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Friday, April 21, 2006

The Corporation, Junior

Every once in a while, completely unrelated ideas collide and produce interesting offspring. I promise this has nothing to do with peppermint lotion.


It's a reach back to college economics, but I think it's safe to say that you can divide income, and by extension the people receiving that income, into two classes: Capital and Labor. Labor, naturally, is out there working for a dollar, while Capital is invested -- for purposes of this post, passively -- and receives a return on investment for use of money.


I noted in Iggy's post last night a mention of the latest go 'round of Andy Beal vs. "The Corporation", a confederacy of a number of the wealthiest and best poker professionals. If you're a hopeless degenerate like me, you've read Michael Craig's excellent book. If not, go get it.

Elsewhere, I found myself reading (probably on 2+2) speculation, mixed with some truth, about the staking that goes on amongst poker pros. This seems to be largely tied to the tournament scene, but I wonder if it plays into the cash games as well?

I have also found myself considering the question of whether I should continue trying to chase online poker bonuses with my much depleted "bankroll".

Mix these thoughts together, stir well and let them simmer overnight. The result, for me anyway, was this question:

If you were an investor (i.e. Capital), would it make sense (alternatively, how common do you suppose it is) to set up a 'corporation' of sorts for the purpose of chasing online poker bonuses?

The way I see it is as follows:

(a) If you, as an individual Laboring donkey, are always playing for a bonus -- initial deposit, reload or both -- your rate of return is artificially boosted by the site giving you the bonus. Even if you're a break-even player, it is possible to "win". Playing on your own account, you're limited, in effect, to taking advantage of a bonus a single time (unless you're ZeeJustining). If a bonus is good -- meaning the boost to earnings is sufficient to make it worth doing -- you might like to do it multiple times.

(b) It's entirely possible, nay probable, that as a Laborer you're passing up good bonuses. A common cause is lack of bankroll, either to get a bonus in the first place or to clear it in an effective manner. Using myself as an example, I'll probably be passing on almost all of the Crypto bonuses this month, as well as the Full Tilt reload.

(c) Members of the Capital class are always looking for a better return on investment (ROI). If I have $10,000 in idle funds, I can put them in savings at 1%, money market at 3%, online savings accounts at 5%, into stocks, bonds or whatever. The appetite for a higher ROI is (usually) balanced with a tolerance for risk -- usually, but not always higher risk accompanies a higher rate of return.

(d) If you put Capital together with Laborers to take multiple advantage of bonuses, to 'whore' them most effectively, and IF the rate of return offered were higher and the risk involved lower than other investment options, why wouldn't Capital do it?

This is the roughest of the rough (it is, after all, a workday), but let's use this as an example:

I'm a Laboring donkey. I reach a staking agreement with Capital for $1,200. I am to play $2/$4 limit with this 300 BB bankroll. If I just play five Crypto sites (I'm going from memory as to the bonus amounts and clearance rates here, so DON'T take this as gospel), I would play as follows:

Interpoker, $100, 500 raked hands (might be 700, I forget).
Will Hill, $45 for 5 table hours
Pokerplex, $50 for 250 raked hands
Sun Poker, $40 for 250 raked hands
UK Betting, $45 for 250 raked hands
TOTALS: $280 for 1250 raked hands plus 5 table hours.

{side note: I'm using the Cryptos as an example because they have monthly bonuses and because I've done them -- there are certainly easier and harder bonii out there}

Not every hand is raked, and some hands only count for 1/4 (if the rake isn't big enough). I could go into Pokertracker later and get a better estimate, but for now let's assume that it'll take 2000 hands of $2/$4 to get 1250 raked. Reality may be a bit higher, but this is a workable number. If we average roughly 70 hands per hour, that's 30 table hours. Four tabling, that's 7.5 hours plus the table hours at Will Hill. We'll call it 10 hours of actual play (again, reality may be a bit different, but this is a rough idea).

For that 10 hours of play, if I play exactly break even, I'll make $0 plus $280 in bonus - about a 23% return on the starting stake. If the profits are divided 50/50 -- and a fair division could be the subject of another whole post -- that's $140 to me and $140 to Capital. I've earned $14 per hour for my trouble, and Capital has earned 11.67% on his/her money in a very short period of time. And this process could be repeated multiple times, as there appears to be a virtually unlimited sea of poker bonuses.

There is upside to this sample return, of course -- if I'm a barely decent player and can win 1BB/100, that juices Capital's return into the 15% range. 2BB/100 and we're pushing 20%. At the same time my earnings (for being Labor) rise to $20 to $25 per hour.

There's also downside. I could go completely BUSTO, but that's not especially likely. If I lose 1BB/100, the returns drop to more like 8% for the investor and $10/hour for me, but it's still +EV.

The kicker, of course, is variance. The number of hands given above is a negligble sample size. I could run from negative infinity to positive infinity in BB/100, especially if no limit is an option (I'm assuming limit here for reduced risk, but it's an option). For that reason, I would think Capital would want to spread its risk over multiple donkeys, and Labor would sell pieces to multiple investors.

You'd also want to tailor your setup in a number of ways. The limits Labor would play would be a function of Capital's appetite for risk vs. return. It's possible that casino whoring might be a +EV extension of this concept. There's always tourney bankrolling, but that's sufficiently high variance to be an entirely different analysis. You'd have a number of considerations in who you chose to invest in and how you monitored their performance. You'd want to spell out how much play is expected and may want an agreed list of bonuses to tackle.

In any event, I think this is an interesting idea, and I wonder if it's already taking place. Not that it really matters. I'll be hanging around the Party Poker microlimit tables this weekend trying to play the last couple hands I need to 'earn' the $75 free they gave me last week.

Enjoy your Friday.


FatBaldGuy said...

Intriguing idea. I don't do a whole lot with bonuses, since most of my play is on PokerStars, but you have to wonder if there is some room next door to the Nike factory, full of computers and little Philipino women multi-tabling low limit hold 'em.

Wolverine Fan said...

I'm not sure you could make enough money to make it worthwhile for a 'corporation' if you have to split the profits multiple ways. Also, what if one member of the 'corporation' is not a very good player and you lose money? Maybe you could clear the bonus and have that be distributed equally but any wins or losses that are incurred when clearing the bonus are up to the individual to handle. Interesting idea thay may be worthwhile for a team of about 4 people.