The annual tortoise and hare convention
had been a bit strange for the last few years. The problem started when the contestants
in the annual race came across a book about poker. They were instantly hooked and
called the race a dead heat, so they could settle down and read the book together.
Since then, the animals had quit their efforts to race each other
and had instead met up each year for a game of poker, some sports betting, and handing
out some awards. They were far from the sleek racing machines they were back in the
days of Aesop. There were tables upon tables of poker games and not a pair of running
shoes in sight. Hares and tortoises in XXXL T-shirts with silly poker logos argued
about who was the best player and how certain hands should be played.
Before the start of the games, many of the hares could be seen
borrowing money from their friends.
Tommy, an impetuous young tortoise attending his first convention,
asked his father why this was.
"I thought we all learned to play poker from the same book. How
come so many hares have no money?" he asked.
His father considered patiently for a moment. "Son. It's time
for you to see the great tortoise shrine. Follow me."
They called a cab (through fear of missing the entire convention)
for the journey of a couple of miles, and the father took Tommy into the great tortoise
shrine.
"This is where the poker book was recorded by our founder," he
explained. "It's identical to the one that the hares have, with the exception of this
one page. The hare, in her haste, skipped over it."
Tommy read the page with interest and found himself learning all
about risk of ruin. It was all fairly obvious stuff, but he'd never really taken the
time to bother with it before. The most interesting thing that he learned was about
small edges at big odds on. Tommy had always enjoyed betting exchanges, and the page
took great care to explain that it was sometimes worth betting with a slightly negative
expectation to lock in a big win.
The book gave a specific example: a winning gambler was about
to double his bankroll with live betting on a football game, having placed a bet on
a particularly unlikely occurrence. Even though there was a 95% chance of the game
now finishing favourably, the book suggested that the gambler should close his position
at slightly unfavourable odds to lock in a big win. If he didn't do this, he would
effectively be betting half of his (soon to be) bankroll with a small edge, which
would clearly be ridiculous. Of course, if there were a way to avoid being in this
position, then he should have placed a different bet in the first place, but just
occasionally this position will still come up.
There were many other words of wisdom and prophecies written within
the shrine, but Tommy found that one to be particuarly profound. His father explained
to him that this secret information had helped tortoises to survive where hares had
gone bust. "Eventually a 95% shot loses," he explained.
Back at the convention, and Holly (a hare obviously) was enjoying
the awards ceremony. Hares were winning nearly all the prizes — richest player, best
young player, and so on. She was loving every minute of it. In fact the only award
that the hares didn't win went to "Slow Hand Eddie" for the most well-known player
category. He was over one hundred years old and was rumoured to be the first animal
ever to play poker.
"Mom, why do we do so much better than the tortoises?" she asked.
Predictably, the mother took Holly to the secret shrine of the
hares.
"This is where the poker book was recorded by our founder," she
explained. "It's identical to the one that the tortoises have, with the exception
of this one page. The tortoise was too slow and didn't manage to read this bit."
This time, the missing page was about expected value and explained
that no matter what you did, you couldn't alter the fact that if you were going to
consistently bet on something at lower odds than the chances of it happening, then
you would lose in the long run.
This made Holly very happy. She had always fancied a career as
an insurance broker, and this reinforced that belief. Her journey back to the convention
was joyful.
Being young and excitable, Holly and Tommy inevitably met up and
began to chat about which animal was the better at poker and indeed at gambling in
general. Despite being sworn to secrecy, they soon ended up squabbling and screaming
"I know something you don't" at each other. Luckily, there were computers handy and
a lot of sporting events and races to bet on that day. They decided to have a competition
in the time-honoured fashion. This time, though, instead of racing, the first one
to double $100 would win.
Holly started off better, laying bets for her entire bankroll
to win a matter of cents but with a positive expectation. Meanwhile Tommy gradually
lost money by taking value bets, but laying them off at terrible odds to protect his
bankroll. A few hours later, they both went bust simultaneously.
They looked at each other in disbelief and decided to approach
Slow Hand Eddie, who was taking a break before starting his final table in the main
event of the week. They found him and explained their plight. Neither of them could
win in spite of the fact that they knew more than the average gambler.
Eddie cogitated for a few moments and then spoke. "Tortoises have
their secrets, as I'm sure do the hares. However these secrets have to be applied
correctly and with much wisdom. Managing your bankroll is a crucial thing," he explained.
"I knew that," exclaimed Tommy.
"You can't take a bad bet though," blurted Holly.
A knowing smile crawled across Eddie's face, and he nodded slowly.
"There are more secrets than those of the tortoises and the hares," he said. "You'll
work it out," he concluded.
"There were even times during our competition that Holly was laying
my bets," explained Tommy. "We can't both have been wrong!" he fretted.
Eddie smiled again. "With the right bankroll sizes, you both might
have been right!" he replied enigmatically. "I suggest you work out why," he suggested,
before proceeding to lumber back to his tournament.
Later that day, Holly and Tommy were much happier. They had shared
secrets and had unearthed information of their own on proper bankroll management.
It amazed them both that they didn't need any additional information on how to actually
get an edge and that managing their risks and calculating their correct level of play
could make such a difference. The best type of player seemed to be a mix of both tortoise
and hare, rather than one or the other.
The formulae they used are not discussed in this story, but readers
either know what they are, or where to find them anyway. If readers have not done
proper calculations on their own bankroll, whether for poker or for other forms of
gambling, then maybe this story could spur them into action and convince them to look
up at what level they should be playing.
Holly and Tommy watched the final of the tournament to support
their friend Eddie. The last hand had Eddie's opponent with a pair of kings and all
the money in the middle. "Eddie is in front," predicted Tommy. Sure enough, Eddie
flipped over a pair of bullets which stood up and made Eddie the champion.
"How did you know that he was in front?" asked Holly.
"The oldest fable of all," replied Tommy.
"Slow Hand Eddie wins with aces."