Loans, and a Little Advice by Phil Galfond

So I’ve played circuit events and traveled a good bit a few years back. I had a good job and had the time and money. Life  changes so i am hit or miss on what i can do live, but its all good.

I know that Drew and Gbear and a few other have started to get their feet wet on the “live” cirucut. I take it for granted I have always lived 1.5 hr from a Big Ring of casino’s in Biloix and a cheap flight down to South Florida if i need to go down there. I actually went to south Fl a few times a year but never for poker adventures. I seen this write up tonight and it is AMAZING, and i think it is a great read for anyone, live online or just a live.

The post starts off based off a thread on 2+2 poker about Erick Lindgren but lets bypass that drama and read the story for what its was written for.

– Mike (Kteller)

Lindgren, Loans, and a Little Advice

By On

Hey Guys,

Hope you’re all doing well.

I just became aware of the huge thread on 2+2 about Erick Lindgren.  I don’t have much to say about it, as I don’t know enough to give any kind of real opinion.  I was very disappointed reading through the thread.  Erick has been extremely kind, personable, and cool to me in our somewhat limited interactions.  I’ve always liked him a lot.  As far as loans, I once loaned him a small sum of money on FTP and he paid me back promptly.  That’s the extent of what I “know” about Erick.

I also know and trust some of the people speaking out against him, and have to assume that most of the accusations are true.

I don’t have anything else to say on the specific situation, but it does bring up some ideas that I’d like to talk about.  If anything I say below seems like I might be talking about Erick again, it’s only coincidence.

1) Some Advice for My Fellow Online Players

Let’s be honest with ourselves:  The online generation is comprised in large part of people who fall somewhere on the scale of your run-of-the-mill introvert to completely socially inept.

We are intelligent.  We have the desire or at least the ability to play and study countless hours on our computer, alone in our room (most people can’t handle a job/life like that).   If we became full time pros before finishing college, we are lacking in life experience.  Those of you who are 21 will often have less life experience than your peers, and wayyyyyyyy less than the 30-50 year olds in the poker world.

(This doesn’t all apply to everyone in the online poker community, but there are some who I think it’ll be very helpful to)

When you come to Vegas for your first WSOP, it’s intimidating. All of these players, even the ones you’ve never seen or heard of, seem to know everyone (especially in the mid-high cash games). They all know how things work at the tables, in casinos, etc. You’re nervous you’ll make a mistake of some kind, whether it’s at the table or just some kind of social faux pas (never seen that word spelled before… I had to look it up).

Your discomfort and the complete comfort of everyone else (as well as the very apparent everyone knows everyone situation) gives the illusion of established reputations and trustworthy people. Surely if this guy knows and is friendly with everyone, he’s a long standing and trustworthy member of the community, right? (obviously, no… not right)

Don’t get me wrong; there are a ton of super stand-up guys in the poker world, but there are also plenty who will angle shoot, lie, and steal. Be careful.

There’s sometimes a guy who seems really nice and cool, and he’s making you feel welcome in a place you felt like an outsider. Usually, this is just what it seems- a nice guy. However, a guy being friendly has nothing to do with a guy being trustworthy and ethical. As a matter of fact, almost every shady person I’ve met is extremely charming. They have to be in order to fool and take advantage of people like you.

If you know that you’re someone who’s uncomfortable socially, and you feel especially uncomfortable in your first live poker experiences, keep in mind that you’ll WANT to trust people who are nice to you, and you’ll want them to like you too. This could lead to you being more willing than you’d think you’d be to lend someone money. You may not want to seem like a dick when someone asks to borrow an amount that you can clearly afford. You’ll want to fit in.

I think a lot of people in our demographic have a hard time admitting weaknesses like this. They’re extremely smart, and that’s something they take a lot of pride in, so it’s important to them that they believe they’ll make good decisions in every situation. Be honest with yourself. You’re not good at everything. You have faults and insecurities that impair your ability to make decisions.

There are times when loaning money to people is a good decision. It can either be profitable for you immediately (if they’re going to continue to play with you, and poorly), profitable for you in the future (when they return the favor if you’re in need), or just a plain old nice thing to do.

You just need to be careful. Young players with a lot of money and no experience in the live poker scene are the biggest marks in the poker world.

Almost everyone I know has been burned at least once, myself included. Hopefully some of you can learn from this rather than from that kind of experience.

