How much skill is there in a game of poker? And why does it matter?
By law Americans are not allowed to gamble over the web. If poker can be shown to be a game of skill then this could have significant implications for the $6 billion US online gambling industry.
And a new study published this month has shown that there is a fair amount of skill involved.
Steve Levitt, economist (and author of Freakonomics) and Thomas Miles, professor of Law at Chicago University analysed the results from the 2010 World Series of Poker in Las Vegas. With 32 000 players and $185m prize money, this gave them a lot of data.
Whilst “ordinary” player made an average loss of 15%, more skilled players made a gain of 30%.
This story was reported by The Economist this week, and you can read more about it there.
Levitt and Miles make interesting comparisons to other “skilled” activities. They conclude that to a first approximation the outcome for opponents in poker tournaments can be predicted as well as profession Baseball games. And Baseball, they say, is undoubtedly a game of skill.
In contrast similar methods have been used study the genuine ability of mutual fund managers. These results have tended to find “little evidence of skill in this domain”. Perhaps this is the more important aspect of this research…
So, to conclude, for a bigger pension pot you may as well invest your own money in stocks and shares (you have as much chance as overpaid fund managers) and brush up your poker skills. Worth a thought anyhow!
Have a good weekend.