A player, “Alex,” came to one of my video poker classes and chose to tell me how his bankroll developed. I’m guessing he was 45 years old, although I could be off in either direction. He started by borrowing $100 from a friend, hitting a good hand which allowed him to end the first day up $500, and slowly building it up from there. Now he was up to “five figures” with no money input at all from himself. It was a point of pride with him that his gambling bankroll was entirely sourced by other people’s money and his skill. He called this his “pure” bankroll.
He never told me what his “five figures” actually meant. While it could be anywhere between $10,000 and just shy of $100,000, I’m going to assume for this article that it’s $11,000 or less. I’ve never heard of anybody bragging about their bankroll in terms of a number of figures and I imagine he probably passed the $10,000 threshold recently and was quite proud of it.
Playing mostly for quarters while building up a bankroll of that size is pretty impressive, and it definitely took some time. In no way am I putting him down.
He then shared what games he was willing to play and under what conditions. He treated this $11,000 pure bankroll as though if he lost it all, his life as a gambler would be over. Even though he had considerable wealth outside of this bankroll, that other wealth was totally out-of-bounds insofar as his gambling went. But within those parameters, he wanted to grow his bankroll as fast as he safely could.
Is this the right way to look at bankroll? Not to me, but every player has to make that decision for himself.
Let’s say you have ten $20 bills in your wallet. Do you know the provenance of each bill? I don’t, unless I just received all ten of them from the same place. If you spend one of those bills for lunch, is it important to decide whether you’re actually spending one of the bills you got from a jackpot at a particular casino or one of the bills you got from a tax refund check?
Not to me. I might care that I had $200 and now have $180, but exactly which bill I was spending is irrelevant. I’m looking at the total only.
The fact that Alex is proud of “never spending a cent of his own money in a casino,” is understandable. But it’s short-sighted.
Alex is 45 years old now. He will not live forever. Video poker opportunities, in general, are declining. They will probably not be as good five or ten years from now as they are today.
Alex’s insistence of only using his pure money, when he has plenty of other money available, is restricting his opportunities in an environment where opportunities in the future won’t be as good. Does that make sense to you? It doesn’t to me.
Alex should ask himself why it is so important to only gamble with pure money. Is it for purposes of pride? Okay. But who is he going to brag to and do they really care? If someone were concerned about his total wealth, would they be more concerned with the total amount or the pathway it took to get there?
With all that said, I’m not recommending Alex plunge and suddenly start playing bigger stakes because his real bankroll is much larger than his $11,000 pure bankroll. He still has to limit himself to good opportunities.
It’s still possible to find 100.8% opportunities and larger in Las Vegas if you limit yourself to quarter single line games. You won’t always find opportunities that size for dollars. But 100.4% opportunities for dollars offer twice the earning potential per hour played as 100.8% opportunities for quarters, simply because you’re playing four times as much.
Playing for dollars entails larger risks. If things went badly while playing for dollars, Alex could go through that $11,000 bankroll. While he has plenty of actual wealth behind that $11,000, I’m not at all sure how much psychological wealth he has. He’s going to have to figure this out for himself.
There’s much to be said for “making hay while the sun shines,” meaning take bigger risks while the opportunities are bigger. There is also much to be said about staying within your comfort zone. These two philosophies lead to different paths going forward.
There is no unique best path for everybody. The only thing I can recommend with certainty for you is that you should examine your alternatives. Sometimes tweaking your philosophy can pay off more in the long term.
A lot of the trauma that people subject themselves to over bankroll considerations comes from ignoring the fact that money is fungible and it really doesn’t matter whether you exceed or stay within some arbitrary boundaries. What exactly is a “bankroll,” anyway? Many would say that it’s money set aside for a particular purpose. OK, fine. Let’s say you have a VP bankroll of $20,000. What exactly is that purpose? To double it? To play as long as possible? To buy yourself a nice shiny pickup truck? To pay for your grandma’s cancer operation? Or to play VP for all eternity or until you die, whichever comes first? How you play, how much, and how often will all have different answers depending on your bankroll/life goal. Would you stop if that bankroll grew to $40,000? Conversely, would you stop if it shrank to $5,000? (If so, it’s really a bankroll of only $15,000.)
Alex appears to have no immediate goal other than perhaps ego gratification, so whether he’s doing the right thing by restricting himself to the artificial limits of his bankroll is a question only he can answer. It’s true that he may be shutting himself out from profitable opportunities. But maximum profit may not be his goal at all.
I’d like to suggest an entirely different bankroll criterion. At some point for everybody, as the amount we risk grows, the pain from losing a given amount exceeds the pleasure/reward we would derive from winning that same amount. That’s why for most of us, our bankrolls are not our entire wealth–becoming twice as wealthy as we are now would not be nearly as pleasurable as losing everything we have would be painful. Conversely, if losing our entire bankroll (presumably, some fraction of our total wealth) would be largely a matter of indifference to us, then maybe we should increase that bankroll, to take better advantage of opportunities and/or to make our goals easier to reach. Or to put it pseudo-mathematically, maximum bankroll utility is achieved when the potential reward/potential pain ratio is maximized.