When betting with or lending money to someone new, the most important thing to do is ask around about them.  The poker community is a small one.  You should know someone who knows someone who can give you some info.

If you’re so unconnected that you don’t know enough people to ask around, ask yourself, “Why is this ‘established’ person coming to ME for a loan?”

The answer usually is that they either already owe money to everyone else they know, or that those people all know not to loan him money.

When I started to play higher stakes games, a TV pro who I sometimes played with (and who I genuinely like) got my contact info and asked for small loans from time to time.  He was often much slower than he said he’d be, but he paid me back each and every time.  In hindsight, I should have realized that he should have been asking his huge circle of poker friends for money, not some online kid who he didn’t know.  I think he was borrowing from more than just me, and I believe that had he run worse, I could have easily not been paid.  It’s hard to imagine that a pro you’ve seen on TV might be broke, or might be untrustworthy (not talking about this specific person), but it’s a very real possibility.

There are a few handfuls of people in poker who’ve shared with me their financial status at some time or another, and others who I’ve heard about their financials second hand.  Every single one of them had less money than the public thinks.  I’ve never known someone to have significantly more than their perceived bankroll.  Keep that in mind.

Once, playing a WSOP tourney a few years back, I played with a slightly well-known live player.  I didn’t know who he was at the time, but he clearly knew everyone and was very comfortable at the table.  He seemed to play very confidently and well.  We were friendly at the table… he was very personable and charming.

I ran into him in the Rio hallway later that week.  He said he’d found out more about who I was… didn’t realize I was such a big deal.  He told me about a weird spot he was in (I forget the details), and asked if I’d be interested in staking him for the remainder of that year’s series.  At the time, I heavily considered it.  I had no one to ask who knew anything about him.  He seemed to be well known and liked, and he played well, from my one day of observation.

I ended up declining, but I really shouldn’t have even considered it.  If he was so good and so trustworthy and connected, why would he be in a situation to ask me for help?  Surely, some of his many friends would be willing to stake him, right?  There had to be a reason.

I’ve interacted with this person many times since, and he’s always been kind and cool to talk to.  That said, I believe now that had I followed through and staked him, I would’ve gotten a bad deal and/or have risked not getting paid.

Just like you ask yourself why someone played a hand the way they did before making a river decision, you need to ask yourself why someone is asking for or offering you something.

This applies not only to loans, but to business deals: whether it’s staking related, an investment opportunity, or some other business venture.  There are plenty of business deals that can be mutually beneficial, but keep in mind that everyone will be primarily looking out for their own best interests.  If you don’t know someone well enough to fully trust them, and you don’t know the business well enough to have a very clear understanding of the value, you should proceed with extreme caution (if at all).

I don’t want to scare young guys into not trusting anyone, or thinking that everyone is out to get them.  That’s not the case at all.

I just want the new crop of online phenoms to be prepared.  Be skeptical.  Ask questions.  Remember that even though it feels like you do, you don’t know a lot of things yet.  I promise.

 

2) Poker and Debts

It seems that some people think money being owed is a sign of something wrong, and that debts that last longer than a couple of weeks are the result of someone irresponsible or shady.  This just isn’t the way it works in the poker world.  Debts are standard.

Money being owed back and forth is almost unavoidable.  Maybe “unavoidable” is technically the wrong word for it, as you can decide never to let yourself owe or be owed money, but it would be very impractical to do so if you’re a higher stakes pro.

It’s not easy to have huge sums of money everywhere that you might play (FTP, Stars, Bellagio, random casinos for WPT/EPT, etc).  Sometimes you run out of money on Stars, and borrow from a friend who has a lot.  Sometimes you lose $500k in a live game, and don’t have any more money in Vegas, so you borrow from someone who does.   Of course, you return the favor when your friend is in need.  You both are better off because of the relationship than if neither of you lent money.

There are times when you’ll bet with someone, and as a result, one of you will owe the other money.  There are also times when you may take 25% of someone’s action in a bigger game.  Again, someone owes someone.

In my opinion, there are three different kinds of debts, and they should be handled differently.  This means that you absolutely need to know what type of debt it’s going to be before you get involved.

Money They Have:

This is when someone owes you money (for whatever reason) that they have elsewhere.  If they can’t pay you back the way you paid them, they have a backup way to get it to you.   Either they’re short on money online, but have plenty in cash, or the reverse.

