PLO8 Revealed – Omaha Hi Lo Strategy

One of the courses I’m taking this semester is in Entrepreneurial Finance. It mostly covers the math behind venture capital deals. This week we’ve been covering options. I’m already very familiar with options, and did a lot of trading in 2006 and 2007. I actually did very well trading options, and then realized I probably didn’t have an edge and focused more on poker. While options can become very complicated, they are actually pretty simple when you get down to it. Today the professor was talking about how CEO’s often want to hedge their company stock positions. They usually can’t just buy some puts because their contract prevents them from doing it, or it will look bad if people find out. What was interesting were the crazy lengths that some CEO’s have gone to in order to hedge their positions. Some of them have formed “book clubs” with other CEO’s. Basically the CEO’s pool their stock together, so they are essentially swapping pieces of each others stock options. This is really not any different than when poker players swap pieces of each other’s action to reduce variance. In general I think its a pretty smart thing to do. But for a CEO who is being incentivized with company stock it can be pretty shady, since they’re capping their downside if they run their company into the ground, but the other shareholders may not realize it.

The last couple months I haven’t played a lot of poker since I’ve been so buried in school work. Thanksgiving week I finally had some time to play and to work on my game. It felt good after the longest break I’ve taken in several years. The semester wraps up pretty soon and I plan to hit it hard in December. So look forward more poker related posts this month. I’m also going to work on some new Cardrunners vids. Let me know if you have any requests.

Most people realize that having a really good mentor can be invaluable, but I’m not sure how many people actively seek them out. I remember when I first started doing mechanical design engineering, I was very lucky to have a good mentor that helped turn me into a good engineer. Take my word for it, there are plenty of bad ones out there…… The thing with mechanical engineering is its such a broad topic you just have to learn the basics in college, then learn how to be effective when you get out into industry. If your first job is with a bad company or group then you are kind of screwed.

With poker I never really had a mentor, I just did a lot of posting on forums and talking to people that way. These days I have a pretty solid network of people to bounce ideas off of. But if I had it to do over I would have sought someone out early in my poker career.

The cool thing about entrepreneurship is its really easy to go and talk to people and get their advice. This is especially true in the Boulder community where I hang out. Over the last year or so that I’ve been in grad school at the University of Colorado I’ve been able to talk to a ton of very experienced entrepreneurs, venture capitalists, professors, trust fund bums, and all sorts of folks. Its amazing how you can call anyone in Boulder and if you tell them you are an MBA student they’ll meet you for coffee. One of the cool things we have in the MBA program is a program where they assign students to mentors. Last year they gave me a guy who was helpful, but he was into alternative energy startups, and that’s just not my bag. This year I ran good and got David Cohen!! David runs the Techstars program in Boulder, and basically his full time job is mentoring people who are starting internet companies. Dave has a new book called Do More Faster which is about how to run startups. I got a copy from Amazon since I figured it would be a good idea to read his book before meeting up with him. He’s been travelling on a book tour so I haven’t been able to meet with him yet. The irony is I haven’t been able to read Do More Faster because I’ve been way too busy with other things. Although the timing couldn’t be more perfect since I’m launching my first web application in a couple of weeks. I’m not going to get into the details of the app now, but I will say that it poker related. I’ll make a post on it in a few days.

This weekend a friend of mine had a home game. Most of the people were ones I used to play a lot of home games with back in 2004 and 2005 when the poker boom was in full swing, and none of us really know what we were doing. Like a lot of people, they lost interest in poker, and were never really gambler’s to begin with. Obviously I ended up taking poker a little more seriously. It was fun though to play in a game that was like a flashback to Party Poker in 2004. There was tons of limping, and people would get annoyed when I would raise them. We played a 13 person tournament with a massive $10 buy in! Most of these people were engineers who make pretty good money, so it turns out I’m not the biggest nit in the world after all. The game was more about drinking than anything else, although some people seemed concerned about the money.  I ended up taking it down and winning a whopping $65. It was easy to just bet-bet-bet and run people over, although I did catch some good cards in key hands. However I did take a beat that would have been pretty filthy if we were playing for stakes that mattered at all. When heads up I got all in with 96 on a 996 board versus my opponent’s 44. He then proceeded to hit running 4′s for backdoor quads. I’m sure that’s happened to me before somewhere along the line, but definitely never live. But it kept things interesting and everyone had a lot of fun, although I did have a little bit of a hangover the next day.

All good poker players realize that other decent players will eventually begin to adjust to their strategy. When you play poker its never in a vacuum, you’re opponents are usually going to remember some things that happened in the past and then adjust in the future. If you are raising every hand, they are going to start calling you a lot wider. If you are only opening 2% of your hands in PLO or PLO8, they are probably going to give you credit for AAxx when you do. It’s a simple concept, but I remember when I first really grasped it as I was watching a Sheets video on SNG’s about 5 years ago.

