steps: an about turn

After my last post it seems an appropriate time to slip in an article on the purported trappings of party’s steps, the essence of which was written and posted some time ago.

Single-table-tournaments (STT’s) typically consist of 10-players with a payout structure of 5:3:2 of the buy-in for the first three places. Cashing out in the steps though is more challenging. The goal is to win a place in the $1000+$65 STT [I] where prizes of $4500, $2500, $1800, $1200 are awarded to first through to fourth respectively. Entry levels ranging from a $10+1 STT right up to a direct buy-in ensure the dream is alive for all punters; each level guarantees two or three take the elevator to the next floor, some lucky-losers are afforded another crack at the same or lower entry-level.

Naturally, as is standard with STTs, rake is charged with a direct buy-in at each level. Finishing 3rd, for example, in a $50 + 5 entry-level (Step 2) merits a fresh shot at the same stage – an effective payout of $55. Unfortunately the prize fund is boosted by only $50 since an additional $5 is raked; so the site appears to ‘tax’ players on buy-in and payout. Uproar ensued, the value police alerted: this was a con to rake to death anyone misfortunate enough caught cycling the steps. Not being a prolific STT player, I only became aware of the steps product courtesy of a link posted to this excellent mathematical analysis.

The worst example was the $10 entry-level; the analysis claimed the effective levy for this step stood at just over 50%. Many marvelled how these players with no sense of value would need to wrestle a ridiculous rake to profit. Bowled over by the analysis, I rounded on Party too - another rip-off scheme, after all one needs to beat a 50% rake.

Now there was irony here, as those very people who boast how easily others are fooled and have no understanding of value, were themselves completely sucked in, as was I. In fact the problem wasn’t thought about deeply enough before determining it a mug’s game to buy-in at a low level. There were still angles from Party, but the principle issue should have been greeted with a ‘So what?’ rather than: “Shock, Horror!”. The rake is no big deal: it is the deal [ii]. A player decides to buy-in to a $200+15 STT with payouts of $1000; $600 and $200 respectively. Conveniently, STT’s with the following buy-in’s are also available: $370+30; $560+40; 950+50. The said player is committed to reinvest any returns direct into one of the higher buy-in STT’s. Assuming he has an average chance of locking in a prize in all the events the expected rake paid from the $215 investment is calculated as follows: $

15 + 0.1 x $30 + 0.1 x $40 + 0.1 x $50 = 27

Adopting the analysis linked to earlier: $188 equity; $27 rake: 14.4%

Sure it looks bad, however, this is what players are doing day in day out in all forms of poker; unless driven to cash out permanently, winnings will always be raked.

Example: chaospoker.com offer a deal: deposit $200 and play only $20 STT’s at $1 rake. However, you are precluded from withdrawing any funds until you amass $1000. This bears some resemblance to the step structure: a player buys in for a fixed amount, potentially plays an indefinite number of games but can’t cash until reaching a certain goal. You’re an above average player and expect to profit $1 from each STT. Now you’d anticipate enduring 800 tournies at a whacking cost of $800 in rake to attain cashout status. What would the advice be here: ‘400% rake on investment! Stick to the 10 % rake STT’s!’? Of course it is nonsense and perfectly transparent that winners will gain, some losers become winners, and others lose less or assume increased longevity through signing up. Although, no contract is ever drawn up people commit themselves to just this arrangement all the time.

If you still need convincing imagine Party choose not to pay out in full to anyone placing in an STT. Instead they pay cash plus a credit into another STT. While it infringes on liberties, it has no impact on value for the regular player: you were going to play again anyway. With some hocus pocus, though, the accusations could fly:

How much rake would an average player pay in a $50+5 event?

The expected rake is 5 + 0.3*5 + 0.3^2 * 5 + 0.3 ^ 3 * 5 +...... + 0.3^n*5 (I)

= $5 * 1/1-0.3 = $7.14 (summing an infinite series)

Rake on equity is 14.9%: it appears through the analysis to increase by nearly 50%, yet the game is evidently no harder to beat. This analysis doesn’t illustrate how demanding it is beat the ‘party steps’, it emphasises how tough it is to beat a raked game period, for the majority of people. It’s quite simply the law of diminishing returns applied to average on-line poker Joe; the step structure demonstrates perfectly what players are doing in all forms of the game day in day out.

If you beat the game at every investment point, then you beat the game (although you can beat the structure without beating every investment point): at the lowest step it’s 10%. The devious and sly aspect to the steps format is the flatness of the payout structure, this makes it somewhat harder to beat – sometimes there are 9 prizes! Although, the structure does appear to make life tougher, it is certain as mentioned earlier, and although there is less variance within the payout of each step compared to an STT, ultimately it is quite high – someone’s going to win a sizeable lump of cash. Unless it is delivered to big cash player it is likely to be cashed out or inactive – either way it’s not earning rake: not good for the cardroom.

So while the analysis is sound the conclusions drawn were false. It would be easy to construct a step structure offering better value than the current STT’s (e.g. 5% rake) but still appear horrendous under the scrutiny of the type of analysis applied previously. The value police weren’t comparing like for like. Similar rake is paid per STT whether it be standalone or step, the difference is you play more STT’s for the initial outlay, per unit investment, and so also additional rake.

A further criticism comes from the belief that most who enter are nothing more shark food, as a consequence of the opportunity afforded for pros to buy-in and wait for the battle-wearied, less-able nervous players stagger into the business end of the structure. It is a claim hard to refute and certainly must be priced into the decision.

If party’s steps could be considered a fair game, then prima’s ‘rounders’ must be viewed as a fantastic deal*. The structure is similar to steps, except the rake is redistributed in the payout except in the top tier. This translates to a significant reduction in rake per unit investment. Additionally it is much less of a shark-trap.

Instead of being rewarded with entry to another or higher level, payment is made effectively in the form of rounder’s dollars, which can be used to contribute to a buy-in at any level. Although to cash out a player must still pull up a chair in the big game, in which he may disadvantaged, over a period of time he can choose to play much less of them than in the restrictive party structure. For instance, consider a marginal winning player at $50 – any higher and he’s a loser; over the course of a year he plays many events and wins $1000 just playing $50 stt’s. He finally sits down and plays the big one with his rounder’s dollars. Over the course of the year only $1000 is poorly invested, -EV: what amount though, had he been forced to move up after each successful sortie? And what’s more the only rake contribution occurred in the main event.


* At least it was when a friend drew my attention to the benefits of Prima’s steps equivalent.

Next Article: Strange Attractors, July 14th