Devo's backing article

[Bonified]

On Pokerpages (http://www.pokerpages.com/articles/archives/devonshire08.htm)

Backing arrangements on the tournament circuit are "the elephant in the corner" to some extent. The majority of the casual audience have no idea that such a large proportion of the field are basically playing with someone else's money. Bryan's article is well-written, explains backing arrangements very clearly and it's good that he has brought this into the open on a site like Pokerpages which has a very large casual audience.

But ... I do have a problem with parts of it. I cannot accept that backing people is "free money". "So they go $40K in the hole. Big deal, when they will eventually cash for $200K". You can't just wish away the worst case scenario as having zero probability. The worst case scenario is so bad for the backer that even if it is low probability, it has to be factored in. Look, this does happen. This has happened. Horse is $250K in the hole, goes up to backer and says "I don't want to play any more". Now what's the backer going to do ? What do you do in this spot Bryan ? Options that I can think of are :

- Write off the $250K
- Sweet-talk the horse round into playing some more
- Take the sheets option, and tell the horse if he quits he's going to find it difficult to play with one arm

Frankly I think the sheets option is by far the best, if you're ruthless enough. If you're not, you can either write the money off or persuade your horse to keep going, which might just be digging the hole even deeper. He's already demotivated, and he's in a situation where only a huge win can get him out of it, but continuing to lose is basically not going to make his situation any worse. Not being able to pay $250K isn't really any different from not being able to pay $500K.

How likely this scenario is depends on your judgement of the staked player, both as a winning player and a trustworthy person. But I do think it is clearly wrong to assign it zero probability. I repeat, this can and does happen.

That's my main problem with it. I also find it hard to believe that when 55 bracelets are being given out every year, there are really any substantial "TV endorsements and other sponsorships" on offer. I personally would feel more pressure to cash if I was on someone else's money, but maybe that's just me.

I know Bryan posts on here so I welcome his comments, and I've never been in a backing arrangement on either side so of course if people who have been can put me right based on experience, go for it. For me, I would be very, very careful about entering a make-up arrangement on either side. It may be unlikely to go wrong, but if it does, it will go very wrong indeed. I derive a lot of satisfaction from making my own way in poker, and of course I also get to keep 100% of the profits. Now that's free money :-)

[cking]

Thats why you have signed contracts that involve paying the backer back. This is known as "make up". Now how it's enforced is one thing but if you have a firm legal contract then it certainly is the right start.

[gobboboy]

He's talking about not paying back as in he's not going to be playing for the backer anymore and not going to enter any more tournaments. Almost all backing deals (if the backer is smart) has makeup and I don't think that is a problem for them, but people quitting in the middle of a deal is probably a much bigger problem (or just quitting when they have racked up a quarter mill in debt and not signing on for a lot more tournaments).

[daryn]

haha.. sheets is ruthless? i wish he would try to break my arm. i could use the money.

[Bonified]

What gobbo said.

If you have a contract saying that the player has a legal obligation to the debt if he walks away, then fine, but that clearly means that the deal is not risk-free for the player.

The point I'm making is that there is a chance that the player will reach a point where he doesn't want to play any more, or even if he does, if he keeps losing and the backer has no confidence that continuing the deal will be profitable. At this point, someone has to pick up the tab. You can't wish this away and say there's no risk to player _or_ backer, as I think Bryan's article implies.

Edit : As for sheets, I made that comment based on something he said in another backing thread. If it was a joke or a level, he got me :-)

[MaverickUSC]

First: I am honored at my first ever 2+2 thread.

Second: I actually stand by my point that backing a WINNING player is risk free. OBV there are the circumstances to consider like long term run-bad and the psychological factors that those incur, but if a player is a long term winner on their own, make up insures that the player is playing basically on their own but provides the opportunity for them to play in bigger games. The rub that I think you're getting at is that if a player is stuck 100k due to make up they're going to play far differently than if they were stuck 100k on their own and playing off their own bankroll. If a player stuck on make-up wanted to make some beer money, he's gonna have to cash for over 100k, where as the guy stuck 100k in toruneys but still playing on a 20k bankroll still knows that he has beer money for the night and ain't sweatin' having to cash for 100k+ to make some bucks for the night.

Glad you appreciated the article. It was written on a plane without any inspiration at all- I was late on a deadline and asked my editor for any ideas, and he promptly said, "Backing."

Devo

[FatalError]

100% risk free?

