PKOs and the Barbell Strategy
In a shameless attempt to brag about a big win, Barry Carter argues Progressive Knockouts are the ideal mix of low and high variance.
A few weeks ago I wrote about the Barbell Strategy in investing and how it relates to poker. This week I realised I missed perhaps the most accurate parralel of all.
The Barbell Strategy, coined by Nassim Taleb, is about extreme diversification. A large portion of a portfolio is in extremely safe assets like bonds, with around 10-20% in high risk speculative assets.
The point of the Barbell Strategy is to protect the portfolio while also benefiting from the potential upside of the high risk assets, and ignoring medium-risk assets that don't perform well in boom or bust cycles.
Lower downside, greater upside
I have been playing a lot more Progressive Knockout tournaments lately and it occurred to me this week that PKOs are the perfect encapsulation of the Barbell Strategy in poker. They are both lower variance in one respect, while having a much bigger potential upside than regular MTTs.
At one end of the spectrum, they are much lower variance. You can win prizes right from the start even if you do not make the money. The prizes are spread out in the form of bounties. For example, on Sunday I played the €25 Battleground on Unibet and did not make the money, but I did win €18 in bounties despite busting in the first hour.
I went back into the lobby afterwards and there were 179 entries in total and of those, 86 players won some sort of prize. Some just won a payout, some won bounties and some won both. In a lot of cases the bounty was way less than their buy-in and the mincash was lower than a regular MTT, but almost half the players did not leave empty handed.
At the other end of the spectrum the potential upside of PKOs is much higher, because one person can dominate the bounties. Apologies for the indulgence, but earlier last week I won the same tournament, the €25 Battleground:
I'm not going to brag too much because I ran like God and my writing partner Dara O'Kearney informs me this was a hell of an anomaly, helped greatly by an overlay. I won €891 in bounties (the equivalent of 71 bounties in a 130 runner field) when the first prize was just €355, and my total win was more than 31% of the whole prize pool. I also won 310% of what the runner-up won. You never see something like this in regular MTTs. Dara informs me heads-up is more important in PKOs for this reason, the upside is so much greater.
I think both examples are extreme, you don't usually see half the field win a prize in a PKO and you rarely see somebody win almost half the bounties. But it does highlight that PKOs are a brilliant example of Barbell Strategy investing in poker. When things are going poorly you can still pick up a few consolation prizes, when things are going well you are on track to win way more than in the equivalent Vanilla MTT.
Do you prefer Vanilla MTTs or PKO? Let us know in the comments:
