Transcript of the Gambler’s Ruin Problem Podcast, Part 2
Dave talks about the Gambler’s Ruin Problem, part 2. It is a real equation for those who do not know. Not only is he recommending the book from which he first learned of the Gambler’s Ruin Problem but he’s sharing his experience and teaching on it!
“In horse racing, the player can, through proper skill, gain the advantage over the house.“
The more units you need to win a session, the greater your chances are of losing the session. Bets of just $4 will, in fact, leave your chances of winning pretty much decimated, or even destroyed.
At 50 units per session, you will win approximately 5 times for every 1,000 trips!
At 100 units per session, you will win just 3 times out of every million chances!
I really want you to get a feel for this because you need to understand how high the negative expectancy is if you play a game with a 5.26% edge against you.
Now, imagine if you were plotting this on a graph. You would have to know how you would plot your winning streak and how you would plot the losing streak for the house. Imagine, as well, the kind of streak you would need to get 100 units ahead betting just one unit at a time.
I assure you the mathematics is sound. You will find them in The Casino Gambler’s Guide.
The point is that a small disadvantage will destroy the player, in the long run, every time, all the time.
If you have a negative expectancy, you will lose!
We have been talking about an even money game. As the odds increase, such as when you are betting horses at 3-1, you have a better chance at getting lucky than if you are betting horses at even money.
I do not mean lucky in one race. I mean compounding it to win successive times.
For a second, let us talk about the difference between the casino and the player. Imagine that you are standing at the roulette wheel and YOU have the 5.26% disadvantage. Or, if you prefer, imagine that there is a casino owner on the other side of the table, smiling every time you make a bet.
What is the difference between your side and his side? The casino has an advantage, period. That is never the case in horse racing. The casino has the advantage at roulette and you cannot make it go away. In horse racing, the player can, through proper skill, gain the advantage over the â€œhouse.
While the casino has the consistent and never-changing advantage, the player gets to control how much he bets. The question is, can the player, by controlling how much he bets, overcome the casino’s advantage?
The answer is, No, he cannot. The player cannot, in the long run, beat the casino. That is an absolute certainty.
Can he get lucky? Absolutely. Can he do it one unit at a time to the point of getting 100 units ahead?
No, it’s not going to happen in a hundred lifetimes.
The answer is No. The casino side has the edge and the player controls the bets.
What if the casino side controlled the bets? Is there anything that can be done to take away the house’s advantage? Is there any way the gambler could bet the money in some tricky way that would nullify the advantage? The answer is, NO! The gambler cannot do it. Nothing can be done, period.
The casino simply cannot create a way to lose.
By the way, if it could find a way to lose, don’t you think that there would be more than a few ultra-wealthy floormen who had people out there playing the roulette wheel with the floorman telling them how much to bet? The answer is, of course. It is a resounding Yes, they would.
There would even be casino owners who were taking money out of the casinos, skimming in their own way, if it could be done. It cannot be done. There is no way to turn a positive into a negative with the betting scratch. Can the wager size or the changing of the wager size cause more extremes so that the player may get lucky? Yes.
As I have said, if a gambler walks into a casino with $100, technically, the best way for him to play, if there is a negative expectancy, is to take every dollar he or she could ever wager in an entire lifetime,build one gigantic pile and make one bet. That provides the gambler with the best chance at winning.
Of course, that is not how it works. But that would be the very best way. I know there is someone out there who is going to say that it’s possible to over-bet the bankroll. If you could get the casino to over-bet the bankroll, I will invite you to go to a roulette wheel because you will be in charge of how the bets are sized. So if you can make the casino over-bet their side, you can bet more on your side.
You are in control of how much money the casino bets. They are betting whatever you are willing to put out. They are paying the reciprocal. You must get it solidly in your head that the casino with an edge will win every time, all the time, when it comes to extremes like 100 unit swings that are bet one unit at a time.
Now, let’s move to the real point. What if you are the one with the advantage? Forget roulette for a minute. Imagine that you have built yourself a system that makes this a 5% advantage. That puts you on the same side of the equation as the casino and you also get to control the size of the bets. You are in total control with an advantage. Guess what will happen. You will win every time, all the time. When I say every time, I do not mean that you win every day.
It’s just like going to the casino where, if you play a substantial session for a substantial number of units, you will win with your advantage every single time. Think about what I am saying. We are talking about a game where the odds are even. In the book by Allen Wilson, there is a formula for uneven odds. It is quite a bit more complex than this one and it is not something that is easily explained.
Click here to listen to the original podcast | Read Part 1 | Read Part 2(you are here) | Read Part 3 | Read Part 4
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