Aaron Brown

Poker Hands
Get your money in with only one card, and there is no further dealing
after the betting; the higher card wins (Ace (A)
the best of it. is the highest, followed by King (K) down to

B
Jack (J), then the cards in reverse numerical
efore he got famous for shorting order from 10 (T) to 2; in a tie, the pot is split,
Lehman Brothers stock in 2007, with each player taking S). We’re using a stand-
David Einhorn won US$650,000 in ard 52-card deck, with four cards of each of the
the main event at the 2006 World 13 ranks.
Series of Poker. He told Jenny Clearly, in this game, neither player ever
Anderson of The New York Times: “Both poker folds an A. Folding gets zero. If SB bets with
and investing are games of incomplete informa- an A and BB folds, SB wins $3. If BB calls
tion. You have a certain set of facts and you are with anything less than an A, SB gets S + $1.
looking for situations where you have an edge, If BB calls with an A, SB still makes $1. All
whether the edge is psychological or statistical.”1 outcomes are better than folding. BB also gets
Another similarity between poker and zero for folding. If he calls with an A, he either
investing is that the games have layers. You can makes $2 (SB also has an A) or S + $2 (SB has
get useful insight by tackling one layer, modeling it, just extra money. anything else).
and solving it rigorously. One of the most important To investigate this aspect of poker, consider a Now, suppose SB decides to also bet with K,
goals in poker is “to get your chips in with the best of simplified version of Texas Hold’em. There are two while BB sticks to calling only with an A. When SB

Credit: Todd Klassy, ‘A Riffle Shuffle’, http://www.flickr.com/photos/latitudes/66424863/in/set-1442169/

it.” That means to arrange things such that when you players, each with a stack of chips worth S. The first has a K, 47 times out of 51 BB will not have an A and
have bet a lot of money into a large pot, you would player is called the “small blind” (SB) and has to put will fold, so SB makes $3. But four times in 51, BB
have a positive expectation if the rest of the cards in $1 in the pot before the cards are dealt. The second will have an A, so SB will lose S – $1. 47 ´ $3 – 4 ´ (S
the hand are dealt with no further betting. Of course, player is the “big blind” (BB) who must put in $2, – $1) > 0 implies that $145 > 4 ´ S or $36.25 > S. So,
investors think about the same thing when putting so the pot is $3. Now, each player is dealt two cards, for very large stakes, SB will bet only with an A but
their money to work. which the other player cannot see. if the stake is less than $36.25, SB will also bet a K. In
Getting your money in with the best of it is by In real no-limit Texas Hold’em, SB can fold or bet fact, if SB’s card is not an A, it doesn’t matter what it
no means the only goal in poker. In fact, there are any amount of money greater than $1 up to her full is, as it always loses. So, SB will switch to betting on
times when you bet knowing you have the worst of stack (which is S – $1 at this point since she already any card.
it. For that to make sense, you must believe that if contributed $1 to the pot). If she folds, the hand is This is the solution as long as S > $33.41. At that
your hand improves, you can get the other players to over and BB gets the $3 pot. In this simplified version, point, BB starts calling with a K as well as an A, and
call large enough bets to make up for the losses when if SB bets, she must bet her entire stack. If SB bets, BB SB switches to calling with an A or K only. Table 1
your hand does not improve. Similarly, it can make can fold and let SB take the pot (which would leave shows the critical values for S. If S is between the crit-
sense to fund a business project with a negative net SB with S + $2 and BB with S – $2) or call the bet, in ical values in the small blind and big blind columns,
present value, if you believe that a successful project which case BB’s remaining stack goes into the pot, SB will bet with anything, and BB will call with that
can be expanded to make enough additional money bringing is up to 2S. There are no more decisions in card or better. If S is larger than the critical value in
to cover the losses in failed projects. the hand, the flop is dealt, and whichever player has the small blind column but smaller than the number
Nevertheless, everything is easier if you do get the better five-card poker hand takes the pot. in the big blind column in the row above, both play-
your money in with the best of it. You’re not count- Before getting to the optimal play, think about ers will bet or call with that card or better.
ing on future contingencies and skillful play, you can which player, SB or BB, has the advantage in this When S gets down to $2, BB has no chips left
sit back and let the law of averages send money your game. SB has to act first but is only forced to contrib- after posting the big blind, so BB will call with any-
way. You may lose on many hands or investments ute $1 instead of $2. thing, since he has nothing to lose. SB still has $1
but in the long run you should do well. If you can To see the solution path for this problem, con- to lose, so she needs at least a 25 percent chance of
also take advantage of future opportunities, that’s sider a simpler version, in which the players each get winning the $3 pot in order to bet. SB bets with a 5