[gobboboy]

Risk of ruin still exists for a long term backing deal, Bryan, same as you playing yourself. But you can't get frustrated and quit yourself.

[Bonified]

That's what I'm really saying, you're sharing the risk, not eliminating it. I appreciate that you (Bryan) are aware of the psychological factor of being stuck deep and maybe didn't want to over-complicate the article. But the possibility of the arrangement ending, for whatever reason, when the horse is seriously stuck is a "black swan" event that I think has to be considered because, while it may be rare if you pick your horses carefully, it will (as I have said above) be very bad if it does happen.

Anyway, thanks for the responses. If anyone who is staked / does a lot of staking wants to chime in I'd be very interested to hear their thoughts.

[Zetack]

[ QUOTE ]
First: I am honored at my first ever 2+2 thread.

Second: I actually stand by my point that backing a WINNING player is risk free. OBV there are the circumstances to consider like long term run-bad and the psychological factors that those incur, but if a player is a long term winner on their own, make up insures that the player is playing basically on their own but provides the opportunity for them to play in bigger games. The rub that I think you're getting at is that if a player is stuck 100k due to make up they're going to play far differently than if they were stuck 100k on their own and playing off their own bankroll. If a player stuck on make-up wanted to make some beer money, he's gonna have to cash for over 100k, where as the guy stuck 100k in toruneys but still playing on a 20k bankroll still knows that he has beer money for the night and ain't sweatin' having to cash for 100k+ to make some bucks for the night.

Glad you appreciated the article. It was written on a plane without any inspiration at all- I was late on a deadline and asked my editor for any ideas, and he promptly said, "Backing."

Devo

[/ QUOTE ]

My understanding is that Make-up exists only for the duration of the staking agreement. So the horse gets down 200k in entry fees, the backer runs out of patience or money and ends the deal. Five years later the horse makes a $1.8 million score in a WPT event. He has no obligation to make up the $200k at this point, right?

If so, then staking obviously is not risk free.


Edit, see this quote:

[ QUOTE ]
"Backing players is pretty much a losing proposition,'' says Ted Forrest, who has backed such players as Cyndy Violette and Layne Flack. "I've lost a lot of money backing other players. There's only a few players that have been lucky to back players that have won for them. I think [Phil] Ivey has backed players that have won for him and Daniel [Negreanu] has been lucky with players he's backed. But for the most part, backing other players is a losing proposition.''

[/ QUOTE ]

Source of quote here (http://sports.espn.go.com/espn/poker/columns/story?columnist=rosenbloom_steve&id=2269129)

[Zetack]

[ QUOTE ]
[ QUOTE ]
First: I am honored at my first ever 2+2 thread.

Second: I actually stand by my point that backing a WINNING player is risk free. OBV there are the circumstances to consider like long term run-bad and the psychological factors that those incur, but if a player is a long term winner on their own, make up insures that the player is playing basically on their own but provides the opportunity for them to play in bigger games. The rub that I think you're getting at is that if a player is stuck 100k due to make up they're going to play far differently than if they were stuck 100k on their own and playing off their own bankroll. If a player stuck on make-up wanted to make some beer money, he's gonna have to cash for over 100k, where as the guy stuck 100k in toruneys but still playing on a 20k bankroll still knows that he has beer money for the night and ain't sweatin' having to cash for 100k+ to make some bucks for the night.

Glad you appreciated the article. It was written on a plane without any inspiration at all- I was late on a deadline and asked my editor for any ideas, and he promptly said, "Backing."

Devo

[/ QUOTE ]

My understanding is that Make-up exists only for the duration of the staking agreement. So the horse gets down 200k in entry fees, the backer runs out of patience or money and ends the deal. Five years later the horse makes a $1.8 million score in a WPT event. He has no obligation to make up the $200k at this point, right?

If so, then staking obviously is not risk free.


Edit, see this quote:

[ QUOTE ]
"Backing players is pretty much a losing proposition,'' says Ted Forrest, who has backed such players as Cyndy Violette and Layne Flack. "I've lost a lot of money backing other players. There's only a few players that have been lucky to back players that have won for them. I think [Phil] Ivey has backed players that have won for him and Daniel [Negreanu] has been lucky with players he's backed. But for the most part, backing other players is a losing proposition.''

