Gamblers ruin is common terminology that is used for poker players and other gamblers and this happens when they raise their wager to a fixed part of their bankroll when they win, but do not reduce this when they lose – the result is losing their bankroll!! This is a corollary of a theorem by Christiaan Huygens, and it is true even if the gambler has a positive expected value on every wager. Gamblers Ruin also applies to the gambler who has finite wealth, playing a fair game against a gambler with infinite wealth. Eventually the gambler with finite wealth will experience gamblers ruin.
This theorem essentially computes probability, has a wide application and there are actually three meanings, the third having to do with negative expected value games. It is a mathematical theory of probability and it is for this reason that bankroll money management plays such a huge role in any poker players’ life. No matter where you go or what you read about poker, bankroll money management features at the top of the heap.
When you are looking at the concept of Gamblers Ruin in the poker context, even if you happen to be a winning player, you can’t make any money if you are broke. Not having a bankroll means loss of the money you may have made or could have earned if this is your job; by having a healthy bankroll, or any bankroll at all for that matter. When you over-bet on your bankroll, this is when Gamblers Ruin comes into play.
There is a point in every poker players game when they should not place a bet if it is going to affect your ability to wager further down the line, so, the lesser of the two evils, even if you have a good hand, can be the most profitable action. In a tournament when your chips are done you are done, you are out of the game, this is what tournament poker is all about. The fact that this possible death sentence hangs over you means you have to alter your game to accommodate it. When you lose 45 percent of the time, this is more than made up for by the fact that you win 55 percent of the time. Muck a hand if you are not 100% sure.
If you look at this from the point of view of finite and infinite wealth as mentioned in the first paragraph, you should get the picture. You have $350 000 in total, this includes everything that you own, Bill gates says that on the flip of a coin he will match your $350 000 against $500 000, he just feels like a gamble. You lose that coin flip, you lose everything, he has infinite wealth, and even if he lost, it would have made absolutely no difference to his life.
And while we are on the subject of proposition bets of this nature, poker players are infamous for placing this kind of bet. Don’t go there if it means losing your bankroll, because you will be left with nothing. If you say to Bill Gates, “no wait” I will bet $100 000 to your $200 000 and leave it at that you are still left with £250 000, you still have the clothes on your back and therefore the means to make more money.