I was in one of my MBA classes the other day when I realized that there are a lot of non poker players who don’t get this concept at all. We were discussing pricing, and how competitors will react if you make changes to your price. There are tons of cases in business where companies made a pricing decision, without really considering how their competitors would respond. When they do this the result is usually a pretty destructive price war that leaves everyone worse off. There are a lot of people out there who think if they do something no one will respond.

It never ceases to amaze me how many parallels there are between poker and business, and how much easier business can be. People who don’t know anything about poker wouldn’t expect your average degen to think on a higher level than your average MBA. But its often the case.

Golf has always been my primary sport. I played a ton of tournaments and always took lessons while growing up in Florida. These days I don’t play nearly as often as I did back then, but my handicap index is still currently at 2.2. I’ve never been a long hitter. which has never bothered me. But lately I came to notice 2 things that have. One is that hitting the ball a little farther is the key to reaching more par 5′s in two which is in turn the key to get from a low handicap to scratch. The second was that a lot of people hit it about 1 club farther than me, that don’t necessary seem to be all of the much stronger. So this got me thinking about what I needed to do to improve. I’m in decent physical condition. I run regularly and go to an Athletic Intervals class twice a week. In the class I can hang with most anyone when it comes to pull ups and push ups, so that’s what got me thinking I should be hitting it farther than what I am. I started to wonder if I just needed to start swinging harder.

So on Friday I decided to try an experiment on the course where I just took one club less than what I normally would. The weird thing was it worked and I started hitting a ton of really good iron shots throughout the round, all going the correct distance despite using one less club than normal. The first time I tried this was on the fourth hole where I hit a 6 iron instead of a 5 iron and actually hit it over the green. I think what I had been doing previously is I developed an ability to hit a certain club a certain distance. Kind of like with a sand wedge how I can hit it 50, 75, 100 yards or whatever by altering the length and tempo of my swing. I think I was doing the same thing with my longer irons without realizing it.

I ended up hitting 14/18 greens including two of the par 5′s in 2 and shooting 70. I would have broken 70 but I drove behind a tree on a par 5 and ended up making my only bogey of the day. I’m going to have a decent amount of time to play in August, so we’ll see if I can keep this going. My problem now is I actually have no idea how far I hit my different clubs….. In the meantime I’m going to start setting my expectations a lot higher in other aspects of my life and see if I can get similar results.

I spent 11 years as an engineer. Some of that time was spent in offices, but for most of it I had a cubicle. I understand why cubicles exist, they’re are usually the cheapest and most efficient way to provide a space for office workers. From that standpoint they make sense. But they are also the most unnatural habitat for a person you could think of next to a prison cell. Don’t get me wrong, I loved my work. And I became so used to office life after awhile I didn’t realize how unnatural it was.

Then last year I left work to get an MBA and focus on entrepreneurship. Before starting school in August I quit my job in June to take some time off. I great time playing golf, working out, and playing poker. My friends called it “the summer of Dan”, because it reminded them of the Seinfeld episode. When school was in I was busier than ever, putting in way more than 40 hours a week. But hanging out with some really great people and learning a lot of new things is awesome and isn’t actually work at all. Plus there are no cubicles. See, I’m much happier here: (I’m in the orange sweater)

Halfway through the school year I hatched an idea for a software company, and I’ve been working hard to make it happen. This summer though instead of taking time off I’m working at an internship, which they expect you to do between the 1st and 2nd (last) years. The internship is at a very cool software company, and I’m getting to do a lot of new things and apply things I’ve learned in school. But after a year away from a cube I’ve found it very hard to go back. I’ve realized that I really need to do something that doesn’t require me to spend 40 hours a week in an office. So I’ve been working very hard to make my software company happen by the time I graduate next spring.

We have a group at school of current students and alumni that get together once a month and someone presents a business idea they are working on. Its an easy way to get honest feedback and advice. Last month one of the alumni said he had to take a regular job because his business wasn’t making enough money. Everyone kind of gave him a sympathetic shake of head. That’s when it really sunk in for me. If can’t make your entrepreneurial ideas work out, then the punishment is you have to sit in a cubicle until you get it figured out. I now think of cubicles as a penalty box in sports. So rest assured I will be working my ass off between and next May to make sure I don’t have to go in the box. Of course, unlike the other people in that group, I also have the PLO and PLO8 to fall back on……

As some people know I’m a full time MBA student. Right now I”m in between my 1st and 2nd years, and doing a summer internship. When I was interviewing for internships during the spring, some people were put off by my poker coaching and book writing. I think that was pretty ridiculous, but most people don’t understand poker. So I stopped mentioning poker, and then the interviews went a lot better.