Howard knew because he was a perfect example of the calculating professional who struggled with an addiction to action, an addiction he wanted to control but not necessarily eliminate. Jennifer Harman has said of him, “Howard Lederer will play for his life. When he’s hungry, he does better.”
Lederer’s media-created nickname, the Professor of Poker, didn’t do justice to the fierceness of his drive or the difficulty of succeeding in poker. Most of the millions of new poker players and fans who saw Howard Lederer as bulletproof would be surprised to know that he spent a significant amount of his time at the pinnacle of the poker world just one wrong move from financial ruin.
Despite Howard’s careful, analytical approach and cool, detached appearance, he has always been, at heart, a gambler. Consequently, he has been broke many times during his gambling career, and pushed himself into bad financial situations, situations pure reason would have dictated that he avoid. But he wanted to gamble.
Even after he stopped being a losing player in 1985, Howard struggled periodically as he worked his way up poker’s hierarchy. At each new level, there was a period where he would lose and either keep slugging it out on a depleted bankroll or move back to the lower-limit game and rebuild.
“I definitely had periods of doubt and didn’t want to admit defeat,” Howard recalled of those days. “I had internal dialogues saying how much regret I’d have to carry if I had to admit defeat and just say, ‘I’m a two-and-four-hundred player.’ I didn’t want to do that.” His skill and desire were so great that he persevered, but he had little to show for fifteen years of success.
Howard also financially backed numerous other poker players. Poker was such a solitary game that financing another player was a rare chance to create an atmosphere of comradeship. It was also a way for a successful player, in theory, to use his skills to invest in something he knew more about than stocks or land. (Howard admitted to chasing more than his share of bad business deals in the 1990s.)
Backing someone is what poker players do with their money until they learn better. If that isn’t one of the wisest expressions regarding gambling, it should be. Many successful players have tried this form of investing but it virtually never works out over the long run. Although an excellent player can be broke and need a backer, there is usually a reason why he is broke. Learning this was a seven-figure lesson for Howard Lederer.
Sometime around 1999, Howard decided to change course. He thought carefully about why he was always on the brink of financial trouble, despite never having a bad year with his own gambling. He cut out the other activities, especially backing other players and the too-good-to-be-true business deals. Since then, he kept his finances in order. “At some point you have to say,” he described later, “‘Okay, maybe it’s just time to bet on me.’”
So when the players had to decide what to do when Andy wanted to play in a $10,000-$20,000 ring game, they took their places along the continuum between risk and security. Jennifer Harman and Howard Lederer both had investors take a piece of their action, though both were uneasy about it. Ted brought his rack of white chips, still in the box from three weeks earlier, to the table. Todd wasn’t playing.
Because of Andy’s presence, the financial arrangements between players were made more explicit and more restrictive. To assure the newcomer that nothing underhanded was going on, it was agreed that no one playing in the game would have a piece of anyone else playing in the game. Therefore, both Jennifer and Howard, who decided to play (and sell pieces of themselves to some players not in the game), wondered if the smarter financial decision wouldn’t have been to sit out the game and take a piece of several players, as Doyle Brunson had done.
This was the theory: Seven players were professionals, of approximately equal ability (or at least close enough where their skills against each other should cancel out). Andy Beal had significantly less skill. If you ran that game a million times, Beal should be the loser and, other than dividing Andy’s money, the pros should break even. But you couldn’t run it a million times; the game was being played only once. Rather than risk being dealt bad cards or not getting into hands with the banker, by owning a percentage of several players, you increased the likelihood of profiting from the skill advantage of the professionals.
Most of the players at the adjacent table, therefore, had a financial interest in the ring game at Table One. For Barry Greenstein and Johnny Chan, however, even that (along with their own high-stakes game) was not enough. Barry saw his friend Ted Forrest playing hold ’em and couldn’t resist proposing a wager to Chan, who also knew Forrest well.
Because Forrest had been winning so big this year, Greenstein thought, he was the only one who could really afford to play at Beal’s stakes. Consequently, while everyone else was playing tight and avoiding the action unless they had rock-solid cards—the size of the stakes, it turned out, had some effect on inhibiting the pros’ natural aggressiveness—Forrest was gambling. It was a sound playing and marketing strategy: He was trying to show the newcomer a good time as well as loosen things up. But it wasn’t working, and Forrest was losing because he kept running into strong cards from Beal or one of the other pros.
After Barry made some comments about Ted’s qualities as a hold ’em player, he could see that Johnny had a higher opinion of Ted’s abilities. Barry respected Ted as a poker player, too, but hold ’em was simply not his best game. In addition, Ted liked to play fast—lots of hands, maneuvers that worked best in shorthanded situations—and he thought, even with Andy Beal in the game, Forrest was an underdog to win. They made a side bet, cross-booking 10 percent of Ted’s action. From that point on, if Forrest won, Greenstein would pay Chan 10 percent of the win. If Ted lost, Johnny would pay Barry 10 percent of that amount. Barry knew what a competitor Ted was, so he insisted on one condition: The bet was off if Ted found out about it during the game.
