The Poker Ecosystem

Contributing to changes in the poker ecology

Cuyahoga Fire"The objective is an environment of decency, quality and mutual respect for all other human beings and all other living creatures."
-- Gaylord Nelson

I first heard the phrase "poker ecosystem" in 1985 soon after I began working as supervisor at a six-table Santa Cruz cardroom. We usually had one game during the day and two at night. Three games were fairly common but five games was extremely rare.

It was my third time being in charge alone in the club. It was late afternoon and we had one weak game going. I didn't want it to break because the evening crowd would be coming in soon, and it is a lot easier to start a second game than get people to hang around waiting for a first game to start. Anyway, I gave a fellow $60 worth of credit "on the book" to keep the game going. When the boss came in, he chewed me out because while this guy was good every week for $20 on the book, now that he owed $60, we might not see him again for several weeks. In my defense, I pointed out the first game never broke, and we got three games going that night.

To this day, I'm not sure if I was right or if the boss was. I lean in the direction that my optimistic tactic was better than his cautious one, but I can see his point too... especially when he talked about how you have to sometimes sacrifice income to protect players from themselves for the good of the overall ecology of the local community.

The two key lessons were: first, responsibly managing the poker ecosystem should be the overriding mission of people on the industry side of the poker business, and second, sometimes you can't be sure what is best for the ecology, even when you know something needs to be done.

Flattening tournament prize pools and 3% dealer tip
After subsequently working strictly as a player for more than a decade, I was involved in two important innovations that had a longterm ecological impact. In 1999 I was in the room (but didn't have a vote) when Mike Sexton and Chuck Humphrey discussed how to have a positive impact on the poker ecosystem with the first Tournament of Champions of Poker. Two ideas went hand-in-hand: 1) flatten and expand the prize payouts, and 2) take 3% from the prize pool as payment for tournament staff.

Prior to this point, prize pools were heavily top-loaded: 40%/20%/10%/etc. This lead to deals being made in the vast majority of events. It also lead to ludicrous situations where you might beat 499 people over a period of days to earn 20% of the prize poll but then lose head-up in one or a few hands, with just as much money at stake as it took you days to win. Mike, Chuck and I all thought the inaugural Tournament of Champions was a great opportunity to introduce something more along the lines of 25/20/15/10/etc. Chuck also wanted to expand the payouts beyond the industry-standard of one table per 100 entries. I didn't like that very much and my memory is Mike didn't either (because players still want to shoot for a big first prize), but Mike compromised to get his way on the next point...

Taking 3% out of the pool for tournament staff, instead of leaving it up to the top few winning players to tip or stiff the dealing and floor staff. Leaving staff payment to tipping was crazy to all of us, especially given that tips were not tax deductible so both players and tipped staff would have to pay taxes on the same money. I wanted to make it like in the UK where additional tipping was not allowed and my memory is Chuck agreed, but Mike said he didn't want to prevent a grateful recreational player from adding a tip on top of the 3%. So Chuck and Mike compromised on their minor disagreements, and I lost out both ways. :)

I also wrote an article for Cardplayer advocating 3% being universally adopted by the industry, as well as calling for unionization of dealers and other staff. It's lunacy that casinos don't centrally pay their employees a good wage and then uniformly pass that cost on to players, but Cardplayer wouldn't publish the unionization/centralization part.

In the end, the poker industry widely adopted the flattened+expanded prize pool idea. This is better than before, but the expanding part has created a "min-cash" phenomenon -- and min-cash "celebrities"! -- that has carried over into tournament strictures which I think has been a negative. (In short, making the final table of a tournament should be treated as a much bigger deal than coming in 100th.)

Likewise, the industry has mostly adopted the 3% idea, but mostly bungled the details. The three percent is the tip. Some in the industry said the Tournament of Champions was creating a problem because more casual players would not understand that tipping on top of the 3% was not required or even sensible. Turns out, the crystal ball those folks used was right. But again, the poker ecosystem is much better off with both the changed prize pools and the 3%, even if both ideas could still be tweaked.

When coming up with the payout structure for PokerStars, where dealer tipping isn't an issue, we also flattened and expanded the payout structure... and I was at peace with the expanding part because the extra difficulty in getting money online made it more important to spread it around a bit more widely than in a casino setting.