WTF?? Who cares???
Some people don’t want to risk any of their own money, that’s one of the secrets to business success or “investing” in real estate or securities, let someone else take the risk. It’s probably a good idea if you can pull it off. There’s no shortage of people who willingly want to take risks and try to tempt the fates, so, let them have it. Here, in this situation, Alex should try to work out some deal where Bob takes all the risk and Alex gets some sort of guaranteed return, then both parties would be happy. For example, Alex could scout for machines and promos for Bob and in return Bob would give Alex a finder’s fee, and so on. Or Bob could bankroll Alex and pay him a wage for playing, that’s how the teams worked when the taxes were favorable. Anyone who’s interested in how the teams worked back in the day should read Kneeland’s “Secret World of Video Poker”.
I don’t know where Liz got any idea that I’m interested in hiring people to scout for me. Or I would be interested in hiring people to play with my money.
I’m not at all interested in that.
I’ve had an Alex-like philosophy in the past and completely understand his perspective, although I’ve evolved a bit more toward Bob’s point of view over time
Around 10 years ago, with a lot of luck, I won $2.50 immediately after signing up for an online poker website. Without ever risking any of my own money, I was able to slowly and carefully grow it into a few thousand until Black Friday.
A few reasons that differ between my experience and Alex’s are
1. I did not trust online gambling sites at the time with my credit card or bank info. I’ve since gained trust and do deposit other sites
2. I didn’t feel I had an advantage at first and needed experience to find the places I could win. (Learned I’m good at sit n go, bad at cash NLHE)
But the feeling of “I’m a winning gambler” vs “I’m a losing gambler” is a vast difference to me (maybe irrationally) and this was a way to guarantee being a winner. That had value
Since I was never planning on depositing, that small bankroll had plenty of value because it was the difference between being able to play online for money and not having that option
Eventually I began depositing online sites after Black Friday when bonuses and promotions became tied to deposit amounts. Although if I didn’t have those thousands from online poker that was won risk free, maybe I wouldn’t have ever deposited other money. Can’t say for sure.
Now if games or promotions are able to be mathematically calculated to an edge, like video poker and unlike online poker, I’m comfortable using “other” money. But I sure remember feeling the same as Alex did.
How did you have those thousands if you did not cash out prior to April 15th? It took over three years for me to get my money out of poker stars from the federal gov.
Another possibility is “Alex” is a total horse’s you-know-what. First of all, I have no doubt he is not as wealthy as he claims but assuming he is merely exaggerating and not out-and-out lying, I have to question why someone with some means would not only feel the need to borrow such a small some of money for a gambling bankroll but also put so much importance on the fact that he didn’t spend his own money. He seems to be proud of the wrong thing and again that leads me to believe he has some serious issues in other aspects of his life.
That said, now I have to ask that assuming he now has roughly a ten- to 12-thousand dollar bankroll, at what point would you (Bob, Richard, or any other AP) advise to start drawing dividends? If he continues to play quarters, my guess is that he is close to the point where taking a small monthly salary would make sense.
If it’s a “pure gambling bankroll”, you would only use it for gambling. Adding or subtracting funds through non-gambling activities changes the equations. Basically, if you are adding to your bankroll with $10/hour expectation through gambling, but subtracting $5/hour for other non-gambling activities, your true input to your bankroll is $5/hour, not $10/hour, and it should be obvious that your bankroll will not grow as quickly as it could. Non-gambling related drawdowns of gambling bankrolls are leaks.
Yes, but we live in the real world. I’m sure very few people who gamble skillfully are only in it to forever build bankroll. At some point a loaf of bread or a pair of shoes need to be purchased. At what point do you make the decision to extract salary. According to your premise, employers should never pay their employees because labor costs are leaks to their general bankrolls.
Not everyone who gambles is in it to extract a salary, most have day jobs for that purpose. Also, bread and shoes and other items can be had on casino comp. But if your goal is to extract a salary, I told you how to do it following mathematics. An hourly salary always subtracts from your average earn rate and the net earn rate is what drives bankroll growth. That’s how you model bankroll withdrawals while still following the math. Just taking some money out of your bankroll assuming that doesn’t affect the math is incorrect. If you want a reference, check Chen and Ankenman’s “Mathematics of Poker”, page 288, “A Word of Caution”.
Well, you did not actually tell me how to do it but instead constantly offered “facts” seriously skewed towards forever building bankroll.
