Monday, October 27, 2008

Risk of Ruin 101

One concept that struck me when reading the Mathematics of Poker is the "Risk of Ruin" (RoR), more commonly known as going busto.


Bankroll Management is extremely important and if you only ever sit down with 5% of the Bankroll, you will be down to 1c/2c before going bust. If you've been serious about poker and can't beat that game then you need to rethink why you are playing poker.


That stated, the first lesson on Risk of Ruin is that any game with a negative EV has a 100% chance RoR in the long term. 100%. Gambling 101, every other casino game is -EV, so don't play them when waiting for a table to come free. Sports betting, Betfair etc aren't because you can have an edge, unlikely but possible.


More on Risk of Ruin next time ...

2 comments:

The blindman said...

That gels with my thoughts on bankroll management. I don't agree with the prescriptive approach to bankroll in most books (e.g Stox 1000BB for Limit). The RoR calculations that these guys do are usually based on you playing the same level until you go bust - which is definitely not the way to manage a bankroll!

Number one rule as you say, is to be sure you are beating the game and the rake. If you are not sure, then proceed with caution.

If you are confident of beating a game, it is reasonable to invest a significant proportion of your bankroll in the game - but you must set rigid rules about stepping down a level (or more) if your roll drops below a specified level.

TiocfaidhArLa said...

I like Doyle Brunson's analogy, when he warns against stepping up prematurely.

There is no need to simulate a tourney, where rising blinds are there to consolidate stacks with increasingly good players going bust at higher levels.

Selectively taking shots are the only way of maximising ROI which comes from stepping up within your capabilities and bankroll.