Gambling

I enjoy Vegas every so often so it seems a discussion about gambling is appropriate. I'm focusing this on table games. I have much to say about slot machines and poker, but that is for another time.

Reasons for Playing

Why would anybody gamble? It's a tax on the stupid, right? Wrong. That's a narrow way to view entertainment. A person might spend $1 on a lottery ticket to dream of winning big. Heck, I have an uncashed check from the IRS for $1.22 that I appreciate as art. 

People gamble for a thrill. Some imagine winning big. Others want to beat the odds. I once read an article saying that gamblers are motivated by the threat of losing money. Like a bungee jumper cheating death, a gambler wants the thrill of not losing.

There are plenty of other reasons for sitting at a blackjack table - socializing, flirting, showing off. But I want to focus more on the financial aspects of gambling.

How to Win

In the long run, you will not win at the casino, so a person must ask himself why he is playing. Once you understand your personal goal, you can find the style of play that works for you. 

Never Lose

I had a rich friend who didn't gamble much but liked to say "I always win in Vegas". He used a Martingale strategy. Basically, he would bet $1. If he won, he would quit. If he lost, he would bet $2. If that lost he would be $4. Eventually he would win and leave the casino. That's a totally valid strategy if you have unlimited wealth and the casino will accept an unlimited bet. In practice, my friend was betting $10 and was willing to lose.. I don't know.. perhaps $10,000 or so. That means a nasty losing streak could make him walk out of the casino a big loser.

Let's say my friend was playing craps. The chance of him losing 10 times in a row is 0.11% or basically 1 in 1000. That means 999 times out of 1000 he will win $10. However one in a thousand times he will lose $10,230. 

For my friend, that is the perfect system. Losing $10,000 would annoy him but wouldn't be a big deal. And that will likely never happy. Instead he gets to walk out of Vegas saying, "I won again" every time he visits.

 Hourly Fee

This is how most people play table games. They take money to the table and want to win but expect to lose. Mostly they want to have fun for a while. In this case, they are giving the casino a lot of "action" and action is how the casino makes money. 

For this example, let's say that a person is playing a game with a 5% house advantage. That could be Let it Ride, or Blackjack. A good way to think about it is that for every $1 bet, the house returns 95 cents. Over the course of thousands of hands played, the final result will end up very close to this.

A person who plans to gamble a lot should strongly consider this house edge. 5% of a $5 bet is 25 cents. That means you are paying the casino a quarter for the privilege of making a wager. Is that a good deal? Sure, sometimes. A quarter isn't much money. But if you are spending thousands of hours feeding quarters into the machine you will end up broke.

Variance

Ah, variance. My favorite word. This is the reason we gamble. In the investing world, variance is terrible, evil, and something to pay to remove. In gambling, variance is the only reason we are there. 

Variance is the likelihood of ending up with much more or less money than you start with. Let's say you have $10 and want to bet on the flip of a coin. A low variance option would be to make 10 bets of $1 each. You might break even and are unlikely to win or lose more than $5. The high variance option would be to bet $10 on a single flip. You are guaranteed to win or lose $10. 

Why is variance a good thing? Who would want to lose big? Remember that all bets in a casino have a house edge. A zero variance game would be "give the house a penny". A high variance game would be "put all my money on a single roulette number". 

What Should I Play?

What you play depends on your goals. Here are some ways that I play.

Free Coffee

I just want to sit at a table, order a free coffee and gamble a little. For this, Pai Gow Poker is excellent. In an hour I will probably win 2 hands, lose 2 hands, and tie a bunch. If my bet is $20, the commission on those two wins is $2. Plus a $1 tip for the cocktail waitress is $3 for my free coffee. Here I probably don't want much variance. I'd hate to run out of money before getting my drink.

Socializing

It's lots of fun to get a group of friends at the blackjack table. Ohh, the dealer has a 6, everybody double down! You got an ace... c'mon blackjack! I view this a paying the casino an hourly wage for the entertainment. Paying an average of 25 cents a hand (as I mentioned above) is likely to be about the same cost as drink at an overpriced cocktail bar. Here, moderate variance is good. A big winner in the group can buy everyone dinner.

