Similarly to how games like blackjack are not quite of the same fundamental structure as poker, activities like sports betting, horse racing, prop betting, and stock investing, which I will collectively refer to as market-based activities, are not symmetric, closed, competitive games. They are quite a bit closer to this than advantage games played against the house, in that they are generally symmetric, multiplayer, and can offer much more sizable edges to experts.
The biggest difference between these pursuits and poker is that market-based activities are not closed games, a term I've used in describing the class of games of which poker is a member. A closed game is a game with clearly-identified players and a distinct beginning and end.
Why does this matter? And how is this meaningfully different from poker, which is sometimes philosophically seen as "one big session" over one's entire career? Here are the implications I've thought of for what it means for a game to be closed:
- To whatever extent something like sports betting is a game, it's not a game that two competitors can sit down and play against each other over any pre-specified moment in time. Investments and bets contingent on real-world events happen in realtime.
- The marketplace in any betting or investment market is arbitrarily large and changing. Poker might be a 2-player, 6-player, 9-player, or 2000-player game depending on how it's played, but it's always established that way before the game begins. Meanwhile, financial markets are "games" with often many many thousands of participants. The amount of interest in the market can change rapidly, and the influx or outflux of participants can significantly impact the mechanics of way the price (or betting line) moves.
- Since the opportunities to "play the game" (profitably bet or invest) arrive at random time intervals, a "player" could go for a long time without actually doing anything. Moreover, a player who has found something to bet on is done making decisions and done thinking as soon as the bet is placed. Contrast this to closed strategy games like poker, where players must make decisions constantly as they play. This arguably has meaningful social and legal implications in a world that values competition and mental exercise; the ongoing strategic engagement of closed strategy games and the demand to be mentally involved in determining the outcome could be a positive enough effect to distinguish such activities from those where a bettor or investor is external to outcomes.
- It isn't possible to replicate a set of conditions from the past to have a rematch of the same "game" with the same rules of sports betting or investing. As market conditions and the real world continue to change, the relative expected performances within any set of players will fluctuate even while the players keep their strategies fixed. This is in contrast to poker's evolution, which is a deeper strategy development into a fixed game with unchanging rules. Market-based activities are analogous to a continuum of slowly-changing poker variants, perhaps where the probabilities of certain cards being dealt are slightly different from day-to-day.
- Thus there's no way to structure a traditional tournament or competition to determine the best players at these games, unless artificial market events were designed. In poker, a long enough tournament would indeed (eventually) rank the players according to their skills, but in market-based activities, the "game" will have changed before enough of a sample size could be captured to identify the best investor over a month, year, or lifetime.
- Not only are the underlying probabilities and "rules of the game" changing continuously in market-based activities, but, even at any given moment in time, as noted in part 9, the probabilities are of a qualitatively different type than those within poker. The randomness underlying investments can be fat-tailed or of arbitrarily large spikiness (i.e. not only high variance, but high variance of variance), whereas the probabilities present in closed strategy games are unchanging and always lead to easily-modeled, bankroll-friendly thin-tailed randomness. This has clear practical implications for the financial planning of players and thus could conceivably be a distinction that is of regulatory or social interest.
None of this is any statement against market-based activities involving skill, or against them involving more or less skill than poker does. Certainly there is tremendous skill in both, but the skills involved in non-closed games are more like "skills involved" in finding +EV opportunities as they arise, rather than strategic outperformance of a competitor in a game with structured, unchanging rules and underlying dynamics.
Despite the favorable, accessible, and practical comparisons that can be made between investing and poker, which I absolutely support, I don't think it's fully intellectually honest to classify market-based activities as games of skill. It's certainly not that they don't involve skill. It's that they aren't games in the closed sense.
Part 13: On control and equal challenges -->
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