Wednesday, January 07, 2009

The Gamble (Your E-mail)

More of you and less of me is always a good idea, and I received a ton of interesting e-mail about the gambling post. What I like most about the e-mails is that they represent an enormous divergence of opinion.

Here are some excerpts.
From M.J. Reese:
First, for most, it is the adrenaline of possibility. While you and I know the mathematical odds, casino games (successful ones anyway) are so structured as to hide those odds as long as possible. Yes, you will be milked, but games will milk you very slowly. Think of it like a game like "Crackdown." Crackdown is full of little "carrots" – little miniature victories that draw you in to seek more (orbs, capability advancement, etc.). So while you always lose in the end (in gambling, not Crackdown), it deceives you with little victories that allow you to fantasize about a path to victory and advancement. This is how casinos pull in the "hardscrabble."

Second, for the intelligent, it is the factor of having "superior knowledge." I only play blackjack (as do most intelligent gamblers) because I know every permutation and the appropriate response to every hand. Given this knowledge, the casino only has a 50.5-49.5 edge. Yes, still an edge, but close enough to a coin flip to give you a real chance on any given trip to come away ahead (if you can walk away).

Finally, for someone like myself, knowing the statistics, I know better than most when to hold 'em and fold 'em as it were. I know when a statistical run of victories is unlikely to repeat itself and to leave.

In the end, it is a thrill of intellectual exercise with the carrot of unlikely material gain attached.

The phrase "the adrenaline of possibility" is entirely wonderful, by the way.

Next, a more visceral explanation from Nick Johns, along with a discussion of something I never think about (ever)--the social experience:
Right to the point, leaving the casino with more than you came with is a #$%#ing rush.

...If you are playing say, Blackjack, it can turn into a real social experience. When the table is winning, everyone is having a blast. It feels like "Us vs Them," and taking the casino's money is almost palatable to your taste buds. Hell, even the dealer likes it because it isn't his money and he gets more tips when the house loses. I don't think this community aspect ever crosses a non- gamblers mind. But if you play Poker, that's a much more individual game. You can meet some really cool people at a table.

...Sure, you are better off not playing at all, but try telling that to the guy that turned $200 into $5000.

As a more direct explanation of that rush, here's a terrific story from John D'Angelo:
The last time I went to Vegas was for my friend Philip's birthday (we've known each other 20 years and are more brothers than anything else). I set aside a pot of money I was willing to lose and made sure it was an amount I could justify as paying for entertainment rather than thinking of it as an investment. I was going to be able to hang out with Philip (he's in the Army so we don't always get to hang out), meet some new people, play a game and have some fun. Now, I'm also enough of a nerd that I read up on the best strategies for most of the games, and decided that I'd stick to blackjack since it has the best player odds and you can play a solid game without needing to memorize a ridiculous amount of information.

Anyway, we were there for three days and two nights, so I made sure to split my money up so I had something to play with each night and only took that day's $200 with me to the casino. The first night we had a blast, but eventually I worked my way through my bankroll. Granted, the fun was mainly due to my friend Philip and I making fools out of ourselves intentionally (we wore suits the first night like Sinatra, even though we knew would not look cool at all) and also through just being the clueless (about an hour into playing we realized that our table was about 2 feet lower than the others and noticed the giant Handicap Sign that somehow eluded us when we walked up).

Next night, I take that day's $200 and we hit a few different casino's and start playing again. Within a few hours, Philip has blown through his cash, and I'm down to my last $30 at a $5 table. He heads off to grab a drink while I play a few more hands and we were planing to head out on the town once I bet the last of my cash. Philip wandered back 15 minutes later and I'm still hovering around $20, losing a few bets, then winning a few to stay even. He decides to run across the street to a bar we had hung out at the night before to wait for me and I'm sure I'll join him in a few minutes. Within a few hands I was down to my last $5 chip, and then before I knew what happened I was suddenly up to $100 through a few double downs and ratcheting up my bet with each winning hand. Mystified with what had happened I made myself a promise: every chip that put me over $100 I would put in my pocket and not touch until I left the table. My adrenaline starts pumping something fierce because I keep winning, never dropping below $70 and repeatedly hitting $100 and putting a chip in my pocket. I keep playing, I have a few more drinks, joke around with the dealer and I suddenly notice Philip walking back over to the table. I'd been playing for over an hour, but for me it was an absolute blur. I finish up my hand and pick up my chips from the table, which totaled about $90 at the time with Philip asking what was taking me so long. Before I can get out a word, I put my hand in the pocket where I was stuffing the chips and I lose the power of speech.

Wandering aimlessly over to the nearest slot machine stool, Philip is starting to wonder if I just had a stroke. I start pulling chips out of my pocket a few at a time, and I feel like some kind of party magician with a bottomless pocket of chips. The chips kept coming so I found somewhere to start stacking them and quickly realized I had $645 in chips front of me. I had gone from my last $5 chip to not only recovering all my losses from that night and the night before, but I was actually up $245 dollars for the entire trip. I didn't sleep that night I was so wired. I still smile every time I think about that feeling, and while I wouldn't say its the "best" feeling I've had in my life, it definitely is unique, powerful and near the top of the list. I couldn't even imagine the emotions involved in a high stakes game given what I got from a $5 table.

And one more, from DQ Fitness Advisor Doug Walsh:
I spent quite a bit of time in casinos -- far too much of it before I was even legally allowed to be in one -- and I can tell you that winning hundreds or even a few thousand dollars, does indeed feel so good that it does offset the losses. That said, the losses always leave you angry, second-guessing yourself, and feeling a bit foolish.

The best odds in the casino for the player are in baccarat and on the craps table (craps can be deadly if you don't know what you're doing though) and, while I don't always win, I do tend to win more than I lose. I started playing baccarat when I was 19. My dad would bankroll me about $1500 and I would drive 2 hours to Atlantic City and gamble according to the system he taught me and I would keep 50% of the winnings as payment for my time. There were days when I would lose the entire $1500 in 10 minutes and even though the money wasn't mine, sliding the final bet of $800 onto the table (progressive system) gave me butterflies. Most times, however, I would break even or win a grand or two. There were a few times when I won over four thousand. The feeling of having purple ($500) chips rustling in your pocket is awesome. The excitement of getting free rooms, free shows, and free 4-star dinners is worth it.

I was 20 and in a 64-man craps tournament in AC. I made it to the final table and was one roll away from walking out of their (underage, mind you) with $10,000. If the guy rolled a 5, I'd win the tourney. He rolled a 7 and I came in 4th. I will never forget that night.

I don't remember any specific losses.

What Doug says at the end is probably true for most people: the wins are far more memorable than the losses.

Here's some information from Manveer Heir about how to gamble at a casino that was echoed by several other people:
Like you, I'm a math guy. I don't care about luck, I care about numbers. I crunch them in my head. I know the odds on Blackjack and Craps are the best odds in the casino (yes, you are still more likely to lose, but it's just barely in the casino's favor). I also understand that while the law of averages says I will lose over time, that I will not play enough hands for statistics to catch up with me in that way. In other words, I can play craps for four hours but that's still not a large enough sample size to say I lose 51% of the time no matter what (the house edge on the good bets in Craps is just over 1%). There are going to be streaks in there, positive and negative. Hopefully, when I play, I get on the positive. Last time I was in Vegas in January, I paid for my entire 5 day trip from Craps. One table I was on shut down because the entire table was winning so much. The biggest thing is, I never spend more money than I can afford to lose and when I start winning I make sure I recoup my costs first and put that money away, that way if I blow all the winnings I end the day no worse than I started it.

More specifically, from Chris:
The house edge at blackjack is only about 1.5% at most casinos. Therefore if you play the lowest stakes possible ($3 in Colorado) you can expect to lose about 4.5 cents per hand. Blackjack dealers deal about 80 hands per hour giving you an expected loss rate of about $3.6 per hour. However casinos give you free alcohol while gambling, and the waitresses are motivated to provide good service because they get tips.. When I go to casinos with friends we play the lowest stakes and average 1-2 drinks per hour. Since this would run up a bar tab of more than $3.6 per hour we feel like we always come out ahead regardless of the luck swings we go through. Craps has an even lower house edge of .6% when played correctly.

Now, an e-mail from Dave that gives a different viewpoint (and a poignant one):
Interesting piece you have about your stay at the casino. I worked at one here in South Africa for a couple of years so I have seen the underbelly of the industry.

The myth that it is mostly the preserve of the wealthy is what we are made to believe by TV and the movies, but the vast majority of gamblers are poor and working class people. Wealthy people are that way because they don't throw their money away. When wealthy people do gamble it is infrequent and you won't see them in the public areas of the casino.

Every Friday I would watch exactly what you did; a family, obviously without too much money walking in, knowing that tonight was their night. Usually the father would say something along the lines of 'This is what I can afford to lose tonight' yet several hours later I would see them at the ATM, while their children stand around watching other kids play in the arcade. They would often leave at sunrise the next morning with that shuffle and despair.

Casinos are required here to pay out 60% of what they take in, so while the player is losing they win enough to keep them believing that the big payout is only 2 button pushes away. It is a system that reinforces the obsession with 'just one more try.'

Since those days I don't play in a casino, and I don't even buy lottery tickets. I also discourage people as much as I can without being preachy. It is a parasitic system that feeds on the hopes of people who have very little to spare.

Finally, an absolutely brilliant and concise explanation by Meg McReynolds of why casinos are so effective psychologically:
I’m not sure how much psychology you had in college, or how rhetorical your question about why people gamble when they know they’ll lose, but here’s some basic psych info on why casinos work.

Gambling provides what is referred to as a “random schedule of reinforcement”. A “constant schedule” would be a Coke machine. You do a specific behavior and get a reward every time (put in the money, press the button, get the Coke.) When it doesn’t work, the behavior disappears very quickly (you don’t put in another dollar after the first one doesn’t get you a soda). This is a terrible way to maintain behavior as a person (or animal) quits the behavior very, very quickly.

A random schedule, on the other hand, is a phenomenal way to maintain behavior. You know a behavior gets a reward and you don’t get it every time. Also, you definitely don’t get the reward if you don’t do the behavior. You also know there’s no way to predict when the next reward will come. Depending on the individual, the nature of the required behavior, and the perceived value of the reward, it can take almost nothing to maintain behavior. My dogs sit whether I have a treat for them or not, and it doesn’t take a treat very often to maintain that behavior. The behavior isn’t demanding/unpleasant, and they may get something nice, so it’s worth it to them.

I'd like to explore the concept of a "random schedule of reinforcement" in a future post, because it seems to explains so much in terms of human behavior.

Again, thanks for all the terrific e-mail.

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