Why are we always arguing about markup?
Nothing says the WSOP is back like poker players arguing about markup on Twitter.
This year’s iteration of the never ending markup debate happened when Mike Matusow sold action for his $10,000 events at the series this year. These are some of the toughest tournaments in poker and Mike is selling at a markup as high as 1.5 for some of them, which is very high for tough fields like these.
I’m selling 50% of all my wsop 10 k or higher @YouStake come checkout my package! I’m giving a free 25% in my smaller tourneys for free to anyone who buys half of my 10 k or higher events! My poker games been real sharp & I’ve only lost 1 yr @wsop! Good luck us! #positivity
— Mike Matusow (@themouthmatusow) September 15, 2021
This led to the inevitable Twitter arguments we see every year about the ethics of markup. Some people argue that poker is a free market and if somebody can get a price they want, good luck to them, the backer was happy to pay it. Others argue it is unethical because you are selling a bad product to an uniformed audience. Plenty argued in favour of Matusow being able to charge what he wants, but the consensus seemed to be that he was not a big enough winner (or a winner at all) for those markups to make the investment profitable.
If you don’t know what markup is in the staking context I explained it a few years ago when this same debate was taking place around Phil Hellmuth. It’s essentially a premium the horse adds because they believe they are such a good investment, the market will pay a favourable price.
Unknowns lead to arguments
I think the reason why the markup debate rears it head every year is because we love to argue about skill in poker. Because of the variance and because of the many unknowns in any given hand, we can never truly know how good somebody is. The player who wins a huge tournament could have got lucky playing outside of their bankroll, the most talented player might be completely under the radar. Even things like when we see a player make a seemingly terrible or genius play we didn’t know if they were gambling or making an informed decision based on blockers, split frequencies and previous reads.
It’s really hard to make a definitive statement on another player’s ability so when a player does exactly that by charging a high markup, naturally we all pounce on it. Our BS detectors start working and we look for signs the player may be wildly misjudging their ability.
In chess we know who the Grandmasters are so debates like this don’t happen in the same way. In poker we can never say for sure who the best players are, and we have an innate need to fill in the gaps our knowledge, so of course this is what we argue about.
Win-Win situations
So is it unethical to charge a high markup that you cannot back up? I am reminded of this excellent quote from Ryan Daut from a few years ago when this same debate was happening when Johnnie Vibes got caught up with the Markup Police:
When I sell a % of myself in tournaments to someone else, we are de facto business partners going in on the same investment, we are both rooting for the same thing. I think it's unethical to knowingly offer your partner in a business arrangement a losing deal.
— Ryan Daut (@rcdaut) April 13, 2019
A good mantra in life is to always try and create win-win relationships with people you work with. We all know what it’s like to enter into a deal and discover you have been overcharged or underpaid by somebody, it leaves a bad taste in the mouth. There is often a misguided view of business out there that it is cutthroat, however in my own limited experience and after reading biographies of successful entrepreneurs, it does seem the people who get to the top do so by making lots of mutually beneficial partnerships.
I still agree with the free market approach, people should be allowed to charge whatever they want. However, that also means that others should be allowed to have their say on whether it’s a good deal. More importantly what Ryan Daut said about creating win-win situations between business partners is the ideal that backer and horses should both strive for.
Of course to truly reach this win-win equilibrium where everyone charges the right amount of markup we first must have an accurate view of our own ability. That will never happen, so we look destined to argue about this forever.
Is it wrong to charge high markup? Let us know in the comments:
