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Thread: Question for Don - Forecasting Investor ROI

  1. #1


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    Question for Don - Forecasting Investor ROI

    Don,

    How does a responsible team manager give a reliable estimate of the ROI for prospective investors?

    The hourly EV and SD are known along with N0, cumulative EV and SD for N0 hours of play, and the expenses associated with N0 hours of play. Additionally, RoR and probability of hitting goal for a set number of rounds is known.

    With all that being said, how does one forecast ROI? I'm not sure how RoR factors into the ROI calculation if at all. Is the basic idea simply to tally hourly EV over N0 hours of play, deduct forecasted expenses, take the investor share and then divide it by the amount the investor invested?

    For example, if hourly EV is 50 bucks over 200 hours (N0) then that gives $10,000 in gross earnings. Let's say there is $2000 forecasted in expenses which leaves a net win of $8,000. If the investor cut is 50% then they get $4,000. So, their ROI is $4,000/$10,000 = 40%. That is well and good but how does RoR factor into all of this? What if the RoR associated with the venture is 50%. Do you think it is responsible to tell the prospective investor the projected ROI is 40% given the staggering RoR?

    Thanks,
    MJ

  2. #2


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    I am not Don, and he has much to say about teamstuff in BJAIII that I recommend reading. I have, however, managed several teams including one that is active now.

    Otherwise this is a way too complex a subject for a forum response. Team structures and team management are frought with unintended consequences and one should proceed with caution.

    Our current team bank is managed as a perpetual fund with rules for deposits and withdrawals. How you distribute team results is a judgement issue that is usually influenced by your overall objectives.

    How you measure player performance and production is critical.

    ROR for team play is set by policy and enforced by team management. We play at RoR <1%.

    There are a myriad of other issues and considerations. If you want to discuss, PM me to contact.
    Luck is nothing more than probability taken personally!

  3. #3


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    Quote Originally Posted by MJ1 View Post
    Don,

    How does a responsible team manager give a reliable estimate of the ROI for prospective investors?

    The hourly EV and SD are known along with N0, cumulative EV and SD for N0 hours of play, and the expenses associated with N0 hours of play. Additionally, RoR and probability of hitting goal for a set number of rounds is known.

    With all that being said, how does one forecast ROI? I'm not sure how RoR factors into the ROI calculation if at all. Is the basic idea simply to tally hourly EV over N0 hours of play, deduct forecasted expenses, take the investor share and then divide it by the amount the investor invested?

    For example, if hourly EV is 50 bucks over 200 hours (N0) then that gives $10,000 in gross earnings. Let's say there is $2000 forecasted in expenses which leaves a net win of $8,000. If the investor cut is 50% then they get $4,000. So, their ROI is $4,000/$10,000 = 40%. That is well and good but how does RoR factor into all of this? What if the RoR associated with the venture is 50%. Do you think it is responsible to tell the prospective investor the projected ROI is 40% given the staggering RoR?

    Thanks,
    MJ
    You never said what the investment was until the very end, when you assumed it was $10,000. But you didn't state that upfront. No, I don't think ROR should impact ROI. ROR more properly would influence what the ultimate Sharpe ratio or SCORE would be. Two ROIs can be identical, but one can involve a lot more risk than the other. So risk should be disclosed, but it isn't a component of ROI.

    Finally, I agree that, for a team venture with investors, ROR should be so small as to practically be irrelevant.

    Don

  4. #4


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    Quote Originally Posted by Stealth View Post
    ROR for team play is set by policy and enforced by team management. We play at RoR <1%.
    I understand RoR should never exceed 13.53%, but I never understand why RoR should ever be lower than 5%.
    Assume the goal is to grow the bankroll as fast as possible, I guess the optimal way to execute is to adjust the bet ramp as frequently as possible, preferably after each session. Make sure the bet ramp will always has a RoR that's not too low, and won't exceed 13.53% in short-term BR fluctuation.
    If constantly(after each session) adjusting the bet ramp to 8% RoR, the career RoR is essentially much lower than 8%, or theoretically nonexistent.
    I don't understand the benefit of keeping a very low RoR, except for three reasons:
    1. Emotional issues, heart attack, good sleep.
    2. Bankroll is too big, bet ramp exceeds the table maximum.
    3. Less heat.
    Someone please educate me what's the motive of keeping a very low RoR except for three reasons above.

  5. #5


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    Quote Originally Posted by San Jose Bella View Post
    I understand RoR should never exceed 13.53%, but I never understand why RoR should ever be lower than 5%.
    Assume the goal is to grow the bankroll as fast as possible, I guess the optimal way to execute is to adjust the bet ramp as frequently as possible, preferably after each session. Make sure the bet ramp will always has a RoR that's not too low, and won't exceed 13.53% in short-term BR fluctuation.
    If constantly(after each session) adjusting the bet ramp to 8% RoR, the career RoR is essentially much lower than 8%, or theoretically nonexistent.
    I don't understand the benefit of keeping a very low RoR, except for three reasons:
    1. Emotional issues, heart attack, good sleep.
    2. Bankroll is too big, bet ramp exceeds the table maximum.
    3. Less heat.
    Someone please educate me what's the motive of keeping a very low RoR except for three reasons above.
    Those 3 are good reasons. I think most glaringly is #2 and #3, even though they're pretty similar. The goal isn't only to make as much money as possible, but to kinda smooth it out. Remember, a pro's bankroll isn't just used for gambling but also for expenses. Whether you win or lose, you're going to have to pay (for example) $3k in living expenses that month plus however much for travel. At full kelly, if you have a -3 SD hour-session, there goes about 25% of your bankroll (at least according to a sim I just did). Expenses, without a doubt, make ROR go up...and a pro can absolutely NOT afford to go broke or lose too much of his bankroll.

    Everyone is in a different situation and has different goals. One person might have a regular day job and if his bankroll goes bust, oh well, he's still going to get paid next week from his job, and he'll be able to save up for a few months and come up with another bankroll. A pro doesn't have that luxury.

    I wish CVCX had an option to include expenses and it'd show up on the ROR calculations and adjust your bet ramp for that.
    "Everyone wants to be rich, but nobody wants to work for it." -Ryan Howard [The Office]

  6. #6


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    Quote Originally Posted by San Jose Bella View Post
    I understand RoR should never exceed 13.53%, but I never understand why RoR should ever be lower than 5%.
    Our team is driven by integrity, longevity and profitability. Math is used and needed to determine how to achieve optimal profitability. Other considerations are needed to comply with other objectives and may require certain math tradeoffs to achieve acceptable profitability. A team bank is frequently large enough to allow bet levels far above casino tolerance in many cases. You can not run with bet levels that are "one size fits all"! You must plan and adjust for the different games and environments.

    Managing the variance in a blackjack team is difficult for many reasons, some are the correct math, some are just good business and some are psychological as we need to keep people motivated to play. For example, when you have lost 25% of your bank in 2 days you will begin to understand the reasons that very low RoR is a good thing, almost regardless of the math.

    Your question was regarding team play and then you propose adjusting your bets after each session. Not going to happen with ~15 team members all playing at same time in four or more different states. So, what is the RoR in this environment with different games and different bet levels all happening simultaneously? You will need to know.

    Understand that the scope of issues at play with a team are not the same issues for a lone wolf AP, I can assure you that while your team plan must be based on solid math, it must also be adjusted to fit your team structures and people.


    Stealth
    Luck is nothing more than probability taken personally!

  7. #7


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    Quote Originally Posted by Stealth View Post
    Managing the variance in a blackjack team is difficult for many reasons, some are the correct math, some are just good business and some are psychological as we need to keep people motivated to play. For example, when you have lost 25% of your bank in 2 days you will begin to understand the reasons that very low RoR is a good thing, almost regardless of the math.
    Right, motivation could be another reason. If some members lose simultaneously, it would be somewhat depressing.

  8. #8


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    if you split after doubling, which is the approach I recommend, then their share would be half of whatever they invested.

  9. #9


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    Quote Originally Posted by Meistro123 View Post
    if you split after doubling, which is the approach I recommend, then their share would be half of whatever they invested.
    This works OK for the small group weekend trip, share a bankroll structure. Not so much for an ongoing team of 6 or more.

    Beware, there are many issues and unintended consequences with this concept for team compensation.
    Luck is nothing more than probability taken personally!

  10. #10


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    Don or Stealth, do you think projecting ROI for the investors is a good idea? What do you think of the method I used in my OP?

    Thanks,
    MJ

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