I’d further divide this into two categories:

-Relationships where money goes back and forth all the time

With friends you know well, where trust is 100% and money is owed in each direction all the time, it’s very normal to not have a payback plan, or to discuss when the money will be returned.  You have outstanding debts all the time, as it’s just easier than constantly settling up.

At this moment, I owe probably three people money (one of them a large amount), and three to five people owe me money.  I think I owe slightly more than I am owed, but that’s not really relevant.  None of us are worried.  If any of us urgently needed to collect because we were short on cash, the other would do everything they could to settle up immediately.

I have had some friends who are very slow to pay back; even at times I’ve needed the money.  This is different than just not having a payback plan.  I’ve never feared with these people that they didn’t intend to pay, but I tend to be less likely to loan them money as a result, just due to the risk of major inconvenience.

I’ve also had friends who end up never having money to lend me, and asking to borrow all the time.

In either of these cases, you shouldn’t feel guilty denying your friend a loan.  It’s just not a fair relationship to you.  That said, I still do feel guilty at the thought of saying no when I have plenty to loan out.  It’s human nature.

-Relationships where debt is rare or new

I have almost never borrowed from someone who wasn’t a close friend.  It’s happened occasionally, and other times I’ve made bets with people, so it’s happened that I’ve owed acquaintances money.

If I ever owe to a non-close friend, I payback as quickly as possible.  If I may be unable to payback right away, I’ll let them know beforehand.  Ex: “I’ll pay you back after today if I still have it.  If I lose this, I’ll wire you the money by next week.”

A looser version would be: “Mind if I hold onto this till I run it up?  If you ever need it back quickly, just let me know and I’ll figure it out right away.”

I think that expectations of payment should be very clear cut.

Money They Don’t Have:

When someone is borrowing money that isn’t just for short term convenience, it becomes a whole other situation.  If someone borrows $100k, and they have a current net worth of $15k, they are asking for a much larger favor (Especially if they have no side income).

If they lose your $100k, they may not be able to pay back for a long time.  They may never be able to pay you back if they stay broke; especially if they go on to borrow from five other people and end up in huge debt.

Obviously, the person lending understands the high risk nature of a loan like this.  I’ve sometimes heard of people offering or requesting interest on these higher risk loans.  I think it’s pretty reasonable to do so.

I had a situation almost like this once, a few years back.  Due to a combination of unforeseen expenses and a bad run, I found myself too short on BR to continue playing nosebleeds.

As I was deciding what to do, a good friend (very good friend, as you’ll see) offered to loan me $1m indefinitely with no interest.  I insisted that I’d pay interest if I took it, and thanked him for the offer.  I ended up declining and playing smaller to rebuild, but I will always remember how generous my friend was willing to be when I was in a tight spot.

This loan would have been kind of like the above, but I did have money tied up in other places.  Had I lost the $1m and more, I could have liquidated and paid him back.  I personally will never borrow an amount of money greater than my net worth, unless perhaps I had a very reliable stream of income that would quickly cover it.  I don’t think it’s necessarily wrong to borrow more than you can afford to pay back at the moment (as long as they’re aware), but I personally am not comfortable with it.

 

What to Take Away

The main point I want to convey from all of the above, other than just to explain some things to people unfamiliar with the world of high stakes loans, is that you need to know what you are getting into.  I believe it’s the duty of the person borrowing money to volunteer when and how they plan on paying back, and if they are borrowing money because they don’t have enough HERE or if they don’t have the money anywhere.

If you’re considering loaning, you should ask for this info if they don’t volunteer it (unless it’s with one of your long standing money-loaning relationship friends)

The ethics of how quickly to pay back may be slightly blurry, and everyone may have different opinions on that, but it’s clearly unethical and shady to lead someone to believe you have plenty of money elsewhere to payback a loan when that’s untrue.  Which brings me to my next thought…

 

3) Ethics and Calling People Out:

It came up in the 2+2 thread that there were people who wanted to publicly out someone for not paying his debts, but didn’t.  This usually happens either because the person who’d be doing the outing feels it’s not their business to call the person out publicly, or because they think it would hurt their chances of getting paid.

The latter, unfortunately, is a very good reason not to out someone.  I’d never ever blame somebody for putting their chances of getting paid back above some indeterminate amount of help they’d be giving the general public by calling the person out.