At the time of the Tournament of Champions planning, Sexton was also jetting around working on setting up Party Poker, while I was more than six months away from anything having to do with PokerStars. The only one poker room that mattered was still Paradise Poker, which was doing its best to keep Pandora's box closed and protect players from things like big bet games, multitable tournaments and any limit games bigger than $30/60. So Sexton and I were approaching times where some different well-intentioned attempts at improving the poker ecosystem would have a more ambiguous impact.

Frequent player awards, rake and Supernova Elite
As mentioned in the article linked in the above paragraph, Paradise did almost everything right. One of those right things was an emphasis on deposit bonuses as a reward to players -- even giving a bonus to players depositing $500 if they already had $20,000 or more on the site. Paradise recognized that players who made deposits were the truly valuable customers for an online cardroom. In fact, if you wanted to try to identify the single most valuable act a player might do to benefit the ecosystem of an online cardroom, it could be making their second deposit to a site.

My biggest negative contribution to the poker ecosystem comes from not stopping the flawed structure of the PokerStars rewards program at its very beginning. I wasn't part of the company years later in 2015 when the then current rewards system, including the Supernova Elite tier, was finally killed off, but I'll take much of the blame for that poorly-conceived monstrosity existing in the first place. I was the main "poker guy" with the company back when the Frequent Player program was conceived (not by me). I never paid much attention to it because I already knew then that the vast majority of players do not come to a poker site for the promotions. Instead they come because, as James Carville might say... "It's the poker, stupid!"

Most players came to PokerStars because the software was best and the poker games were good quality. That's it. That's the secret of running a great online poker site: give players a great POKER experience.

The enterprise side of the poker ecosystem is the poker business, not the "rewards" business. A successful cardroom should target people who seek to "maximize their poker" not "maximize their rewards". So, I was right to always keep the focus on the poker, but I was wrong to ignore the smaller, but very vocal minority who seek their profit/edge from exploiting promotions rather than in skillful poker playing.

And I should have been more vigilant about this because there has always been a vast divide between people who focus on the value-of-poker versus the minority who focus on the less critical concept of cost-of-play. For the mass of players, the value of poker is fun. They may hope to win, but losing is the equivalent of spending disposable income at a movie or going golfing. At the same time, for the mass of winning players, the value of poker is playing in an EV+ appropriate way over the course of a lifetime (or limited lifetime like the period of a tournament).

In contrast to these winners who win via clear EV+ poker playing, there have always been players who try to win via exploiting rewards programs or avoiding paying their equal share of casino time collection or rake.

There is a world a difference between winning an amount of money due to outplaying an opponent in a pot versus winning because you successfully ducked paying collection twice a day, every day for a year.

Back in the mid-1990s, the largest B&M cardroom in the world was the Commerce Casino. Management decided to raise the rake on all games, while also eliminating the 10/20 Limit (all games were limit poker then) and creating a 9/18 limit between their 6/12 and 15/30 games. This had numerous repercussions. 10/20 was traditionally the lowest "serious" limit, and time collection was taken every hour. The new 9/18 games would take a drop every hand (like the 6/12 games did). This meant the rake of the 9/18 games would be significantly higher than the 10/20 had been. And, because of the optics of the 3-chip/6-chip structure, pots tended to grow much bigger too.

The numerous rocks who played the 10/20 games were up in arms over the higher rake. A significant number of them decided to loudly take their "action" to the Bicycle Casino. At the same time, the Bike reacted to the Commerce's rake increase by lowering theirs. This lead to...

The Bicycle Casino games were utterly devastated.

The Bike lost enormous numbers of players to the Commerce... because the Commerce poker games were better! The Bike's games were filled with tight-ass, no gambling rocks (still trying to duck paying time collection).

On the other hand, the Commerce boomed. The Bike became an even more distant second place to Commerce. The Commerce gobbled up market share that it never gave up. Why? The Commerce games were better because the rocks left and because -- like it virtually always does -- the higher rake led to better action games... which were more entertaining for recreational players and more profitable for (sensible, non-rock) professional players.

Higher rake means more players will be losing during every session, which means games will be livelier because more players are on tilt, which means professional players will be able to win more (even with the higher rake expense) while recreational players will be able to have more fun splashing money in bigger pots. Except for when Hold'em games first came to California, those months at the Commerce after they raised the rake featured the best group of poker games housed under one large casino roof in the history of poker.

