How Card Counting Can Help You Become an Advantage Player in Life

In the minds of gamblers, the dream of striking it rich far outweighs the reality of the less than favorable odds.  Nowhere is this more apparent than with the lottery. The odds  of winning the lottery are astronomically low  but when you factor in the millions of tickets that are sold, sooner or later someone will most definitely win.   Last month a high roller in Atlantic City hit the blackjack equivalent of  winning the lottery when he pulled in nearly $6 million. The odds, although slim,  were much greater as compared to the lottery  – especially when you factor in that he was playing at a $50,000 limit table.  However rare, it’s stories like this that drive people to gamble at the blackjack tables and purchase lottery tickets.

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On a riverboat casino I once witnessed a 21 year old kid parlay a $25 buy-in into $1000 in less than an hour.  As his chip pile grew so did his grin, and he insisted on high fiving me repeatedly.  I was happy for him but I was hoping he would take his money and run.   Instead, he tried to ride his luck even further – even increasing his wagers to $200, $300 a hand. He was playing with “house money” and he figured he had nothing to lose. However he did have something to lose and unfortunately the story had an all too familiar ending.  He hit a bad run and gone was his $1000 grin.

This is a common phenomenon among gamblers.  When they’re lucky enough to be up on a casino, rather than quitting while they’re ahead or  keeping the size of their wagers at a modest level, they become loose in their play and they take on even more risk.  There’s a disconnect between the perceived value of their gambling winnings and their actual value.  But $1000 is a $1000, regardless of whether it’s casino chips or a paycheck.

In behavioral economics, the tendency to value some dollars less than others is called “mental accounting”. This concept was developed by Professor Richard Thaler of the University of Chicago.  People tend to place gambling winnings in the category of “bonus” or “found” money.  People are  more likely to waste their tax refund or gift money as opposed to income earned on the job.

What contributes to gamblers placing less value on house money is the use of casinos chips.  The value of casino chips are cheapened in much the same way that credit card dollars are because there is seemingly no immediate loss of money. For some, credit cards and casino chips are like monopoly money.  Shoppers are much more likely to spend beyond their budgets on credit card purchases as compared to cash purchases.  When buyers  fork over cash, the value of of their hard earned money hits home.  In casinos it’s easier for gamblers to risk hundreds, even thousands of dollars when they’re pushing out chips instead of cash.

So the next time you’re fortunate enough to be winning at the blackjack tables, or receive a tax refund or bonus check, be sure to  keep your mental accounting in proper perspective.  If you don’t, it can be very detrimental to your financial well being.

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Many gamblers are intrigued by betting systems  based on the amount wagered and the outcome of the previous hand.   These  systems, which are touted in some books and all over the internet,  are betting progressions – the  most popular of which is the Martingale.   With the Martingale system you start off with your base bet, and if you  lose, you double your wager.  You continue to double up your bet with each loss until you win, at which point you return to your base unit.  If your hand pushes with the dealer, you  wager the same amount.  This approach produces a high percentage of small profit sessions.

This system may seem like a fool proof way to beat the house.  After all,  the odds of losing 7 or 8 hands in a row are slim.  As long as you finish a session after a winning hand,  you will walk away a winner.  But,  all progression bettors learn the hard way that  sooner or later you will get wiped out.  Eventually  you will lose 7, 8, even 10 or more consecutive hands and your session will end with a devastating loss.   When a progression runs into an  inevitable unlucky streak, the result is  financial ruin.   For example, if a Martingale bettor with a $10 base unit  loses 10 straight hands, he would  drop $10,230.  When you’re doubling your bet everytime you lose,  it doesn’t long for a small base bet to become a huge bet you can’t afford to lose. If you play long enough, at some point you will be hit with a painful  losing streak.  I know this all too well, having once lost  14  straight hands in Atlantic City.  If I had been utilizing a betting progression, the result would have been disastrous.

Betting progressions could work in a hypothetical world.   If you had an infinite bankroll and played at a casino which offered an  infinite table maximum, you would be able to whether the storm of any losing streak,  without fear of going broke or being constrained by a table max.  In  the real world however, gamblers play with a limited bankroll and table max’s are far from infinite.  House edge is what rules.  Simply stated – whoever has the advantage will come out on top. All casino games have a built-in edge for the house which is immune to betting progressions.   Due to their simplicity and often positive, short term results, betting progressions may be appealing to unsuspecting gamblers, but unlike card counting and other forms of advantage play, they do not hold up to the unforgiving laws of probability.

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Professional gambler has always been a moniker that makes me twinge.  As a card counter, I have never considered myself a gambler.  Investor is a much more fitting title for a professional card counter.  Some may say that this is an insignificant matter of semantics.  After all, both gamblers &  investors put their money on the line with the goal of making a profit. However, there is a big difference between the approaches & outcomes of a gambler as compared to an investor.

These are the traits of a gambler:

1)   A gambler does little or no research & preparation before taking on risk.

2)   A gambler hopes to win despite unfavorable odds.

3)   A gambler acts based on hunches, misinformation &  unproven systems.

4)   A gambler is affected by the emotions of greed &  fear.

5)   A gambler’s motivation is largely driven by thrill seeking &  entertainment.

6)   A gambler loses.

Conversely, these are the traits of an investor:

1)       An investor completes thorough research &  preparation before taking on risk.

2)       An investor knows he/she has a high probability of winning (making money) because the odds are in his/her favor.

3)       An investor utilizes a rational &  proven model or system.

4)       An investor does not allow emotions to influence his/her decisions.

5)       An investor’s motivation is not risk seeking &  entertainment.

6)       An investor wins.

These characteristics hold true not only in blackjack, but in just about any potential gamble/investment, whether it’s the stock market, poker, real estate or buying a fast food franchise. Gamblers tend to have a narrow, short-term view of risk versus reward, focusing primarily on the upside. On the other hand, investors see the big picture &  factor in risk when evaluating the long-term prospect of an investment. Of course even the savviest investment has an element of chance. But, if you have the right mindset &  implement a  rational, proven approach, you will maximize your odds of success.

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