Poker pile-on

Full Tilt Poker, an online poker site, just recently was called a Ponzi scheme. The US governement has upped its attack on poker sites, and in the process, will cost Americans a lot of money.

Full disclosure: I have $14 in my account at Pokerstars.com. I also used my frequency player points to buy a mug and a cap. I originally deposited $50 back in 2005, took out $100 in 2006, and have vacillated between $10 and $30 in the account since then. Obviously, I have a lot riding on this. If Pokerstars goes under, I'm going to have to have that difficult conversation with the wife: "I know I've made some bad decisions. That massage chair for $800 which I never used. Those fur coats for the dogs. Three big screen TVs in 3 years, each time saying, yes, this one is finally big enough for me*. But now, its going to be Kraft dinner and tuna for the next few weeks. Wait, what?! I just found $14 in the couch ... never mind!"

Back in 2006, the US government slipped a section into the SAFE Port Act that made sending money to online gambling sites illegal. This was a big blow; some sites pulled out of the US and others declared they would still serve Americans. The next few years, online floated along in a grey area (like Canadians getting US satellite signals or picking up a chocolate bar off the ground and still eating it) and then "Black Friday" (Apr. 15, 2011), where the US government arrested representatives of the big online poker sites and shut down the websites. Their big claim is that poker site "tricked" banks by disguising charges. Now the US has made a further complaint, that Full Tilt is a Ponzi scheme and doesn't have enough money to allow players to get their deposits back.

This is so annoying. Hey, you know what else is a Ponzi scheme? CPP! The money young people give to the Canadian Pension Plan isn't invested or put in the friendly giant's mattress; it pays for the old retired fogies. But don't worry, when you're an old fogy, there will be a new batch of suckers to pay for your retirement. Or something.

That was annoying thing #1. Here's number #2**: poker players warned about this. Hey Sherlock, if you make it hard to get money out of a poker site guess what? It becomes hard to get money out of a poker site. The reality is people are going to play online poker because casinos are creepy. I'd rather sit in my underwear and play poker with my wife sitting in her nightie on the couch next to me ... wait. Okay, that's a bad example because 14% of the time you'll see that exact scene in a casino. But you get my point. And with the US government making it much harder to legitimately get money on/offline, you push poker players into having to use shadier methods. Like sending checks to the pokersite with sneaky names like the "Ace of Spades Non-Gambling Charity Foundation".

Annoying #3 is poker is not gambling! I know, you might think it is because there are cards and a dealer, like blackjack (which is gambling). But its not, because there are players that consistently win. What's that? Your aunt Sally wins at blackjack? No, actually she doesn't. She's stealing from you uncle. But the other reason why it can't be a game of chance is that you don't have to show your cards to win. You can bluff. The last reason is that you get to check your cards first before you voluntarily put money it. In blackjack, craps, and roulette you have to pay before you get your cards, the dice are rolled, or the wheel is spun (raggedy man!) Not gambling mean laws that apply to gambling don't apply to poker.

So what we have is an activity that adults freely engage in and the US government has declared war on. So what that a bunch of players are going to lose a bunch of money. Collateral damage.

Now Full Tilt isn't helping by mismanaging its funds. But the scary thing is the exactly same thing would happen if everyone decided they wanted their money in their TD checking account (worse ... see below). The US government is making a big deal about the fact Full Tilt has $400MM in liabilities and $40MM in cash. But what they don't mention is these sites make about $1MM a day in profit. Like all businesses, cashflow is much more important that net assets. But if the US would stop being so anti-online poker, these sites could set up in the US and be regulated. This is win-win, because they would pay taxes and they would be regulated so they would be required to keep some percentage of deposits available.

Okay, now something that will scare the hell out of you. Full Tilt had 10% of its deposits in reserve. In banking, this is called the "reserve rate". And Canada phased out "reserve rates" back in the 90s. Yes, that means that banks in Canada are free to lend out 100% of the money you deposit. But don't worry. Because the powers that be are dealing with this huge gambling problem.

* Phrasing!
** This is like saying "number number 2", but it made me laugh, so it stays in.