Of course, while higher rake was creating the greatest group of games in the world, there was the obvious danger to the ecosystem that an unsustainable amount of value was moving to the cardroom and to the winning players. Would there be enough new players (depositors) drawn to these great games to sustain them when combined with the larger amounts of money put in play by the existing recreational players who were enjoying the better games? Or, would the high-action, higher-raked games burn brightly for awhile and then burn out? As it turns out, Rounders created a large number of new players and the possible problems with the higher rake never had the chance to materialize -- and then online poker and the poker boom happened, and new players were popping up like weeds.

(A similar thing happened online. The WSEX/World Poker Exchange cardroom eliminated rake altogether... attracted a bunch of rock players, failed miserably and went out of business.)

Which brings us back to PokerStars reward program, at the beginning and circa-2015 during the poker plateau.

The PokerStars rewards program was an attempt to positively impact the ecosystem, but a key aspect of it went very badly... similar to how protecting birds of prey might lead to wiping out the rabbit population on an island.

We wanted frequent PLAYer rewards, but it evolved into a frequent FOLDer rewards program.

Simply being dealt into a hand is of little value to a cardroom. Likewise, a player "playing" 24 games but folding his hand on each game is of cumulatively little value to a cardroom, but players who largely did just that greatly benefitted from the PokerStars reward program. Even worse, players who slooooooooooow games dooooooooown every time it is their turn to act add a negative value element to the ecosystem.

The most valuable players to a cardroom are:
1) those who deposit multiple times (meaning primarily losing players, not those players who are more of a nuisance because they deposit and withdraw their entire account each time they play)
2) first time depositors
3) players who voluntarily put money into a pot with average or above frequency (including solidly winning players)

Less valuable players often engage in negative value actions:
1) continually slooooowing dooooown games
2) folding well above average (whether winning, losing or breakeven players)

Some Supernova Elite player who folded far more than average, slowed games down, and played breakeven poker (meaning their winnings came purely from the rewards program) had a negative impact on the ecosystem. This negative impact was not really the fault of the player, but rather the fault of PokerStars for encouraging these sloooooow, folding players in the first place.

A rewards program intended to have a positive impact on the poker ecosystem should focus on rewarding players who do the three valuable actions above, while not rewarding players who do the two negative actions.

First time depositors and re-depositors who have lost their deposits (rather than cashed them out) should be the main focus of rewards. To state what should be obvious: losing players make it possible for both cardrooms and winning players to exist. Cardroom resources should focus mostly on rewarding/investing in new and losing players. Winning and breakeven players should get a much smaller amount of the rewards pie.

It's the poker, stupid. Being able to play against an ongoing supply of losing players should be the primary reward for winning players!

Pre-Black Friday, to fill tables PokerStars rewarded sit-and-fold players. Full Tilt allowed phantom deposits. Both these ideas should be seen as foolish now -- even if the bad rewards program was merely an error while the phantom deposits idea was insane.

Cardrooms should not mind betting/winning players, but they should not encourage parasitic players who seek to extract profit from casino procedures rather than skillful poker play. Very generally, winning players are more action than breakeven players... you have to play hands to win hands. Likewise, winning players are more active than bonus/rewards-fixated players. So, besides depositors, cardrooms should seek to focus rewards on players who enter pots, and thus generate rake. Folding before the first round of betting generates no rake, regardless of how many tables you sit at and fold.

While the PokerStars rewards programs were deliberately not the same as pure rakeback, the rewards still took money from winning players and losing players and redistributed it to folding rocks. Bad idea. I'm proud of almost everything I was associated with at PokerStars, but paying any rewards to a player for sitting in a game, pausing 15 seconds and then folding is idiotic on its face.

Way too many resources benefited a few hundred moderate value players, who played too many tables, slowed down too many games and thus negatively impacted the experience of recreational players.

The poker industry has a middling understanding of poker players, but most poker players have very little understanding of the poker industry. I have known this for many years, but it is astonishing to me how some players still don't understand how toxic the Supernova Elite rewards tier was to the poker ecosystem. The millions of dollars paid to a few hundred mediocre value players could have been far, far better spent on depositing and active betting players. In fact, a case could be made that (besides government action) the poker boom turned into a plateau significantly because cardrooms took from the poor and gave to the mediocre... which was bad for the poor players and also bad for the winning players.

