Introduction

In the late 1970s and early 1980s, the bond and option markets were dominated by traders who
had learned their craft by experience. They believed that their experience and intuition for
trading were a renewable edge; that is, that they could make money just as they always had by
continuing to trade as they always had. By the mid-1990s, a revolution in trading had occurred;
the old school grizzled traders had been replaced by a new breed of quantitative analysts,
applying mathematics to the "art'' of trading and making of it a science.

If the latest backgammon programs, based on neural net technology and mathematical analysis
had played in a tournament in the late 1970s, their play would have been mocked as
overaggressive and weak by the experts of the time. Today, computer analyses are considered to
be the final word on backgammon play by the world's strongest players - and the game is
fundamentally changed for it.
And for decades, the highest levels of poker have been dominated by players who have learned
the game by playing it, "road gamblers" who have cultivated intuition for the game and are adept
at reading other players' hands from betting patterns and physical tells. Over the last five to ten
years, a whole new breed of player has risen to prominence within the poker community.
Applying the tools of computer science and mathematics to poker and sharing information across
the Internet, these players have challenged many of the assumptions that underlie traditional
approaches to the game. One of the most important features of this new approach to the game is
a reliance on quantitative analysis and the application of mathematics to the game. Our intent in
this book is to provide an introduction to quantitative techniques as applied to poker and to the
application of game theory, a branch of mathematics, to poker.

Any player who plays poker is using some model, no matter what methods he uses to inform it.
Even if a player is not consciously using mathematics, a model of the situation is implicit in his
decisions; that is, when he calls, raises, or folds, he is making a statement about the relative
values of those actions. By preferring one action over another, he articulates his belief that one
action is better than another in a particular situation. Mathematics are a particularly appropriate
tool for making decisions based on information. Rejecting mathematics as a tool for playing
poker puts one's decision-making at the mercy of guesswork.

Common Misconceptions
We frequently encounter players who dismiss a mathematical approach out of hand, often based
on their misconceptions about what this approach is all about. We list a few of these here; these
are ideas that we have heard spoken, even by fairly knowledgeable players. For each of these, we
provide a brief rebuttal here; throughout this book, we will attempt to present additional
refutation through our analysis.

1) By analyzing what has happened in the past - our opponents, their tendencies,
and so on-we can obtain a permanent and recurring edge.
This misconception is insidious because it seems very reasonable; in fact, we can gain an edge
over our opponents by knowing their strategies and exploiting them. But this edge can be only
temporary; our opponents, even some of the ones we think play poorly, adapt and evolve by
reducing the quantity and magnitude of clear errors they make and by attempting to counter-
exploit us. We have christened this first misconception the "PlayStation™ theory of poker" - that
the poker world is full of players who play the same fixed strategy, and the goal of playing poker
is to simply maximize profit against the fixed strategies of our opponents. In fact, our opponents'
strategies are dynamic, and so we must be dynamic; no edge that we have is necessarily
permanent.

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THE MATHEMATICS OF POKER 8