Investing...In Poker Players
When someone tries to raise capital, we normally think that the person is trying to start or expand his/her own business. Recently, a 28 - year old man named Noah approached investors for help: he ended up raising $900,000. However, the money was not used for pursuing his entrepreneurial endeavors. Instead, he was using that money to enter a poker tournament.
During these next three days, arguably poker’s biggest event ever will take place: The Big One for One Drop tournament. Entry Fee: $1 million.
As a result of the large buy – in, many poker players had to seek out wealthy businessmen, hedge fund managers, and real estate moguls to raise the money. So, why would these investors stake their own money for a poker tournament?
Answer: The potential return from their investment - the winner of this tournament takes home $18.3 million. A certain percentage of the winnings will then go to each investor.
Even though the concept of investing in poker players seems novel, poker has always had “an informal investment economy” where players stake each other and/or receive support from wealthy friends. However, the practice has become more formal over the recent years. For instance, there are now websites with the goal of matching players with investors, and investment funds have been formed to invest in players, similar to how a mutual fund invests in stocks.
Even though these investments seem extremely risky, many investors do not see the practice as outright gambling. One investor, who is also a mergers and acquisitions advisor, states:
The key to poker investing is spreading investments over numerous players and many tournaments.
What do you guys think? Is this a worthwhile investment?
You can read the full article here.
Maybe that's where JP Morgans 2bn went....
HAhahahahha, this is the funniest thing I have heard today!
We used to stake each other all the time back in college (though it was usually for pretty low amounts) for online tournaments and big live games. My group of friends were really hardcore into poker and we'd usually get together and play the Sunday majors on PokerStars (like $215 buy-in, a couple thousand players, winners usually got somewhere in the $175-250k range) normally with our own money, but we had an informal agreement on certain tournaments like satellites into larger events where we'd agree that if anyone got into a big game we'd all have equal stake in the play. Good example being that junior year one of my good friends got into the WSOP Main Event via satellite and none of us did, but we all had equal stake in his winnings. He ended up cashing so we all ended up getting a few grand out of it, and after that started staking a lot more often. I think it's pretty common among pros - as are sidebets, which I heard Phil Ivey has a few big ones for this tournament - and it's pretty common that most of the pros playing in this event aren't buying in with 100% their own money. Given that the tournament is capped at 48 players and there's definitely more than 48 people who were interested, some guys (i.e. Phil Hellmuth) are staking multiple players just to have a piece of the action without actually playing. It's the same as any other investment in a way.
very very tough to make money in staking. you can give it a shot on 2p2; you just buy shares of a players buy-in (you can start very small i.e. buying http://forumserver.twoplustwo.com/163/staking-selling-shares-online/
Damn, I didn't know shit like this goes down lol, that's tight.
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that would be the most retarded investment anyone can make
I play enough poker that I'm familiar with this practice, but it really doesn't make much sense to me. And I will say, there are MANY poker players who have a positive expected value (EV) when they play.
However...
If you back a poker player, you have to decide what percentage of their winnings you will receive. Now if I pay for 100% of a poker players buy-in, I want 100% of their winnings. But then their incentives are all fucked up, so you need the poker player to make a significant stake in their own game. But let's say the poker player is playing in this $1M tourney, and fronts $100k for it. You front the other $900k. Ok, so a fair deal might be that you get 90% of whatever they cash for. BUT IF THE POKER PLAYER CAN'T AFFORD THE BUY-IN, THEY'RE PROBABLY PLAYING AT HIGHER AND THEREFORE MORE DIFFICULT STAKES THEN THEY'RE USED TO. So even if the poker player has a long track record of winning, how can you know they'll win at these higher stakes.
Not the mention, the average poker player loses, because of the cut the casino takes. One important implication of this is that if you look at the set of all poker players with long-term win streaks, a non-trivial percentage of them have just been getting better-than-average luck (been 'running good') for a very long time. So it's therefore also hard to ensure you're picking a winner based on past results.
Compare this to investing in the markets, where an 'average' return is the market return, minus fees.
Only advantage I see of investing in poker players is that you're money isn't tied up for very long. With stocks you might realize a 7% return over the course of a year. But a poker player entering a tournament might only have your money tied up for a week. So if you are able to find investments in the poker market that are even expected to give you a 1% return, that's actually much better than you'd get in the markets.
I've staked and I've been staked before and my conclusion is if you're not running a business like Johnny Bax & Sheets, its not worth it [for the investor].
Haven't played holdem in a while. Though off point, this piece on poker reminds be of the days I used to play poker every other night. lol Anyway, arguably you can find ways to add meaning to every form of investment. You just have to pitch it right.
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