As far as it not being their business, I believe it depends.  If someone is doing something that you consider clearly crossing a line into unethical, I think they surrender their right to privacy when it comes to that issue.  Sure, it’s not my business to tell everyone that this person is broke.  But if that same person is borrowing money left and right from unsuspecting victims, all the while making it seem like he has the money to pay everyone back tenfold, I think I can say something.

This doesn’t only apply to loans.  If someone is cheating, or running some other kind of scam, people should know.

There are other factors to consider, though.  Do I want this person that I’ll be seeing and dealing with often to hate me?  Do I fear retaliation of some kind?  When it comes down to it, there are many reasons to NOT speak up when someone is out of line.  It’s an unfortunate truth.

What sucks about this is, without people speaking out, it’s very hard to truly know who to trust.  For instance, everything I’ve heard and seen would lead me to believe that people like Patrik Antonius and Daniel Negreanu are 100% trustworthy.  But if you came to me and said that one of them wants to borrow $500k for a couple weeks, asking if I could vouch… I mean, I don’t really realllllly know.  I’ve never had close financial dealings with them, and I barely know them personally away from the tables.  I’m very confident that they’re both stand-up guys, but how can I really tell you I’m positive?

I felt the same way about Chris Ferguson, who some people now blame for his part (whatever that may have been) in the FTP scandal.  I’ve even spent a little bit of time with Chris away from the tables, and he was an extremely kind, generous, awesome dude.   I hope that it comes out eventually that he did nothing wrong (other than perhaps not knowing as much as he could have), but I obviously can’t truly know his character from a few surface interactions.

I’ve actually been tempted to speak up a few times in defense of some of the people under public attack, but I’ve held myself back, realizing that I don’t truly know enough to make statements that are anything more than half-educated opinions.   Maybe I’ll say more on this another time.

The truth is, I’ve been shocked too many times now by finding out someone I thought I could trust wasn’t trustworthy.  I’ve learned to never be sure until I’m truly sure.

Another problem with everyone keeping quiet is that the person being unethical may not even realize they’re doing something wrong.  Sure, they’ll know that some people disagree with what they’re doing, but they often still believe they’re in the right.

From some things I’ve read, and my own experiences, almost everyone considers themselves a good person.  It’s a pretty basic human need to look at yourself in the mirror and think, “I’m ethical.  I do the right thing.”

I think there are very few people who believe that something is scummy or wrong and do it anyways.  They just come up with justifications for themselves.

“Some people do the same thing and get away with it.  I’m at a disadvantage if I don’t”  Yes, but if 95% of people aren’t doing it, you’re gaining an unethical advantage against them.

“He wronged me first, so I can be unethical in retaliation.”    But what if you’re wrong about him wronging you, or what if it’s a misunderstanding?  It is just your opinion, after all.  Now you’re just being plain unethical and doing things you know are wrong.

“Yeah, I know it’s not ideal that I don’t pay people back for as long as possible, but I’m gonna pay eventually.  I’m not stealing.”  Really, dude?

Because of this, I think that what we should do, if we can’t bring ourselves to publicly out someone, is to tell the person himself how we view their actions.  After writing that, it sounds very elementary school guidance counselor, but let me try to explain.

For example, there are still people today who publicly defend multiaccounting.  They think there’s nothing wrong with it, and it’s part of the game.

But let’s say someone they respect says to them, “Hey, I think multiaccounting is clearly cheating.  You’re in the wrong here, and it’s not close.”

What if three people they respect tell them the same thing?  Now the person might start to question his beliefs.  Maybe he changes his view of what’s crossing the line and what isn’t.

Maybe you get to hear the person out, and they explain their view, telling you why they think they aren’t in the wrong.  Depending on how you feel about it, you can argue with them, agree with them, or realize you now consider them a scummy person and don’t want to be their friend.

Maybe this does nothing, and I am just being an idealistic elementary school guidance counselor, but I truly believe that people don’t try to cheat and steal, for the most part- at least in their heads.  If we let them go on thinking that what they’re doing is acceptable, they’ll definitely never change their ways.

Even if we convince someone he’s being scummy and he doesn’t change anything, at least now he looks in the mirror and sees a scumbag.

Take care, guys.

-Phil

About KTeller

You can contact me or find out more about me here:

mike@kteller.com

http://pocketfives.com/profiles/kteller8/

Comments

  1. Very well written article. Kudos Mr. Galfond!

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