Also, you say “most have day jobs for that purpose” but wouldn’t you agree that the “most” you speak of are only working those jobs until they reach a point where their gambling endeavors are able to support them?
Also, when you say “not everyone,” what exactly do you mean? Let’s try to put a real number on that and then take it from there. How close is your “not everyone” to my “very few” and if we are in the same ballpark then you need to either change your fundamental opinions or finally admit that you don’t believe anyone can earn a decent living gambling. That professional gambling, in your opinion. that bankroll is the be all and end all and only jobs can pay bills.
Another observation, this guy might be an accountant, they learn early on not to “commingle accounts”. This is probably a valuable lesson also for those who pay taxes or deal with government programs. If someone can prove you’ve commingled your account, they can nulify the entire ledger. See wikipedia under “commingling”.
Actually, it makes little sense to set aside the funds earned from one of several simultaneous income-producing endeavors. Money, as I’ve said before, is fungible (and the IRS, for one thing, basically considers all your income to be so). Alex’s keeping his “pure” bankroll mentally or physically separate from his other funds makes no more actual sense than a fast-food restaurant keeping all the money from sales of french fries in a separate register.
And for what it’s worth, even that first $100 he borrowed was indeed “his own money.” He was free to spend it, gamble it, or burn it. The fact that he acquired a debt obligation to obtain it is irrelevant. As to whether he should “withdraw” from his bankroll at this point, that returns to the question of what the purpose of his gambling (and his bankroll) was in the first place. If it was to earn a little money while having some fun, he’s well past the threshold where going broke is a realistic possibility, assuming he’s playing for quarters: it would be less than a tenth of one percent if he was playing FPDW, for example. (And by the way, there’s a clue in Bob’s narrative that suggests he started out, at least, playing DDB, which requires a MUCH bigger bankroll to survive, even if you play the best version (10/6) and play it perfectly.) He could withdraw small amounts and still have a very small RoR. Again, making the perhaps dangerous assumption that he’s playing the best games and playing them perfectly.
Also, no matter what game Alex was playing, he has no particular reason to be proud of himself. He was very, very lucky to survive initially; even playing .25 FPDW and playing it perfectly, you’re a heavy favorite to go bust with only a $1000 bankroll, much less $500.
Kevin wrote: “Money, as I’ve said before, is fungible (and the IRS, for one thing, basically considers all your income to be so).”
Not true. For example, gambling loses can only be used to offset gambling wins, and gambling wins are added to your AGI while losses are part of your deductions if you exceed the standard deduction. And the IRS expects you to keep a proper log book solely for your gambling activities. See Scott’s “Tax Guide for Gamblers” for details.
Liz, I was well aware of that, and I figured that everyone else knew it too, so I didn’t bother to mention it. NET income is taxed by the IRS, not GROSS income. That applies to gambling income as well. And all such income is folded into the 1040 filing, and that is taxed at the same rate no matter where it came from. (That’s why I said “basically,” as I’m well aware of the nuances but didn’t want to turn my post into a tax seminar, as it was parenthetical to the point I was making and everybody already understands those nuances.) The point I was making is that for practical purposes, money you make from gambling–even carefully segregated–is legally and practically no different from money you make any other way. And yes, we all know that you can’t offset gambling losses IN A GIVEN CALENDAR YEAR.
And as far as AGI having to be offset by itemized deductions–only true if you don’t file as a professional gambler under Schedule C. Also, the IRS has no problem with your reporting your aggregate (net) gambling income for the year as long as you keep records–whether or not you file a Schedule C. Anyway, none of this has much to do with gambling bankrolls.
A guy like this will never make big money at gambling, but maybe that’s fine for him. After all “slightly better than breaking even” puts him in the top 0.01% or so of all gamblers.
To me it sounds like the guy takes a lot of pride in being up lifetime and doesn’t want to risk a bad run wiping that out, which could easily happen at higher stakes. I used to be the same way, which has probably cost me literally millions of dollars. Even among people who are real winners at gambling there are two types of people, one likes to protect their wins and the others are pretty much degenerates who like to press as hard as possible when they have an edge. The press types inevitably go busto a few times over the years but usually learn to tone it down if they stay in the business.
For the other type, tolerance for playing big and losing is just something you have to build up over time. Obviously “big” has different meanings to different people. I personally have five times the net worth or so I had when I started out in gambling but I now bet 20-50 times more, yet the losses bothered me more when I was first starting out. There really is no psychological change to my approach I have made other than taking dozens of terrible beatings over the years and coming back eventually to have more money than when I started.
If I were advising this guy I’d emphasize to him that he’s up over 10 royals lifetime, which losers at VP almost never reach aside from hitting a lucky dealt royal on a multiline game. So he’s established that he is a solid winner at VP. If he adds 30k to his bankroll and starts playing dollars, he is still up 10 royals and if he loses 12k from there to be down lifetime, he’d still be up 7 royals.
