A few months ago, I showed the above picture to a few friends and got some buzz from it. Several of them asked what strategy I used and when they got mad at me for simply answering with, “Math” I decided that I should write this post. So sensitive jeez.
Admittedly I dabbled in a few casino games when I was younger, but as I learned about proper trading I started to shy away from it. Why? Because making money from casinos is a losing game. The mathematical odds are not in your favor. So the more you play, the higher your chances of losing in the long run. Eventually it just stopped making sense to even try playing in casinos.
That is, until I saw that sign above. This blackjack tournament was designed as a knockout competition. It was $20 to enter and upon entering, players are allocated chips that represent points. Each round consisted of 7 hands and players would bet these points to try to rack up as many as possible. At the end of the round, points are tallied before the next set of players enter and a new round is played. Those with the 7 highest scores by 10 PM were allowed to participate in the finals table. Each 7 hand attempt to qualify would cost a player an additional $20.
Like all other casino games, blackjack has a losing probability percentage, something like 48%? This means that out of 100 hands, we would lose 48 and the house will win 52. It’s a small difference, but enough to wipe out any player.
But what stopped me dead in my tracks was this realization. The sudden realization that in this tournament, I was no longer playing against the house but against other players! We are faced with the SAME probability, and as long as I can beat them I can win!
I needed a seat at the finals table, so I tried to rack up as many points as possible in only 7 rounds. Of course the only logical thing to do was go all-in in the first hand. If I get lucky enough to win in the first round, I can just bet minimum for the remaining six. Then I would just hope my points were high enough to reward a final seat.
First hand. All In. Bust. I’m out.
But, just because I lost this time doesn’t mean my strategy is wrong right? (Trading reference!) I decided to try once more.
I waited for the 7 rounds to end before jumping in with the next group.
First hand, All-In. Win! I’m on the board, but just barely.
So, second hand I bet half of my now double number of points. Win! I now tripled my initial price point. With 5 more hands to play before this qualifying round ends, I did the only thing that made sense. I bet minimum.
Min bet, min bet, min bet, round over.
Congratulations Dennis, you qualify for the finals.
This story has a sad ending however. I lost in the finals, first round. (Finals were conducted the exact same way. 7 hands, the player with the most points wins). But not without a lesson!
In the final table, the nature of the game was different. I didn’t realize that I no longer needed to rack up as many points as possible. I just needed to have more chips than my opponents by the end of 7 hands. With all of us faced against a 48% win probability, I should’ve bet against all of the players (myself included). For each of the 7 hands, I should have just placed the minimum bet. This way the odds in my favor would now be 52% because I’m betting that by the end, all of the players would end up with less chips than they initially started.
Instead, I went all-in in the first hand and lost.
To traders probability is everything! If the odds aren’t in your favor, don’t place the trade.