Money lessons for poker players - Liquidity
How easily you can get your hands on your own bankroll is a key factor in making it as a poker player.
Poker is a game played with money, but how well do poker players understand money itself? I have found that the answer to that question tends to be at the extremes, poker players tend to understand money incredibly well (hence they often branch out into things like investing, trading, crypto) or indeed they are terrible with money which is why a lot of otherwise talented players end up going broke.
With that in mind I wanted to start a series that briefly touched on money concepts that I think poker players need to understand and should do further research on.
This week’s money concept is something that is important in life but in particular in poker. Unfortunately a lot of poker players do not think about liquidity until they run into a problem.
Liquidity refers to how easily you can convert an asset into cash. Stocks, bonds and crypto are considered very liquid because most of the time you can exchange it for cash within a few days, sometimes much quicker. If you have money tied up in a business or property, however, that is not considered very liquid. It takes a lot of effort, time and red tape to get your money out.
A lot of people realised the value of having liquid cash this year when the pandemic and global lockdowns hit us. We saw people trying to withdraw money from stocks, either to free up cash or to avoid a downturn, which led to a lot of uncertainty and waiting. Many financial experts increased the amount of easily accessible cash they advised people to keep in an emergency fund for future events like this.
Don't keep all your cash in one place
In poker we had the silliest example ever about the importance of liquidity when the Midway Poker Tour paid players out in precious metals in an attempt to get around local gambling regulations. As a result the players had to learn about precious metals, value them then find a buyer for them before they could realise their winnings - not very liquid at all.
Almost a decade ago poker had the biggest ever liquidity crisis in the form of Black Friday when millions of dollars in poker bankrolls were frozen on Full Tilt by the DOJ, in some cases taking years to for players to get back. This literally changed the game and in some cases professional poker players were forced to retire because they could not access their bankroll.
The liquidity lesson for poker players is to always have plenty of cash on hand and not to have all of it in one place. Whether that is one single bank, one single safe deposit box and especially not a single site. You never want to be in a position where a single point of failure could freeze your poker career. Spread your money around.
Poker specific liquidity issues
There are other liquidity considerations in poker, including how liquid your money is on different sites. PokerStars is considered by most people to be the biggest and safest site, much more liquid than a grey market unregulated site like a PokerBros skin. Given how PokerStars has the most traffic, it also makes them very liquid in terms of game choice.
Then the currency itself is a consideration, having $100 on a site in cash is more liquid than having $100 in T$ which can only be used for tournaments. Tournament tokens are less liquid than T$ because they can only be used for very specific tournaments, and so on. Player points are less liquid once again as they can only be redeemed for specific perks, in that respect they are like a gift voucher (not very liquid).
Poker is a game where money is the tool of your trade, so where you keep your tools has a profound impact on your ability to make an income.
What other financial concepts do you think poker players need to understand? Let us know in the comments.
