COTW: The Moneyball of Poker - Micro Stakes Full Ring Games

ChazDazzle · 10-29-2010, 12:32 AM

"In the late 1970s and early 1980s, the bond and option markets were dominated by traders who had learned their craft by experience. They believed that their experience and intuition for trading were a renewable edge; that is, that they could make money just as they always had by continuing to trade as they always had. By the mid-1990s, a revolution in trading had occurred; the old school grizzled traders had been replaced by a new breed of quantitative analysts, applying mathematics to the "art" of trading and making of it a science.

If the latest backgammon programs, based on neural net technology and mathematical analysis had played in a tournament in the late 1970s, their play would have been mocked as overaggressive and weak by the experts of the time. Today, computer analyses are considered to be the final word on backgammon play by the world's strongest players - and the game is fundamentally changed for it.

And for decades, the highest levels of poker have been dominated by players who have learned the game by playing it, "road gamblers" who have cultivated intuition for the game and are adept at reading other player' hands from betting patterns and physical tells. Over the last five to ten years, a whole new breed of player has risen to prominence within the poker community. Applying the tools of computer science and mathematics to poker and sharing information across the Internet, these players have challenged many of the assumptions that underlie traditional approaches to the game."

From The Mathematics of Poker - Bill Chen & Jerrod Ankenman

In a three part COTW series I hope to introduce some of the statistical concepts that have transformed the fields of finance, baseball, backgammon, and numerous social and hard sciences but have yet to be meaningfully applied to poker. As it was in finance before the 80’s and baseball before Bill James, the poker world is currently dominated by players who have learned through experience, intuition and gut feel. While HEM and PT3 enjoy a wide user base, their function is almost exclusively descriptive rather than predictive. This leaves much to be desired considering the most important questions in poker, such as "what’s my opponent’s likely hand", and "will he fold to my bet", hinge on incomplete information.

The underlying assumption of these methods is that the best decisions are based on quantification and numbers, determined by the patterns of the past. The intuition we implicitly develop as poker players supports this hypothesis - namely that there are essentially stable relationships between the observable characteristics of our opponents, their actions, and whether they are strong or weak in a hand.

The first post of this series will examine the nature of expected value in poker and how attempting to maximize it is really a question of applied statistics. Using Nate Silver’s success predicting the 2008 presidential election as a backdrop, the second post will introduce the statistical method known as regression analysis which can be used to quantify the relationship between related factors. In the last post I’ll apply these concepts with a video demo of an Excel model I built for estimating an opponent’s hand range from hand history data.