You hear all the time how nice it is to have a large stack in tournaments. Many also say that when you play cash-games you should always buy in for the maximum because then your stack-size isnt as limiting in how big pots you can take part of, and the bigger the pots are, the more you can win.
And to some extent this is true. Most cash-game players should play with a full buy-in, but the reason for this would be that they are good at making the tactical changes you need to make when your stack is big. If the reason for playing with a full buy-in was just in order to make the pots big, you could just have moved up a level, where the pots are much bigger (in terms of dollars) and the competition only slightly tougher.
There is actually a good argument for keeping your stack small as well, but you don´t hear about it much. On a table of only small stacks, the optimal preflop strategy is to play hands which have a high chance of winning on a showdown. Medium and high pairs and high cards do well against other hands on a showdown.
On a table of only big stacks, on the other hand, the chance a hand has of winning on a showdown is still important, but it is also important to consider if that hand could easily be dominated (KT for example could easily be dominated by hands like AT or KQ). KT could be just as easily dominated on a small stack table of course, but on a big stack table you could lose much more because the pot can get bigger. If you hit top pair on the flop, and someone has the same pair with a better kicker, you could easily lose 100 big blinds, as opposed to say 30 big blinds on a small stack table.
Just like you can lose a lot from having a good, but not good enough, hand on a big stack table, you can also win a lot when an opponent has a good hand and yours is better. That´s why players around a big stack table should replace the weakest of the “high chance of winning at showdown” hands with speculative hands. Speculative hands are hands, which don´t win too often on showdown, but make great hands more frequently than other hands. Pocket pairs often become a set or better, connected cards (like 98 or 54) often becomes a straight and suited cards often become a flush. When you hit a set, straight or flush (or better), and an opponent has a good, but not that good hand, it is gonna be more than worth it for the times when those pocket cards didn’t hit the board well.
Now imagine a table where half the players are small stacks and half the players are big stacks. What type of hands should the small stacks play? Their stacks still limit how much they can lose when they get a good, but not good enough hand, even when involved in pots against big stacks. So they should play as if they table was all small stacks.
The big stacks, however, have a problem. A big stack wants to play “showdown-hands” against small stacks, because the pot will be limited against small stacks. And he wants to play speculative hands to a greater extent against big stacks. So what he has to do is play something in between. He has to play some of the risky “showdown-hands” and some of the speculative hands.
Imagine yourself being a small stack playing on a table where some of the players have that strategy. You have a big advantage. Your pure, clean-cut and dare I say a little sadistic “showdown-hands”-strategy is superior to the wishy-washy “neither here nor there”-strategy of those players because your weakest high-cards have a higher chance of winning on a showdown than speculative hands. If your opponents were as good as you, you would still do better because of your strategic decision to play with a small stack.
There are problems with playing with a small stack, though. Whenever your stack gets big, you have to switch to another table in order to buy in with a small stack again. Small stack play is also very boring to play. But some take advantage of this tactical advantage. They are called ratholers or “short-stackers”, and they are unsurprisingly hated among big stack sharks.