The Discussion on Higher Rake that Nobody is Having
Posted by Phil Galfond
Posted by Phil Galfond posted in News & Rumors
The Discussion on Higher Rake that Nobody is Having
Last year, Daniel Negreanu discussed the effects of higher rake in an interview. The community reacted negatively, and he felt his message was taken way out of context, so he made a blog post clarifying his point.
As a poker player and as someone building a poker site, I obviously have a lot of opinions on rake, policies, game offerings, and countless related areas. At the time, I worried that I’d seem disingenuous if I joined the discussion - that detailed criticism of future competitors would come across as opportunistic marketing for my own business - so I chose not to get involved.
I came to regret that decision. By not saying things I normally would have as a member of the poker community out of concern for how it would come off for me and for Run It Once, I think I was actually being less authentic.
For some reason, the topic has popped up once again. Doug Polk talked about it on a Podcast with Joe Ingram. Daniel discussed it briefly on his own podcast, and tweeted a link to the post during a debate with Doug, Joey, and others.
The points I would have brought up last year are points that I still haven’t seen discussed, so I’m going to take this opportunity to say what I wish I’d said almost a year ago.
I’ll mostly be talking about the blog post where Daniel clarifies and explains his thoughts. His interview comments did sound worse, but Daniel is an honest guy and I very much believe that he meant what he wrote.
His blog post is absolutely logical, and the conclusions Daniel draws are obvious and not really controversial (there is a minor argument to be had on how the economics of his real-life example truly work, but it’s complex and irrelevant to what I’d like to discuss). Many in the poker community berated Daniel for standing up for Stars and their rake increases, but not many engaged him in a real discussion.
Daniel describes two 10-20 Limit Hold'em games running across the street from one another. One rakes $100/hr and the other rakes $300/hr. The low rake game has a pro-heavy lineup, but those pros can still do better in the low rake game than in the rec-heavy high rake game.
He talks about a recreational player, Bhupan, who usually plays in the high rake game but occasionally ventures across the street into the low rake game. Daniel argues that the high rake game was better for Bhupan: he loses less and has a better experience playing with other recreational players despite the high rake.
This argument is perfectly sound, and I’m sure in this case it was true.
Skipping ahead to Daniel’s conclusion:
“In closing, NO I do not think higher rake is good for poker, but YES, I do think it makes sense to give the majority of the bonuses or rewards to recreational players.”
Whether you agree with his opinion, this is a perfectly reasonable stance to take, and Daniel is sure to make clear that he doesn’t think higher rake is good for poker.
The problem with the post is what Daniel skips over, stops short of saying, and implies.
Let’s start with implications. Many people will agree with Daniel’s (valid) arguments, but will then be led to draw inconsistent conclusions:
“For Bhupan and other players at his skill level, HIGHER RAKE WAS BETTER FOR THEM than paying a lower rake in a game against pros.”
Many will read this as implying “higher rake is better for recreational players like Bhupan,” which, if believed, is a very compelling moral argument in favor of high rake. We should all care deeply about what is best for recreational players.
The thing is, his arguments don’t lead to that conclusion (and Daniel makes sure not to say it explicitly). In actuality, all that should be taken from this is that in these two specific games, as they were described, Bhupan was better off in the one which had higher rake.
“I do not think raising the rake is good for poker. No rake is “good for poker.” But you need to understand that a game full of pros is far worse for the game than a high rake.”
Many will read this to mean “pros are worse for the game of poker than high rake.” He is once again actually talking about a specific table of players ('this game' rather than 'the game' of poker), but more importantly, he’s comparing pros to high rake (in a way that could be easily construed) as though they are mutually exclusive - pick one or the other. This shouldn’t lead to a conclusion about the real world poker economy.
Throwing in phrasing like “better for recreational players” and “worse for the game,” which are regularly used in the community to talk about poker as a whole, makes it very easy for readers to conflate the two uses and draw the wrong conclusions.
