Being Bankrolled

[assume_R]

So my friend was interested in bankrolling me. He said we'll each put in exactly the same $$, and split the winnings or losses down the middle for 2011. It would essentially double my EV while halving my RoR (but he would get half the EV). You could say I'd be doing all the work, and he'd be like an investor. Is 50% fair? What would be a reasonable RoR I should aim for since I am playing with somebody else's money too. In my simulations I was looking at 5%-10% for what I usually play now.

Thoughts? Do people have experience with this, and what would be considered reasonably fair?

 

[Ferretnparrot]

when people invest into my play, I tell them to pick a percentage like 10% and we agree to it. Then after every trip they pay or take 10% of my win or loss. It is the same as if 10% of every bet I make was their money but it skips all the math of dealing with 10% of a 80 dollar bet and having to break it into white chips for each player.

Based on how much percent they want to play and normal volitility, I will ask a certain amount of cash up front to cover potential losses, which i refund if I win, or they only get a portion back if I lose.

Depending on how much I like the person, I may charge a percentage of their EV for the services.

 

[Southpaw]

I have no experience with team play, although there is one format that I hear of over and over.

Correct me if I describe this wrong, but I think I have it right. Many times I have heard of teams breaking the bank in a certain way after a certain monetary goal has been reached (i.e., double bank or half it or whatever). I suppose that you could break it after a time deadline, but then there comes a question of if the time stipulation favors the investors or players.

The common breakdown I always hear of is 70% of profit (or loss) is shared by investors, while the other 30% profit (or loss) is shared by players. In your case, it seems that you would each have half a share in the investor category, but you would have full share in the player category.

So, if you started with 10k and doubled your bank, the bank would now be at 20k. The profit is 10k. 65%, or $6,500 of this (35% from investor share and 30% from player share) would go to you, while 35%, or $3,500 would go to your friend (he only has share in the investor category). Each of you are returned your original investment of 5k.

SP

 

[assume_R]

Okay, so ferret and south, it seems you both agree on the actual process (while ferret recommends after every trip handling the profit or loss, not at the end of the year). The difference, it seems, is the %. South, you would say 35% to my friend would be fair, and ferret, you'd say that a number such as 10% for my friend might be fair. Those are both lower than my original 50%. Do others have an opinion on what % should be returned to the investor? And I like the "every trip" idea, ferret.

However, now that I think about it, doing it every trip might make my friend skeptical if bad variance happens one trip, and he loses several thousand. While I know that this type of variance can easily be compensated by the end of a larger time scale.

 

[NightStalker]

How it'll double your EV?

So my friend was interested in bankrolling me. He said we'll each put in exactly the same $$, and split the winnings or losses down the middle for 2011. It would essentially double my EV while halving my RoR (but he would get half the EV). You could say I'd be doing all the work, and he'd be like an investor. Is 50% fair? What would be a reasonable RoR I should aim for since I am playing with somebody else's money too. In my simulations I was looking at 5%-10% for what I usually play now.

Thoughts? Do people have experience with this, and what would be considered reasonably fair?

Your bank =10k, evph=20$ph
new bank=20k, new evph=40$ph
He takes 50% in winning, your share=20$ph.
Investorlayer=50-50. But you are half investor also, so your share=75%?

0.1-5% RoR is okay with me.

 

[Automatic Monkey]

Okay, so ferret and south, it seems you both agree on the actual process (while ferret recommends after every trip handling the profit or loss, not at the end of the year). The difference, it seems, is the %. South, you would say 35% to my friend would be fair, and ferret, you'd say that a number such as 10% for my friend might be fair. Those are both lower than my original 50%. Do others have an opinion on what % should be returned to the investor? And I like the "every trip" idea, ferret.

However, now that I think about it, doing it every trip might make my friend skeptical if bad variance happens one trip, and he loses several thousand. While I know that this type of variance can easily be compensated by the end of a larger time scale.

