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Texas Hold'em-A Game of Cigarette Butts

Updated: May 2, 2023

Disclaimer : Anything mentioned in this post is not financial advice and is for informational purposes only. We do not recommend buying or selling any securities that are mentioned in this article. All investments carry risk and there is no guarantee of profit nor protection against loss. WealthGap does not provide any legal, tax, or accounting advice.


 

When the pandemic first began, I started playing Texas Hold'em cash games. Initially I was only playing 1/2 to 2/5 recreationally amongst friends. However, in my third year I discovered GTO theory and started playing the game in depth. After playing 50/100 for a couple months, I realized that poker is a game with huge variance and at the highest level, the edge you have against other professional players is very small. Therefore, pros just wait for weak players (also known as "fish") to join and devour them.


Buffett famously coined the term "cigarette butt companies" to describe companies that are poor long-term investments but have low share prices, allowing investors to make a small profit. This is similar to picking up a discarded cigarette and smoking the one last puff to gain some utility for free. At the highest level, poker is just pros constantly trying to look for those free puffs (fish), and sometimes you can even burn yourself as the fish can bad beat you. However, investing in cigarette butt companies can result in a significant opportunity cost because you could have invested in a wonderful business at a reasonable price, and over time the stock would have done wonders for you. Similarly, in poker, if you can beat 25/50+ games chances are that you are quite intelligent. Pursuing other professions can enable you to excel and increase your earnings year after year.


It's important to note that while a professional poker player who is good at the game can earn a lot of money, their earnings are extremely capped in the future. It's challenging to find public super high stakes games with plenty of fish. At least half the players who play on Hustler Casino playing 50/100 100/200 200/400...etc are not pros, but gaining access to those games is not easy. Once you play on a stream, your play style will be analyzed and be exploited in future games. That's why even though Phil Ivey gets invited to play on stream sometimes he rarely plays a hand because he understands that people will study him and poker is a game of information.


If you love the game, then by all means, enjoy grinding, but if you are more ambitious, I recommend pursuing something more lucrative over the long run. Even the highest-earning poker players only have a net worth of ~100M over the years and none of them comes close to becoming a billionaire. These are the TOP grinders.


For sharks who have excess bankroll, you should consider opening an account with WealthGap. If any of you played against me before at the casino, you would know I am a winning poker player and I am an even bigger winner in the stock market.

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