12 wilmott magazine

 Table 1: Critical values for S Table 2: Small-blind bet range, expectation range and call range
Small
Critical value for S S blind Small-blind bet range Big-blind call range
Card Small blind Big blind expectation
A 36.25 33.41 1,000 0.01 AA AA
K 17.13 15.71 KK; QQ; JJ; TT; 99; 88; 77; 66; 55; 44;
100 0.12 AKs; AQs; 33; AJs; 22; ATs; A9s; A8s; KK; QQ; JJ; TT; 99; 88; 77; 66; 55
Q 10.75 9.81 AK; A7s; AQ
J 7.56 6.86 50 0.23 A6s; AJ; A5s; KQs; AT; A4s; KJs; A9 44; AKs; AQs; 33; 22; AK; AQ
T 5.65 5.10 A3s; KTs; A8; A2s; K9s; A7; K8s; A6;
9 4.38 3.92 K7s; A5; KQ; K6s; A4; KJ; K5s; QJs; KT;
AJs; ATs; A9s; A8s; A7s; A6s; AJ; A5s; KQs; AT; A4s; A9;
20 0.53 A3; K4s; QTs; A2; K9; K3s; Q9s; K8; K2s;
8 3.46 3.08 A3s; A8; A7; A6; A5; KQ; A4; A3
Q8s; K7; K6; Q7s; Q6s; K5; QJ; Q5s; K4;
7 2.78 2.45 QT
6 2.25 2.00 JTs; Q4s; K3; Q9; J9s; Q3s; K2; Q8;
KJs; KTs; A2s; K9s; K8s; K7s; K6s; KJ; K5s; QJs; KT; K4s;
J8s; Q2s; Q7; J7s; Q6; J6s; Q5; JT; J5s;
10 0.84 QTs; A2; K9; K3s; Q9s; K8; K2s; Q8s; K7; K6; K5; QJ; K4;
T9s;Q4; J4s; J9; T8s; Q3; J3s; J8; T7s;
QT; K3; Q9; K2
Q2; J2s; J7; T6s; J6; T5s; J5; 98s; T9
or better and folds otherwise (with a 5, she wins if BB
T4s; J4; 97s; T8; T3s; J3; 96s; T2s; T7; J2; Q7s; Q6s; Q5s; JTs; Q4s; J9s; Q3s; Q8; J8s; Q2s; Q7; J7s;
has any of the 12 cards below 5, ties with the three 6.6 1.00
95s; T6; 87s; 94s; T5; 98 Q6; J6s; Q5; JT; Q4; J9; Q3; Q2
other 5s, and loses to the 36 cards higher than 5;
J5s; T9s; J4s; T8s; J3s; J8; T7s; J2s; J7; T6s; J6; T5s; J5;
that’s 12 ´ $3 + 3 ´ $1.50 – 36 ´ $1 = $4.50; but betting 4.0 1.12 86s; 93s; T4; 97; 92s; T3; 85s; 96; T2
98s; T9; T4s; J4; 97s; T8; T3s; J3; 96s; T2s; T7; J2; T6; T5
with a 4 has a negative expectation). However, as
84s; 76s; 95; 83s; 75s; 87; 94; 82s; 74s;
BB never wins by calling with a 4 or lower, he might 2.8 1.09
93; 86 95s; 87s; 94s; 98; 86s; 93s; T4; 97; 92s; T3; 85s; 96; T2;
as well fold those hands, which keeps our pattern
65s; 92; 73s; 85; 64s; 84; 72s; 76; 63s; 84s; 76s; 95; 83s; 75s; 87; 94; 82s; 74s; 93; 86; 65s; 92;
intact; when S = 2, both players bet or call with a 5 or 2.2 1.03
54s; 83; 75; 82 73s; 85; 64s; 84; 72s; 76; 63s; 54s; 83; 75; 82; 62s; 53s;
better, and fold otherwise.
62s; 53s; 74; 52s; 65; 43s; 73; 64; 42s; 74; 52s; 65; 43s; 73; 64; 42s; 72; 32s; 63; 54; 62; 53; 52;
With poker, things are a bit more complicated 2.1 1.03
72; 32s; 63; 54; 62; 53; 52; 43 43; 42; 32
but the same basic logic applies. With a very large
None 42; 32
S, both players will only play if they are dealt the
strongest possible two cards, AA. Table 2 shows the
results for S = 1,000. If S goes down to 100, SB will SB adds AJs when S = 100, but AJ unsuited only at S = best starting hand but which middle hands are best
of course continue to play AA but will also bet with 20. BB adds both at S = 20. The reason is that BB has depends on the precise circumstances. There is even