My advice: if he's not also an AP, don't. Nobody but an AP can understand what we have to put up with statistically, and nobody else would really believe it. You also know how long it will take you to get in an N0 and have a reasonable chance of showing your friend what he is looking for.

Maybe teach him to play and let him get out there and earn his stripes, first? But I still don't know if AP's are made, or born.

 

[Southpaw]

My advice: if he's not also an AP, don't. Nobody but an AP can understand what we have to put up with statistically, and nobody else would really believe it. You also know how long it will take you to get in an N0 and have a reasonable chance of showing your friend what he is looking for.

Maybe teach him to play and let him get out there and earn his stripes, first? But I still don't know if AP's are made, or born.

I agree with AM here. Don't take anyone's money unless they fit one (or more) following 3 types:

1. A fellow AP
2. Professor of Math or statistics
3. Business owner / longtime investor in the stock market

If they only fit into one (or more) of the latter two categories, make sure they understand AP beyond what is presented in movies such as 21. Make sure that they know about NO, the S.d. involved, SCORE and the "expected" W.R. and why you may not exactly be able to live up to the "expected" W.R.

SP

 

[zengrifter]

So my friend was interested in bankrolling me. He said we'll each put in exactly the same $$, and split the winnings or losses down the middle for 2011. It would essentially double my EV while halving my RoR (but he would get half the EV). You could say I'd be doing all the work, and he'd be like an investor. Is 50% fair?

No. The split formula should give equal weight to play time and investment.
A typical (longer-term) arrangement would only afford a pure investor/non-player with 25% of the profit. zg

 

[Lonesome Gambler]

Everyone seems to be ignoring the fact that your friend is getting quite the bum deal, especially if you go the "chop every session" route. He's absorbing 100% of the loss, while you both split 100% of the profits down the middle. For a more detailed explanation, see pg. 121 in The Book, "Risk-'Sharing' Scams."

This arrangement is very beneficial for you, but if you want to not screw your friend, make it very clear that this is a long-term investment, and make sure that you're playing a LOT of volume before and agreed-upon chop. If the entire year of 2011 is your goal, then do your friend a favor and make sure to put in as much volume as possible. This will benefit you both, creating more profit for you, and producing less risk for your friend.

Freerolling can be a great arrangement under the right circumstances, but it's easy to think that everyone's getting a fair deal when they're really not.

 

[zengrifter]

Everyone seems to be ignoring the fact that your friend is getting quite the bum deal... This arrangement is very beneficial for you.

No, its AssumeR who is getting screwed -
- he's putting up half the BR AND playing ALL the hands and only getting 50%.

AssumeR should get 75%. I am assuming that you misread - the section in "The Book" :laugh:

 

[Lonesome Gambler]

No, its AssumeR who is getting screwed -
- he's putting up half the BR AND playing ALL the hands and only getting 50%.

AssumeR should get 75%. I am assuming that you misread - the section in "The Book" :laugh:

No, I didn't. I did misread the original post—my mistake. In this case, I agree that AssumeR should get a much higher return, probably closer to 75% to compensate for playing time, exposure, etc. I originally read it as AssumeR's friend putting up 100% of the bank and splitting the profits 50/50.

 

[zengrifter]

I originally read it as AssumeR's friend putting up 100% of the bank and splitting the profits 50/50.

That would also be fair, provided its long-term.
Short-term would be more like 80-20 favoring the investor. zg

 

[Lonesome Gambler]

That would also be fair, provided its long-term.
Short-term would be more like 80-20 favoring the investor. zg

Which was exactly my point. In the short term, a 50/50 split, especially in the case of chopping after each session, gives the player a massive advantage and the investor a really bad deal. Now that we've determined that AssumeR was not talking about this situation, it's really a moot point.

 

[zengrifter]

Which was exactly my point. In the short term, a 50/50 split, especially in the case of chopping after each session, gives the player a massive advantage and the investor a really bad deal. Now that we've determined that AssumeR was not talking about this situation, it's really a moot point.

