This article sponsored by PokerFox.net
The "Peter Principle" was initially introduced in a book written by Laurence Peter, and it states, "In a hierarchically structured administration, people tend to be promoted up to their level of incompetence." Basically this means that if you do your job well you get a promotion, and your job keeps changing as long as you do it well. The promotions only stop when you are not doing your job well, leaving you stuck in the one job you aren't good at after being promoted out of so many jobs where you were excellent. This leaves many large companies with an inordinately large number of employees who are simply unable to do their job well. Think about how this works in the poker world for a minute.
Poker is definitely a hierarchal structure, with levels from play money or .01 / .02 all the way up to the monster 100 / 200 NL games or even higher. Each level you move up things get tougher, just like they do in a business setting, and as things get tougher some people get stuck at a certain level. Obviously not everyone has what it takes to be a CEO, but some people make very efficient janitors and that is fine for them. The problem comes when someone is promoted to a level where they don't perform so well and may even fail.
In the world of poker, especially online, everyone wants to move up levels and play with the "big boys", but for most people that is not a wise goal. The best goal to have is to make as much money you can at the level you are playing now. Then you can consider moving up when you have a very comfortable bankroll to do so and you are sure that your skills are sharp enough for the next level. If all you want to do is move upwards as fast as possible you will inevitably find yourself in a situation where you are no longer beating the game or are winning so little that you become easily frustrated and variance can kill you.
A year or so ago I had a student who was multi-tabling the 2/4 and 3/6 games on Party and making about $12 an hour doing so. Considering that he lived in South Africa this was a pretty good living for him, and more money than he had ever made before, but it didn't take long before there were dollar signs in his eyes and he wanted to move up to where the big money was.
This student (we'll call him Joe) also occasionally played small buy-in tournaments, mostly for a break from the grind. About a month after we began lessons Joe won a $30 buy-in NL tournament on Party to the tune of about $3,500. His bankroll stood at $4800 at the time, and the win brought him up to $8900. I assumed Joe was going to move up to 5/10, which I thought he had the skill to beat. Instead of moving up to 5/10 however, Joe skipped right to 10/20 and started playing 6max tables as well as full ring games and he was playing 3 games at a time just like he had been doing at the 2/4 tables.
Joe was sure that he had no more need for my lessons, and pretty much ignored my advice to be careful and play 5/10 for a while first. I didn't hear from him for about 4 months. The first thing I heard from him after 4 months was "Friend I need your help" in a messenger window. As it turned out Joe wasn't really good enough to multi-table the aggressive 10/20 games and his bankroll was back down to $3,400. The Peter Principle had gotten him and he had found the level where he wasn't good enough to beat the games yet.
Joe was smart about things after that and he waited a few more months before he even moved up to 5/10. Now he comfortably plays 5/10 with a safe bankroll and makes more money than anyone else in his family doing so.
The Peter Principle is a big part of the reason I am cautious when I recommend bankroll numbers at the mid levels. A larger bankroll "ceiling" will require you to spend a little more time at your current level honing your skills and will give you more of a safety net if you should fail and have to move back down to work on those skills some more.
I see the Peter Principle in tournament play quite often. Players who play smaller SNG's or satellites to get into the larger buy-in tourneys but who don't ever seem to get past that point. They are taking money from a source where they are a proven winner and throwing it into a place where they are often a losing player. Taking a shot at a bigger tournament is by no means always a bad idea. It can help you to learn about the play at the higher levels and it is certainly fun to see that huge first prize waiting for you, but doing it frequently can put you into limbo, losing the same amount in the big tourneys that you win in the cash games or SNG's that you usually play.
Keeping good records is one way to avoid the Peter Principle. If you can look back at the last year and see that you are losing money playing no-limit, but winning playing fixed limit games, then you know to step down a level at the NL and work on your game or simply stop playing it. It's never fun to step down a level, but it's a lot better than being stuck in a quagmire, breaking even when you know you should be winning.
Another way to avoid the Peter Principle is to keep studying. Since you are visiting Pocketfives I can only assume that you are constantly working to improve your game. Luckily for us each "position" in poker is very similar to the last one. If you are solidly whipping the 10/20 games then as long as you keep studying and you are careful with your bankroll, there is a very good chance that you will beat the 15/30 games as well when you move up.
As you move up through the levels you will often see people who are approximately break-even players, and now you will know why. The Peter Principle has caught up with them and they have found the level where their bankroll no longer grows. After awhile they will become frustrated and quit poker entirely in most cases, because they simply can't seem to beat the game. Usually these players will focus on bad beats as the reason they are failing.
If the break-even players I see at the 10/20 tables just dropped down to the 5/10 level they would certainly be winners, and winning is both more fun and more profitable than telling bad beat stories and wondering why everyone else gets so lucky. Then they could work on their game while they were making money and smiling. They might gain enough knowledge and experience to beat that 10/20 sooner than they think.