Big Score

I get my thrills from the chance of winning a large bet. For that, I like to play roulette. A single bet on a single number pays 36 to 1, so a $30 bet will win over $1000. Here, I want variance. I expect to lose all of my money very quickly so I am not giving the casino much action. In the rare case when I win, I don't sit and keep playing, I take my money and dance around and brag to everybody how I won $1000, and I'm buying dinner because they are suckers for losing all their cash at Let it Ride.

Beating the Casino

You can't beat the casino. According to wikipedia 17 of the 30 largest hotels in the world are in Las Vegas. I'm not saying Las Vegas has more big hotels than any other city, I'm saying Las Vegas has more big hotels than all other cities combined. We are talking about a city in the desert deep smack in the middle of nowhere. You can't beat the casino.

But you want to try anyway. Here is what you might consider.

Card Counting

You can potentially gain an advantage over the house playing blackjack if you count cards. Basically, high cards are good for the player so you count how many are left in the deck. When the deck becomes favorable you greatly increase your bet.

This is fine as an academic exercise or perhaps to add another level of depth to your gambling experience. However it's a crappy way to make a living. I'm going to assume you don't want to do anything illegal or anything that will get you banned from a casino. You probably don't want to work with a crew. In that case you will be lucky to earn $5 per house of expected income. And this isn't fun and easy income like flipping burgers, this is mind numbing hours and hours of simple arithmetic. Spending hours and hours thinking 1+2-1+1-2+1+1-1+1-1-2+1-2-1 would drive most people insane. And remember variance. Now you actually don't want variance. Some month you lose money.

 I have a friend who counted cards for a while. Unfortunately he is cursed with a real job and realized one day that he would rather lose $5/hour drinking and flirting than win $5/hour sober in arithmetic hell.

If you really want to try card counting, the first step is to play a perfect Basic Strategy. Memorize it and deal yourself 1000 practice hands. If you get any wrong, deal another 1000.

Players Club Points and Video Poker

If you like video poker, great. You might as well get points for playing. But don't expect to win.

I have a friend who is super-deluxe-secret-diamond-platinum with one casino. It is somehow tied into his hotel and flight programs. He loves the VIP status. At airports he has his own private cabana with a staff of ass kissers. At hotels he gets to use the secret check-in desk that movie stars use so he need not associate with us common folk.

I asked him how many points he needed to earn for this status. It was 1,000,000. Most of those points he got from video poker. At 99.5% return on video poker, that means he spent $50,000 to earn super-VIP status. When I confronted him, he said, "sounds about right". 

For him, it might be worth it. He travels a lot for business. He didn't grow up rich so maybe he really likes all the butt-kissing. For me, I'd rather have the $50,000 sitting in a tax-deferred retirement savings plan.

The moral of this story is that the points systems will cater to some people, but you likely aren't that person.

I'm not anti-players club. If you are going to gamble anyway, you might as well sign up. When you lose $500 it's nice to get a free buffet and 2-1 show tickets. 

Craps Skill, Roulette Bias, Poor Shuffling

Any time I have looked into the claim of a skilled craps player it is bunk. I know humans are capable of amazing feats, but this is too much.

Modern roulette wheels are not biased. If you think you see a pattern, it is just your insanity poking through.

Some professional gamblers can spot poor shuffling techniques. They noticed when cards are discarded and how the clump together. On the next shuffle they can predict when a certain card is likely to fall. I don't doubt that happens, but that sounds like a lot of required skill. With the same time and money to get trained you could have gotten a PhD in something.

Poker

Beyond the scope of today's ramble. While it is true that a player can be good enough to beat other players, the reality is that you likely aren't that person.

Betting Systems

Just no. Any bet you make carries with it a house edge. You can't escape it.

Best Bets

Baccarat: Want an easy chance to simple win or lose? The house edge isn't too bad.

Blackjack: If you play basic strategy, this is a good game. Pro-tip, buy a strategy card in the gift shop. A $3 investment might save you lots of money. And you make friends with other players who know they should hit on 16 but are afraid to.

Craps: If you stick to the pass line, the house edge isn't bad. But playing the Odds is the best bet in the casino. There is zero house edge on the Odds bets. If you aren't playing full odds, you need to be making a cheaper line bet. Technically Don't Pass is better than pass, but the difference is so minor that it isn't worth pissing of Guido when you cheer when he loses his $1000 bet.