The Man Who Broke Atlantic City
theatlantic.com
theatlantic.com
Made famous in books and movies, card counting is considered cheating, at least by casinos. In most states (but not New Jersey), known practitioners are banned. The wagering of card counters assumes a clearly recognizable pattern over time, and Johnson was being watched very carefully. The verdict: card counting was not Don Johnson’s game. He had beaten the casinos fair and square.
Card counting is not cheating, at least if you can do it without an external device. That's like saying that you can play this game but only if you don't think about it really hard. Even with card counting the casinos have a slight edge against you. They swap the shoe out frequently so that you have to reset your count.
The reason it's not illegal in NJ is because someone sued them and won. It should be legal everywhere.
As of January 2012, there are no federal, state or local laws which prohibit card counting in the United States as long as no external card counting device or person assists the player in counting cards.
BUT:
In all parts of the United States, with Atlantic City being the sole exception, casinos may ban any player for any reason including card counting as long as the Federal laws against discrimination based on race, creed, sex, national origin, age, or physical disability are not violated.
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I think that a casino should be able to kick out anyone that they want for any reason, including card counting, being extremely lucky, being a jerk, etc...
Also of note though, is that while Atlantic City casinos can't eject people for winning, they can hamstring them in a variety of other ways. Usually they just change the table stakes from "$100,000 max bet" to "$0.25 max bet" on whatever table the winner is on, severely limiting his winning potential.
It's entirely possible he'd just continue playing because he enjoys the came, and knows that for the time being he's "up".
For example, in football (soccer) it's cheating to punch the ball into the goal... but the associations that decide on the rules could make this perfectly fair play next year, just by deciding that they no longer define it as cheating.
In Vegas, it's worth noting that a casino can eject any player for any reason, whether they are 'cheating' or not. If they are deemed to be actually cheating, they have the potential to sue for recompense, as well as blackball the gambler from that (and other) casinos. Nevada also has state laws that define what cheating is[1] and what recourse the casinos have.
Card counting is considered 'illegal' by the casinos, but most legislation only applies to physical tampering, such as marking cards or using illicit devices. That won't stop the casinos from ejecting or blackballing you for counting.
In Atlantic City though, they can't eject you for card counting, but they are allowed to change the table stakes on you. If you're at a $10,000 a hand table, and wiping out the casino in a way they don't like, they're perfectly allowed to change the table stakes to 25 cents at any table you sit down at.
It's crappy, but you're still welcome to enjoy the gambling experience, just without the potential to win anything significant.
[1] - http://www.leg.state.nv.us/NRS/NRS-465.html#NRS465Sec083
Because of the recession casinos are desperate for high-rollers. To lure them in they offer perks. Some of those perks include slight modifications to the rules and a "loss discount" -- for example: losing $500k only costs you $400k.
This guy negotiated rules that changed his odds to 50/50. Then he negotiated an 80% loss discount, which meant for each $1 of upside, his downside was $0.80.
So to pull this off, you need $1m to put down, great negotiation skills, even better blackjack skills, good luck, and a very sophisticated understanding of stats.
The rules were generous but NOT totally even. The house still had around 0.25%, which is low, but not unheard of. Even on the Vegas strip you can find Blackjack games open to the general public under 0.50% house edge. Of course, that's with optimum general strategy, not "playing your hunches", which could easily open the house edge to 10% or more depending on how dumb you're playing.
My guess is that he was card counting, but not with a traditional system, and he wasn't using it to size his bets, just to make strategy decisions, which would be harder to detect.
The odds of beating 3 separate casinos, over a reasonable number of hands, even against a very low house edge, are quite small.
Edit: I would guess he's developed some algorithm for keeping track of swings and general variation, so he plays not hand by hand the way counting goes, but rather "batch" or "streak" While will also have wild swings of him making and losing lots of money, but if he keeps tabs on these variations, he can swing them in his favor over time.
He clearly knew more than the people who were watching him, so the fact that all the 'experts' were paying attention doesn't mean he wasn't following a winning strategy.
Also, the article made some reference to variation, without explaining the edge. I'm guessing there was a real point lost there.
He split his 8's to 4 $100k hands, and then doubled down on each, for 4 $200k hands. He just got really unlucky on each hand, that the point value was so low.
No one is writing stories about the millions of other high rollers who lost. It's entirely possible his outcome was driven entirely by chance alone. No card counting, no special expertise other than knowing the odds of the game. Just sheer luck. Unfortunately, that doesn't make for a very interesting read.
This article describes someone with a lot of money playing blackjack with bad bankroll management who quit while he was ahead.
If you do the math, you should see that after 14,000 hands with 0.25% house edge, the chance of a gain is around 40%.
what about the MIT Blackjack team? (I assume you're refering to Blackjack) ~ https://www.youtube.com/watch?v=gXR5sKR3f-E&feature=rela...
from the article it looks like pre-counting (odds) using software isn't factored or detected.
He plays blackjack.
This isn't a blog post or a new article. This is a short story. I thought it was interesting and I thought it was well written.
