Transcript of the Gambler’s Ruin Problem Podcast, Part 3
Dave talks about the Gambler’s Ruin Problem, Part 3. 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!
This is the point I am trying to make. If you can get that 5% advantage, you will win. What will cause you to lose? Nothing. You can have fluctuations. As is true for the casino, you can over-bet the bankroll and cause fluctuations, but in the long run you will still win, assuming you have a large enough stake with which to play.
The key points here are that if you have the advantage you will win. When I hear guys say no, I can win more often. I make twenty bets a day and I play five days a week. Do the math. That is 100 bets a week. There are 4.33 weeks in a month so gamblers who say that are making over four hundred bets a month.
If a guy is out there playing with 100 units or fifty units or less, the number is there in an equation, depending upon his average odds. That equation would also tell him what his chances are of winning as well as what his chances are of losing.
But most people do not apply this equation. Instead, some people will flat bet and that is fine. But they will talk about how they have lost two or three months in a row. It depends on the magnitude of the number of bets you make. You need to know that if you have a 5% advantage the world is your oyster and it is all a matter of building the bankroll.
Building the bankroll logically indicates that you are escalating the bets which then change the unit size. The result is that you are suddenly starting new sessions and the whole thing changes. The point is that if you have an advantage, even a small advantage, it can be leveraged with compounding and that equation expands things. Do you really have an advantage? The only way you will know if you have an advantage is to track your bets.
A guy said to me: I make fifty bets a year. Those comments were actually posted on the webpage, paceadvantage.com. I use this example many times. I am not trying to beat up this individual. I happen to personally like his posts and I do not disbelieve him. “I make fifty bets a year and I get a 100% advantage. That was the exact quote he made to me.
Aside from the fact that you are making Walmart wages at fifty bets a year, the problem that he faces is it could be years, even decades before he has enough wagers to really know that he is a winning player. I get it. Everyone is going to say I will just count the dead presidents to which I say, ok.
What I am saying is that the guys that claim they have done well for three years and then lost for a year is, simply, that the likelihood of losing for a year means one of two things. Either: 1) you are not making a lot of bets, or 2) you simply do not have an advantage even though you did have an advantage in previous years. Perhaps the world has changed or it may be that your system has changed. What I am talking about here is, simply stated, denial of truth. Winning players win and losing players lose.
What about the casual player? Suppose that describes you, a person that plays once or twice a week at one or two tracks where you make a few bets. Sometimes you win, other times you lose. You go up, you go down.
Go back and compare the withdrawals from your account with the deposits that you made and you will find that you have not been winning as much as you have been losing. I will not say it is impossible to win. Of course, it is not impossible. But it is pretty rare to find a casual player that is actually a winning player.
I am not here to beat you up. I am also not suggesting that you have to quit the game. I actually got an email from someone after I did a show somewhere. I may have been talking on Derek Simon’s show. It is one that I so dearly enjoy. I got feedback from a gambler that said, you are telling me I cannot win.
Yes, that is exactly what I am telling you. You cannot win in the long run. I have used the golfer example, the PGA golfer story and it is all true. There are plenty of golfers that play very seriously because they love the game. They know that they will never be on the PGA tour or win a purse. That does not mean they should give up the game. They enjoy the game.
I am very passionate about this because I see people who do not give themselves a chance to win. First of all, if you are playing quick sixes, I wish you luck. But, with the size of the take-out, you might as well buy a lottery ticket. The payouts are similar and the chances of hitting are very small, somewhat like what awaits you if you play a slot machine with a big jackpot.
If you are playing for hundreds of thousands of dollars in payoffs, you might be that one guy that gets it. It is like getting struck by lightning. On the other hand, if you are realistic and simply want to win and you do not mind that it’s difficult to do because the odds are about 26:31 it’s okay to press your luck.
If you go to OTB, the race book, or you play at home and fill your ADW account and play to get lucky, that is fine and wonderful. You can be a skilled player. But the key is to put yourself in a position where you are capable of winning and that is Part Two of this conversation.
Just to be clear, Part One of the conversation, what I am trying to get people to see is 1) if you have an advantage, you will win in the long run even if you bet the bankroll incorrectly. If you over-bet your bank- roll and you go broke, you will come back with another bankroll and you will probably over-bet again. Eventually, the money will come to you just like the money comes to the casino, as long as you have an advantage.
Part Two is different. If you have a disadvantage and you bet tiny units, you cannot possibly win. That kind of betting will simply grind you down. What are the chances of winning when betting just $2 a pop? What are the chances of winning $100 if you bet $2, $2, $2?
You have to go fifty units and up. That is pretty hard. You can do it in one race if you bet horses that are 50-1 and higher. But the more realistic, pleasurable way of enjoying the experience is to get lucky. You can put together a parlay or bet some exactas. There are all kinds of ways to do it. Part Two of this is as follows: thou shall not flat bet or bet small units if you are a losing player or a negative expectancy player.
When I dealt craps, I would have people come to the table and bet just $1, $1, $1 or just $2, $2, $2 and I would say why not enjoy playing? Why not just let loose, bet $1 and stack it up four or five times? Win for $1 then bet $2. If you win for $2, bet $4. If you bet $4 and win, go to $8.Then put some of the winnings in your pocket and bet some more back.