Whats the worst hand in poker?

[doughishere]

Little Econ read that came across my desk today. Some of you may have seen this already....... ;)

 

 

Whats the worst hand in poker?

 

Ask any competent no-limit hold'em player and the response is automatic: "two-seven off." Examples of this hand include two-of-hearts and seven-spades or two-of-clubs and seven-of-diamonds. This is the hand with the lowest high-card -the seven- that also (i.) minimizes the odds of a flush (as the cards are "off" - i.e. of two different suits) and (ii) minimizes the odds of a straight (as the cards are five numbers apart).

 

Through this answers is technically correct, it is not actually the worst hand in poker. The worst hand in poker is the second-best hand. This is the hand that incentivizes the player to bet heavily with out the odds in  his or her favor. It is the poker hand that offers the player the greatest risk of loss. Competent players know to fold a two-seven off. Gifted players know to fold

the second-best hand.

 

A similar framework applies when thinking about industry structured in cyclical, commodity business. The most profitable industry structure is a "rational" structure that has been consolidated to one or a few participants who together control pricing either explicitly(monopoly or cartel) or implicitly (by widely broadcasting pricing decisions such that the small number of industry participants can act in concert without directly coordinating their decisions). A consolidated, rational industry allows up-cycles to last longer and down-cycles to be shortened. Through-the-cycle profitability for each participant is meaningfully enhanced.

 

The next-best industry structure is a fragmented industry. A fragmented structure is characterized by its smaller, marginal participants. In up-cycles, these marginal players often lack the capital to rapidly invest in additional capacity. In down-cycles, these same marginal players lack the balance sheet strength to endure protracted downturns and so are relatively quick to shut capacity. A fragmented industry is therefor marked by slightly longer up-cycles and demonstrably shorter (and shallower) down-cycles.

 

The worst industry structure is the second-best structure - and industry that is "almost-consolidated" fewer participants, but not so few that pricing has become rational. This structure leads to more violent cycles with (i) protracted downturns characterized by many-well-funded large players each battling to outlast one another, followed by (ii) shorter, more-powerful upswings that are rapidly cut off as survivors rebuild financial strength and add capacity. Through-the-cycle profitability is diminished as the industry consolidates toward rationality.

 

[Guest notorious546]

link?

[bookie71]

The worse hand is the "pat" hand that is second best.  ;D

[Otsog]

I don't think that analogy makes any sense.

 

 

[Hielko]

Little Econ read that came across my desk today. Some of you may have seen this already....... ;)

 

 

Whats the worst hand in poker?

 

Ask any competent no-limit hold'em player and the response is automatic: "two-seven off." Examples of this hand include two-of-hearts and seven-spades or two-of-clubs and seven-of-diamonds. This is the hand with the lowest high-card -the seven- that also (i.) minimizes the odds of a flush (as the cards are "off" - i.e. of two different suits) and (ii) minimizes the odds of a straight (as the cards are five numbers apart).

 

Through this answers is technically correct,

It is not technically correct since it depends on the number of players at the table / the average hand strength that people have when entering the pot. 72o is better than 32o when you play headsup.

 

it is not actually the worst hand in poker. The worst hand in poker is the second-best hand. This is the hand that incentivizes the player to bet heavily with out the odds in  his or her favor.

The odds are in your favour when you have a strong hand. When it is second best you just have bad luck.

[constructive]

Given that there is no data supplied to back up this assertion, I'm calling BS.

 

Also to the VIC author's point, look at the charts for PPC, TSN and SAFM. He says you can take advantage of intense negative cycles in their stock prices every 3 years. That's false on its face, the cycles as reflected in stock prices have been fairly subtle and unpredictable, even in retrospect.

[jay21]

I don't think that analogy makes any sense.

 

I agree. I don't understand the poker point (2nd best to what? the nuts, pre-flop, etc) or the industry point. It really doesn't make sense imo.

[JayGatsby]

I need to think more about the specific analogy, but my guess is the original claim that 72o is not the least profitable hand is probably correct. 72o causes people to recognize their weakness and get out quick.  This seems to back that up: http://www.tightpoker.com/poker_hands.html . So 72s actually has the worst expected value. I guess because it gives people some sense of hope that ultimately causes them to lose more money than if they had 72o and just got out quick. How you apply that to life / investing is a different question, although I think it has some good lessons.

[DTEJD1997]

Hey all:

 

The worst hand in poker is the hand that you lose a lot of money with!

 

As to 2-7, 8-3, J-4 and so on...I am not playing these unless I am in an un-raised big blind.  Unless you hit it almost perfectly, I am certainly ditching these post flop.

 

Some of the very biggest mistakes I've made in BOTH poker and investing is that I was TOO focused on my hand OR the company.  In poker for example, some of my biggest mistakes/losses have been when I was too focused on my hand and that took away from my analysis of what was on the board AND WHAT OTHER PLAYERS MIGHT HAVE.  For example, flopping trips and then being vulnerable to a straight/flush.

 

With investing, I've made HUGE mistakes and HUGE losses with companies that were well run, well capitalized, well managed, etc BUT WERE FACING poor industry trends.  My mistake was in being too focused on the company/management and NOT ON THEIR threats/industry.

 

For example, I own several well run oil service companies.  Excellent companies!  Very neat, very compelling investments!  HOWEVER, the mistake I made was in thinking that their management/position would be able to offset a decline in oil prices.  That thinking is absolutely correct, up to a point.  With oil down over 1/2 from it's peaks, it just doesn't matter how well run they are...they are going to hit.

 

Sort of like flopping trip aces with 3 suited cards...then on the turn it is 4 suited cards!  I've got trip ACES!  a great hand!  but it is terribly vulnerable in this circumstance....

 

Very interesting how poker & investing share so many things.

[alwaysinvert]

The worst hand in poker is the hand that you lose a lot of money with!

 

That's generally not true, because the hands that you lose a lot of money with are also the ones that you are supposed to make a lot more money with. Hands that you never lose a lot with rarely earn a lot because the second best hands are most often distant seconds.

[bigbluffzinc]

In poker the hands you lose the most money with are the worst hands.  If that weren't true you'd fold the other hands instead of playing them.  That should be intuitive.  Folding = 0.  You'd never play a hand where the EV was less than 0.  You'd fold.  As a result you lose the most with 72o & similar hands. 

 

Fwiw this is a digression from the post, I think the author may have been suggesting you lose the most money in situations where you're caught with the second best hand.  That's clearly true, if you're dealt KK preflop and an opponent AA, you clearly lose a lot of money.  In investing if you find what looks like a great business but things turn against you, you'll lose a lot of money... I hope that was his point..  But as someone else indicated, this is just unlucky.  You accept these consequences when you play the game.

 

Poker is a lot like baseball where the game has strikes.  The strikes are the rake, you're forced to participate unlike in investing where you can wait indefinitely.  There are a lot of similiarities with poker and investing but people can overreach with their comparisons..