Thoughts on the poker business world.

Don’t Be Evil Manifesto

At the beginning there is something people want: primary needs, or things they like and enjoy. For the latter, it may be a game, a sport, drinking with friends, enjoying a good meal, well, you name it.

The Early Ages

People naturally indulge their desire to some extent: they call friends over, they organize parties, they prepare a good dinner for their guests… It is generally quite informal, and the success of the activity much relies on the abilities and motivation of the direct participants.

This is the Do It Yourself way, and for many things it works reasonably well.

The Dawn

Unfortunately, for other things, it doesn’t quite work. Maybe you cannot cook, neither can most of your friends, and you cannot perpetually harass the poor guy who happen to be good at it, each time you would like a good meal. Or maybe you are not very talented at organizing things, and your address book is pretty thin. Whatever the reasons, there are often desires you don’t manage to satisfy very well on your own.

This is where specialization occurs. If you cannot do it, someone can, but he is not going to repeatedly spend his time and energy for you without some kind of compensation. Therefore, you will try to find an agreement, like, you invite me for a good lunch each sunday, and I teach you some chess (or whatever), since you like it so much.

You scratch my back and I’ll scratch yours.

The Rise

But obviously, there is a critical issue with barter: each side must be able to provide the counterparty with something he wants. And if promises are part of the deal (like, I’ll give you six bottle of wine next fall), people must trust each other.

Money solves these problems, by quantifying and materializing in a durable way your contribution to someone’s desires. Now, the winemaker can sell wine to his friends, and buy peas from his neighbor who doesn’t drink alcohol.

From then on, nothing prevents the new entrepreneur from spreading his activity, and trying to get as much money as possible, so as to satisfy his own desires.

Fret not — I’m not going to sell you marxist propaganda!

Climax

A few months later, the winemaker has been able to develop his business, buy new machines, and hire employees to help him. All in all, he is more efficient, he trains his employees, and he can offer more choice, possibly better quality and/or better prices to his customers — since he is now organized to work for more persons at once. This is a nice improvement for many people.

The other persons who used to grow wine “in their backyard”, so to speak, making wine for family and friends during their free time, cannot compete with the business; they don’t have anywhere near the means. They are alone, and it takes them fourth time longer to do the same work, to begin with. Therefore, their options are basically follow tracks or do something else.

In the meantime, the professional winemaker has a rather free hand on the market. He is a nice guy, so he doesn’t want to abuse the system, but he is not the only one to decide: indeed, he had to borrow money to buy the parcel of land, the equipment and to pay his first employees. And the persons who lent money to him couldn’t care less about wine and friends: all the investors want his to make the best profit. Therefore, the prices go up. In fact, as long as a business is in a dominant situation and faces weak competition, it doesn’t need to go out of its way to give the best product/service to their customers. Low cost, high prices and eventually high profits is then the name of the game.

Hopefully for the customers, other winemakers can then find investors too, as the market is obviously very profitable. The competition becomes tougher, and each winemaker is forced to gain a competitive edge, by giving the best product for the best price.

Ultimately, the market is supposed to reach some kind of equilibrium, and the value of the whole thing (that is, compared to the initial situation) is somewhat shared between the business and the customers. This is how individuals seeking only personal interest almost magically contribute to the community.

The Poker Boom

And this is what happened to poker, thanks to the online market. Cardrooms (brick and mortar) already brought a service to the players, in providing them with a place suitable for playing, and by allowing people who don’t know each others to play together. But this can be an intimidating environment, and you are not guaranteed to find your favorite game.

Playing from home on your computer is definitely a worthwhile service: firstly you can play against people from all over the world, anytime, and you don’t have to commute, you can play much more hands per hour, the dealers don’t blunder, you don’t have to deal with physical bullies… It caught on like wildfire.

Highly profitable market translated into several companies trying their chance, making for a tough competition which is always better for the customer.

Overdrive

Unfortunately, for all its beauty, the system has its limits. Under normal conditions, there is a match between personal and community interest. But tough competition continuously lowers prices and reduces margins, always closer to zero profit. Consequently, businesses are compelled to reduce costs of production, and broaden their customer base, to remain viable. This is indeed vital, since a business can kill its competitors if it can get a significant edge on a very competitive market.

Pretty quickly, reduced cost means inferior quality for the customer. Maybe you used to have strong support, and now you get someone who hardly speak your language and doesn’t do more than searching for keywords in a small knowledge base. Maybe they laid off some techies who took care of several systems, and the customers now suffer from degraded performance, downtimes and other problems. If you got to cut an arm in order to stay alive, you do it, but you won’t juggle anymore.

Secondly, companies need to extend their customer base. Again, on a competitive market, this is a matter of success or failure, buy or be bought. Getting more customers is done with marketing and advertisement.

Marketing and advertisement come in different sizes. A company needs to make sure its brand has a good image for the company, and it also needs people to know that it exists. But under strong pressure, companies are past those preliminaries; the objective is more customers, here and now.

Thus, they hammer. Big time.