How I Learned to Stop Worrying and Love the Mart

Revelation Chapters 6:12: "And I beheld when he had opened the sixth seal, and, lo, there was a great earthquake; and the two most unholiest of shoes were joinithed togetherith, forming a monstrosity which shall markith the feet of his dark army."

This picture was taken at Walmart, which many consider the evilest of stores. In this blog post, I'm going to try and convince you of something: Walmart isn't really that bad.

I watched a documentary about Walmart (I think it was "The High Cost of Low Price") and it made me not like Walmart. I didn't shop there for years and instead went to Zellers or Superstore. After a few years of pain and suffering, I changed my mind.

Zellers is that absolute worst store in the world for customer service. I have left my basket (full of stuff) and walked out of Zellers more than any other store I've been to. These people just do not want my money.

Question: How many idiot cashiers does it take to determine the price of a can of beans? Answer: It is actually a trick question. It takes three of them, milling about, to figure out they need to call a manager to come over and answer it. When the line-up goes back into the housewares section, it is time to get off your cell phone and open another till.

Many Zellers have self check-outs, which are awesome because 4 tills can be watched by one person, but they never use them. Instead, they have gone to the committee-of-three cashiers model because apparently they only hire people with 1/3rd of a brain. Cashiers are the one place where you want an abundance of staff, because that is where money changes hands.

The other day at Safeway, I tried to buy a chocolate bar and the scanner wasn't recognizing it. The cashier asked a bagboy to go check the price, and I said forget it. The cashier said to me, "Can I offer you the chocolate bar for 50 cents?" Impressive customer service.

Which brings me to Walmart. That store is a joy to go to. The aisles are wide, the staff are friendly, and they get you through those tills fast. There are always dozens of cashiers on.

I'm going to try and read your mind. Right now you are saying:
"But Walmart destroys mom and pop stores."
"Walmart treats its employees bad and bust unions."
"They keep prices too low." What?

Mom and pop stores suck. There, I said it. My wife worked retail for years. Small business owners are crappy to their employees. Here's an actual conversation:

• "So, there will be a staff meeting on Sunday for 1 hour after the store closes."
• "You know that you have to pay everyone a minimum of 3 hours, right?"
• "What?"
• "That's the law."
• "I've never heard of that. I'll tell you what, I'll make it 45 minutes, and I'll bring it cookies."
• "You can bring in anything you want, but you have to pay us for 3 hours."

My wife was never invited to a staff meeting again. You think Walmart can pull that sh!t?

I remember when I worked for Dairy Queen back in GP, the owner used to get some of us guys to go over and mow his lawn and do general yardwork -- during work hours. There is no way that is legal. The mythical mom and pop don't exist -- all business owners are dicks.

The advantage to mom'n'pop stores is that mom and pop will spend money in the community and not ship it back to corporate headquarters, or to foreign shareholders. This is one of the best arguments against Walmart. Unfortunately, it doesn't carry the weight on we look into it.

Let's take the Croc-o-pedic shoes in the photo above. Let's say they cost $10 at Walmart, which can be broken down into:

• $5 - wholesale cost of shoes, which goes to some Chinese manufacturer
• $2 - wages to employees
• $2 - overhead like rent and power
• $1 - profit to head office and/or shareholders

The problem with mom'n'pop stores is they buy the same stuff from China, but they don't have the clout to get them to lower their prices. So you get the same foam-a-geddon shoe, but its more expensive, say $15.

• $7 - again, wholesale to China
• $4 - wages (assuming mom'n'pop are better to their employees)
• $4 - overhead (because they have a smaller store that is not in some industrial park, so the relative cost is higher)

So in this example, buying your mac-goofy-shoes at Walmart causes $6 to leave the community, while buying them at mom'n'pops pulls $7 out of the community. This is just ignoring the fact you spent more of your hard earned money on the shoes. The only time that mom'n'pop stores have an advantage is when they are selling locally made products. In that case, I fully support local businesses. But if you are buying Chinese-made shiny crap, then buying from mom'n'pops is just throwing your money away.

Note: I have nothing against Chinese products. They are awesome. But America really screwed up. You know the expression, "A capitalist will sell you the rope to hang him"? In the pursuit of short-term profits, they outsourced all their knowledge. So now, there is really nothing China can't make. I for one, will welcome our Chinese overlords.