any pair, any suited hand with an A, and at least a 7 (a a smaller range than SB until S gets very low. That dispute about whether the worst hand is 72 or 32 (7
suited hand is indicated with an “s,” such as AKs, and means that BB usually has the better hand. The only and 2 cannot be connected in a straight, while 32 can
means that both cards are of the same suit), and AK advantage to a suited hand is that it can make a flush, be part of two straights – A2345 or 23456 – but 7 is a
or AQ (with no “s,” these represent unsuited hands, and if it does, a flush almost always wins, even if it is higher card than 3).
so the cards are of different suits). composed of low cards. Therefore, the flush possi- Table 2 also has a column listing SB’s expectation.
With S = 100, BB also expands his range but only bility is much more valuable to the player with the BB’s expectation is always $3 – SB’s. If S is very large,
to pairs down to 55. As S gets smaller, both players weaker hand, which will be SB. SB folds the 220 times out of 221 that she doesn’t get
add more hands to their ranges but SB adds faster It’s harder to see but you could also detect that dealt AA, so her expected winning is very small, and
than BB. Things change at S = 6.6, when BB starts SB cares more about whether the two cards are close BB wins $3 nearly all the time. But as S gets smaller,
adding hands faster, and by S = 2.8, BB is calling with together (adjacent cards like JT are called “connec- SB starts playing and winning more hands. Losing
everything, while SB is still not betting with some tors”). The closer together the cards, the greater more hands too, but her expectation increases. At
weak hands. In fact, there are two hands – 42 and 32 the chance of a straight, and, like flushes, straights S = 6.6, her expectation is $1, which means that the
unsuited – that SB will never bet on. almost always win. For example, SB will play QJ at S game is fair as she put $1 in to start (BB put in $2,
One interesting thing is that SB and BB do not = 20, while BB waits until S = 10, even for QJs. and his expectation is $2). So, for S > 6.6, BB has the
add the hands in the same order. Of course, both of This sort of thing is the reason why you won’t advantage in this game. Unfortunately for SB, her
them add stronger hands before weaker but SB cares find the same rankings of starting hands in any advantage peaks at S = 4, when it is $0.12. After that,
^
more about whether cards are suited. For example, two poker books. Everyone agrees that AA is the it declines as S declines.

wilmott magazine  13
aaron brown

Figure 1: Average winning amount of various starting hands in a large Figure 2: Connector, one-gap, two-gap, three-gap, four-gap, and
sample of online poker players unconnectable suited hands
Unsuited hands Suited hands Pairs Connector 1 Gap 2 Gap 3 Gap 4 Gap Unconnectable

