The Poker Peter Principle

The “Peter Principle” was formulated by Dr. Laurence J. Peter and Raymond Hull in their 1969 book The Peter Principle, a humorous treatise. In simple terms it states that in a typical business, employees who are successful and perform their jobs well are promoted. Each promotion takes them to a more demanding level, requiring greater and greater skills and abilities. Eventually, however, they are promoted to such a high level that they are no longer competent. Thus most people eventually reach and languish in a position for which they are incompetent. If a business is expanding very rapidly, someone may be in a position for which they lack the necessary skills without even being promoted. (In the recent Full Tilt debacle, Ray Bitar, whose business experience consisted of being Chris Ferguson’s college roommate and running a day trading office, suddenly found himself in sole command of a multi-billion dollar enterprise. Leaving aside his ethical shortcomings, this position was way beyond his skill set — he was far past his competence level. I guess it should also be added that the owners and board of directors were also by then way beyond their competence level, or they would have recognized the problem and replaced Bitar.)

In poker, players can make their own decision as to when they should be promoted. We can look on playing in higher-stakes games or higher buy-in tournaments. Strangely enough, the Peter Principle applies to many poker players. As long as they are winning, they move up. Aside from a very select few, they eventually arrive at games and stakes that exceed their level of competence. They are playing for stakes that are too high against opponents who are too good. At best they break even. More frequently they are losing players at this level. Unlike a typical business, poker allows you to promote and demote yourself whenever you feel it is appropriate. Yes, I know it is a hard for a player who has beaten $2-$5 and $5-$10 blind cash games, but loses at $10-$20 and gets crushed at $25-$50 to admit that he should demote himself back to $5-$10. He can also attempt to improve his skills while playing in the games he can beat. If he feels his skills have improved and his bankroll is sufficient, he can again take occasional shots at higher stakes when the games appear weak. If he does well, then perhaps he is now ready for the promotion, if not, it is better to return to a level at which you are competent.

In summary, if you have been moving up in stakes, especially if these moves have occurred very rapidly, and you start losing demote yourself. Return to stakes and games where you are competent. While your ego may not like it, your bankroll will. Don’t let the Poker Peter Principle destroy your bankroll and your life. ♠

Steve “Zee” Zolotow, aka The Bald Eagle, is a successful games player. He currently devotes most of his time to poker. When escaping from poker, he hangs out in his bars on Avenue A — Nice Guy Eddie’s at Houston and Doc Holliday’s at 9th Street — in New York City.