The Peter Principle

Introduction

In this Article

• What is the so-called "Peter Principle"?
  
• How does it apply to poker?
  
• Weak form of the Peter Principle
  

(Editor's note: Written by Matthias Wahls)

In economics, the so-called “Peter Principle” exists. It implies that employees of a company will be promoted until they have reached a position they are no longer able to manage. It's at this position that they usually stop climbing the hierarchy. This principle is also applicable in public service. Anybody who has ever had a disagreement with a staff member of a public authority knows exactly what I mean.

If one assumes that this principle is also valid to a greater extent in the world around us, it would lead to a rather pessimistic attitude. It would imply that the most important points of control within our society are occupied by incompetent persons. Social critics have long maintained that such is in fact the case.

I personally believe that there is some truth in this maxim, and that it could be a good starting point for various deliberations. Nonetheless, the majority of offices should be filled with competent people who haven't been yet because they a) haven't been in their position long enough yet, b) are underestimated or c) don't have an advocate amongst the leadership.

With regard to poker I see the following problems:

Players playing where they are incompetent

Consequently, they climbed up the limits until they reached a level on which they changed from a winning player to a losing player. The only correct step now would be to return to the limit which they were able to beat. But going backwards is something everybody is reluctant to do. For some, it even represents a major psychological problem. It seems that they'd rather lose money than to acknowledge their “failure”.

Rubbish! First of all, it's not really a failure when you climb up the steps rapidly and eventually meet some resistance. One cannot expect to take the elite by storm. The development of poker skills takes a lot of time. Viewed from another point, even real failure isn't disgraceful. The weighing of failure correlates with the “culture of failure”. In Germany, it often happens (IMHO) that people pour scorn on the “loser”, or that he has to endure know-it-all remarks (“I told you so!"). In the USA, on the other hand, the courage of having risked something is approved (“I respect you for your courage. Next time it'll work for sure!”).

To sum up: Failure is not a disgrace! Go back a step and calmly prepare for the next attempt!

Some people reduce their win rate

This is the weakened form of the Peter Principle. Let's assume you make 2 Big Bets per hour on $10/$20. Now you climb up to $15/$30 and “only” make 1 BB/h. The profitability has thus decreased. Of course, this situation is by far less serious than in the first case. Also, the real win rate can only be determined based on a great amount of hands, meaning that it could be that you have an above-average amount of bad luck immediately after your advancement.