Ted promptly lost $445,000 of the $500,000 he brought to the table. Unlike the game earlier in the month with Beal and Reese, however, he knew he could take his time and wait for a good opportunity to make a stand with his last $55,000. Also, in contrast with the March 9 game, he had more chips in his box and could rebuy if he lost these. But he had to consider whether playing as loose as he had been would bear fruit. Every time he got in a hand with Andy Beal, the banker was holding strong cards. The other pros also seemed to be hanging back until they had strong cards.
On a bathroom break, he found himself next to Johnny Chan, who told him, “You have to win in this game because Barry bet me that you wouldn’t.”
It burned Ted that Barry Greenstein bet against him. He didn’t take it personally; they were friends, loaned each other money, and even played high-stakes matches against each other’s girlfriends. (Ted had won over a million dollars from Barry over the course of a month in 2000 at Chinese Poker. Barry’s girlfriend Alexandra then played Ted in Chinese Poker and won about half of it back. Ted’s girlfriend then played Barry in $1,000-$2,000 Seven Card Stud Hi/Lo in a short handicap match in which her antes were smaller and, though Ted could not coach her during the match, he could give her a three-minute lesson at the table immediately before. She played superbly and won $15,000 but Ted would not give Barry a rematch with her. Ted realized that the reduced ante, in the long run, would not have given his girlfriend enough of an advantage.)
Ted focused even more on the game to prove Barry wrong. He tightened up his play and began winning. After he had recouped his loss and gotten ahead by a couple hundred thousand dollars, Barry Greenstein exercised his option to call off the bet and take his $65,000 loss. He couldn’t understand it. It was as if Ted had somehow read his mind and changed his game so Johnny Chan would beat him in the side bet.
Barry found out that Johnny Chan’s chat at the urinal, not Ted’s clairvoyance, was responsible for the turnaround. He confronted Chan about violating the terms of the bet, but Chan insisted that it didn’t matter. At these stakes, he claimed, Forrest had to be playing his best game the whole
time. Barry was sure he was right but paid off Chan rather than fight about it further. Even though the other players at the table took his side in the dispute, he received little sympathy. “That’s what you get for betting with Johnny Chan,” one of them said.
When the game broke up seven hours later, Ted duplicated his result of twenty days earlier: He started the day by taking 100 flags out of the box, and ended it by putting 300 back in. Ted Forrest won exactly $1,055,000, one large bet more than the first time he played with Andy Beal.
It capped off what may have been the best month in the history of high-stakes poker. Statistics of this sort were impossible to obtain, much less verify, but few players have even played for high enough stakes to win $1 million in a session, much less repeat the feat less than three weeks later. Ted also won $2 million (for the team) against Andy Beal on March 10. With his share of the team’s win, the two $1 million scores, and several other great sessions, Forrest won $4.4 million at poker in March 2001, and over $6.7 million for the first three months of the year.
Howard Lederer also won, as did John Hennigan. Howard still believed the backers, not the players, had the best of it. On the other hand, Doyle Brunson, who spread his risk among players he backed in the game, was the big loser. Chip Reese lost over $800,000 in the game, and Doyle had bought half his action.
Andy Beal, the reason for all the excitement, was the forgotten man. He broke even, playing very few hands. The whole experience was a bore, a wasted afternoon. He won some big pots because he waited, as the instructional books taught in full-table games, for premium cards. When he played a hand against opponents from the heads-up games, or players who heard about his wild-man style, they were surprised to find him always backing up aggressive betting with strong hands.
But the experience confirmed his first impression: He would have a chance to do better (and have more fun) against just one opponent. He also noticed that the pros were not as fundamentally sound as he expected. They were great at thinking and counter-thinking during the hand, at varying their play, and at reading opponents, but they seemed to get a lot of basic pot odds decisions wrong. If he made the mathematically correct move every time, wouldn’t that substantially reduce or even eliminate the advantage of the professionals? And if he could get the stakes high enough, maybe he could knock the pros off their game.
4
THE POKER CONJECTURE
Luck is the residue of design.
—Branch Rickey (1881-1965)
Conjecture (noun): inference based on incomplete evidence; guesswork.
—The American Heritage Dictionary
SPRING 1976
Twenty-four-year-old Andy Beal sat alone in the drab Housing and Urban Development conference room in Washington, D.C. He had bid $350,000 for an apartment complex HUD was auctioning in Gulfport, Mississippi. The 5 percent deposit he left at the bidding window, $17,500, was all the money he could scrape together from ten years of hustling in business. He was used to being too young to do the things he did, but he was stepping up to an entirely bigger league. Alone with his thoughts, he was getting nervous.
The bids would be opened and the winner announced at 11:00 A.M. At 10:20, another bidder finally joined him in the conference room. The man looked professional; he wore a suit and tie, and carried a briefcase. Andy was wearing jeans. He was starting to feel out of place.
The man introduced himself and they made awkward small talk. They were both bidding on the Gulfport property.
“So,” the man asked, “how much do you think it’ll sell for?”
Andy felt a bit more comfortable. Though a novice in this business, he had done his homework. He had gone to Gulfport and spent several days inspecting the apartment complex. The roof leaked. It was run-down. It was only half occupied. But he was handy and fixing it up himself was how he thought he could make a big profit.