So when Daniel leads off his second paragraph with,
“Now, let’s take a deeper look at how an increased rake affects players,”
and then goes on to talk about very specific situations, it sets readers up to infer the wrong meaning.
I’ll stop now and be clear: I’m not claiming Daniel did anything unethical.
I believe he was making the best argument he could for a conclusion that he believed in. He’s very smart and persuasive, and in my opinion, he is almost always on the right side of a debate. Presenting the best argument you can for your beliefs is what I’m doing right now, so I can’t fault him for that.
Now, let’s talk about the example and see how it applies to the real world currently - a topic that I think the post skipped over:
In the two-game example presented, Daniel seems to be saying that if Pokerstars moves more and more towards being the high rake game with no pros, they believe that it will be better for them and better for the recreational players. This is a very good argument in favor of the path they are taking since recreational players are integral to the game.
In the real world, like in the example, there are other places that run poker games. We at Run It Once have been working very hard on offering the players a viable alternative. Party Poker has made some great and honorable moves and has aligned itself with smart players who truly care about the community.
However, as things stand currently, Pokerstars has the overwhelming majority of the traffic in online poker.
For most players, there isn’t really a “game across the street.”
So, the Bhupans of online poker are getting something more closely resembling the higher rake of that soft 10-20 LHE game combined with the toughness of the all-pro game!
Nobody is being helped in the short term besides Amaya. The analogy doesn’t mirror reality right now.
But, I concede, it will take time for the decisions and offerings to continue to roll out and to take their effect on the poker ecosystem. The 10-20 limit games didn’t reach their equilibria overnight.
I expect that Pokerstars will continue to shift towards the games and policies they truly want to offer, and the effects of those decisions - their desired result - will take a while to come to fruition. Only then will we find out whether they were “right” or “wrong.”
So let’s take a look at what will happen once the dust settles. There are only two outcomes that result from Pokerstars metaphorically becoming the soft game described in Daniel’s post:
This is the scenario where the world of Bhupan becomes a reality.
Other sites (hopefully us!) succeed in offering pros an environment they prefer playing in, and they (we!) become the game across the street.
Party Poker, RIO, and/or others will offer beatable but tough games with fair pricing. Pokerstars will offer really soft games, probably exclusively spreading lower edge variants like Beat The Clock (my opinion), but will keep rake so high that pros will stay away.
In this endgame, Pokerstars eliminates pros from their ecosystem and can offer recreational players what they and Daniel believe is a better losing experience (I’m not arguing in favor of or against that opinion today). Pokerstars grows and succeeds, and the recreational players on their site enjoy the product. This, in my opinion, is what Daniel’s post implies that he wants to happen.
Meanwhile, recreational players who care about the same things that pros do will find a home at one of the other sites.
-Recs on Pokerstars are happy
-Pros and Recs who don’t like those offerings have options elsewhere and can continue playing
Sounds all good, and I think it very well could be a great outcome. If the other poker sites can offer the experience and liquidity that Pokerstars currently does, things work out for everybody.
It is my position that, once we reach this endgame, Pokerstars is no longer operating a poker site, but a casino.
Now, there is nothing wrong with that. If a company wants to only offer negative EV games, operates with integrity, and provides a product people want - good for them. They can be successful and their customers can be happy.
It’s just not poker, and their customers won’t be the people who want to play true poker.
In this scenario, Bhupan’s rec-filled game is the only game built for longevity. It continues to run while the low rake pro-friendly game struggles and shuts down.
Like in Endgame 1, Pokerstars becomes a high rake, rec-only “poker” site. All of the pros are driven out, and the recreational players who stick around stay because they enjoy the product Pokerstars is offering.
Unlike Endgame 1, in this world, Run It Once, Party Poker and the others all fail. The true poker enthusiasts have nowhere to go.
This is online poker’s Armageddon. Pokerstars morphs into a poker-themed casino and there is no game across the street.
