Nudge Gamble

2414108728_dfc5ec2f01_b  Picture cred

If you were worried that the world financial system had become a bit like a casino, then this development might worry you. The latest front on the drive for financial innovation turns out to be poker. Simply put, based on estimates that 95% of online poker players lose, since they don't know how to play to win, if you wewre to train up people who could play, give them some money, monitor their playing patterns (and losses) and adjust the players' daily limits accordingly and split the profits with them:

The players get half their money at the end of the month and the remaining half at the end of the year. This is to protect BadBeat if and when a player hits a bad run, but it also helps players to control and keep their earnings. Daily loss limits are seen as the cornerstone to developing profitable players. Losing your daily loss limit three times means you move down to playing with half that amount until the poker gods smile on you again. “We have players bankrolled from $50 to $100,000 a day. At these top levels, tens of millions of dollars are gambled a day,” says Conroy…

…The business is testing its training model by paying 50 graduates in Serbia to learn to play from scratch, putting them through an intense poker boot camp. They had to be able to handle basic probability to get selected. “Thirty-five of them were playing non-losing poker within two weeks,” says Conroy. “We showed them the cards to play in various positions. It’s not rocket science. It’s about the discipline and using position.” Position is the player’s seat in relation to the dealer, and thus his or her place in the betting order, an important tactical consideration

Turns out, surprise surprise, that:

Hedge fund managers and traders are certainly familiar with poker. Manro Haydan trader James Vogl won $400,000 at an event at the 2004 Las Vegas World Series of Poker before concentrating on the financial markets. David Einhorn, president and founder of Greenlight Capital, a US long-short value-oriented hedge fund, finished 18th in the 2006 World Series of Poker main event, winning $659,730.

I look forward to seeing how comapnies like BadBeat play their hand as the current economic story unfolds. And it stikes me that despite being gamblewrs at heart they might show more discipline than hedgies, sinc etheir moto is "risk not thy whole wad".