Skin in the Game – Poker staking from the Investor’s perspective

June 19, 2013

The WSOP is halfway complete which means this topic is slightly late but as people are posting packages for the main event, the info is highly relevant. If you know or follow any poker players, seeing information about a “package” has happened. It’s them putting together a list of events they’ll be playing, an offer for you to buy a piece of their action, a markup rate on your investment, performance info, and usually some terms & conditions.

What inspired this post was some of the outlandish packages I’ve seen out there. People who claim to be professional poker players but seem more like Ponzi scheme racketeers who happen to play poker. I want to give a warning to those who might invest in such poor offers and I want to warn players against creating such packages. If people waste their money on such things, they’ll stop investing when they don’t see a good (or any) return.

If you’re going to invest in players, here’s the factors I evaluate that you may find of use

1. Skin In The Game

First thing I always look for is how much of themselves a player has. I generally prefer people who have at least 50% of themselves. You want a player to believe in their own ability and have a vested interest in their own success. For me, 65% would be the bottom number I’d consider. Less than 1/3 of themselves and I start to wonder why they’re playing

2. Mark up

Markup (MU) is a hot point of discussion in the poker world at the moment. Lots of people out there with some outrageous MU. Markup covers administrative type stuff for the player. Collecting and distributing shares, tracking and, if you’re both lucky, tax items. To me, an ideal MU is zero, but realistically somewhere in the range of 1.2 and capping around 1.35 tops. I’m ok with a discounted MU to a person buying a larger piece of action. Less admin for the player, it only makes sense. Packages should show the calculations of MU for you to see easily.

Players charging a MU of 1.4 or higher baffle me. People who invest on rates higher than that seem like they hate money or have never done any financial investment. Going back to  skin in the game, if the MU is high and they sell a large piece of themselves they have no skin in the game. For the truly obnoxious, they could bust every tourney on your dime and still walk away with a sweet profit. Check out the examples below. Sadly, that 80% at 2.5 is something I’ve actually seen out there.

Pkg Amt Piece sold MU Total to Player Investment in Self Inv %
$10,000 50% 1.00 $5,000 $5,000 50%
$10,000 50% 1.20 $6,000 $4,000 40%
$10,000 50% 1.33 $6,650 $3,350 34%
$10,000 50% 1.40 $7,000 $3,000 30%
$10,000 65% 1.00 $6,500 $3,500 35%
$10,000 65% 1.20 $7,800 $2,200 22%
$10,000 65% 1.40 $9,100 $900 9%
$10,000 65% 2.50 $16,250 -$6,250 -63%
$10,000 70% 1.00 $7,000 $3,000 30%
$10,000 70% 1.20 $8,400 $1,600 16%
$10,000 70% 1.40 $9,800 $200 2%
$10,000 70% 2.50 $17,500 -$7,500 -75%
$10,000 75% 1.00 $7,500 $2,500 25%
$10,000 75% 1.20 $9,000 $1,000 10%
$10,000 75% 1.40 $10,500 -$500 -5%
$10,000 75% 2.50 $18,750 -$8,750 -88%
$10,000 80% 1.00 $8,000 $2,000 20%
$10,000 80% 1.20 $9,600 $400 4%
$10,000 80% 1.40 $11,200 -$1,200 -12%
$10,000 80% 2.50 $20,000 -$10,000 -100%

When the MU is high and the piece for sale is as well, you have to ask yourself, is this person building a bankroll by being a poker player or just by soliciting from foolish investors? If it’s the latter, why would you want that to be your money?

Recent Results

When looking at stocks or investment funds, you always look at performance. If you’re not, you should be.  You should do the same for your poker investments. Momentum has a lot of influence on mindset. For live action, Hendon Mob is a good place to start. For online, SharkScope is where most people provide results that I’ve seen. Consider both when you’re looking at investing. Be skeptical of those who can’t or won’t provide results.

Long Term Results

Consistency is a great thing. If you look at someone’s results and see 4 or 6 month gaps without anything significant, it is reasonable to find out why. I prefer to invest in people who have good results throughout the year because I consider that related to the next few points.

Mindset

Not a commercial for The Secret or a Cult but the player you’re investing in should have a positive attitude, confidence in themselves and their ability and be prepared for the time commitment involved to the package they’ve put together. If they’ve never played a tournament series and are proposing they play 50 events, is that really something you think they can do well?

Is the person enjoying life or are they talking about jumping off balconies? End of the day, poker is still a game, and fun should be had. People do their job better when they’re happy, that’s an absolute fact.

Sphere of Influence

This isn’t a technical item you can do hard analysis on but it is something that factors greatly in my valuations. Do they have a good support network, be it players and/or family and friends who are supportive and encouraging? Or do they have that crazy significant other who causes drama and can be distracting? Are they in debt to others? Do they owe money to the IRS? No one wants a piece of the guy who will have a tax agent waiting for him at the cash cage.

