The Inner Game intermediate
Risk of Ruin Explained
Risk of ruin is the probability that you lose your entire bankroll before your skill edge plays out. Keeping it near zero is the whole point of bankroll management — because a strategy that's profitable on average is worthless if a downswing ends the game first.
What drives risk of ruin
Three factors:
- Your edge (win rate). A bigger edge lowers risk of ruin.
- Your variance. Higher variance raises it.
- Your bankroll size in buy-ins. More buy-ins lower it.
The interplay matters: a small edge with high variance needs a large bankroll to stay safe, while a big edge with low variance can survive on fewer buy-ins. Tournaments, with their huge variance, demand far more buy-ins than cash games for the same risk of ruin.
Why "average profit" isn't enough
A sequence of +EV bets still busts you if one stretch of bad variance hits zero. Once you're broke, future expected value is irrelevant — you're out. This is the practical meaning of ergodicity: the time-average outcome for one player living through the swings is not the same as the average across many players. Survival comes first.
Keeping it low
- Hold enough buy-ins for your format and win rate.
- Drop stakes during downswings.
- Don't take shots you can't refill.
- Reduce variance when needed (game selection, avoiding marginal high-variance spots when your roll is thin).
Common mistakes
- Focusing only on win rate while ignoring variance and bankroll.
- Taking +EV gambles that risk the whole roll.