I don't feel that a 50-50 play for investor-only short-term is necessarily bad --
-- its better than the investor playing himself. zg

 

[assume_R]

Which was exactly my point. In the short term, a 50/50 split, especially in the case of chopping after each session, gives the player a massive advantage and the investor a really bad deal. Now that we've determined that AssumeR was not talking about this situation, it's really a moot point.

Yeah, I was referring to also splitting the losses 50/50. Seems most think something closer to 75/25 would be fair for the situation I described since I would be doing all the playing.

And to nightstalker, yes, so my personal EV would stay the same with half the RoR as if I played alone. If I were to play with the same RoR that I play normally play with alone, then my EV would be greater than double.

 

[NightStalker]

no

And to nightstalker, yes, so my personal EV would stay the same with half the RoR as if I played alone. If I were to play with the same RoR that I play normally play with alone, then my EV would be greater than double.

same ror, same ev

 

[zengrifter]

same ror, same ev

Not worth it. zg

 

[assume_R]

[No] same ror, same ev

Here's what I meant (real numbers from cvcx). These aren't what I'll be playing with due to the too-high RoR, and unreasonable spread, but just an example.

Let's assume I have $10k on my own. For a 10.4% RoR, I can make $47 / hour spreading $15 - $150.

Now, if I have $20k, to have a 10.4% RoR, I can spread from $25 - $425, and make $145 / hour.

Exactly the same RoR, but more than double the EV.

 

[Lonesome Gambler]

I don't feel that a 50-50 play for investor-only short-term is necessarily bad --
-- its better than the investor playing himself. zg

Not likely—if the player shares the profit, but the investor absorbs all the loss, the investor has a negative expectation even if the player is ahead. The player would need to play considerable hours before the investor would even have a positive expectation. Now, a non-skilled investor would still have a negative expectation playing solo against the house edge, but it's highly unlikely that they would put in the amount of hours that a solo, bankrolled player would be putting in.

It's even worse if the chop is done per session: say you play 10 sessions. You win $10,000 each on 4 sessions, but you lose $10,000 each on 6 sessions. Although the bank is in the red, you still profit—to the tune of $20,000. Meanwhile, your investor has eaten a $80,000 loss in his investment. It's a bit of a contrived scenario, of course, but you see the problem with such an arrangement.

The split wouldn't necessarily need to be 80/20 in favor of the investor in order to be a fair shake, but the investor's cut should certainly reflect their increased risk as a result of the profit-sharing agreement with a non-investing player.

 

[matt21]

Here's what I meant (real numbers from cvcx). These aren't what I'll be playing with due to the too-high RoR, and unreasonable spread, but just an example.

Let's assume I have $10k on my own. For a 10.4% RoR, I can make $47 / hour spreading $15 - $150.

Now, if I have $20k, to have a 10.4% RoR, I can spread from $25 - $425, and make $145 / hour.

Exactly the same RoR, but more than double the EV.

I think you are thinking about this in exactly the right manner. There's definitely a huge benefit from having an investor when just looking at the numbers (and forgetting about other aspects for now - trust, honesty, administration). I'd advise to write up a good agreement - what happens if you get mugged for example, what about expenses, ability to withdraw the investment etc. - similar to when you join a team really.

You need to consider that the 25-425 spread will probably attract a lot more heat because it is much bigger in $ terms and in terms of ratio (17:1 compared to 10:1). A benefit is you can move to $25min tables from $15min tables and as a result get in more heads-up play, maybe better rules. I found my EV increased dramatically when I switched from $10 tables to $25 tables.

A simple way to determine the relevant splits is to do;
50% on basis of BR (50/50)
50% on basis of playing hours (you are doing 100% of it)
Thus you again arrive at the 75/25 split.

Go for it if you can. everybody comes out a winner, subject to variance in results.