ROI and Risk Rate

You need to determine what Return On Investment (ROI) you’re comfortable with and know that it is entirely possible you won’t recoup anything. You also need to understand the risk involved. Risk seems to be downplayed by some players while they tout they huge ROI you “could” get. Sure, if I back you in the main event I could get x% of approx $7 million if you win first, but you as a player have to get through 6-8 thousand players for that to happen.  Charging additional MU because of the potential ROI is not reasonable because it doesn’t factor risk appropriately.

My Investments

If you got this far, wow, you may actually want to do this investing thing. If you have the money to do it responsibly, find some packages you’re comfortable with and go for it.

For me, I’m a huge fan of the long sweat. I like to invest in a package that has 7-20 events. It helps fade the variance that is a natural aspect of poker. I saw this package after I had made my commitments, but if I had the funds, this is the kind of package I would’ve been all over. Although I don’t know him personally, we have a ton of mutual friends. I like his mindset, and his selection process. The MU on individual events is interesting to me. This package got snapped up quick and you can see why.

Cylus Watson Package (reposted with permission)

I’m planning a trip this summer so I’m saving most of my funds for that but I did make 3 investments this summer. All 3 happen to be women but that was a small factor to why I selected them. All 3 meet my criteria above. Reasonable MU, consistent results, great mindset, and a supportive network around them. I have 10% of someone in the Stud event, 5% in a package of 7 events and 1% of a new movie star in the Main Event.  That’s my only main event action at the moment.

My first staking was with Katie last year. I had 1% of a 25 event package of which, she played 23. I got a 34% ROI on my $310 investment. I love Katie’s attitude and her mindset is spot on so I actually called dibs on investing again back in January. This year’s package is smaller (fewer events) so I have 5% and I’m excited

Katie Dozier event package (reposted with permission)

In addition to the funds invested, I’m sharing my good Canadian juju with all I’m investing in. Canadians have done super well at the series so far so it certainly couldn’t hurt. :)

Tips for Players

  • Investors can be a great thing. Extra moral support, not wanting to let them down, etc. Being reasonable and realistic is better for you, them and the prospect of future reinvestment. Think of it as “You can shear a sheep many times but only skin him once” Gouging happens once. Good investments can happen time over time.
  • Be professional. You have lots of resources available to put together a package and for invoicing. Use them. Be prompt in your repayments and it is reasonable to expect investments when stated. Know that you cover your own action til you have the money in hand.
  • Don’t lie. Tweeting a fake bust out hand almost always gets caught. If you’re not up for an event, back out and issue a refund. Tweet your entry slip or table info and reasonable updates. Be focused on the game but keep people informed when you can.

Chip Pictures

If after all of this, you decide you still want to “invest” poorly in someone with a high MU and overselling value then let me make a proposition for you. If you want to waste spend money to see pictures of poker chips, let me present a far better option than green felt.  I’m selling shares of my upcoming vacation to Spain at a rate of 1% for $25. No discount for larger shares but I will take and post pictures of poker chips at scenic locales at least 3 times per day for the entirety of my 8 days. That’s a mere $1 per photo. For an additional $10 I’ll even include a chip you choose and provide. Guaranteed to be included are photos at:

Cash, Paypal, BofA transfer or POP Money acceptable methods of payment. You’ve wasted money on worse, you know you have.

Tips on tips for those coming to Vegas

October 14, 2009

This is a republish of a blog I did this spring at another site.  I’m transitioning here and this info still applies so I thought I’d share it here.

I apologize for my blogging absence.  If you were to see my poker log, you’d see that I’ve been spending a lot of time at the tables and not at my computer desk.  Despite layoffs, purse strings tightening and all this talk of recession, the tables have been good.  Even better, it seems stupid people haven’t given up gambling.

However, I have noticed a different type of cost cutting going on and my friends who work as dealers have confirmed it.  It comes in the form of tips. I thought I’d help out those of you who don’t know what tipping practices might be in my fine city and out some of you cheapos, educating you on a little good karma.

Las Vegas is very much a city that is built on service.  Greased palms, the $5 handshake, or a bill slipped in a g-string (if that’s your thing) just add to the experience.  Most anyone in a customer service occupation makes most of their living off of tips.  You should see it in their service.

When people come to Las Vegas, I see several people who aren’t sure what to do.  Maybe the tipping standard is different where they’re from.  Maybe they haven’t played a live game before.  So, here’s a guide.

At the poker table – In a cash game you genreally tip at least a buck for a pot, unless all you’ve won is the blinds.  For a tournament, you subtract your buy in from your winning and tip on the profits…. somewhere between 5-10% is pretty standard. If you happen to win a high hand, that’s essentially free money and 5-10% is also a good rule.

Also an important note: Poker dealers in Las Vegas each keep their own tips.  They don’t pool them.  So, you tip the dealer that gave you the winning hand, don’t wait until the end of night to see how you end up overall.  I consider the tip as much a cost of doing business as the rake that gets taken out of the pot.  Personally, I happen to know many dealers in my favorite rooms so I wouldn’t consider cheaping out on them.

Valet – a service not everyone employs, but a single girl often does.  Standard is $2-3 when you get your car.  Personally, I always do $5.  That consistency has gotten me a spot in the valet when it may be full to others on more than one occasion.

