Your bankroll – how much do you need?
How large a bankroll do you need to outlast any bad run of cards and ensure that you’ll never go broke? This question comes up time and again in letters and e-mail from readers.
While “How big a bankroll…” is a complex issue that can’t be resolved by applying a rule or formula, there is one fact you can bank on with absolute certainty: If you are not a winning player, your bankroll will never be large enough. To completely eliminate the possibilities of ever going broke, losing players need a big enough bankroll to outlast their life expectancy. Without one, they’ll find themselves regularly infusing their playing stake with fresh cash.
Some players really do have bankrolls that will outlast their life expectancy. In southern California, where there’s always lots of loose money at play in card casinos, they are derisively referred to as “trust-fund pros.” Many of them play every day, and will swear to you that they are long-term winners. Trust-fund pros seldom deceive their opponents no matter how strongly they claim to be winning players. They only delude themselves, and their opponents know it.
The price of self-deception, however, can be high. Consider a 40 year-old trust-fund pro who plays $10-$20 and loses an average of one big bet per hour. If he plays 2,000 hours a year and lives to be 85, he can expect to lose $1,800,000 playing poker. Outside of a very select few, that’s a lot of money by anyone’s measure.
Suppose this particular player is not really that bad and only loses $3 per hour. He’ll still run through $270,000 before keeling over at the table. It’s not as bad as a million-eight, but still a stack of jack for most folks. The best thing you can say about this player is that he did a good job of financial planning if he started with a $270,000 bankroll and spent his last dollar on his last day of life. (If he did a perfect job of financial planning, he’d work it so close to the nub that his check to the undertaker would bounce.)
While there are more than a few trust-fund pros out there, most players underwrite their poker with their paycheck. Poker, to the majority of them, is recreation – just a hobby – and if they lose today, it’s no big deal. They can supplement their bankroll on payday, and as long as their losses do not exceed their discretionary income, they don’t need to concern themselves with having an adequate bankroll.
For all the players who are not lifelong winners – and estimates I’ve read suggest that 85-90 percent of all players do not beat the game – an adequate bankroll means either a trust fund big enough to sustain a lifetime of losses, or a paycheck that can cover their losses from one payday to the next – without risking the rent money.
But suppose you’re a professional and poker is your paycheck? How much do you need to keep from going broke?
A professional poker player should realize that every dollar he wins will not be added to his bankroll. After all, he has to pay rent and buy groceries just like anyone else, and his only source of income is his winnings. Lose, and he pays his bills the only way he can: by drawing down his bankroll. But there’s a limit to how deeply he can dig without putting himself in jeopardy.
Reducing your bankroll converts capital into income – and that distinction is an important one. Change too much capital into income and you’ve eaten your seed corn. When a player on a short bankroll hits a protracted losing streak, he has only a few choices. He may have to get a job in order to build up his bankroll (in which case he is reversing the process and converting income to capital), or else he can become a horse for someone else and take only a percentage of his winnings, or he can quit poker entirely. None of these are very desirable options for working professional poker players.
Bleeding off capital is not limited to poker players either. Businesses do it all the time. Some years ago, when Pan-Am was on the rocks, they sold off their flagship building in New York City. As a result, their balance sheet made it seem like they had a good year. But you can only convert capital into income once. Then it’s gone. A poker player’s bankroll is his capital. When poker is your business, you don’t need money to build factories, or buy office buildings, trucks, machine tools, or banks of computers. Money – in the form of a playing bankroll – is your capital. Lose too much of it and you’ll probably have to drop down and play at smaller limits, put the screws to your personal spending habits, and grind out an adequate bankroll. If you lose too much, you’ll be so undercapitalized that you’ll be ill equipped to even compete at all as a professional.
I’ve always used 300 big bets as a reliable bankroll. That’s not a number I ginned up myself. I think it was postulated by Mason Malmuth or David Sklansky. If a bankroll of $6,000 to play $10-$20 hold’em seems like a shockingly high number, I recommend reading Gambling Theory and other Topics by Mason Malmuth. It’s an amazingly insightful work into some of the statistical realities that surround poker. You’ll learn how the vicissitudes of fate can produce some extreme results over the short run, and even $6,000 may be a conservative estimate for that game.
But that’s not the whole story. If you were an outstanding player in a regular game comprised of absolutely horrendous, extremely passive players – who seldom raised but always called until all hope, no matter how small, was completely dissipated – I’m certain you could play on a much smaller bankroll without the risk of going broke. But few among us have been lucky enough to find a regular game filled with players who are that bad.
Even when you’re a favorite in your game, you’re probably not a prohibitive one. If you regularly play in a tough game, you probably need more than 300 big bets to hedge against going broke. For the average working professional player – the guy who plays every day trying to win between one and one-and-a-half big bets per hour – I don’t see any reason to digress from the conventional wisdom of a 300 big-bet bankroll.
Can you still take occasional shots at bigger games? Sure – and you probably ought to – as long as the game looks good and you are a favorite. If anything, it will help you prepare for the next move up the poker ladder, once your bankroll grows large enough to play there regularly.
Limit poker, after all, is like a job. As long as you’re a winning player, the more hours you put in, the more money you’ll earn. And if you give yourself a pay raise by jumping to a bigger game, you ought to earn more in the long run. Just make sure you don’t take risks you can’t afford – like playing on a short bankroll. Without a sufficient cushion, all it takes is a few big losses to find yourself terminally downsized.
As for using money management concepts – like setting stop-loss limits and quitting once you’ve won some predetermined amount of money – and thinking they will shield you against the possibilities of going broke, forget about it. If you are a favorite, just keep playing. The more you work, the more money you’ll make. But if you’re tired, depressed, sick, just can’t concentrate, or that once good game is now full of tough opponents, get up and go home. It’s time to quit. Besides, the game will be there tomorrow. Poker, after all, is a marathon; not a sprint.