HN has a strong bias against anything artfully written (read: more than the bare minimum of words). I guess I shouldn't be surprised considering the crowd (mostly engineers, myself included) but it is sad to me when people do the 'TL;DR' thing.
HN has a strong bias toward allowing people to allocate their time based on their preferences. The tl;dr convention is tremendously useful because it allows people to make an informed decision as to whether or not to read the article, based on a summary which is (typically) more accurate than the headline.
In particular, if someone thought the article might have something new to say about the math of blackjack, the original comment would have dispelled them of that notion and therefore saved them some aggravation.
On the other hand, if someone was looking for a short story about the personality behind a famous gambler and didn't want to get bogged down in math, your comment may have enticed them to read. Thus, both comments are of value.
I would prefer people said "summary" or "precis" instead of "tl;dr".
In any case, it's only one of many conventions. Another convention is that "The Atlantic", "New Yorker", etc. write high-quality short stories and don't dive into technical details. It's sad that people feel that other readers here are ignorant enough of history to need additional clues about a 150+ year old magazine.
You get the info on the subjects childhood, house, car, wife/husband, children, upbringing, college, style of dress, appearance, office, eccentricities, pets, etc, etc.
There's a lot of human interest element in these stories.
And of course the are paginated to increase page views for advertising.
Not that there aren't good articles occasionally in the publications you cited, but there is way too much "Sunday paper" in it.
Kerry Packer's gambling is pretty legendary.
There's a story about how he was in a high-roller room in Los Vegas and there was a Texan (oil?) millionaire boasting about how big his ranch was.
Packer was annoyed at how noisy he was, so he walked over.
Packer: "So how much is this property worth then?"
Texan: "'bout $20 million"
Packer (pulls out a coin): "toss you for it"
Apparently the Texan didn't like that idea much...
Packer successfully invested a lot in building casinos in Australia and Macau. His son has taken over his empire and invested even more, though not as successfully.
He later said "You only get one Alan Bond in a lifetime ... and I've had mine".
"So my philosophy at that point was that I can afford to take an additional risk here, because I’m battling with their money, using their discount against them."
If he's already up significantly (battling with their money) the discount isn't likely to come into play. And he's still playing a negative expectation game so every hand he plays he should expect to give back a little of his gain.
I don't think we're getting the real story here.
“You’d never lose the million. If you got to [$500,000 in losses], you would stop and take your 20 percent discount. You’d owe them only $400,000.” ... So when Johnson got far enough ahead in his winning sprees, he reasoned that he might as well keep playing.
I don't quite see how this makes any sense - if you get far ahead in a winning spree, the value of your discounted loss diminishes significantly... doesn't it? For instance, if you won $2 million, the discount is now $100k on a $2.5 million loss, which is only 4% (much smaller than the initial 20% discount of $100k on a $500k loss)
Because the discount kicks in at $0.5M of losses, he should plan to lose bets for $0.5M first. This is a setup.
Now he needs play to win the bets for remaining $0.5M he has.
Because the odds are 50/50, after a few rounds of playing with the $0.5M he has, he's going to have lost half the hands, and won half of them. While he gets 2x for his wins, he gives up only 0.8x for his losses.
Net = 2x - 0.8x = 1.2x. He just had to rinse and repeat with the $0.5M he was left with. Though I'm sure he brought in a lot more money once the $0.5M loss kicked in the discount.
Just note that this explanation is a simplification. 50/50 odds (technically 49.75/50.25 according to Johnson) have to be accompanied by an even performance on double-downs and splits.
Probably his nights while he had the discount followed a normal distribution with most of them break evenish but as explained losses were cut off around 400K and winning streaks were allowed to spiral.
I don't really see luck being a major factor. In the long run he's going to have a blockbuster night and then get kicked out of each place just like he did.
he negotiated a .25% houe edge (roughly half of normal perfect play) and if he loses 500k he gets 20% back, each session independent.
check this analysis. he is +EV by martingaling his wins - 7/8 times he loses 400k with a 20% discount (400k x 7 x .80 = 2 240 000), 1/8 times he wins 400k x 8 with no reverse-discount = 3 200 000, so that's a mil in EV. if he pushes his martingale as far as he can his expectation grows superlinearly, which is why he martingales his wins until they cut him off.
is this math right? if he was -EV, the house would let him keep playing, hence telling him he can continue to play under normal rules. note he refused.
update: an easy way to see this (gross oversimplification) is if he plays only one hand/session he stands to win 100% of the money 49% of the time and loses 80% of the money 51% of the time.
We don't know whether he had several -$400K sessions before his big run. Gamblers and non-gamblers talk more about upswings than downswings.
There could be some other unmentioned factors that aided him a little, but the capped downside, a lucky run, and selective reporting are probably a sufficient explanation.
so it depends how he structures his taxes. if he can get his taxes calculated yearly instead of per session, taxes make him a bit less of a winner. if his taxes are calculated per session, he is -EV. this is the same problem that poker players face, IIRC the precedent there is that if you file as a small business you can sum your wins and deduct your losses annually.
