I am not and never have been a gambler. Years ago, I was part of a social group of five couples. Our routine was to go to dinner every Saturday night, and then, on a rotating basis, to go to the home of one of the couples for poker. I felt like a complete nincompoop in that I couldn't remember, from one week to the next, the order of things. They would write it out for me: one pair, two pairs, three of a kind, full house and so on. The other fellows seemed to know what was in everybody's hand and to bet accordingly. I could never quite catch on. I would stare and the list and stare at my hand, but I really felt quite stupid. I really didn't know what was going on.
The amazing thing is, I would win. Sometimes, in open poker, I would throw my cards in, and somebody would say, "Hey, Dummy, you win!" So I was convinced that poker was really a game of chance, just dumb luck.
A couple of economists, Steve Levitt and Thomas Miles of Chicago University, have done a study which indicates the opposite. They studied the World Series of Poker of 2010, in which there were 32,000 players and prize money of $185 million. It's open to anyone who pays the entry fee. It attracts some top players and a host of yokels like me who think it really is just a game of chance and see it as an opportunity to become rich.
The top players are 12 percent of the entrants who did well the previous year. Second, was everybody else. It turned out that the highly skilled players in the first group had an average return on investment of 35 percent. The yokels lost 15.6 percent. If poker were truly a game of luck, the return of the highly skilled players should not have differed so greatly from the others. Levitt and Miles also did a study to determine whether mutual fund managers have special skills similar to the poker players, and they found little evidence of that.
Reading about these studies took me back to a day in September of 1944. I was on the Queen Elizabeth, the ocean liner converted to a troop ship. I was one of 400 Air Force returnees who had completed their combat tours and were returning to the United States. Also on board were 3,500 wounded soldiers. Most had been hospitalized and had just received back pay.
Poker games broke out in various parts of the ship. As we continued on the five-day Atlantic crossing, the money gradually accumulated in the hands of a relatively small number of players. It made me nervous to watch young country boys, many wearing bandages or casts, betting thousands of dollars, thinking it was just a game of luck.
Gambling in the United States is a $6 billion business. In 1910 a Louisiana judge ruled that poker was just a game of chance, and that precedent stands today. Nobody dreamed then of online poker or a World Series of Poker. Meanwhile, thousands of yokels may be risking their homes and their futures in the mistaken belief that it is all pure luck. Maybe it's time for re-examination.