The Best In The Business

[SuuPRlim]

In Patrick's situation though, he is running a business which has been successful so far, and he's managing a poker bankroll sensibly. If he was betting £15k a game sports, taking drugs, gambling in the pits etc then 100% he would be having a lot more fun.

FYP

Not sure why everyone is replying as if the two things are exclusive, from everything I have read on here it would seem that being best in the business has provided Peeleeno with a bankroll that far exceeds his poker requirements?

If this is the case then surely there is no issue diversifying into a few other things that could generate a different source of income?

2/3 of working capital is a lot though

[mikeymike]

Think Warren Buffett - when he started out he used his bankroll to buy into a couple of companies - when the share price rose he took his profits and invested them into other businesses. He continued to do this each time diversifying into different assets until he had a broad portfolio, knowing that some would lose money, some would make a small profit and some would show big returns.

If you have a bankroll of say £2 million , but only need £1 million it is surely a shrewd move to place spare cash into something else.

You mentioned people like Branson and Sugar - all have one thing in common they diversified their business interests.

Believe me i wish pads and his business partners all the best in their ventures - i just do not see the logic in having a BR that is more than you need -
 

[StuartHopkin]

In Patrick's situation though, he is running a business which has been successful so far, and he's managing a poker bankroll sensibly. If he was betting £15k a game sports, taking drugs, gambling in the pits etc then 100% he would be having a lot more fun.

FYP

Not sure why everyone is replying as if the two things are exclusive, from everything I have read on here it would seem that being best in the business has provided Peeleeno with a bankroll that far exceeds his poker requirements?

If this is the case then surely there is no issue diversifying into a few other things that could generate a different source of income?

2/3 of working capital is a lot though

Yeah, im not suggesting 2/3 or even anything that would limit his playing level or comfort

If he has £1.5m but can play at the same level comforatbly of £1m then he should be investing £250k in something else?

[Doobs]

Think Warren Buffett - when he started out he used his bankroll to buy into a couple of companies - when the share price rose he took his profits and invested them into other businesses. He continued to do this each time diversifying into different assets until he had a broad portfolio, knowing that some would lose money, some would make a small profit and some would show big returns.

If you have a bankroll of say £2 million , but only need £1 million it is surely a shrewd move to place spare cash into something else.

You mentioned people like Branson and Sugar - all have one thing in common they diversified their business interests.

Believe me i wish pads and his business partners all the best in their ventures - i just do not see the logic in having a BR that is more than you need -
 

He has said on here that he has invested in other businesses and has talked about thinking of future investments multiple times, so not sure what people's issue is.

I accept succesful people have diversified their businesses, others have made fortunes as one trick ponies and others have completed messed up by diversifying.  Not that any of this talk of succesful businessmen is great evidence to support your original argument he should buy a house and an investment trust. 

Pads seems to be doing pretty fine doing what he does.

[SuuPRlim]

Think Warren Buffett - when he started out he used his bankroll to buy into a couple of companies - when the share price rose he took his profits and invested them into other businesses. He continued to do this each time diversifying into different assets until he had a broad portfolio, knowing that some would lose money, some would make a small profit and some would show big returns.

If you have a bankroll of say £2 million , but only need £1 million it is surely a shrewd move to place spare cash into something else.

You mentioned people like Branson and Sugar - all have one thing in common they diversified their business interests.

Believe me i wish pads and his business partners all the best in their ventures - i just do not see the logic in having a BR that is more than you need -
 

Mikey I'm agreeing with you for the most part! And certainly not disagreeing with you

Think we got off topic here, having £1m in cash you're not using then you should 100% invest it somewhere, house is a great call as its (literally)a safe as houses investment and you'll save £30k a year in rent along with some other nice benefits. Stocks, bonds whatever having it sat in the bank is non-optimal needs to be somewhere doing something. Pads hasn't suggested he has a big surplus of money that's sat burning a hole somewhere though.

The discussion we were having (prompted by yourself) was the line between cutting your BR and therefore your earning potential in exchange for long term security. You advised he could cut his roll by 66% and get his financial security close to guaranteed for life (he probably could) there reaches a point for all successful guys in a cash business where they have to alter their perspective on growth vs security, there's no right or wrong answer to that just what makes you feel comfortable.