-Recs on Pokerstars are Happy
-Pros and Recs who don’t like those offerings are out of luck. Online poker is dead.
This, in my opinion, is what Daniel’s post (along with some additional context clues) implies that Amaya wants to happen. I believe that it’s not what Daniel wants to happen, but he might think it’s the most likely outcome.
In this two minute section of Rikard Åberg’s interview with Negreanu, Daniel says (paraphrasing) that RIO starting a site is a win-win: Either it succeeds and gives players a good place to play, or it fails to attract enough players to keep games running and shows the poker community that, hey, maybe Amaya was right about the direction they’re heading in.
That’s a perfectly reasonable view, though IMHO the second result is not a win :)
From his tone, I can tell that he believes RIO (and probably other sites that attempt to be ‘pro-friendly’) will likely fail. There’s nothing wrong with him having that opinion, and he’s polite and doesn’t say it outright. In fact, as you may know, we’re way behind our initial development schedule here at Run It Once, so I’m certainly not proving anyone wrong yet!
We have also heard from Amaya representatives, time and time again, how their research shows (paraphrasing) that pros don’t matter.
After the community banded together for a 3 day boycott back in 2015, Amaya’s VP of Corporate Communications, Eric Hollreiser, wrote:
“...we can tell you that we did see effects from the recent boycott that give us even greater confidence that our strategy is on the right track to improve the health of the ecosystem. During the three-day boycott we recorded the healthiest consecutive three-day ecosystem results of the year with steady net gaming revenue, even though our net-depositing players lost at a much lower rate than they have all year. As we have seen with Spin & Go's, which have higher retention levels than cash games due to the increased winning experiences provided to all players, we believe this decreased loss rate will result in those players' deposits lasting longer and retention rates improving, resulting in more deposits and more money in the system because players are enjoying their time at the tables more. This is the right foundation for us to build upon.
Our commitment to poker is as strong as ever.
We believe that our actions will demonstrate this in the months and years ahead.”
This is just one example, but they’ve made statements with similar implications a number times.
My biggest concern is what Daniel’s post implies to me about Amaya’s plans and core values, which Daniel stops short of discussing.
It’s my belief that the endgame they have in mind involves offering exclusively unbeatable games. This is a big assumption to make, and I might be dead wrong. I hope I am.
It’s also my belief that they don’t think there will be a game across the street. This is Endgame 2.
Of course, I could be way off. Maybe they plan for Pokerstars to have their own “game across the street,” offering half unbeatable games and half what I would consider true poker. If that’s the plan, though, why have they been increasing the rake or reducing the rewards in all games? Why do they keep telling us that we don’t matter and that recs prefer Spin N Gos and Beat The Clock?
And why is that soft 10-20 Hold'em game, the game that Daniel chose as an example of a better place for Bhupan and the recreational players that he represents, unbeatable?
I don’t disagree with (almost) anything Daniel said in that blog post almost one year ago. It’s what he didn’t say that I take issue with.
If Amaya believes their important customers want unbeatable games, and if they believe that competitors going in a different direction will fail, it's their right to focus on those games. There’s absolutely nothing wrong with them drawing conclusions from their data and making the best decision they can for their shareholders.
But if that is the case, Amaya believes in a very grim future for us, and if Daniel wants to engage the community sincerely, I’d prefer for him come out and say it.
Personally, I believe that we’re much more likely headed towards a version of Endgame 1 (aka I believe in online poker).
Blackjack, Roulette, Craps, Poker… you can call them all gambling, but you and I know that poker is fundamentally different from the rest. We fell in love with poker because of the beauty that lies in that difference.
I won’t be surprised in the slightest if Pokerstars does better and better as they introduce more fast, exciting, low edge, high rake games. But if the games are unbeatable, it’s going push out the hordes of people who love the game for the same reasons you and I do.
There will always be millions of us looking to play true, authentic, beatable poker. If Pokerstars ceases to meet that demand, somebody will.
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