Other cardrooms were even more blockheaded in redistributing rakeback evenly to players dealt in regardless of their involvement in the generation of the rake. Giving a person who folded their hand a piece of the pot is fundamentally an odd idea. Obviously direct rakeback is also pure goofballism on its face... instead of taking $3 in rake and giving players back $1, why not just take $2? The reason of course is because the higher initial rake makes for livelier games than just raking less would, which means a cardroom raking $3 and giving back $1 will take in more net rake than a cardroom that simply just rakes $2.

Equal distribution of rakeback was terrible for high rake-generating losing players, mildly negative for winners, and a goldmine for rocks. And maybe worst of all, it has lead to a rake obsession among the players who have come of age in the post-Black Friday era. (To this day, many still believe that because they are dealt a high volume of hands that for some mystical reason they should pay less rake per hand than everyone else.)

In early 2018, PokerStars introduced Double Board No Limit Hold'em. Double Board Limit Omaha was already offered in some casino mixed games, but I hadn't heard of Double Board No Limit Hold'em being spread anywhere, at least on a major scale. So when many of the first reactions to adding an entire new board of cards focused on the trivial rake aspect of the new format, it really was mind blowing, even to my jaded mind. How could any thoughts about rake be the first thing someone would say about such a massive, fundamentally different game? How could anyone miss the point so horribly? Double board introduces skills to the game that don't even exist in single board, and are exploitable by better players, like a higher likelihood of huge bets far above the rake level made by players with the nuts on one board but nothing on the other -- which does not benefit the cardroom.

It's the poker, stupid.

When PokerStars clumsily eliminated the Supernova Elite rewards, one player asserted Stars was penalizing the 2% of customers that generate 98% of the company revenue. It's easy to laugh at such extreme delusion, but it is also interesting to see how the bad rewards program lead not merely to these middling value players thinking they were the most important players, but to the extreme that an armadillo was thinking he was an elephant.

Time has demonstrated a more logical rewards program has been an improvement over the "folding rewards" one, but I still wish I could turn back the clock and alter the fundamentals of the PokerStars rewards program when it was presented to me. Even though "it's the poker, stupid", when a boom occurs, a lot of people get caught up in the ensuing vortex, including those who loudly think that whatever is best for them personally is best for the ecosystem.

As the most experienced poker person in the company, I should have said: "Any rewards program should overwhelmingly benefit the players who are the true engine of rake generation -- depositors and those who make voluntary bets into pots."

I should have said giving more money to losing players also gives more money to winners -- trickle up economics.

I should have said the best reward for winning players is to be able to play with a healthy supply of losing players.

I should have said it is bad to drive poker-focused players from the game and encourage rewards scroungers.

I should have presented ideas where rake could be taken in a more ecosystem-friendly way. (One old idea rooted in the b&m casino method of time collection that no one has ever tried is charging every player dealt into a hand an equal share of the rake generated. If a hand requires $3 rake, instead of taking that from the pot, take it equally from all the players dealt in. Then listen to the squealing of all the sit-and-fold rocks...)

At the very least I should have said, rewards should have been focused on people betting into pots, not people being dealt into hands.

The photo at the top of this article is of one of the several times the Cuyahoga River caught fire in Cleveland, Ohio. The Cuyahoga burning was one of the things that lead to the founding of the modern environmental movement, the creation of Earth Day, and the recognition that our ecosystem is fragile and vulnerable to toxic influences. The poker world has not yet had its own similar eco-conscious moment. Even the FullTilt/Absolute/UltimateBet scandals haven't lead to a coming together. Instead those scandals have acted more like Watergate, contributing to making an overly adversarial relationship between higher-than-average-volume players and cardrooms.

This is a pity because, to make a bad joke, both cardrooms and regular players rely on the same endangered species to survive: the fish.

Despite best intentions, the PokerStars (and other) rewards programs altered why some people play and how they played. While you can make some mistakes during a boom, you need to fix and avoid such mistakes during a plateau.

(One final note, the ecosystem is so complex that the rewards problems could have been addressed by limiting the numbers of games a player could play; or limiting the number of games that qualify for rewards; or reducing the amount of time a player has to act each hand for each additional game he sits at; or reducing the amount of games a person could play once they have used up X time or had Y hands folded for timing out, etc. The root of a problem is usually caused by decisions several steps before the appearance of the actual problem itself.)

See also The Online Poker Industry Evolution and When Google Gave Party Poker a Death Penalty