On backing and its associated psychology
As in past year’s WSOP events, I am taking small amounts of backing money from friends that want to “invest” in my WSOP endevours. With my 24th place finish last year, people seem to easily imagine the big rewards that would have come my way if the cards broke differently. Apparently, they don’t give the same credence to the lesser results that might have come with slightly different luck.
The simple fact is that it is hard to know your true expectation in tournament style poker. The vissitudes of fate are such that you would really have to play in a thousands or more events before you could start to think that your returns reflect your true expectation. One of the reasons for this is that the payouts are so top heavy. Fully 20% of the prize pool in the event that I finished 24th in was awarded to the winner. Obviously, it is therefore crucial to your long term earn rate that you win more often than the average player. Unfortunately, many of the WSOP events I play in have 2,000 or so entrants. Even if I win at a rate twice as often as the average player, I would only expect to win every 1,000 events or so. Given that I typically play 3 or 4 a year, it will be 250 years or so on average before I am “overdue” for a win.
Expanding the definition of a great result a bit, you see that those who make the final table earn about 70% of the prize pool. Given that I am nine times more likely to make a final table than to win the thing, I should be able to pull off a final table every 111 events or so (again assuming I am twice as good as the average player). Unfortunately, given my rate of play that still means I can’t really start to whine until I’ve played for 28 years or so.
The only statistic that I can actually start to evaluate at all is my rate of getting paid at all. In general, about 10% of the field gets paid and if I am twice as good as the field, I should cash in every fifth event I play. At this point, I think I have played in 9 WSOP events (although it may be eight) and I have cashed in two of them, so I guess I’m more or less on track there. Of course that also means that in the three events I’m expecting to play this year there is a very real chance that I don’t cash in any of them.
Furthermore, I’m not confident that I really am twice as likely as the average player to cash or win a WSOP event. This is because I’m not convinced anyone really is that much more likely to cash or win. Even if you are twice as good as the average player, there are so many situations that simply don’t require much skill to play. If you have QQ or KK and the other guy has KK or AA and the stack sizes are right, you are going to lose all your chips to him 80% of the time. It doesn’t matter how much better than him you are. I would think that a large proportion of poker situations are played in way that is correct or at least only minimally bad by virtually everyone. The actual situations where your skill afford you an advantage are a reasonably small subset of the total number of situations you find. Even then, your skill advantage will usually only translate to a 70% or even 60% advantage. Tournament poker is a ridiculously uncertain way to earn a living.
As a result many of the top pros have various backing deals. In most of these deals they get their entry fees paid by other people with deep pockets and then they keep a percentage of what they win. This kind of deal is irresistable to many tourney players because they risk nothing and they still get a chunk of what they win (as much as 40% for the best players). These deals are not quite as easy to get as they used to be because many people who provide the backing have discovered that it isn’t such a great deal for them. I know at least two people who used to provide backing to many players who have cut way, way back.
In my case, however, I give my backers a much better deal. I don’t keep any share of the money that I win with their money. If I took backing of 100% of my buy-in, I wouldn’t be able to win any money at all. This would obviously make no sense for me. However, in practice I end up taking not more than a thousand or so in backing, so I don’t have to give up everything I win. I feel bad holding back a percentage of my winnings because I’m not really primarily a tourney player, but I feel like I’m giving backers a deal that is the long run profitable for them as a result. Despite that, I’m also not that crazy about the deals because I dread the idea that I will actually lose their money a high percentage of the time. It is a bit like a lottery. If this is the one time in 111 that I make a final table, they could win a lot of return. However, if it isn’t, there is a good chance that they will only get back a small percentage of their money or even nothing at all.
Of course, if I end up playing the Main Event, I’ll be happier with the idea of backers because the $10,000 entry fee seems like real money to me. The smaller buy-ins don’t seem like much cash at all, so I don’t especially value the discount that backers provide.
Amusing trivia discovered while running the numbers for this blog entry: I’m 877th all time in the world in terms of money earned playing Limit Hold’em in WSOP events. Given that I have played exactly two Limit Hold’em events in the WSOP in my life, that sounds pretty good to me.
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