Poker and the real economy

    • elhh82
      elhh82
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      Recently i have been reading a lot of articles about how many of the derivatives contract (the synthetic ones) are just akin to gambling. They are just bets that are traded according to the success or failure of the equities or whatever they are tied to.

      The buying and selling of these contract do not add value to the real economy in any way whatsoever, and should therefore be banned. (This is as opposed to stock and non synthetics derivatives, where they actually are used to finance real world products and services).

      So this led me to think about poker. How does online poker give back to the real world? Or does it just suck money out of the real economy, into the poker economy without giving much back?

      I know live casinos and stuff provide a lot of jobs, infrastructure development and also most importantly tons of tax revenues for the governments that host them. But i don't really see the same arguments being applied to online poker as much.

      If it doesn't give much back, wouldn't it eventually lead to the same condemnation that is facing the derivatives industry right now?

      What do you think?

      For some context of what i'm talking about at the start, read:
      http://www.nytimes.com/2010/04/21/business/21cdo.html?fta=y
      http://www.nytimes.com/2010/04/22/opinion/22thu1.html?partner=rss&emc=rss
  • 15 replies
    • Jackalof
      Jackalof
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      Online poker sites employ tons of people;
      Those sites pay taxes, funds sports events, sponsors teams etc;
      In some countries poker players have to pay taxes;
      Winning players invest the poker money into their businesses, real estate etc.

      IMHO.

      Regarding stocks - only stocks bought in primary market fund the issuer, secondary market is just for speculation and does not add value to the organization or economy itself (but most trades are done in the secondary market).
    • LuborC
      LuborC
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      In one of CR videos one of the coaches said that good poker players are entertainers of a sort who the fish pay for the good times the have while playing.

      If you can accept this as true then poker players give the same to the society as actors, musicians, writers and such.. It's just a different kind of entertainment.
    • Jackalof
      Jackalof
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      Or in other words poker sites provide satsifaction for the gamblers, same as World of Warcraft for example.
    • ihufa
      ihufa
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      we're all leeching scum but i could not care less
    • elhh82
      elhh82
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      I think one point i didn't make earlier in the OP was that, all this has to be balanced against the potential socio-economic harms of the activity.

      You can't deny that Poker has far more potential for social harm, than say watching an expensive concert.

      And that is also why there has been so much of a backlash against synthetic derivatives, coz they pretty much are responsible for a lot of the chaos in the markets in 08/09
    • Jackalof
      Jackalof
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      Oh, now I understand what you're saying :f_biggrin:

      Yea, I totally agree that it has a lot of potential harm in the social sector.
      But hey, maybe ban alcohol and cigarrettes, genetically modified food etc, then poker :f_cool: I heard modified carrots make you want to go on a killing spree.
    • Atoks
      Atoks
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      Boy have u picked a complicated topic! There are so many nuances to this it would take several degrees just to understand what exactly has been going on in the scenarios described in those articles.

      I'd like to point out the following quote from the editorial that was linked:
      "That is not investing. It is gambling, and it is abusive. It has no place in banks that can bring down the system if they fail."

      From this I understand, that individuals running their own equities are allowed to do whatever they wish with their own personal equity. While on the other banks, who are often owned by the people/countries and therefore are a part of a "communal" equity shouldn't risk that equity on deals that are not transparent, regulated or present existence threatening risks.

      Poker and other games will always be a moral sticking point. Just like many other ill effects in the world it ruins lives and assets. I feel that it is possible poker will get banned in the future. However I also feel there are other way more pressing issues that should be dealt with way sooner. Hopefully those willing to work to become really good at games will be able to enjoy the fruits of their studies and labor for years to come. I'd like for poker to be around for at least the next 15 years. After that I'd rather focus on other things.
    • TerrorBlade
      TerrorBlade
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      I'd say I'm pretty good for my country's economy. I bring overseas money here at no cost of raw materials, so I'm basically just a money generator.

      Also what others said about jobs, taxes and whatever else etc.

      And 2nd to over 9000 levels about alcohol, please consider alcohol which kills thousands of people a year in NZ alone before we even have a conversation about poker.
    • tokyoaces
      tokyoaces
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      Originally posted by elhh82
      The buying and selling of these contract do not add value to the real economy in any way whatsoever, and should therefore be banned.
      This is one of the most scariest statements I've ever read. I cannot imagine living in a country or society in which all things that did not add real economic value were banned.

      I would have thought the past 60-70 years of recent history would have taught us all that extremist views are never a good solution. I believe the word you were looking for is not banned but regulated.

      As far as gambling goes a lot of economic activity can be generated by regulating and taxing the industry. I know I would rather see some of the money go to the government as opposed to fly-by-night payment processors who change outrageous fees.
    • elhh82
      elhh82
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      ^ i'm just making a quick and dirty summary of the articles. It's best if you read them to get a better idea :)

      any activity generates some sort of positive return. But the question is how much, and that has to be juxtaposed against the potential or apparent harms that the activity causes.

      If not, people would be allowed to sell their organs for profit, for example. Surrogacy for money would not be such a big issue. And even prostitution and the sale of drugs should be easily legal. :)

      So it's not as black and white as you put it.
    • tokyoaces
      tokyoaces
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      Originally posted by elhh82
      If not, people would be allowed to sell their organs for profit, for example. Surrogacy for money would not be such a big issue. And even prostitution and the sale of drugs should be easily legal. :)
      I must admit I never considered having to protect people from that level of stupidity. However my level of love for capitalism might surprise you. :D I'm definitely for legalized and regulated drugs and prostitution.

