Poker And Capitalism

waterloo“[Poker] exemplifies the worst aspects of capitalism that have made [the United States] so great.” Just consider the array of similarities:

1. Though there are rules and etiquette loosely associated with it, otherwise everything goes: in other words, its fundamental nature is profoundly amoral. (This is contrary to the ideologues who claim that capitalism is either A) “moral” / God-sanctioned / Rand-sanctioned / etc or B) “immoral” / “imperialist” / etc; newsflash, it’s NEITHER).

2. Players governed by emotions that cloud out calculation lose out in the long run. Blocking out emotions is harder than it sounds, because as in real economies, even able and rational poker players are sometimes overcome by the “animal spirits” of the moment.

3. It is important to maintain a good reputation: for instance, if you become known for bluffing too much (or not bluffing at all), you are going to get called out on it and lose money. Under advanced capitalism every major corporation maintains a PR department.

4. The majority of people in many capitalist societies such as the US believe that they are good enough to get well ahead, whereas in practice that is rarely the case (e.g. median household incomes have been more or less stagnant since 1973). Likewise in poker, most players believe they’re really good at it – ask around and you’ll find that 75%+ of people who play poker say they win on average, despite the mathematical impossibility – but in real life, only <10% end up corralling most of the gains.

5. Those who do lose attribute it to bad luck, rigged games, etc. -anything but their lack of ability. Likewise with the losers of capitalism.

6. The Matthew Principle: “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath”. Just as there is a tendency in capitalist economies for wealth to become concentrated, so the players with the biggest stacks have a major advantage.

7. Poker doesn’t make money, it only redistributes it. Likewise with capitalism, which doesn’t generate wealth per se, which only comes from labor, capital, (finite) natural resources, and the efficiency with which said factors are converted into useful work. The idea of capitalism (or of bankers, at least prior to 2008) as somehow generating value out of thin air, bypassing the laws of thermodynamics, is one of its most powerful myths. Poker players at least aren’t subject to this delusion.

8. As with effective capitalist systems, there is a lot of scope for social mobility based on specific talents; however, the adjustments can be very big from round to round in no limit poker. (More regulated capitalist systems are akin to limit poker; less regulated to no limit). Bad capitalist systems, e.g. ones dominated by oligarchs or monopolies, are akin to rigged games with insider dealings.

9. However, if you’re ruined, you can sometimes get back into the game. For instance, through buy-backs. But that is rare. More frequently, you are simply ruined.

10. Obviously, the elites at the top that run the poker games benefit through the casino rake, which they use to maintain their sites or brick-and-mortar casinos. This is equivalent to the government taxing capitalists in order to maintain the state apparatus (courts, police, etc) to sustain capitalism itself.

One exception I used to think existed is that there are no “fat tails” in poker, i.e. totally unexpected events that can completely upend normal risk assessments, whereas capitalism positively teems with them (e.g. the chaotic collapse of global stockmarkets on Black Monday in 1987; the collapse of Long Term Capital Management due to their models neglecting the risk of a Russian default). But whereas you can get “bad beats” in poker – in which your opponent plays wrong but beats your stronger hand by lucking out – they would still be within the realm of plausible expectation to anyone familiar with the rules of the game. Your Internet connection may snap, causing you to lose a big hand, but these events can be foreseen (and taken into account in calculations of hourly rate) and will in any case fail to cardinally change the size of your bankroll.

Today, the Feds proved me wrong by shuttering the three companies that dominate online gambling in the US and issuing arrest warrants for their CEO’s, in the latest display of creeping authoritarianism by the Obama regime. (The government only wants you to be able to gamble under their roofs – it’s a pretty sick deal, you get taxpayer funded bonuses for losing money and buy-backs are on the house – though granted, the entrance fee to that casino is just a bit too high for most people). It’s not clear if the players at those sites will be able to cash out their online chips; in fact, it’s even possible that the resulting panic will unleash an exodus that will bankrupt them before players from Europe and Asia can take up the slack. So I guess Black Swans can appear in gambling dens too.

ADDENDUM

Gambling card games as metaphors for political economic systems can be extended further. For instance, central planning / command economy can be productively compared with blackjack.

In the long-run, even assuming perfect play with *no* tricks, you are going to lose more than you win. Or, constrained Pareto optimality. This is certainly not the case for good poker players.

Of course, most people will never know how to play perfectly, and while they may get lucky and profit from the system, the long term expectation is always one of loss.

There is a solution to this: card-counting. The equivalent would be something along the lines of running a black market, or organizing a covert operation to buy up resources at (cheap) domestic prices and sell it at (higher) international prices. This is hugely destructive to the casino-state, of course, hence the penalties – both at the card table and in real life – are stiff. Card-counting is against the rules in casinos and can get you banned from them. Black marketeers in command economies can expect to get prison, hard labor, or even shot, if uncovered (to avoid this they usually co-opt corrupt members of the nomenklatura of the casino-state, sending them a slice of their profits in exchange for theirs turning a blind eye – or even aiding their operations).

Since it is the casino-state that wins out in the long-run, it is logical to scramble into its ranks. Hence the typical, intense competition for entrance into the nomenklatura seen in planned (and heavily socialist) economies from the USSR to modern Venezuela. But getting in by pure talent rarely works. In most cases, you need connections within the casino staff.
This is it for now, but I’m sure one can make plenty of other points, both pro and contra.

Finally, what about Communism? Well, it’s a utopian state that has never been close to achieved anytime, anywhere; it is a state where scarcity vanishes. Perhaps something like playing poker with stacks of (fake) money. Like Zynga on Facebook?

Comments

  1. Yalensis says:

    Beware! Excessive gambling can cause a man to go mad and shoot himself — especially when he mistakenly bets on the Queen of Spades instead of the Ace !

  2. goodfellas says:

    @AK
    What do you make of article? It doesn’t seem to fit with China’s rising trajectory in global affiars.
    Is it simply a case of corrupt, selfish elites wanting to flee punishment in China? And if this article is accurate, why isn’t the Chinese govt. working to prevent these people from fleeing China with their money and skills?

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