I repeatedly hear the question, “I’ve done my homework, worked on my game, and paid my dues but I still can't break through. What’s missing from my game?” There are an infinite number of possibly correct answers to that question, but the most common one is simple bankroll management.Well, sort of. I’m not referring to systems like the one in Fox’s excellent article “Bankroll Management.” Those are great, and definitely should be in every player’s knowledge base. However, there needs to be something bigger, stressing proper use of all of the tools at your disposal. Your most important tools are proper game selection and general asset management.
Most great businessmen are excellent asset managers. A poker session isn’t much different from a boardroom meeting where bravado, ego, and jockeying for positional advantage abound. Why not apply some of the lessons learned from the likes of Warren Buffet? The first step to becoming a great asset manager is learning to recognize an asset when you see it.
The first thing you must do is lose your pride. Not your ego and certainly not your confidence – just pride. Properly controlled, your ego can feed your confidence; as long as it doesn’t kill your drive to become better, ego can be quite useful. However, letting your pride put you in games you shouldn’t be in is wildly detrimental to your success in poker. Don’t value your ability on what stakes you play. Let your bankroll speak for itself. The “better” players whose acceptance you desire are good enough to know this game comes down to cold hard cash. A dollar is a dollar…it doesn’t matter where or how you got it.
Money isn’t the only asset we have as poker players, all too often our time is overlooked. Before any asset can be managed you must assign it value. The best way to value time is through “opportunity cost.” Your time is worth the most you could be earning. If you’re making $15 an hour at poker and $20 an hour at an office, then it costs you $5 an hour to play poker (assuming you could choose to do either.) Consequently, if you’re sitting on the couch watching TV, your opportunity cost is a full $20 an hour because no one pays you to watch TV. When your goal is to maximize profit, including opportunity cost in your decision is a must.
When you’re playing poker to make money, you should be judging your success on just one thing: profit. Forget ROI – it’s a great way to judge your ability compared to the players at a given level…but that’s pretty much all its good for. It’s nearly impossible to tell if you’re playing at the right level from ROI alone. The real stat you should be relying on is your Earnings per Hour (EPH.)
For cash game players, EPH is simple – take the amount you earn in a session and divide by the total hours you’ve played. Track this carefully and keep a running average. If your average starts to dip, you’ll know you may be developing a leak in your game or need to shift strategy. It’s a decent early warning sign, and can save you tons of money by showing you when you need to do some extra homework. Be sure to keep your average separately at each level.
It gets a little more complex for Multi Table Tournament and Sit and Go players. In order to calculate your new stat, you must first figure out how long your average tournament lasts, dividing the total number of tournaments you have played at a given buy in by the hours played. The number of players in each tournament directly influences variance, so for larger MTTs, you’ll need a more significant sample size.
Your EPH stat’s most useful function is as an indication of what level you should be playing. As you begin to climb through the levels, keep an eye on what your EPH is compared to the prior level. When your EPH maxes out, you’ve hit your level. It doesn’t matter what that level is and what the # of buy-ins your bankroll supports – you will make more money and require a smaller bankroll than if you were playing up three levels. Your ROI fails to factor in your time. EPH does, so you can easily see what level you should call home.
From time to time, be sure to venture up (possibly even down) a level or two to put in some hands. Calculate your new EPH at that level when you have enough hands. If you’re new EPH is higher than your previous one, consider yourself to have moved to a new level. I have heard many suggestions on what constitutes “enough” volume to have reliable statistics and while 50K hands may seem conservative, it is probably best. If you’re multi-tabling, you’ll get there before you know it. Can’t wait? Adjust that number down a bit, but be sure you remain over 20K hands or your stat may be unreliable.
I didn’t call it the golden rule just so I would have a catchy title. When you play poker for profit, your objective is cold hard cash. So next time you contemplate if you’re “playing high enough,” turn to your handy EPH. You’ll be laughing all the way to the bank while others “pride” keeps them three levels too high and stifles their bankroll. Remember that your bankroll isn’t your only asset, managing your time will be a big key to your success.
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