Phlea wrote: “Well, you did not actually tell me how to do it but instead constantly offered “facts” seriously skewed towards forever building bankroll. ”
As another example, you could skim 10% off of every royal you hit, 1% tip for the key person and 9% for you to spend on non-gambling related activities. But, now only 720 bets instead of the full 800 bets of the royal are going into your “pure gambling bankroll”. You should adjust your optimal strategy, ROR assumptions, and/or Kelly ratios assuming 720 for the royal, not 800. The math behind strategy, ROR, and Kelly make the assumption that your bankroll is a “pure gambling bankroll”. If it’s not, you can make corrections, such as above, otherwise the results of the math will be incorrect because the assumptions are not valid.
Regardless of the source of funds, $11,000 is not much when playing dollar games. Even with good strategy, the risk of losing it all is considerable (> 10 %). Risk must be considered alongside return.
Rather then wondering when to quit gambling all together (when should you cash out your stocks or real estate investments?) or how much can be withdrawn from a “pure gambling account”, most people have the opposite situation, namely how much money do they need to divert from their day job/side gig to justify a particular gamble given the current size of their “pure gambling account”. The answer is simple, determine the amount of cash back needed for your goal of ROR or Kelly (I’d recommend Kelly). No doubt, given the situation with tight casinos these days, it’s more than the casino is offering. So, you can make up the difference with a cashflow from your day job/side gig. Say you need an additional 1% of coin in to meet your goals, well fund that from your day job/side gig. Maybe eventually you will find a promotion that doesn’t require a cashflow into your “pure gambling account”, but in the meantime you can fund your gambling from your day job/side gig. Search “Jazbo Kelly betting for video poker” for some numbers.
I’ve been debating as to whether or not to comment here as the article has certainly taken on a life of its own, makes its own valid points and the discussion is interesting. However, there are some points of my discussion with Bob that I believe he might have misunderstood.
To be fair, I am a bit proud of having been able to build up a bankroll from virtually nothing and Bob picked up on that during our conversation. Nonetheless, it wasn’t really germane to the point I was trying to make at the time, which I think is what Bob might have misunderstood.
First off, I’m more than a decade older than Bob thinks. That’s important because I’m retired. In fact, it’s the central point here. My other money is in conservative investments and I am depending on it to live out the rest of my life and calculated my ability to retire on that basis. Again, I think Bob got an inflated idea of how much that is. It’s enough but I don’t consider myself wealthy. If I were to take a significant amount from that fund and lose it, it would negatively impact my retirement and it’s money I can’t earn back in the future. Someone at my point in life should not be putting large amounts of needed capital into high-risk investments. My primary reason for keeping my bankroll separate is that I was not then and am not now willing to transfer a substantial amount of retirement money from a safe, low risk investment into this high-risk venture.
Bob stated both during our conversation and in this article that once the money is earned, it shouldn’t matter where it came from. We’ll have to agree to disagree here. This activity keeps me busy, is interesting and can provide some extra cash now and then when/if I decide to take some of the funds for personal use. If I were to lose it, it would not negatively impact my retirement; it’s gravy. It’s that simple. That’s why I keep the funds separate.
To some of the above comments: I most certainly didn’t start playing VP with only $500; I started with blackjack and played very conservatively at only the best games, increasing risk and amounts as the money grew. I was most certainly very lucky in the beginning. My bankroll is currently fluctuating in the $20k-$25k range and I am just beginning to move to 50¢ VP while still playing some quarter games. The money will need to double again before I’d look at dollar play. Consider it a conservative approach to a high-risk investment vehicle.
Another point that didn’t come up in our conversation is experience and the discipline that comes from it. Growing this bankroll has been difficult and I have learned a lot along the way. I still have a LOT more to learn. By slowly increasing and expanding my play as I slowly grow the funds, I take smaller hits from my mistakes (and I’ve made several) and learn how to deal with them. I can’t just screw up, lose my initial investment and then put more funds into the deal to cover up my mistakes. It’s much easier to throw $30k into something, lose it and then throw another $30k into it to keep going. This approach forces me to continue to be vigilant and disciplined in assessing the risk/reward of each play and understanding whether or not I can afford to invest in that play.
Bob makes a good point about the continuing decline of VP opportunities and while his argument about taking larger risks before those opportunities are gone makes perfect sense, I can’t do that in a fiscally responsible manner in my situation at this stage of my life. Again, I think Bob grossly overestimated my net worth. Having enough to retire a bit early doesn’t mean I’m living the high life with money to burn.
As an aside, the initial $100 wasn’t borrowed. A visiting friend wanted to play blackjack with me and offered to stake me so we could play together. It was a spur of the moment event at the time. I then decided to see what I could do with the winnings. If I had lost it, this thread wouldn’t be here. 😉