Money Management in Theory and Practice: Part 3

In part one of this series on how to optimally manage money and maintain a bankroll, I stated that this is not a one-size-fits-all endeavor. It varies from individual to individual depending on factors relating to finances, psychology, skill level, and personal situation. That column included a list of questions.

The second column reviewed those questions relating to your net worth. It divided bankrolls into three sizes – small, medium and large. A small bankroll is an amount you could get in a month or less from working, from your business or from your investments. A medium bankroll should take about six months to accumulate. A large bankroll takes a least a year. If you have no outside sources of income, then either decide how many weeks it would take you to earn your present bankroll (after expenses) at whatever job you can find or just treat your bankroll as large. Losing a small bankroll is distracting, losing a medium one is disturbing and losing a big one is disastrous.

This led to the conclusion that… You should take sensible chances with a small bankroll. Don’t risk losing a large bankroll! The larger your bankroll is, the more risk averse you should be.

In this next column, I am going to discuss how your personal psychology influences your bankroll management. These were some of the questions from the first column:

• How would you class yourself psychologically (calm, excitable, a steamer subject to tilt)?
• Are you risk averse or do you like to take chances?
• If you went broke (or nearly broke,) would you be devasted or would you shrug, accept that it happens and quickly start rebuilding your bankroll?
Think about these questions and come up with your answers. Years ago, Mike Caro classed players as Plodders and Adventurers. I prefer the alliteration of calling them Plodders and Plungers.

Plodders try to grind out a steady living. They try to play against opponents who are significantly worse than they are. They play for stakes that are only a tiny portion of their usually increasing bankroll. Plungers like to play for the highest stakes they possibly can. Some of them are incredibly great players, and they want to prove their greatness by beating other great players.

As an example of plunging, do you remember the Durrr Challenge? About 10 years ago Tom Dwan offered odds of $1.5 million to $500,000 to anyone who would play him 50,000 hands of heads-up poker. He beat Patrick Antonius, then was a significant loser to Daniel “Jungleman” Cates. Black Friday interrupted the challenge, and as far as I know it has never been completed, although the two may have reached some kind of partial settlement.

Clearly all three are great players. It seems likely that Jungleman was a better heads-up no-limit hold’em player than Durrr, yet Durrr was giving him 3:1 odds on a side bet and guaranteeing to play a lot of hands. The demise of FullTilt and the resultant loss of a lucrative contract appear to have left Durrr with some sort of financial problems. I could give many more examples of great players who managed to torch very large bankrolls. (You can tell my instincts are to be a plodder.)

I love to watch the plungers, and the excitement they create, but I try to avoid following in their footsteps. There are a lot of plungers who aren’t nearly as good as they think they are. The nose-bleed stakes winners in Bobby’s Room and the Ivey Room love to see a competent player win a tournament then decide to mix it up with the ‘big boys.’

Try to decide where you are on the scale from absolute nit to total maniac. For purposes of managing your bankroll, I will divide players into three psychological categories Plodders, Middle of the Road, and Plungers. As we saw in the last column, you should be more willing to take chances with a small bankroll than with a large one. Clearly how you manage your bankroll will be determined not only by its size, but by your personal psychology.

In the next column, I will cover other factors relating to bankroll management, and then try to combine the two variables bankroll size and psychology with other miscellaneous factors into some specific advice for how to handle your bankroll. ♠

Steve ‘Zee’ Zolotow, aka The Bald Eagle, is a successful gamesplayer. He has been a full-time gambler for over 35 years. With two WSOP bracelets and few million in tournament cashes, he is easing into retirement. He currently devotes most of his time to poker. He can be found at some major tournaments and playing in cash games in Vegas. When escaping from poker, he hangs out in his bars on Avenue A in New York City -The Library near Houston and Doc Holliday’s on 9th St. are his favorites.