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Poker Strategy With Gavin Griffin: The Moral Responsibility Of Markup

Griffin Explains Why High Markup Drains The Poker Economy Of Investors

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Hey, it’s almost World Series of Poker time, so you know what that means! It’s time to have our annual discussion on Twitter about who is charging too much markup!

I’ve talked about how markup works in previous columns, but let me do a quick refresher before we get started on what I think about the subject. Sometimes, when people are looking for investors in their tournaments, they offer percentages of their action for sale to either the public or people they know in the poker industry. Almost always, they charge a premium, commonly known as markup.

Gavin GriffinPeople calculate how they’re going to charge markup in all sorts of ways. If someone believes they are profitable in a $1,000 buy-in tournament, they might charge $12 for every one percent of the action someone wants to buy. They might charge more or less and that is up to them to decide how they are going to calculate this amount. This $2 difference in each percentage is meant to make up for the player’s skill and time. It allows them to play in tournaments that they might not have been able to comfortably afford if they had kept all of their action, or perhaps they just want to lower their risk profile even if they could afford the buy-in.

I’m honestly not even sure what caused this year’s kerfuffle over markup, but there are many sides to this argument and I tend to fall on the side of protecting the consumer. Of course, all caveats apply here. Nobody can actually know what another person’s ROI is in any individual tournament, and it’s basically impossible to reach a meaningful sample size in live tournaments. Some prefer an open market and that anyone should charge whatever they can get for their action, regardless of whether it’s actually a good investment or not. According to this theory, it’s a pure and free market and people are aware they’re making an investment that might not pan out. If someone can get 2:1 markup, they should charge it, investors be damned.

Regarding it being a free market, Andrew Barber makes an interesting point when he says that all of the best investments in poker are never available to the public. They’re taken up by insiders in the poker industry and backers that have large amounts of capital and a keen eye to spot those that can turn a profit in poker. If these people are never available to be invested in, how can it be a free market? The public marketplace is now populated by people who can’t get backing or sell pieces to the insider market, but may have made a name as a poker player in the past and are selling based on that name, not on a current skill set.

There are others who believe that the poker community should be self-policing and that when someone offers to sell for an amount that is clearly unprofitable, they should be called out on it. Last year, Phil Hellmuth sold 30 percent of his $10,000 Super Turbo Bounty event for a 1.8 markup. This means that he got $5,400 of this buy-in from these investors. It’s basically impossible for anyone in this tournament to be worth more than say, a 30 percent ROI and I’m being incredibly generous.

I don’t doubt that Phil’s lifetime ROI in WSOP tournaments is higher than 80 percent. If you could buy all of his tournaments for that price, it wouldn’t be that big of a deal IMO. However, he’s offering a one-time markup of 1.8 on a tournament that even the absolute best players in the world don’t even approach 80 percent ROI. In addition, he tends to show up late to tournaments and this would be a huge detriment to his earning potential in a tournament that moves this fast.

The poker world called him out on this and I think we were right to do so. We have no regulations on things like this. We have to be self-policing if we’re going to take care of the people who are interested in investing in poker tournaments.

The market isn’t really free. We’re only offered mid-tier winning poker players and when they charge astronomical markups, they are draining the investment community without those investors really knowing how badly they’re being soaked.

As long as we have poker tournaments, we’ll have people seeking out investors in order to afford them. When these investors get taken advantage of, they won’t be interested in investing anymore. Therefore, we as poker players have a moral responsibility to make sure these investors aren’t getting fleeced. If you don’t feel like you have a moral responsibility, remember that the money these investors have is finite and if they get beat badly on the markup over and over again, they won’t invest anymore. Whether your argument is moral or fiscal, speaking up about high markup is good for the community overall.

Gavin GriffinGavin Griffin was the first poker player to capture a World Series of Poker, European Poker Tour and World Poker Tour title and has amassed nearly $5 million in lifetime tournament winnings. You can follow him on Twitter @NHGG

 
 
 
 

Comments

NOEYECONTACT
over 1 year ago

I believe that you are confusing "free-market", a market in which no one is coerced into doing something and may decide for themselves what is best. And an "open-market", in which everyone has access to all participants in the the tournament that they are looking for staking. In a free market those looking to stake players are free to choose if the will pay the markup or not. No one is being taken advantage of because they are "freely" choosing to spend their money as they see fit. Along with this comes the risk and the "caveat emptor".

 
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notCIA
over 1 year ago

Noeyecontact's assessment is correct.
Evidently, Gavin is comfortable being part of the Nanny State despite being ignorant of Economics and Ethics. Maybe he should consider Politics over poker.
Personally, I would never invest in Hellmuth at that markup, but I don't pretend to know anyone else's motivations for doing so.

 
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Lassedrengen
over 1 year ago

Good point, NOEYECONTACT!

 
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