.
Bob, this is critically important. Here is my experience with this.
Whatever the nature of the occupation, any partnership needs to have and agree to abide by a money management allocation model. How we manage money with ourselves or together with another person is critical. The dollars themselves, while important, are not the most critical part, because in the beginning of these endeavors, or a relationship , the dollars may be small. The real value in the beginning is to develop self-trust (if you are single) and trust if you are in a relationship. Managing money is a trust building exercise that eventually leads to keeping a level head in losing, but more importantly when winning.
If an entity (single person or couple) manages according to an allocation model, the process looks something like this.
Gross Income = X. Living expenses .4X. Taxes .1x. Business Capital Reinvestment .2X Business Expense .1X Debt .1x Fun .5x Give .5x. . The Xs should add up to 1 or 100%. Check my math!
This is exact model I used to become a successful stock trader after years of losing money. You can use any percentages for allocation that you can live with at first, but the key goal to independence in your probabalistic endeavor (professional trading and/or gambling (to me they are, professionally, exactly the same)) I learned to divide ANY income into these categories. Whatever starting money I started with, I didn’t break it down until I was above the starting water mark. Obviously you have to be net positive to allocate. Sometimes a job helps with this initially but the goal is to have your endeavor pay the bills. When your living expenses can be covered by .4x (in my example), you are now paying your bills with your endeavor. Cutting expenses is generally a must at this stage. If you can’t cut your expenses to live your dream, you have to ask yourself if you are really serious about being a professional. When you can pay your monthly bills with your Living expense allocation, you can consider yourself a professional.
This type of model has many positive effects and prevents a lot of negative effects. While you can come up with many of them, my favorite is, after a large win or set of wins, say for example you make and $8K royal and some other miscellaneous profit, so in a week you have made $10K, $4000 goes to living, $ 1000 goes to taxes, $2000.00 goes back into business capital, $1000.00 to debt (credit card or other), Etc. This means you take your wins seriously as you must split them up across categories, so you keep your head on straight and are more likely to be disciplined in the next set of events. The psychological effects are positive and profound.
When I was a losing trader, I lived with a roommate and had a broken down car. I decided to to go a financial seminar about managing money and all I could use to get there was a non-freeway legal scooter (125CC in California). I went for three days and had to travel 50 miles on side streets to get there and back. This seminar taught me this allocation method. Within a year after I had turned a 5000.00 starting trading stake into $40,000, doesn’t sound like a lot but I paid all my bills during that time and ended up with: savings, money saved for potential taxes, debts paid off, and an increase in my business capital. If you look at the percentages they are really unbelievable. I experience tremendous financial success for a number of years then got off the discipline wagon, then failed, then got back on the wagon and reclaimed success. Another note: it seems we will be challenged by success and then failure, multiple times.
Making money in endeavors like gambling or trading comes down to money management and money allocation. The amount of money is absolutely insignificant compared the value of using a system. If you are weak in these and have no system, you will fail, guaranteed. I am not talking about the particular strategy in your game (obviously you need to have an edge that works over time) , I am speaking clearly about managing the money that results from it. Even if you make a bunch of money during a certain period of time, without a system for capturing that money and putting it to work across the important areas of life, you will be prone to over-trading, over-gambling or whatever and lose it all.
The value of either doing this yourself and not telling your partner about the specifics (he/she will only see that you are a fiscally responsible person) or in educating your partner on this can NEVER be understated. I wasn’t ever successful educating a partner on this so I just keep these systems to myself and live like I have a fantastic job that pays me a great paycheck every two weeks, when the reality is that I never really know exactly when the money will come in to any significant degree. On the outside, however, you would really never know the difference. I think you have to find the right partner to expose them to all of this stuff, it’s best if you can. It’s been my experience that some partners can buy into it and some can’t. You have to know what kind of partner you have and even manage that accordingly. That’s been my experience thus far.
I believe your “Fun .5x Give .5x.”
should be
Fun .05x Give .05x.
otherwise your tally reaches 1.9
Also, you’re only putting 20% of your win back into your bankroll? That’s going to significantly affect the ROR and Kelly calculations. That’s the thing about gambling, the “windfalls” get offset by the “droughts”. You need the windfalls to have a chance of surviving the droughts. The windfalls aren’t true windfalls, they are just the better half of gambling.
If you’re going to skim, the right way to do this is to skim some of your EV. For example, the royal is about 2% of your return (varies by game, look it up). If your edge is 1%, then about half the royal is your EV. You could split your EV 50-50 between your bankroll and other non-gambling expenses, so 3/4 of a royal would go to your bankroll and 1/4 would get skimmed off. But now, your net-net edge is reduced to 0.5%, which roughly means your bankroll has to double for the same “risk of ruin” and your approximate Kelly bankroll also doubles (variance/edge bets) while your Nzero (variance/edge^2 hands) goes up 4 times.
Thanks, William. An excellent formula for managing windfalls. Not to mention budgets in general.
Yikes. The above discussions of “skimming” one’s bankroll are a tough pill to swallow for me. I am the “other” of the two classes of people Bob mentions viz. bankroll management–that is, wagering is kept in one pot and expenses in another.
The myriad formulas and tables on the web discussing RoR, EV, Kelly betting, &c., assume 100% reinvestment of winnings. Those that draw from their wagering reserve for expenses eschew the sacred assumption of total reinvestment, and for them, the road is a lot more bumpy. Hazard such behavior at your own risk!