Cocktail waitress – you don’t pay for your drinks while you’re playing at a Vegas table or slot machine so you generally tip the waitress $1 every time you get a drink.  At the slots, every second drink is passable, so long as you aren’t playing the $5 slots.

Housekeeping – when you tip is up to you.  It’s been my experience that if you tip early in your stay ($3-5) it’s likely you’ll get extras in your room if possible (mouthwash, extra lotion, an extra chocolate on your pillow). At minimum you should also do it again at the end of your stay, at $2-4 per day.

Taxi – The standard is 10-15%.  If you are here on business and want a blank receipt you need to make sure you tip at least $5.  No tip and receipt request, don’t be surprised if the cabbie fills in that receipt for you and documents that they picked you up/dropped you off at one of those fine establishments on Industrial (aka Strip bar central) – good luck then expensing that cab ride.

For those flying, sky cap is at least $1 per bag, I’d lean towards $2.  Same amount for the bellman taking your bags to your room.

Of course, we have those other standard service industries that also rely on tips

Restaurants – good service is usually tipped 15-20%.  Groups are generally charged 18%.  If you’re at the bar, its generally a buck per round, more if you’re doing a bunch of complicated drinks.

Masseuse – For most spa services 15-20% is standard.

**I have to say, this post was inspired by two things.  One was friends in these service industries talking about people feigning ignorance about tipping and just not doing it.  The second was witnessing a Canadian visitor at the poker tables who was blatantly fitting the bad Canadian stereotype.  It can be summed up by the following joke:

Q: What’s the difference between a Canuck and a Canoe?

A: A canoe tips.

Now, I’m originally Canadian, born and raised, and I’m a decent to generous tipper so I’m not sure why Canadians get such a bad rap but I have definitely seen many examples of it.  At the poker tables I’ve seen it bite them in the ass on more than one occasion too.  Open to hearing why Canadians think its ok to be so damn cheap.  It goes directly against the ‘polite Canadian’ image in my opinion.

Feel free to comment if I forgot anyone.  I know I didn’t cover the ladies on Industrial… I’m hoping there’s a guy or two who can provide some enlightment.  That’s just not in my realm of experience.

Economics

December 19, 2008

This isn’t how I planned on starting this blog but its an interesting start.

OK first off… AIG did not receive a bailout. They received a loan. The loan is at 11.31% for 24 months. The insurance segment and divisions outside of their investing are quite strong so the gov’t looks to receive that money and make a profit on it.

By no means am I saying that there hasn’t been some shady dealings going on but a lot of it is a product of the current mentality as a whole. Money was being lent to people who should never have gotten it. They couldn’t afford it, they were unlikely to repay it and they had a history showing their lack of responsibility.

Banks, as an industry, took care of themselves. The strong, liquid, responsible ones were able to acquire those that had made some bad decisions. There is no government bailout in that regard. The government did what banks should be doing. They evaluated the business, its plan to succeed, its solvency, its likelihood to repay the debt. From that the government decided whether or not they should loan them the money.

On an individual level, homes were mortgaged two and three times. This should rarely, if ever, be allowed. Credit was/is extended to people who have recently filed for bankruptcy. If someone shows a pattern of failure, why would you allow them to continue to repeat that failure?

On that same concept, the credit agencies for commercial finance didn’t downgrade stocks a long time ago when they should’ve. This is ridiculous because they’ve discredited themselves in a lot of ways. It had the trickle effect of Banks loaning to companies they shouldn’t have, people buying a stock that was over valued and, quite frankly, organizations that should’ve been overhauled or scooped up by the competition a long time ago.

This recession/depression/hell will not end until we get back to some very fundamental basics.

• People don’t spend more than they can afford. This includes reducing the number of credit cards they own, and actually managing the level of credit they maintain (i.e. paying your bills)
• Credit agency ratings holding merit. If someone shouldn’t be loaned money, then it needs to be reflected in their credit report (commercial or personal) and lenders need to act on it. If you can’t get anyone to lend you money its probably because you aren’t managing what you do have properly or effectively. Clean up your act, change your budget, modify your business plan, and innovate within your means
• Accountability – if you borrow money, pay it back. Be good to your word. Value your reputation. Work for what you want.
This means:
• Maintain good credit.
• Pay your bills
• Bonuses are not automatic. They need to be earned and are paid to those that go above and beyond their job and generate more profit for your organization

Our society as a whole has developed this level of entitlement that is completely out of control.
This mind set of “I want it. I don’t care if (pick one or more)
a. I don’t deserve it
b. can’t pay for it
c. don’t need it
d. am not worthy of it
e. am unqualified for it.
f. Haven’t worked for it.

…I want it so give to me now” is ridiculous.

I don’t buy into this theory that Banks got money because rich people were involved. Ever watch “It’s a Wonderful Life” and George Bailey’s explanation of how a Savings & Loan works? That’s banking at its fundamental essence. The money goes out to those that are borrowing and they repay it, with interest, so more people can borrow for their business, home, etc. It’s the cog in the wheel that makes the wagon run.

Hey! Look at me with the timely and topical post that also includes reference to a Holiday classic.


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