Applications in Poker

The more one begins to understand the nuances of the game of poker, the easier it is to start believing that the concepts central to comprehending the game on a deep level are inapplicable in any other field. After all, in what other areas of our lives do we find ourselves regularly attributing mathematical denominations to other people’s actions and trying to figure out how to best exploit their weaknesses? Hopefully none, otherwise we would be exhibiting some decidedly sociopathic tendencies.

However, when we flip this dynamic around and start applying ‘real-world’ concepts to poker, there are a number of things we can learn. In particular, poker has a lot in common with academic disciplines such as economics, sociology, behavioral psychology, and even philosophy, and many concepts from these fields can be used to help us better understand the game of poker. One of these such concepts is the Pareto Principle.

What is the Pareto Principle?

In 1896, Italian economist and sociologist Vilfredo Pareto published a paper showing that roughly 80% of the wealth and land in Italy at the time was controlled by the richest 20% of the population, and suggested that this ’80/20 principle’ would hold true in many other environments as well.

He investigated other countries’ wealth distributions and found this to be true. In fact, Pareto took this principle far enough that he experimented with peas in his garden, recognizing that 20% of the peapods in his garden contained up to 80% of the peas.

Management consultant Joseph M. Juran later proposed that the idea be named the Pareto Principle and extended its application into many business contexts. Juran believed that in many companies, 80% of the profits came from 20% of the customers, and this has since become somewhat of a rule of thumb for many business managers. It can also be said that 80% of sales come from 20% of products, or that 80% of complaints come from 20% of customers, and so on.

How is it relevant to poker?

Tim Ferriss’ excellent book, ‘The Four-Hour Work Week,’ shows many different contexts in which the 80/20 principle is applicable. He suggests that it can be extended to a simple input-output metric: 20% of the inputs in any given business or economic system are usually responsible for 80% of the outputs.

Since poker is, at its core, an economic system unto itself and since we as poker players should be doing our best to see ourselves as small business owners, it makes sense that we would want to try to apply this concept to poker and see what we might gain from it. As it happens, there is at least one very obvious way in which the 80/20 principle applies directly to poker.

Inputs and outputs at the table

If we’re defining a game of poker as an economic system with a series of inputs and outputs, it makes sense that the inputs would be the decisions we make and the outputs would be our profits.

In fact, this delineation actually matches up perfectly with the kind of strategy we would usually be adopting at a nine-handed table: since a tight player may play around 15% of hands on average and a loose player may play around 25% of hands, it can be asserted that many players will usually be playing somewhere in the region of 20% of hands overall.

It makes sense to assume from this that all of the profit we make at poker comes from the 20% of the hands we’re actually playing, but we can take this concept a little further than that. We can look at the top 20% of this 20% of hands we actually play (4% of total hands) and extrapolate that 80% of our profits come from those hands – this is very likely accurate.

If you look at the average Holdem Manager 2 or PokerTracker 4 database, you’ll see that a huge proportion of a winning player’s profits come from those top 4% of hands (roughly TT+ AK+). This seems like a reasonable application of the principle – 20% of the hands we play account for 80% of our profits.

There are other applications of the principle that hold true at the table. We might be able to assert, for example, that 80% of our profits come from 20% of our opponents; depending on what games we’re playing in, this could easily be true. We could also flip it around and say that the biggest 20% of our mistakes account for 80% of our losses.

Whichever way you look at it, the input/output metric of the Pareto Principle encourages us to look not only at the thin, marginal edges that are so common in poker, but also to focus on getting the most out of less marginal situations and maximize our edge at times when we know circumstances are in our favor.

Off-the-table inputs and their effects

Of course, our on-the-table decision-making always has to be supported by healthy off-the-table processes and so we need to consider how the Pareto Principle affects things like game selection, session scheduling, and theoretical study.

It’s not a stretch to say that for players in certain game types, 80% of their profits could come from 20% of the games they play in, so they may benefit from cutting out many games in which their ROI is thinner and replacing them with other games or simply playing fewer tables.

Similarly, it’s reasonable to suggest that if we find ourselves putting in a large amount of volume during periods where we’re not able to play our best for whatever reason – be it tiredness, distractions, or lack of motivation – then we may find that 80% of our profits are made during 20% of our sessions, the 20% in which we are able to truly play our A-game and maximize our EV.

Finally, we may also see that if we’re spending long hours away from the table studying the game, we reach a point of diminishing returns. We study because we feel like we should be studying, but we’re just looking at hands aimlessly without really digging into the level of detail that would step our game up a notch.

This is an example of a situation where 80% of our improvements might come from 20% of our studying time, so consider carefully whether the studying you’re doing is really as efficient as it could be. If it’s not, do some research on learning styles and figure out which system of learning works best for you, focus on that one, and keep your studying as efficient as possible.

A final word

The Pareto Principle is just that – it’s a principle, not a rule. This means there are plenty of situations where it holds true, but some others where it doesn’t. Consider whether your own personal situation might require an adapted version of this rule. If you’re operating on a higher level of efficiency, you may find your input-output balance is a lot healthier.

Perhaps the top 40% of your inputs are generating 60% of your outputs or perhaps you’re even reaching a perfect 50-50 ratio – 1 input to 1 output. For many people, though, the balance will be more extreme.

In some circumstances, you may find that even the top 1% of your inputs are generating 99% of your outputs. Try not to see this as a mistake; see it as an opportunity for growth. Trim the fat, cut out that 99% of mostly useless work, and watch your graph trend upwards.

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