[/ QUOTE ]

Source of quote here (http://sports.espn.go.com/espn/poker/columns/story?columnist=rosenbloom_steve&id=2269129)

[/ QUOTE ]

And more words of caution, this time from Thomas Keller:

[ QUOTE ]
So, cutting to the chase, when should someone stake another poker player? My protective instincts toward my readers are screaming at me at this moment, wanting me to yell out, "Never, never stake any poker player in any game or tournament as the downsides are vast and often deceptive. In addition, those who stake poker players generally end up losing a lot of money."

[/ QUOTE ]

Keller also says this:

[ QUOTE ]
I have learned a lot about how and, more importantly, when to stake players. Unfortunately, I have learned the hard way, and despite putting considerable time, effort, and heart into my staking endeavors, I am currently running a hefty financial loss in staking. This should not be surprising, as I believe that most people lose money when they stake poker players.

[/ QUOTE ]

Source of the two Keller Quotes (http://www.cardplayer.com/author/article/all/137/7354)

Note that Keller reputedly lost a lot of money in a backing deal with Scott Fishman that included make-up when Fishman got way stuck and walked away from the deal. Reports on the amount that Keller lost range from around 200k to 400k.

Staking is far from a risk free endeavor as far as I can tell.

[Zetack]

Sorry, one last one, before I stop flogging this horse. Even Mason Malmuth has criticised staking with make-up as a potentially risky endeavor:

[ QUOTE ]


One problem with these deals is that if the horse does poorly and gets in a big hole, and there is always some chance this will happen [the horse walking away from the deal] no matter how well he plays, he will then be playing for nothing because even if he does well in a tournament, all the money will go for making up the entry fees.



[/ QUOTE ]


Source of the Malmuth quote (http://forumserver.twoplustwo.com/showthreaded.php?Cat=0&Number=4933037&page=0&vc=1)

[DonkStrike]

Of course, you can, also, run into the Tom McElvoy "problem".

Tom's backer "thought" he was backing him the year he won the main event. Tom "thought" he was not backing him on that event. I believe all litagation was eventually dropped.
btw, I am NOT saying Tom was pulling a "Jaime" here. I'm just saying you must be aware that "misunderstandings" can occur.

[MaverickUSC]

All of the above obviously correct. I suppose I should have been more clear in my preposition of free money to include all those other litigating factors as well.

Devo

[Cornell Fiji]

[ QUOTE ]
All of the above obviously correct. I suppose I should have been more clear in my preposition of free money to include all those other litigating factors as well.

Devo

[/ QUOTE ]

I really hate how sue happy everyone in America has become.

[ReptileHouse]

Definitely. We need more Karens, Ruths, and Helens. The population is totally skewed right now in favor of Sues.

[FortWorthJim]

Is there any merit to staking without makeup? Would anyone do this?

In the Mark Blade book, "Professional Poker," he said the best deal would be a 70-30 split in favor of the backer with no makeup. The percentages could be adjusted down to 65-35 or 60-40 depending on how strong the player is.

He said even with a 50-50 split he would rather back someone with no makeup because of all the issues talked about here with a prolonged losing streak (jumping ship to another backer, playing worse because of pressure and not having money to live on).

However, it seems like all the deals actually carried out in the poker world have makeup to prevent the player from making money before the backer does.

[Greg (FossilMan)]

[ QUOTE ]
Is there any merit to staking without makeup? Would anyone do this?

In the Mark Blade book, "Professional Poker," he said the best deal would be a 70-30 split in favor of the backer with no makeup. The percentages could be adjusted down to 65-35 or 60-40 depending on how strong the player is.

[/ QUOTE ]

How can you back anybody for one event and give them 30-40%? Nobody is that good. If you back for one event, and the player is great, you can give them maybe as much as 20% and have positive EV for yourself. If you do a long-term backing deal, then you can give the horse 50% or so.

The way to avoid the make-up issue is to simply never have an open-ended deal. Make the deal for a set period of time, like 6 months or a year. Then, if the player has any integrity, they will play out the period, and do their best, no matter how deep the hole becomes. Of course, if they don't have such integrity, why would you ever back them to begin with?

Later, Greg Raymer (FossilMan)

[FortWorthJim]

[ QUOTE ]
[ QUOTE ]
Is there any merit to staking without makeup? Would anyone do this?

In the Mark Blade book, "Professional Poker," he said the best deal would be a 70-30 split in favor of the backer with no makeup. The percentages could be adjusted down to 65-35 or 60-40 depending on how strong the player is.

[/ QUOTE ]

How can you back anybody for one event and give them 30-40%? Nobody is that good. If you back for one event, and the player is great, you can give them maybe as much as 20% and have positive EV for yourself. If you do a long-term backing deal, then you can give the horse 50% or so.

The way to avoid the make-up issue is to simply never have an open-ended deal. Make the deal for a set period of time, like 6 months or a year. Then, if the player has any integrity, they will play out the period, and do their best, no matter how deep the hole becomes. Of course, if they don't have such integrity, why would you ever back them to begin with?

Later, Greg Raymer (FossilMan)

[/ QUOTE ]

I should have specified. He was referring to long-term deals.

[ReptileHouse]

[ QUOTE ]
How can you back anybody for one event and give them 30-40%? Nobody is that good. If you back for one event, and the player is great, you can give them maybe as much as 20% and have positive EV for yourself. If you do a long-term backing deal, then you can give the horse 50% or so.

[/ QUOTE ]

Can you elaborate a bit? How is this any different than any other short term vs. long term EV situation? That is, the odds are the odds regardless of sample size. What am I missing?

[Greg (FossilMan)]

Create an imaginary record of results for a tournament player over a series of 100 events. If you can, get real data from a random online player for 100 tournaments in a row. Now, do the math if you had backed him for each event 1 at at time with him keeping a percentage of the profit. Now, do the math again, for the same set of 100 events, but this time give him a percentage of the net profit for all of the events combined.

In the first instance, the player has to make a profit for himself, unless he fails to cash in all 100 events. In the second instance, if the player loses, he gets nothing for his time. If the player does make some nice cashes, and a net profit, he will still end up with a LOT more money in the first instance, if the percentage he gets is the same. In fact, it is quite easy for a player to win over the period, and for the backer to lose, if the results are paid out to the player 1 event at a time.

Later, Greg Raymer (FossilMan)

[ReptileHouse]

Examples are wonderful for this sort of stuff. I was missing that in the second case (multiple events) that the profit, if any, would not be split until after all the events had completed. I was erroneously assuming that profits would be split after each event in both cases.

Thanks, it makes sense now.

[Zetack]

[ QUOTE ]
Create an imaginary record of results for a tournament player over a series of 100 events. If you can, get real data from a random online player for 100 tournaments in a row. Now, do the math if you had backed him for each event 1 at at time with him keeping a percentage of the profit. Now, do the math again, for the same set of 100 events, but this time give him a percentage of the net profit for all of the events combined.

In the first instance, the player has to make a profit for himself, unless he fails to cash in all 100 events. In the second instance, if the player loses, he gets nothing for his time. If the player does make some nice cashes, and a net profit, he will still end up with a LOT more money in the first instance, if the percentage he gets is the same. In fact, it is quite easy for a player to win over the period, and for the backer to lose, if the results are paid out to the player 1 event at a time.

Later, Greg Raymer (FossilMan)

[/ QUOTE ]

But in either case, the idea posited in the originally cited article, that backing a winning player is risk free, simply doesn't hold water.

[MaverickUSC]

It's pretty damn risk free as far as the world of poker goes. Me sitting at the table is not a risk free proposition, but I like my job security much better than somebody with a job. Sure there's a risk that I'll go broke, but it's pretty unlikely. If you are backing a player with integrity and a winner then you are making as high percentage of a risk free bet as you can when it comes to poker.

Devo

[JohnnyGroomsTD]

If you are a winning player, aren't you in essence, backing yourself? Yes, the division of profit goes 100%-0%, but in essence you are your own backer. Is this a losing proposition? Just for argument's sake....

[MaverickUSC]

Obv no jobs suck and unnecessary.

Backing myself is a risky proposition if I suck at money-management and go busto.

Devo

[Bakes]

"When I back people, I expect the same thing. I will not back somebody if there is even the slightest hint of shadiness going on. I must have complete confidence in my horse's word of mouth, since that is what is attached to the poker player I am investing in."

Thank god someone understands this, what a breath of fresh air.

[El Diablo]

Mav,

It seems like you are making some assumptions like the backer having a virtually infinite bankroll and perfect abilities when it comes to assessing the skill level and integrity of horses.

[ncpokeresq]

Devo,
Not to try to touch on a sore subject, but didn't your backing agreement break down? Which points out another problem in backing: if the horse hits a score, as you did in the O/8 event, the backer may make the equivalent of a hit and run and decide to pull the plug.

[MaverickUSC]

Yeah, my agreement broke down after he blew $120k in cash games two weeks after my cash. OBV things can break down when the backer runs out of money, but that sucks for the backer more than the player cause then the player is out of the make-up hole.

Devo