(/me used to be a small-time poker player)
[1] expectation in blackjack is computable because perfect play is deterministic, expectation in poker is harder because it depends on human factors like your mood and your opponent's skill level and his mood. you can only measure past expectation. A lot of players think they are winners but are really breakeven or losers, but blame it on bad luck.
Taxes are always computed on net winnings annually. Filing as a pro can affect the rate and allow deductions for expenses, but even amateurs can deduct losing sessions against winners if they have documentation.
I spent a short time in the 'gaming' industry building electronic slots and other types of games. The word on the street was that the industry encouraged these types of stories. And, while maybe they didn't directly sponsor them, they looked favorably on them. These types of stories perpetuate ideas of the little guy beating the house.
The profit of the gaming industry comes from the average person thinking that they can beat the house, when, the fact they can't. When the average person begins to believe that they can't win, casino profits go down. As such, casinos put billions of dollars into R&D and marketing to give the average person the illusion that they can win.
I wasn't involved long enough in the gaming industry to be an expert, and I'm sure there are some exceptions. But, generally, to average people, of which I would classify 99.9% of the population, even those of us terribly smart people, the house advantage always wins.
"Many casinos sell laminated charts in their guest shops that reveal the optimal strategy for any situation the game presents. But these odds are calculated by simulating millions of hands, and as Johnson says, “I will never see 400 million hands.”
More useful, for his purposes, is running a smaller number of hands and paying attention to variation. The way averages work, the larger the sample, the narrower the range of variation. A session of, say, 600 hands will display wider swings, with steeper winning and losing streaks, than the standard casino charts."
By splitting them (following strategy) you give yourself the best odds of your choices, and according to probability, this makes it a better option in the long run. However, by splitting them, you are doubling the money you have risked on them, and therefor if you are only playing a single hand and then never touching blackjack again, you are basically risking twice as much money on a hand that, more often than not, you will lose.
Second, it is strongly implied (without details being given) that he has negotiated rules giving him an unusually favorable expected value per hand -- either a very slightly negative one (which would explain why Tropicana is willing to keep playing with him), or perhaps even a positive one that they keep overlooking. The only rule I saw in there that sounds odd to me is "calling the hand" -- is that a recent twist to blackjack or something?
> It was the dealer’s turn. He drew a 10, so the two cards he was showing totaled 15. Johnson called the game—in essence, betting that the dealer’s down card was a seven or higher, which would push his hand over 21. This was a good bet: since all face cards are worth 10, the deck holds more high cards than low. When the dealer turned over the house’s down card, it was a 10, busting him. Johnson won all four hands.
Pretty sure that by "betting that the dealer’s down card" it means that this was the logic behind his betting on the four hands, not that there was a seperate bet on it.
"Calling the hand" most likely refers to the kind-of-tradition of cheering on what you want ("come on facecard... COME ON FACECARD!!")
> "The tactic requires both great memory and superior math skills."
Not honestly true, at least about the maths skills. Memory... isn't how I'd describe it, though I suppose it's sort of right.
In my opinion, the most difficult thing is concentrating on multiple things at the same time (1. Keeping the running count 2. Counting how many cards have been played 3. Following the game itself and deciding what to do 4. Chatting with dealer / other players) - so this can perhaps be called "memory" as you have to remember these things all at the same time.
But for each thing you need to remember, it's a very simple thing on its own. Counting isn't about remembering the order of every card that's come out, it's not even about remembering what card has come out.
If you were to watch a video of a Blackjack game, i.e. you were left in peace and not doing anything yourself, few people would be incapable of counting the cards.
(here's an example of the "Illustrious 18" set of strategy index numbers for one counting system: http://bjmath.com/bjmath/tcindex/i18index.htm )
The house always wins, and they still won. This is, for each of them at just a few million, very cheap advertising. Consider how poker/holdem was hyped during the last decade, this is just the same in a different setting.
They will easily win those few millions each back and more. For every smart person such as this guy, there are thousands of idiots out there. The article itself mentions they're trying to lure in high-rollers. This looks rather obvious.
Thus, the title, how Atlantic City supposedly "got broke" by a man, seems very misleading in this context.
Still, maybe I'm missing something here.
Great runs are rare of course, but not unheard of. The reason people don't hear about them often is that very few players play at such a sophisticated level to minimize the house advantage to a paper-thin margin, and even fewer do so at a high-stakes table where this would make big news.
edit: I am completely serious
Card counting is a code phrase that translates to "if you don't let the house win, we won't let you play".
What makes it different is that we needed two things to leverage the $1 million he put up per Casino and the Casino management being fool-hardy enough to believe that they computed the odds on the change in rules and discounts correctly.
It would be like say oh stacking the deck in that the founders get one class of stock and everyone else another class which allows the founders to retain ownership control of a start-up.
You do not need to card count as he changed the rules to only have hand shuffled six decks in the shoe..I can with a certain memory system compute the odds on cards dealt from that shoe and so can you..its not hard..its simple math..