      I think I would be okay with people selling their own organs even to the point of suicide. On the other hand I wouldn't want to see parents trying to sell their child's organs so I can see how prohibiting that is socially responsible.

      However, let's get back to gambling!

      I think one thing that gets quickly confused is that the financial markets are good ways to raise capital specifically because they are based on speculation. If people weren't out there betting on the probability of your success and failure then only AAA companies would be able to raise capital. This is obviously not good.

      Furthermore we cannot rule out arbitrage because it is such an effective gambling strategy. These derivatives were created largely for that purpose.

      It also feels like this whole discussion is incomplete and this was one of the most complicated and multi-level gambling schemes ever invented:

      Buyers and sellers were gambling on the value of property rising. Furthermore they were gambling on how much it would go up per year by getting locked into ARM and other interest only loans. Banks, in order to meet the demand of the housing market, started to bundle various levels of loans into big packages to reduce their risk. Then they split up the bundles into bite-sized chunks that investors could buy and bingo here we have the CDO derivatives.

      Now while no one is watching how the original mortgages are bundled the synthetic derivatives are created as an arbitrage against the CDO's because no one has any clue what the CDO is comprised of. (Very few were transparent and even now that is still the case.)

      So I've simplified a lot of the details, and my apologizes if I muddled some of the truth, but my actual point is: Why are we focused on the failure of just one level of the speculation? To me that's like the police coming into a Las Vegas casino and arresting poker players for gambling!
    • elhh82
      elhh82
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      I'm actually also a proponent of legalizing and regulating pretty much everything. I firmly believe that people should and must be allowed to do what they want, as long as the societal costs are mitigated by proper government regulation and access to adequate education.

      If people are making informed choices, nobody should stop them, but rather we should always facilitate those choices.

      In terms of this discussion however, i don't actually want to discuss the financial markets as much, but rather just wanted to use that to jump start the discussion on the poker economy.

      Take for example a country like America, do they have that much to gain if they legalize online poker?

      1. All the sites are based offshore. So the American government will not be able to get any form of tax revenue from the profits the sites make.

      2. Following that, there will also be minimal job creation for Americans, because the businesses aren't based there. Compare this to a land based casino, which is a catalyst for the development of a whole host of supporting industries around it, online poker rooms and casinos are a bad deal.

      3. Even if we assume that these sites only have Americans playing Americans, there will still be a huge capital outflow because of the money going out through rake. Even 1% of every pot is huge! The only that there will be any capital inflow would be to assume that the Americans as a whole are able to beat the rake.

      4. And then there are the social costs. Many would argue that allowing people to "gamble" (lets face it, most of the fish we like are pure gamblers) from home exacerbates the possibility of addiction and financial disaster. The game goes faster, you have less social contact, and there is rarely someone around to tell you to stop.

      This is just some of the stuff off the top of my head.

      It would be interesting to find out what kind if discussions happened in the French legislature that resulted in them opening up the online poker market.
    • supeyrio
      supeyrio
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      "main purpose" of derivatives is for one to hedge risk at a lower cost. as you pointed out, people use them to gamble.. but people gamble in almost every other instrument. remove derivatives market, and we are still left with shares/forex/commodities/futures markets, that all has a "main purpose" that is apart from pure speculating, but yet cannot stop gambling from taking place!
    • Waiboy
      Waiboy
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      Originally posted by LuborC
      In one of CR videos one of the coaches said that good poker players are entertainers of a sort who the fish pay for the good times the have while playing.

      If you can accept this as true then poker players give the same to the society as actors, musicians, writers and such.. It's just a different kind of entertainment.
      +1

      Originally posted by elhh82
      I think one point i didn't make earlier in the OP was that, all this has to be balanced against the potential socio-economic harms of the activity.

      You can't deny that Poker has far more potential for social harm, than say watching an expensive concert.
      What about following a crap sports team? Far more potential harm than poker IMO. Sure you may lose your house due to supporting a losing poker habit, but at least you aren't tempted to burn it down out of frustration. (Bad day at the office. Excuse me, please).
    • tokyoaces
      tokyoaces
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      Originally posted by elhh82
      1. All the sites are based offshore. So the American government will not be able to get any form of tax revenue from the profits the sites make.

      2. Following that, there will also be minimal job creation for Americans,
      Full Tilt once had their headquarters in Los Angeles. I guarantee they would love to move back. Most likely all of the big platforms would have a presence in America. Also if a platform was licensed and legal in the US then they would be getting tax revenue from it. The ones that weren't licensed would be pushed out just by lack of traffic and inability to advertise.

      Originally posted by elhh82
      3. Even if we assume that these sites only have Americans playing Americans, there will still be a huge capital outflow because of the money going out through rake.
      This hasn't stopped Americans from buying Japanese cards and Korean televisions. :D

      Originally posted by elhh82
      4. And then there are the social costs. Many would argue that allowing people to "gamble" (lets face it, most of the fish we like are pure gamblers) from home exacerbates the possibility of addiction and financial disaster. The game goes faster, you have less social contact, and there is rarely someone around to tell you to stop.
      The system now doesn't have any provisions for problem gamblers. With legalization and regulation one thing that can be done is self exclusion. You register once with the government authority and then no licensed poker room is allow to accept you as a customer. Also its normal for part of the taxes from gambling to be used for gambling addiction education and prevention.

      Right now the US government gets 0% and except for the US grinders and pros its is purely an outflow. Regulation would allow some of that money to come back, but more importantly it would allow US based operators.