GTO Poker Theories: Diversification
'Don't put all your eggs in one basket' is great advice for life and in particular poker.
One of the real gifts poker has given me is that it has been a great jumping off point to learn things from other disciplines like economics, AI, psychology and Game Theory. So here is a series of articles where I bring some of the most interesting things I have learned from other subjects outside of poker which are applicable in this game we know and love.
This week's GTO Poker Theory is a very well known and arguably common sense principle from economics and investing, yet so many otherwise talented poker players have come unstuck because they didn't do it, so it still warrants a reminder.
In finance diversification is when you allocate capital in a way that reduces risk. Quite simply it would be holding your cash in a variety of funds rather than in a single stock, so that the downside of a crash is less devastating. It's a way of reducing variance, if you have all your stock in a single company all it would take is for them to go bust for you to lose it all. However, if you spread your money around across a number of Fortune 500 companies that is way less likely to happen.
You don't need to be a finance expert to understand this, diversification is well known from the phrase 'don't put all your eggs in one basket' to highlight the risks of being all-in on a single investment. It's salient career advice too, while previous generations could easily have remained 'career men' in a single company, anyone working today has to have their fingers in a few pies as a way of future proofing themselves.
Bankroll management
The most obvious way this could be an issue for poker players is if they keep their entire poker bankroll in one place. No matter how safe you think the site is, Black Friday reminded us there is no excuse for leaving your entire online roll in one site. Likewise, if you carry all your bankroll around in a live casino you leave yourself vulnerable to muggers. Your bankroll is the way you make more money, so you need to protect it by spreading it around.
It's not just about diversifying your bankroll allocation, it is also probably wise to at least dip your toe in one other format than your bread and butter games. If you play No Limit, spend some time with PLO, if you play Six Max SNGs, play the odd full ring MTT, if you play Zoom, try Spin & Go etc. You never know when a format is either going to become less profitable or be removed from the lobby entirely. It will be a much softer fall if you already have a head start on another format.
Then of course you can diversify your income by doing things other than poker. The happiest poker players I know are involved with something else besides poker, even if it's a poker related side project like coaching or Twitch. Plenty of serious poker players have fallen out with the game but because they devoted so much of their time to it that they are now at a loss what else to do. One of the best ways to make poker less stressful and more enjoyable is to have something unrelated to poker in the pipeline.
This is all assuming you are following strict bankroll management rules of course, the absolute worse way to put all your eggs in one basket is to have your entire bankroll on the table at one time. That really is an accident waiting to happen.
What theories from outside of poker have helped your game? Let us know in the comments.
Related articles
