The Value Of Low-Variance Poker

People play poker. (Photo by Lionel BONAVENTURE / AFP)

There’s not a lot of difference among the top performers in any sport. Championships are often won by the slightest of margins, like the Cleveland Cavaliers coming back to beat the Golden State Warriors 93-89 in Game 7 of the 2016 NBA Finals.

If you want to win the Big One, you need to work extra hard to make those incremental gains that so often spell the difference between first and second place. Or do you? Instead of expending all that energy trying to perfect your craft, maybe it’s better to work on achieving solid, consistent results – like the San Antonio Spurs, who won four titles under head coach Gregg Popovich while making the playoffs every year from 1998 to 2019.

This is even more important when the sport you’re playing is poker. With so much of your success depending on the luck of the draw, getting the fundamentals down pat and avoiding big losses in marginal spots is more than just half the battle.

Stay Sharpe

So where do you draw the line between poker growth and poker security? This is where William F. Sharpe comes in. The American economist and Nobel Prize winner developed the Sharpe ratio in 1966, representing the tender balance between risk and reward in the financial sector. It looks something like this:

S = E(Ra-Rb)/σ

If you’re already feeling a bit dizzy, hang in there. The letter “S” is short for the Sharpe ratio, which this formula calculates. The “E” refers to the Expected value you get when you compare the difference between the Return on a certain asset (Ra) and the Return on a stable benchmark asset, like a GIC (Rb). And the last symbol “σ” is the lowercase Greek letter sigma, which represents standard deviation.

It’s just a fancy way of dividing the reward by risk. Fancy, yes, but also incredibly useful. There are two ways you can increase your Sharpe ratio, and therefore the performance of your portfolio: Increase your expected return, or lower your standard deviation.

When the portfolio in question is your poker game, this translates to increasing your win rate or lowering your variance. And as we said at the top, once you’ve reached the point in poker where your win rate is already high, maybe it’s time to shift your focus to the other side of the equation.

Into the Fold

Welcome to the world of low-variance poker. In this world, instead of trying to squeeze every last drop of expected value out of those marginal spots, you’re often going to simply give up and fold. Most of your big wins in poker will come when you’ve got the nuts, and your opponent happens to have the second nuts – or tries to bluff you out of your shoes.

Could you win more by playing closer to Game Theory Optimal (GTO)? Sure, but at some point, it’s just not worth the risk. Leaving some money on the table is especially useful in cash games. You don’t want to drive away your inferior opponents by outplaying them too badly; they’re the primary source of your winnings.

And by playing a lower-variance style, you can more easily assume the additional risk of moving up in stakes, meaning you don’t need as many buy-ins in your account. Playing it safe also has its place at the tournament tables.

Survival is more important overall here than chip accumulation (though not always), so why risk your tournament life on a marginal spot? Save those chips for a more opportune moment than a 52/48 flip. You’ll be richer for it in the long run, and you’ll save yourself a lot of mental anguish, too. A brilliant poker mind is a terrible thing to waste.