Interesting anecdote - good friend of mine was CEO of for the Noble brothers (massive bars/arcade company) and on his first day he was at one of the properties very enthusiastically telling him some ideas he had to grow 2.5% here 7% there etc and apparently one of the brothers turned to him and said "STOP! I've already got enough money, can you just make sure you don't lose any it" preserve or prosper - its down to individual.

Comparing the situation to people like Stu Ungar or Erick Lindgren is somewhat irrelevant as these are totally different situations, I think there are probably better examples (going huge here and obviously way out of scale) like Kodak, Enron, Pan Am etc, big companies that were flying and the tides turned and they failed - not saying this will happen to pads or that it's even a remote possibility - but i thought the basis of your post was that money locked up and safe is protected from a Woolworths style meltdown whereas when it's in play, no matter how conservative you are with your funds, the risk (no matter how small) is there, and like you said...going form top to bottom and then back to top is a long and tough road.

Me personally, I sit somewhere in the middle, I've always chosen to be aggressive with my money and had I been less so I would almost certainly have a lot more, but I put myself in situations where I could have made huge money and I feel ok about that. These days I'm a little older, little more risk averse and typically choosing to be less aggressive with my money and actively looking to lock small amounts up here and there with a thought for the future. If I was single I'd probably still be just as aggressive as always. Life, personality, circumstances and opportunity generally dictate how you make these decisions, the only advice I have for anyone (as said previously) is before you make any financial decisions 0 understand the risks in full and don't be wreckless.

[tikay]

.......I think there are probably better examples (going huge here and obviously way out of scale) like Kodak, Enron, Pan Am etc, big companies that were flying and the tides turned and they failed -

Hi Dave,

Am enjoying this debate from the rail, so to speak, but I gotta correct you there or it will bug me all night.

Enron never failed because "the tide turned", they failed due to systematic accounting fraud. Their business was never even remotely viable or profitable, ever. They just cooked the books big time. All that changed was that they got caught.

But I'll not argue with your wonderful pun that "Pan Am.....was flying".

[cambridgealex]

I think if buying a house means you reduce your potential to make money in poker by any significant amount, then it's a bad idea, financially speaking.

I've put it off for a long time, as it's definitely a disaster (again, financially speaking) if I buy one and have to drop down in stakes, and would be same for pads.

However, if the house money is spare, then I think it's better put in a house, than into a bar or restaurant or some other industry where you have no experience and are basically just punting, even if smart people are involved in the project.

[SuuPRlim]

.......I think there are probably better examples (going huge here and obviously way out of scale) like Kodak, Enron, Pan Am etc, big companies that were flying and the tides turned and they failed -

Hi Dave,

Am enjoying this debate from the rail, so to speak, but I gotta correct you there or it will bug me all night.

Enron never failed because "the tide turned", they failed due to systematic accounting fraud. Their business was never even remotely viable or profitable, ever. They just cooked the books big time. All that changed was that they got caught.

But I'll not argue with your wonderful pun that "Pan Am.....was flying".

Tikay you are absolutely correct, actually makes a decent example just in the wrong context

Tikay you're a successful  bloke - lets hear your personal opinions on the risk/reward debate!

[mikeymike]

Hi Dave

I concur with the majority of what you say –though we have gone slightly off topic.

I think that by diversifying your bankroll you are not necessarily decreasing your bankroll – just the opposite.

Say you have a sum of £1 million and invest a third in property and a third in some investment funds.

You still have the same bankroll it is just in other assets – those investments can be cashed in or loaned against.

So now say you are saving 30K rent – this increases the BR and with a good stockbroker returns on your investments should yield 18% per annum - thus increasing the bankroll further.

If your cash bankroll drops to zero – then surely you would be reassessing your poker game.

People can and should do what they want and feel is right for them after all it is their life to lead.

Mike



 

[SuuPRlim]

Well I think your NET - WORTH stays the same (likely even increases) Patrick's business though is cash, he needs money to play poker tournaments, the more bankroll he has for poker tournament (then providing he is a profitable concern in those tournaments) then the more money he can make. If he has £1m, and is exercising his 0.5% max exposure per tournament fund management rule then it means he can effectively "bet" £5000 on himself at every tournament. He can play with the majority of his action in all regular tournaments and can still play HR events and it be worthwhile. Reduce his liquid bankroll to £400k (he's still worth £1m of course) but now with his same bankroll rules he can only "bet" £2000 per tournament, which might significantly reduce his earning potential.

