Friday, September 18, 2009

Poker, Golden Eggs and the Famous Goose

An interesting allegory from the world of gambling:
When Mississippi legalized gambling, a casino moved in, followed by professional players. One of the first table games the casino created was Texas Hold 'em, a game where two cards are dealt to each player, then three cards are dealt up on the table--community cards that each player can use or not with his own hand--and then two more cards are progressively dealt to the community cards for common use. The best five cards are used by each player and then the best hand wins. There are four rounds of betting, one when the two cards are dealt to each individual, one when the three community cards are dealt and one with each of the two subsequent community cards. In each betting round three raises are allowed. For a game of 10-20, where the first two rounds are ten dollar bets and the second two rounds twenty dollar bets, and if there are the usual ten players at the table, the pots can get big. Most professionals can play forty hands an hour. The casino takes five percent from each pot, called the "rake", to pay their overhead--dealer, cards, rent, taxes, etc.
Ten players, forty hands an hour, five percent a hand means the casino took the equivalent of two hands an hour, almost fifty hands a day.That money left the game, not to return.
The casino did well initially. There were always 10-20 tables going twenty four hours a day, ten players a table. Then the number of players began to drop, the casino closed tables to consolidate the players. Then the casino staggered the tables hours. Finally the game disappeared. At that casino, Texas Hold 'em 10-20 is no longer available.
When the casino tried to figure out how they lost this important game--important for both their income and their image--they learned that the rake siphoned off money from the players--and the game--and simply bled the players dry. In their effort to profit from the players, the casino wrecked the game.
For "rake" read "tax".

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