Poker face

What are you reading now? Failure by Stuart Firestein

What are your essential books on poker and trading? The Education of a Poker Player by James McManus and Beat the Market by Ed Thorp and Sheen Kassouf.

What age did you begin playing poker? At 14, I played my first significant stakes game with strangers, in the basement of a local tavern. I did it to find out if I could walk into a group of adult strangers and walk out with their money. It was intensely liberating to find out that I could.

Do your poker winnings exceed 7 figures? Lifetime, easily. But never in one year. My earnings are remarkably consistent since age 20, less than a 3 to 1 ratio between my best year ever and my worst. Part of that is I have a mental goal, and play harder until I get to it, and then slack off. It used to be what I needed to live on, now it’s what I need to keep the confidence that I’m still a top player.

What was your role in the development of Value at Risk (VaR)? I was part of a small group of New York quants who stumbled upon it accidentally while looking for something else. I might claim to be Mr. V in VaR, as my greatest contributions were to the value concept. I was less involved in “at Risk.”

Describe your daily activity at AQR. Some days are 24 hours, literally, of following market events and fund positions. Other days are eight hours of approvals, limit setting, stress test analysis, training, research reviews, client meetings, policy discussions, report design, hedge trading and other nuts and bolts of peacetime risk management. 

What fund metric do you watch most carefully? Obviously it depends on the fund and the purpose, but I’d say maximum drawdown is the overall most useful historical statistic.

Is it harder to make $1 million trading or $1 million playing poker? To consistently make 
$1 million per year net in poker from play is very, very difficult; in trading it’s only difficult. Taking an expected $1 million per year out of the poker economy without putting anything back challenges the interests of a lot of people. In trading, $1 million goes completely unnoticed.

When do you play suited connectors pre-flop? When the board is going to give me a straight or a flush.

Who is the least likable professional poker player that you have played? As a rule, professional poker players have personality quirks that make them unlikable to most people. Because I share those quirks, I find it easy to tolerate players that many people disliked, including players like Stu Unger, Amarillo Slim, David Sklansky, Scotty Nguyen, Johnny Moss and Mason Malmuth. 

What is least stressful, your risk management role or playing high-stakes poker? I seldom feel much stress when I am playing for myself, regardless of stakes. Stress comes from being responsible for other people’s money.

How many hands of poker does one have to play before he or she should consider playing WSOP? If you’re playing for fun, I’d say 100 hours in live tournaments is plenty to be relaxed and enjoy the experience. If you’re playing to make money, it would probably take at least 10,000 hands at serious live stakes versus strong competition to develop a positive edge.

How many hands have you played? Perhaps 250,000, 25,000 at really serious stakes. That’s nothing for a modern on-line player, but in the 20th century it qualified you as a serious player.
Ever hit a royal flush? Of course. But I’ve never won a large pot with one.

What are your best two tips for poker players that want to raise their game? Find an ambition more likely to make you happy and concentrate.

Who is your poker hero and who is your investment hero? Dwight Eisenhower, Ed Thorp.

Will the U.S. equities market correct 10% before the elections? There are 350 trading days until the 2016 elections. Historically, 32% of trading days were more than 10% below the peak of the last 350 days. I have no strong reason to think the next 350 trading days will be significantly different from history in this respect, so I think there’s a 32% chance that the S&P500 on November 8, 2016 will be more than 10% below its peak from now until then.