Risk aversion in poker


Risk aversion and monetary dissociation in poker

There is a great inherent problem with money: its value influences who has responsibility for it, and no one in the world wants to lose or destroy it.
When the average person is faced with the task of administering a significant sum of money, this ancestral psychological mechanism automatically kicks in, and willy-nilly has an impact in that person’s decisions.
The fear of losing money, the instinct to protect it. Commendable activities in most cases, but there are fields such as poker or finance where this can be a problem.
In poker and finance, money is the main asset, and keeping it hidden for fear of losing it prevents or slows down the possibility of multiplying it!
Indeed, in both situations, one finds oneself investing money with the goal of having a return on investment and ending up with a larger share than before. It will not always happen, but the important thing is that the sum total of all the times you do it is profitable.
If, however, those figures involved have a bearing on the emotionality of those managing them, there is a very high risk of making a sub-optimal decision, and often by a lot!
One can look for “safer” solutions, with lower risk but much lower return.

Risk aversion vs. risk appetite

The general definition of risk is “effect of uncertainty about goals“, and it should be noted how this does not have a solely negative meaning, but can also be positive. So it is not wrong to say “I risk winning too much”!
Risk assessment is very familiar to those who have studied poker theory: it is the probability of the event occurring, multiplied by the effect this event could have on the item in question.
In economics, the relationship with risk describes a subject’s preference when called upon to choose between a certain amount and a random amount. The three different forms of relationship with risk, aversion, neutrality and propensity, are self-explanatory.
Among poker players, the appropriate question “Would you rather have a million or a 50/50 chance of winning two million?” is often circulated, which is perfect for describing the three situations.
In fact, by expected value you should know that the two quantities are absolutely equal, but the answer describes the preference: those who choose a million right away are risk averse, those who choose to bet are risk inclined, and those who feel indifference are neutral to it.

Learning to manage risk

Many of you may have found yourselves answering “a million right away!” so are they risk-averse? No, another very relevant factor comes into play here, which is the amount involved in proportion to our usual.
For most of us, a million is still a difference maker-if there were 20 cents at stake, we would probably all have bet to make it a little more interesting.
This is part of the psychological impact of money on the player. The bigger the numbers get for us, the less risk appetite we will have, which is why there is bankroll management that allows us to always play numbers that do not influence our decisions.

Risk management in poker

The bankroll alone, however, is not enough, because a player may place more value on a stack than it is worth monetarily. Perhaps obsessed with the idea of wanting to close the session in the positive, he would rather not risk losing a stack.
This is where the mindset factor comes in, the ability to get into the mindset of what risk is and understand that sometimes taking it is more beneficial.
The real problem, in fact, comes when one’s risk aversion (which in the previous definition compared two identical quantities, one certain and one random) becomes so strong that one prefers a certain sum to a “risk” sum of greater value.
As if we asked you, “Would you rather have a million now, or a 50-50 chance of having 2.5 million?”
A poker player is neither risk-prone nor risk-averse. He must be good at calculating it, understanding it and taking advantage of the occasions when this is a benefit.

The important thing is the expected value

All of this basically translates into an understanding of expected value, which is–in fact–the only interest a poker player must have in every moment of his games.
The most illuminating example is when a tournament player is in a push-fold situation, perhaps near a payjump and/or when another player has raised or gone all in in turn.
Sometimes the fear of losing leads to making the most cautious and least random decision, a nice fold in this case, a call or check in others. But calculator in hand you realize that in the long run, taking the right risk would have brought benefits.
Maybe often the result would be to exit the tournament and lose, but the times he would win, the average gain would more than compensate for the losses. In other words, it is +EV to take risks.
Another blatant example is the thin value-bet, which is a bet made with a medium-value hand that can still take a little something against worse hands, but so risks losing even more against better hands.
People often prefer the safer route: check or call to go to showdown against a wider range and win more often.
However, if by calculating the expected value of this move the outcome is positive, not betting is a mistake, even if it raises the frequency of times we will lose.
Fear of variance leads to making wrong choices. We must first learn to be risk-neutral, and then be able to assess situations to know when it is appropriate to take risks.
Even a few percentage points of difference can generate higher EV, and depriving yourself of it is always a mistake in poker.

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