The Expected Value (EV) of Life

by Greg Dinkin | Published: Dec 17, 2004

Clifton X. Savior is a generous name for a generous guy. Clifton and I were on our way to play poker last week at a club in New York when we got on the subject of tipping dealers. At this particular club, they hand out tickets every time you win a hand for a drawing to win prizes, typically cheap electronics. Clifton, who plays either $4-$8 limit hold'em or no-limit hold'em with $1-$2 blinds, was commenting about all the times he had walked out of the club broke with 30 tickets as his lone consolation prize.

We arrived at the club and everyone had a smile for Clifton. The floorperson seemed eager to please, and found us two seats at a no-limit table with $1-$2 blinds. Over the course of the next four hours, the game was between six- and eight-handed. You pay by the half-hour ($4 for this game), so the players act quickly and the dealers oblige. On average, Clifton was winning five pots an hour. He was tipping two bucks on small pots and three on big ones. And this being New York – and not Las Vegas – no one was sitting at the table with a roll of half dollars and a half-price coupon book stuffed in a fanny pack. Clifton's tips were generous but not beyond the norm.

If you're a student of poker or expected value (EV), you've already figured this out: Clifton has absolutely no win. Between the rake and tips, he's hemorrhaging $20 an hour, and while he's a solid player, he's not that solid (certainly not solid enough to compensate for the overhead at these limits). He might as well go to the racetrack.

If you're a little smarter than the average bear, you might be looking for other motives. Might Clifton be a journalist, quietly gathering information for a prestigious magazine or a new book? Does he have a secret crush on one of the dealers whom he is trying to impress with his generosity? Is he a detective in the midst of a sting operation?

If any of the following are true, you – the astute student of EV – might forgive his generous tipping. Because it has a purpose that can lead to financial personal or professional gain, it can be booked as an expense. Maybe he could even justify adding 10 bucks an hour to his official poker log.

But stop for a second and try to think beyond EV. Maybe he works around angry people all day and likes the positive energy that comes from being a generous tipper. Maybe he works in the service business and knows the value of manual labor. Or, maybe it simply makes him feel good to tip. Those are all reasons that have nothing to do with financial EV.

In my first book, The Finance Doctor, I advised readers to evaluate costs over the course of a year. Spending $5 a day on cigarettes might not seem like such a big deal, but when you consider that you're inhaling $1,825 over the course of a year, it makes a greater impact. As poker players, you already know this. Whether it's the rake, tipping, value betting, or comps, you know that the value of a small edge adds up to your livelihood.

I remember going to a Chicago Cubs game with my friend Zubs back in August of 1999, and every time he bought a hot dog or a beer, he told the vendor to keep the change. "Zubs, even though that doesn't add up to much over the course of a game, it does over the course of a season." I was making six figures not breaking much of a sweat as a consultant, and I was chastising my friend for giving a guy who was sweating through his shirt an extra quarter.

Playing poker professionally led me to be immersed in the world of EV. I had gone so far as to not only begrudge someone a little spare change, but also lecture a friend on the merits of not doing so. Shortly after the Cubs game, I went on a blind date, and the subject of poker came up. After about a half-hour, the woman asked me, "So, what came first, the poker or the poker face?" Here I was away from the poker table, yet I was so guarded about giving off a tell that I couldn't begin to let a beautiful woman get to know me.

Five years later, it seems like every day that my brother Andy quotes Wayne Dyer, when he says: "The more you change the way you look at things, the more the things you look at change."

For years, I have extolled the virtues of poker and how it is a fantastic metaphor for business. Along the way, I've forgotten that it can also be an awful metaphor for life. Keeping your cards close to the vest is a great strategy in business; it's also a lousy one for dealing with someone you love. Never showing emotion is a great way to sell a bluff; it's also a lousy way to be around your family. Being mindful of every little expense is a great way to build your 401K; it's also a lousy way to treat people in the service industry.

Last year around Christmas, I watched Daniel Negreanu walk through the poker room at Bellagio with a rack of $25 chips and $100 chips and pass them out to the dealers and staff. He had a big smile on his face as he wished everyone a Merry Christmas. If I think only about EV, I can come up with arguments both ways as to whether or not this was a smart move. But when I think about life, my only conclusion is that the EV to Daniel's life is so great that it can't be quantified.

If you want to be a professional risk-taker, you must explore small edges, control costs, and look at every bet as a value proposition. But if you can't turn that off when you're living your life, it will be tough to find any joy from the money you accumulate. How many wealthy, miserable gamblers do you know?

Clifton rarely buys in for more than $100. If he goes broke, he reasons that he still would have spent more money in a bar that evening. He saves his liver, makes some friends, receives positive energy, and, on his good nights, goes home with a few bucks. Sure, tipping well is a cost, but being able to talk through a hand with a dealer when he's grabbing a smoke or simply being welcomed with a warm smile is also a benefit. But benefits and EV aside, he tips what he tips because it makes him feel good – and that's reason enough.