jsearles and Chinamaniac debate about the value of his WSOP pieces

[DABADASS]

... I also agree that throwing around the word "stakeback" is just a fancy way to muddy the waters for unsuspecting donors.

I must admit that I've been confused about this mention of "stakeback" since the offer was announced. Can somebody provide an example -- a simple mathematical hypothetical -- of a deal offering "stakeback" and a deal not offering "stakeback"? (which, in my limited understanding, is just that the staker gets his investment back before "profits" are calculated... well, duh!)

A stakeback is in basically every staking arrangement. I skimmed his thread and I thought I saw someone mention make-up, but apparently I was mistaken.

Let's say someone stakes you for a $10,000 tournament and you agree to split the winnings 60/40. You end up cashing for $50,000

W/ Stakeback:

50,000-10,000= 40,000 * .4 = $16,000 for the person being backed, and $24,000 profit for the backer

W/o stakeback:

50,000 * .4= $20,000 for the person being backed, and $20,000 profit for the backer.



Basically, when you don't have a stakeback and you cash for more than the buy-in, the investor loses out on 40% of the buy-in compared to an arrangement w/ stakeback. (Using the 60/40 split mentioned above.)

So, if you cash 15% of the time, a stakeback adds around 6% per tournament. (Using the same 60/40 split)

Math:

$2,000 tournament, 15% cash rate (assuming the min-cash is > the buy-in, and same 60/40 split in favor of the backer)

$2,000 * .40= $800 * .15= $120 in EV gained by the backer (relative to a non-stakeback deal)

120/2000= 6% per tournament