2.5 1.0

2.0 0.8

Average realized profit in big blind units

Average realized profit in big blind units

1.5 0.6

1.0 0.4

0.5 0.2

0.0 0.0

-0.5 -0.2
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 20% 30% 40% 50% 60% 70% 80%
Probability of winning versus a random hand Probability of winning versus a random hand

Figure 1 shows the average winning amount of and distinguished them by whether they are 1con-
Figure 2: Connector, dealt.
Gap, 2 Gap, 3 Gap, That’s
4 Gap no guarantee
and Unconnectable of success
Suited Hands but it puts the
various starting hands in a large sample of online nectors -(adjacent
Figure 1: Average winning amount of various starting hands in a large sample of online
cards, like JT), one-gappers (J9, for
poker players
wind at your back.
poker players. The units are in big blinds. As games example), and so on. The last category – unconnect- How about real investing? Here, a key strategic
are played for different stakes, this helps to normalize able cards – have gaps greater than 4. decision is what sorts of situations you will look for,
the results. So, in a $5/$10 game (the SB posts $5 and Realized winnings increase with hand strength ones where you think you could build an edge. In
the big blind posts $10), winning $50 is five big blind but at different slopes for different gap types. There’s large S situations, potential investment amounts and
units – the same as winning $2,000 in a $200/$400 some noise in the chart, which may be due to subtler returns are large relative to the cost of investigation;
game. The horizontal axis is the probability that the factors, or perhaps due to sampling error. in small S situations, the reverse is true. If you choose
hand will beat a random hand after the flop is dealt. This is a puzzling story. Hand strength does wisely about what kind of opportunities to explore,
The negative expectations for most hands reflect the matter but in order to be a profitable poker hand, you should find a good supply of deals in which you
rake (the poker site takes a percentage of the win- the main requirement seems to be being among the have that edge.
nings, so the average hand loses money) and the fact strongest hands of a type. The best unsuited hand On the other hand, the complexity of even the
that the positive expectations are concentrated in a (AK) wins 0.54 big blinds, on average, versus 0.14 big simplified game should give you pause about using
few big winning hands. In fact, the weaker hands are blinds for the more powerful sixth-best-suited hand simple heuristics or models to make these decisions.
nearly always folded for a small expected loss; you (A8s). A6s wins 71 percent of the time versus a ran- After all, as the historian John Lukacs put it, “Poker
don’t lose any more money folding 72 as folding Q9. dom hand, yet wins only 0.03 big blinds, on average, is the game closest to the western conception of life,
While realized winnings generally go up with while T9s is much weaker, winning less than 50 per- where life and thought are recognized as intimately
hand strength, it is by no means monotonic. I’ve cent of the time versus a random hand, but in actual combined, where free will prevails over philosophies
split the hands into unsuited hands, suited hands, play wins three times as much, 0.09 big blinds. of fate or of chance, where men are considered moral
and pair, and each group forms its own sequence. How does this relate to real poker? One of the agents, and where — at least in the short run — the
Even though the weakest pair (22) wins significantly key strategic decisions in a poker match is which set important thing is not what happens but what people
more often against random hands than the strongest of starting hands to play. Of course, the actual fold, think happens.”
unsuited hand (AK), 22 loses money, on average, bet, or call decisions will be made in light of circum-
while AK makes more 0.5 big blinds. stances but it’s still important to go in with a plan. In
Another feature of Figure 1 is that both the a large S game, it’s possible to build large pots relative
endnote
unsuited and suited hands seem to have branches to the blinds; in a small S game, it is not. If you make 1. Anderson, J. 2006. Hedge Fund Manager Who Plays His
that go above the main sequence. To understand a wise selection of starting hands, more often than Cards Right. The New York Times, August 11.
these, In Figure 2 I’ve graphed only the suited hands not, you should find yourself ahead when the flop is

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