Sneeze Limits

The term "money management" is always a fun place to start an article on poker, as it's guaranteed to arouse strongly expressed opinions, even among people who know they are in basic agreement.

Money management has long been a favorite term of system peddlers, people who through malice or ignorance want to sell you systems for beating casino games (everything from keno to poker). While these systems have plenty of well-documented shortcomings (and occasional merits), it's worth thinking about what's so attractive about them, and how they come up short. The systems I find most interesting in this respect are some of the simplest, and have to do with limits - criteria you can use to decide when to stop playing. Win limits tell you to stand up when you've won a certain amount. Loss limits restrict your losses. Time limits put a cap on how long you should play. Each of these limits has some core appeal, and in the right circumstances can be a reasonable heuristic for getting you out of the game at the right time. But as general rules to apply to your play, they're no more likely to turn you into a winner than being struck by lightning.

While these schemes are mostly nonsense, there is a degenerate way in which they actually can improve your expectation. They make you play less. For players who play at negative expectation (and there are many), playing less poker could be a financially lucrative move. While a win limit (or loss limit, or time limit, or sneeze limit) won't affect your hourly expectation, since it won't cut down on the number of minutes you play per hour, it might affect your weekly, monthly, or yearly expectation if you end up playing fewer hours per week, month, or year. And there's an easy way to adapt these systems to improve your hourly expectation. For any hour in which you reach your limit (it doesn't matter which kind), don't play any more minutes that hour. So, each hour will have fewer hands in it, and your expectation will be reduced in magnitude. As long as you're a losing player, and you don't make up the hours or minutes some other time, that will be an improvement. If you're a winner, of course, it will likely end up costing you money.

But what if you're a winning player? To the extent that these systems have merit, it's because they are heuristic approaches to identifying genuinely good times to quit - rules of thumb you can use in place of really evaluating all the information available to you. The great attraction of rules of thumb is that they can give you a reasonable approximation of the right answer for a lot less effort than actually figuring it out. But if all heuristics were good heuristics, I wouldn't be writing this column. There's no law of nature that guarantees there's a good shortcut for everything - and there probably isn't one for figuring out when to stand up from the poker table. While limits are easy to apply, they're remarkably insensitive to how good the game is. That's because your results after a few hours are only a poor indicator of the profitability of the game. While it's true that a big loss may be a warning sign that you're playing at negative expectation, the relationship is quite weak. Worse yet, when a good player is suffering a big loss or enjoying a big win, it's often because of some of the factors that make the game good - lots of action, lots of good investment opportunities, players hitting long-shot draws, and so on. So, they may even be worse than random.

Of the three limits I mentioned, time limits probably have the strongest relationship to the profitability of a game. If your game tends to deteriorate as you play, and you have no other way to assess your level of alertness, time limits might do a reasonable job of getting you away from the table at the right time, as long as you pick a reasonable limit and stick to it. Still, adhering to a limit blindly will often force you to abandon a game you know is profitable when you feel fine and have nothing better to do. And paradoxically, because it takes some discipline to adhere to time limits, many players will be more likely to abide by them when they're feeling well than when they're not, which is the opposite of what you'd want. However, for players who are going to eat, sleep, and play poker a fixed amount of time during a year, and just want to know when to do which, budgeting a fixed amount of time for playing is not a terrible way to get your sleep when you need it (especially if the game is going to be just as good tomorrow).

Some gambling writers have abandoned the term money management altogether, due to the risk of being mistaken for someone selling a system. That's understandable. I prefer to keep the term, because it expresses clearly a goal that most of us have, of making principled decisions about what to do with our money. Ultimately, money management is about finding investments that meet your goals. Although heuristic shortcuts are handy now and then, and certainly attractive, they're certainly not guaranteed to meet your investment needs.