“Five hundred thousand, tops,” Andy replied. “Not more than that.”
“Oh, I know it will sell for more than that. We bid more than that.”
Andy’s stomach lurched. For some reason, he could tell the man was being honest.
He suddenly felt foolish. He had spent all this time and money, and it was not going to happen. He had imagined how to line up the financing, move to Mississippi, and immerse himself in bringing this apartment complex around.
It was just not going to happen.
He had no business being here. This was a man’s game and he was just some kid from Lansing. Where did he come off thinking he knew what things were worth?
Nervous in the silence, he fiddled with the brochures on the table. HUD was auctioning two properties: the one Andy had bid on in Gulfport, and one he had never seen before, another apartment complex, this one in Waco, Texas.
I’m washed up, Beal told himself. I have no chance.
He looked at the Waco brochure.
It looked like a nice property. Eighty-five percent occupied. Why not make a bid?
An argument raged in his head.
That’s absurd. You’re out of your league. You gave it a shot, so just let it die and go home.
Just get off your butt and submit some nominal bid. At least that way, you’ve got a shot. And while you’re sitting here, the clock is running.
Quickly, he thumbed through the brochure. Yearly rents were about $180,000. If he didn’t bid much more than that, how badly could he get hurt?
If he knew how they would react at HUD’s bidding window, he never would have had the nerve to do it.
It was past 10:30 when he cautiously approached the woman at the bidding window.
“Excuse me, ma’am. I’d like to withdraw my bid on the Gulfport property and get a bid package for the Waco property.”
At the top of her lungs, it seemed, the woman yelled for her supervisor. “THIS YOUNG MAN SAYS HE WANTS HIS BID BACK ON GULFPORT, AND HE WANTS TO BID ON WACO! CAN I DO THAT?”
It sounded ludicrous.
The supervisor came out.
“Son, what is it you want to do?”
Andy explained it again.
“Well, I guess it’s all right.”
He decided to bid $217,500, rounding the estimated yearly rents to $200,000 and adding the amount of his cashier’s check. Scrambling to finish the paperwork, he barely got the bid in on time.
It was just before eleven when he reentered the conference room. Now it was filled with businessmen. He saw the man he had spoken with earlier, who asked where he went.
“I went out and changed my bid.”
The man was furious. “You can’t do that. I never should have told you about our bid.”
Andy tried to calm him down.
“No, don’t worry. Not the Gulfport bid. I withdrew that. I put in a bid on Waco.”
The man still looked angry.
The representatives from HUD filed in, and started with the Gulfport bids. The man next to Andy calmed down when his group’s bid, over $600,000, turned out to be the high bid.
Andy’s bid was the first opened on the Waco property.
“$217,500.”
He suddenly had a chilling thought.
What if all the other bids were for just a fraction of that? How foolish would he feel about buying a property he had never seen before and paying double or triple what anyone else—anyone who, unlike him, knew what they were doing—would pay?
The second bid was $206,000.
He immediately calmed down. Win or lose, at least he hadn’t overlooked some giant flaw that made him enormously miscalculate the amount to bid.
None of the remaining bids exceeded $206,000, however, and Beal had the winning bid. He was entering the big leagues of the real estate business—not in Gulfport, Mississippi, as he thought or planned, but in Waco, Texas. He had never set foot in Texas.
The apartment complex in Waco turned out to be a phenomenal deal. He found someone in his hometown of Lansing, Michigan, who would co-sign the mortgage in exchange for 10 percent ownership. He arranged the dea
l so it would close on the twenty-eighth of the month. In three days, he collected the first month of rent. The $15,000 repaid almost his entire deposit.
The complex was just eleven years old and in good condition. He moved to Waco to take care of it. He was, at least figuratively, finally on solid ground.
Andy Beal had always wanted to know how things worked. When he was eleven, he and his Uncle Denny would go to the Salvation Army on Saturday mornings. Denny was good with his hands and they would buy broken television sets for a dollar or two. Denny showed Andy how to fix them. Denny would then take out an ad in the paper and sell them for $30 to $40 apiece. In 1964, most families had only one television, and it was considered a major purchase. Some sets sold to families splurging on a second set at a bargain price. Others struggling to get by could now purchase a first TV.
Andy later started fixing and reselling television sets on his own. Once, while out on a date, he persuaded the girl to join him on a detour to the home of a family that offered him their broken set. They had to lug it out to the trunk of his car so he could get it home.
His next business was purchasing kits for alarm systems, intercoms, and antennas and installing them in homes and apartments. If you lived in Lansing in the late 1960s and looked in the Yellow Pages for such a service, you wouldn’t know from the listing, the name (Central Security Systems), or the person answering the phone (an answering service), that the principal owner was just seventeen years old.
Beal graduated from high school in 1971, took a year off, and started at Michigan State University in 1973. He was a good student, but he was there only because his mother insisted he continue his education. He did well in the classes he completed, but his growing business interests forced him to drop several classes, or accept grades of “Incomplete.” He also took night classes at Lansing Community College in 1974 and 1975.
The Professor, the Banker, and the Suicide King Page 8