On a final note, the reason these fitness shoes alegedly work is they make it more difficult to keep your balance and walk, so you have to work harder and therefore burn calories and tone your muscles. I see elderly people wearing these and I think, What the hell are you doing, this is going to make you more likely to fall. I guess you'll lose a bunch of weight when you are in the hospital with a broken hip.

Tune in next time when we open the Seventh Seal of the Apocalypse!

What catchy title for a post uses the word thermodynamics?

Understanding thermodynamics can help you in the world (seriously). There are four laws of thermodynamics, but one and two are most interesting. They are paraphrased below:

Law 1 - Energy cannot be created or destroyed, it can only change form.
Law 2 - When changing form, some energy is always lost as waste heat.

Put another way: "Not only can you not win, you can't break even."

Practical application #1
I read a story about a plan to put wind turbines near a highway to try and recapture the wind created by the fast passing cars. Sounds like a great idea, right? Use Law 1 above and tell me what is wrong with it.

Where does the energy come from? When the highway is empty, the wind turbine won't turn, so the cars must be providing the energy. And that is exactly what they found when they tested it. The fuel efficiency of each car was found to be reduced slightly. The energy created by the cars was being changed from mechanical energy (motion of the car) into wind energy (motion of the air molecules) into mechanical energy (motion of the turbine) into electrical energy.

The worst part is, as Law 2 states, every time you change form, you waste some energy. So you are basically burning gasoline to create electricity, but in the most inefficient way possible. It is sort of a Rube Goldberg contraption of idiocy.

So you may be asking yourself, "Where exactly is the practical application of thermodynamics you promised?" And here it is. You can yell at the monitor when you read these types of dumb ideas and your partner and/or dog and/or fish and/or D&D action figure can nod their head at how smart you are. Or maybe shake their head at how crazy you are. I'm not sure.

Practical Application #2
If the 1st practical application wasn't enough, here is a second one, which actually involves money and prison!

I had a co-worker pitch an idea for an invention to me. He said that his brother-in-law had a patent for a machine that could generate energy very cheaply. It was made from an outer hub with seven magnets, which was attached to an inner ring with .... (he paused and looked around, like he was about to blow my mind and didn't want any other minds around us to blow -- no collateral mind blowing) six magnets. "Because the magnets are spaced like that, the hub magnets are always pushing the ring magnets around, like a merry-go-round that never stops."

I'm sure you've all heard of perpetual motion machines. Now contrary to popular belief, the US Patent office will not reject the filing of a patent just because it is for a perpetual motion machine. However, it does stipulate that a working model must be provided before the patent will be granted. Needless to say, that has never happened.

Here's the thing. It is possible to build a "perpetual" motion machine with magnets. The reason is magnets do have energy in them, so as the machine moves it will slowly weaken the magnets. This obeys Law 1. However, taking the final step and trying to generate electricity from it can be a tricky step. Law 2 says that every time you try and change the form of energy, you piss some of that energy away. So the very act of hooking up a generator to your spinning 13 magnet science project will cause it to either spin slower or maybe weaken the magnets faster. In any case, you are just using the magnets like batteries and they will eventually die out, requiring you to get more magnets.

You may have been waiting for the money and prison part. Here it is. My co-worker told me about this incredible invention and asked me if I wanted to invest in it. His brother-in-law was selling stakes in the company, which could be "worth millions". I explained how perpetual motion machines were impossible without an energy source. My co-worker looked at me, and then tried to explain the 6 magnet / 7 magnet configuration again. He even produced a sketch on some graph paper which "proved" it. Did I mention this co-worker had a degree in Engineering? I politely looked at his sketch and explained that you couldn't violate the first or second law of thermodynamics, which this idea clearly did. I warned him that he should not invest, and should explain thermodynamics to his brother-in-law next time they meet. "Well, I won't be seeing him for a while. He's in prison on fraud charges." I got up and slowly backed out of his office, which was a surprisingly awkward way to leave an office.

Moral of the story: There is no thermodynamic law against being a moron.

PS. I swear to dog this story is true.