It's really hard to make a billion dollars.  Especially when you didn't start off with a hundred million dollars.

A company with a nine figure annual net profit is a milti-billion dollar company.  I'm too lazy to look up Party Poker's market cap, but I remember it IPOed at $8 billion, and even post UIGEA they are still probably worth ten figures.

So that's why FT's situation is so mind blowingly stupid. How the f*ck can a company whose net profit in a year is roughly the same order of magnitude (if not size) of it's asset base not have enough money to pay back its players?  What the hell have they been doing with the $100-200 million they made every year before this one?  I know hindsight is 20-20, but if I owned a (multi) billion dollar company, I think I would have foregone a few extra percent of return to make sure I had the cash on hand in case some of my accounts got seized!  It's not like last year you couldn't have figured out that asset seizure was a distinct possibility.  Facepalm.jpg.

The reason for this post is not to bash FT (again), but to talk about the Merge network.  So here's a company that could easily have started in some dude's basement (probably not how Merge started).  And over the past few weeks, it has climbed to the top 10 of poker sites.  A lot of people have said, why would you continue to operate when you know the DOJ is going to be all over your ass?!?  And it reminds me of a story that one of my economics professors told me (not sure if it's true, since it looks like WU lost a lawsuit).  But the jist was that when the phone was first developing, Western Union and Bell reached some kind of understanding where WU would have a monopoly over the telegraph business and Bell over the phones.  This was despite the fact that it was obvious the phone was the superior technology.  The point is that sometimes, having a short period of monopoly power is a powerful thing (and might be superior to longer term viability).  I mean if you started a poker site from your mom's basement and you were staring at a few hundred million a year in profit left by Stars and FT, wouldn't you go for it?!? Is it wrong to run a global poker site from Australia?  Last time I checked, playing online poker was not illegal in most of the US.  It would take you an awful long time to rub a hundred million in hundos over your titties.  BTW, in most modern societies, calloused nipples are generally considered a turn-off.

My understanding is that the Big 3 (well, more like the Big 2 and their pet chimp) wouldn't have gotten caught if they weren't doing anything shady on the processor end.  Maybe there's more to it - I don't claim to know.  But it could explain why Merge's cash outs are so slow.  They obviously didn't get caught in the fake DOJ-operated processor sting a few weeks back... and that shows me they are careful.  They have also temporarily stopped opening new US accounts...  again, being careful.  There are rumors that Merge will be shut down in 2 months, but I'm not sure if the DOJ has as much authority over cash in mattresses in the Philippines.  I'm no legal expert.  But if they did, I'm pretty sure all the drug cartels would be out of business by now.

Merge is now close to being a one billion dollar business, with tons of upside if the regulatory environment changes.  They now have something they conceivably want to protect.  And I think they will have seen what not taking care of customer's money can do to a business - thanks FT!  So I think my downside to increasing my Merge funds will not be as bad as FT - that's why I play.  But mostly because I friggin' love to play online poker!  I'd rather play small stakes than not play at all.  Suck me DOJ!  (later post)

It's really hard to make a billion dollars - usually.

PS.  I'm not suggesting you play!!!  Seriously.  And if you choose to play, you have to be super-careful with money management.  In particular, you need to have contingency plans.  (Later post)