“As a general rule the most successful man in life is the man who has the best information.”
“Everybody gets so much information all day long that they lose their common sense.”
Back before I got the poker bug and got interested in writing computer programs, my favorite area of study was mathematical economics. It was fascinating to me that given enough information and the proper filters, a great deal of economic behavior could be predicted if the economist could only figure out which variables were relevant. Good economists realize the value of good information, and as the internet has grown, the amount of available information (good and bad) has grown exponentially.
A great deal of our economy depends on the opinion of “experts” as to where our money should be spent. Expert stockbrokers and real-estate salespeople earn a great deal of money by having more information than the consumer. It’s far more efficient (in theory at least) to trust someone who spends their entire life accumulating information about the stock market and the real-estate market than to spend the few extra hours of our valuable time accumulating and acting on the relatively small amount of data we’re able to acquire.
One of the reasons I was never interested in the stock market is because I would never be able to have as much information as those on the “inside,” or those who spent 16 hours a day researching the market. The amount of information asymmetry— when one party of a transaction has more or better information than another party– was too large, and the market insiders would always have an edge over an “outsider” like me.
Betting on sports, however, was a market where a different kind of information asymmetry existed. As a former football player, I knew which variables were relevant, and all of the data available to the so-called experts was also available to me. A small group of insiders may have access to injury information that is unavailable to me, but for the most part, any football bettor has access to the same information as any other bettor or line-maker. To succeed as a football bettor, I only had to be better at data analysis than my competitors.
All of this gets back to the question, “where does your edge come from?” In any gamble, be it real-estate, stocks, or sport-betting, a positive expectation comes from doing something better than those you are betting against. Given that the same data is available to all parties in a particular transaction, the positive expectation comes from the one who better analyzes the data related to the transaction in question.
In poker, the transaction in question is the hand that you are currently involved in. Thus, the poker player with a positive expectation in a given hand is the one who does something better than his opponents. Usually the something revolves around information concerning the transaction. Since the amount of information asymmetry in poker is huge– it’s possible for one player to have a great deal more (and better) information than his opponents– the edge in poker comes from having more information than your opponents, and better analyzing this information.
Below is an analysis of the different types of information involved in the poker world, and how these types of information contribute to the economic concept of information asymmetry in poker.
The Three Types of Information in Poker
While the term “information” usually applies to a broad spectrum of concepts, it seems to me that there are different categories of information, based on how this information is acquired. Here are three different categories for information in poker, based on my observation of the game:
1. Poker knowledge
Poker knowledge refers to information regarding odds and probability, hand distributions, and starting hand strength. This type of information is usually learned by studying books and the mathematical aspect of poker, although it can also be learned through experience. This category of information describes basic facts that are independent of game conditions, and represent the “fundamental” concepts of poker.
For example, it is a fact that Q7o is a slight favorite against a random hand heads up. This basic fact, if known by one player and unknown by the opponent, gives the knowledgable player a slight edge.
Information asymmetry, as related to poker knowledge, is based on the fact that one player has studied poker more than his opponents. Like the sports-betting world, this information is publicly available to all players, and the player that spends the most time analyzing the information (if done intelligently) will have the biggest edge.
The surprising thing about poker knowledge is the amount of disagreement over basic concepts. A quick read of this thread shows that two people who have spent years thinking about the game can’t even come to an agreement about the optimal strategy for playing AQo.
The lesson here is that if two experts cannot even come to an agreement about fundamental poker concepts, the level of information asymmetry that is possible between an expert poker player and and average player can be very large.
2. Poker experience
Poker experience refers to the amount of information absorbed or collected during a player’s time at the table; it concerns mainly internalized information that applies to specific situations. While poker knowledge relates more to rules independent of game conditions, experience teaches an observant player how to use the information given off by a group of signals communicated by a table full of players. The infinite number of patterns and rhythms of the game can’t be learned from a book, and the poker player as information collector is rewarded for his awareness of these subtle aspects of the game.
Physical tells are an example of information that can only be learned through experience. While a player can learn general concepts like “strong means weak” and “a player who covers his mouth with his hand after a bet is usually bluffing,” there are an infinite number of subtle, player-specific tells that can be learned from a book, the many ways these players uniquely communicate these tells cannot be summarized in a book.
The information asymmetry in the experience category is proportional to the amount of experience possessed by the players involved in the game. However, an observant, intelligent player who does a good job of analyzing his collection of experienced data can “catch up” to a player with far greater experience who is less observant.
In terms of gaining an edge in experience, there is no proxy for putting in time at the tables and being a part of the infinite combinations of variables that occur in any poker game.
3. Opponent specific information
Like poker experience, opponent specific information comes from observation of the behavior of individual players over time. In the past, this type of information could only be obtained by physically watching your opponents play poker. Today, players can obtain player specific information on a very small subset of players by watching poker on TV (although this information will only be useful in the small chance you will face these opponents in the future). For brick and mortar poker, the only real way to collect opponent specific information is to spend time playing against a wide range of opponents (although floormen and friendly regulars can point you in the right direction).
Thanks to recent developments in the world of online poker, players can obtain a huge amount of player specific data about their virtual opponents without even observing a poker game. Thanks to the online poker hand history and data collection tools like Poker Tracker, poker players can collect extensive data on their opponents just by clicking their mouse button. A diligent data collector can “observe” (virtually) the details of the way every single hand was played on an online poker site (shameless plug: check out my Poker Tracker Guide to find out how to do this).
Since relatively few players are using these opponent specific data collection tools, there exists a huge informational advantage for the players that do. If I know the tendencies of every player at the table and my opponents do not, it creates a huge information asymmetry that gives me a significant edge over these opponents.
There are many types of information in poker, but the three categories above provide a framework for thinking about where a poker player’s edge comes from. The above discussion illustrates why professional poker players come from such a diverse background: since all poker players have the same amount of information available to them, every one has an equal chance of becoming an expert in poker. Those who have the biggest expectation are those who collect the most information and figure out how best to use that information to make decisions.
In other words, poker is a game that heavily rewards those who put effort into the collection and analysis of information. Just think of it this way: every poker book you read, every hand you observe, and every time you use Poker Tracker, you are increasing your edge over your opponents.
Information Asymmetry in Poker
“As a general rule the most successful man in life is the man who has the best information.”