As a rough example, suppose he has a 25% ROI on £5000 tournaments and 20% ROI on £10,000 tournaments. he plays 25 tournaments a year £5000 buyin and 20 a year £10,000 buyin. With his previous bankroll of liquid £1m he was making  £25,000 profit from his £5,000 tournaments (5000*0.25 *25) and £20,000 profit from his £10,000 tournaments (10000*0.2* 20 /2 - he sells 50% of his action) thats a profit from those tournaments  of £45,000.

Now with is new £400,000 bankroll he makes £10,000 from his £5,000 tournaments and £8,000 from his £10,000 tournaments. Totalling £18,000 and a loss of earnings of £28,000 due to his reduced BR. I'm not saying this is completely a bad thing, suppose he's making £75,000 a year from his other investments, well then it's a sensible move. 

There are considerations beyond the simple numbers too, as a downswing might mean he then has to sell action for £1500 tournaments etc which would lead to an even bigger loss of earnings.

I guess the point of this is that gamblers who insist on keeping a large amount of cash liquid are not necessarily being as wreckless as people often think - although quite a lot of the time (depending on the person obviously!!) they are

[Magic817]

I think if buying a house means you reduce your potential to make money in poker by any significant amount, then it's a bad idea, financially speaking.

I've put it off for a long time, as it's definitely a disaster (again, financially speaking) if I buy one and have to drop down in stakes, and would be same for pads.

However, if the house money is spare, then I think it's better put in a house, than into a bar or restaurant or some other industry where you have no experience and are basically just punting, even if smart people are involved in the project.

Think this nails it, especially the last comment.

[Doobs]

I think if buying a house means you reduce your potential to make money in poker by any significant amount, then it's a bad idea, financially speaking.

I've put it off for a long time, as it's definitely a disaster (again, financially speaking) if I buy one and have to drop down in stakes, and would be same for pads.

However, if the house money is spare, then I think it's better put in a house, than into a bar or restaurant or some other industry where you have no experience and are basically just punting, even if smart people are involved in the project.

Think this nails it, especially the last comment.

Buying a house when you have no experience must be just punting too?  Just because houses have gone up for 20 years doesn't mean you can't lose.  Pads is living in one of the most expensive parts of the country.  Surely it is at least possible you can lose there? 

Interest rates are rising, Brexit could be a disaster for the UK and London. 

[cambridgealex]

I think if buying a house means you reduce your potential to make money in poker by any significant amount, then it's a bad idea, financially speaking.

I've put it off for a long time, as it's definitely a disaster (again, financially speaking) if I buy one and have to drop down in stakes, and would be same for pads.

However, if the house money is spare, then I think it's better put in a house, than into a bar or restaurant or some other industry where you have no experience and are basically just punting, even if smart people are involved in the project.

Think this nails it, especially the last comment.

Buying a house when you have no experience must be just punting too?  Just because houses have gone up for 20 years doesn't mean you can't lose.  Pads is living in one of the most expensive parts of the country.  Surely it is at least possible you can lose there? 

Interest rates are rising, Brexit could be a disaster for the UK and London. 

So long as I continue to live in London it doesn't matter really. If my house falls in value 20% over next 5 years then it's likely all houses in London do the same. So if I move in 5 years I'll be buying a house 20% cheaper.
 

[Woodsey]

I think if buying a house means you reduce your potential to make money in poker by any significant amount, then it's a bad idea, financially speaking.

I've put it off for a long time, as it's definitely a disaster (again, financially speaking) if I buy one and have to drop down in stakes, and would be same for pads.

However, if the house money is spare, then I think it's better put in a house, than into a bar or restaurant or some other industry where you have no experience and are basically just punting, even if smart people are involved in the project.

Think this nails it, especially the last comment.

Buying a house when you have no experience must be just punting too?  Just because houses have gone up for 20 years doesn't mean you can't lose.  Pads is living in one of the most expensive parts of the country.  Surely it is at least possible you can lose there? 

Interest rates are rising, Brexit could be a disaster for the UK and London. 

So long as I continue to live in London it doesn't matter really. If my house falls in value 20% over next 5 years then it's likely all houses in London do the same. So if I move in 5 years I'll be buying a house 20% cheaper.
 

If you can afford to buy a house in London then you will likely be minted when it comes to buying a house elsewhere in the uk. I could not afford to buy a house there, a mate of mine has recently but he is a millionaire several times over and he could only afford an ex council flat for about £400k.

[cambridgealex]

If he is a multi millionaire then why can he only afford a £400k flat?