Quit While You're Ahead
From Wired How-To Wiki
Admit it: You saw 21 and fantasized yourself counting cards and rolling out of Vegas with millions in cash stuffed down your pants. There is only one problem with this scenario, which is that you're not part of a highly organized and trained team of mathematics grad students at MIT. The good news is that there are some statistical methods that you, too, can bring to bear on your game. Just remember that if a casino boss pulls you aside, you didn't hear it from us.
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Play card games
In the 1970s, Edward Thorp was one of the first mathematicians to prove that you could beat blackjack by counting cards. Card games are one of the few games in the casino—unlike roulette or craps, for example—where you have information. Unlike dice, which have no memory, a deck of cards has a standard and well-known set of suites, and you can see which cards are being played. In statistical terms, the player has a mathematical expectation greater than zero. Most counting systems require you to keep track of how many face cards are on the table, and adjusting your bets accordingly. Mathematician Richard Epstein charts out the optimal zero-memory strategy, but this is more memorization than most people are capable of after a couple of free drinks. Also, be subtle—while not technically illegal, most casinos will politely eject you from the table if they see you writing down the number of aces that are face-up.
Play the long game
The well-known Kelly criterion, or Kelly strategy, has been cited by Thorp himself and used by investors like Warren Buffett. Basically, it states that rather than trying to win each bet, you should optimize to improve your winnings over the long haul. That requires setting a budget (or “bankroll”, in gambler's terms) and only placing a certain percentage of your bankroll on each bet. That percentage is determined by taking into account the amount you're comfortable losing, and your odds of winning (or “edge”). If you set rules like this for yourself, you will avoid the chance that you will lose your mind and put the deed to your house on the table in the middle of a hot streak. It also prevents you from staking your life savings on game in which you have no edge, wisely suggesting that you walk away.
Remember the gambler's ruin
There are two well-known phenomena that occur at the gambling tables. The first is known as the “gambler's ruin”, which is used to explain many different mathematical equations that have the same result—if you keep playing long enough, you will have no money, either because the house has an infinite number of resources and can afford to keep playing longer than you can, or because people have a tendency to not reduce the amount they bet when they are losing. The second is the “gambler's fallacy”, which states that when an event hasn't occurred, it becomes more and more overdue to occur. A winning result isn't like a late bus—just because you waited for it doesn't mean it's going to come. Just because the last six times you flipped a coin, you got heads, doesn't mean that the next flip is more and more likely to become tails. The odds are still the same—fifty-fifty.
Just walk away
If the amount that you've lost is starting to make your palms sweat, just walk away. Even Edward Thorp walked away from a table where he was losing, saying, “My gambling strategy today is streamlined: I don't play much more than half an hour in one spot or win or lose too much there. If I start to lose, I cut my bets. I'm probably being cheated and I don't have time to find out.”
Based on an original article by Adrienne So.
This page was last modified 05:43, 12 May 2011 by howto_admin.
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