Planet Money Episode 749 Professor Blackjack

[Guest notorious546]

anyone hear this podcast yet?  thoughts on thorp or his new book?

 

http://www.npr.org/sections/money/2017/01/20/510810752/episode-749-professor-blackjack

 

“GOLDSTEIN: The formula worked. He figured out a way he could trade both call options and the underlying stock so that he'd be protected if the price of the stock went down, and he started making money consistently. A few years later, by the way, a couple of economists came up with this same formula. And they published it, and their work went on to win the Nobel Prize.

Anyway, Thorp starts managing money for some of his friends and colleagues, goes on to start an investment firm - the first one that is really driven by math and technology. And the firm has this incredible run of using quantitative techniques to find just one edge after another. For something like 20 years, it is one of the most successful investment firms in the country.

THORP: In, I think, 230 months, we had three down months. All the others were up, and three down months were all less than 1 percent.

GOLDSTEIN: So like that's...

THORP: We had...

GOLDSTEIN: I feel like that's not supposed to happen. Nobody makes a profit every month for 20 years.“

 

[Gardener]

Listened to it this morning on my way to work... Not that it's really important but from what I understand his technique of 'mastering' blackjack was based on the game where they only use one stack of cards as opposed to multiple now?

[Liberty]

Thorp's book here:

 

http://www.cornerofberkshireandfairfax.ca/forum/books/a-man-for-all-markets-ed-thorp/

[DTEJD1997]

Listened to it this morning on my way to work... Not that it's really important but from what I understand his technique of 'mastering' blackjack was based on the game where they only use one stack of cards as opposed to multiple now?

 

I used to count cards....

 

The "stacks" of cards are known as decks.  Back in day, Blackjack was either 1 or 2 decks.  At some point in the 70's, the casinos started using 4,5,6,8 decks dealt from a "shoe".

 

This makes counting only marginally more difficult.  You adjust the "count" to reflect the number of decks in use.  In advanced counting systems, the count may change your "basic strategy".

 

What DOES make 4,5,6,8 deck counting MORE difficult is that you have to hold your concentration for longer periods of time.  In single deck, once the deck is shuffled, your count starts all over, in a shoe game, you might have to concentrate & count for 20+ minutes.

 

As time has gone by, casinos have put in many different counter measures to combat counters.

 

1). They are changing the rules & payout on BJ.  For example, BJ pay 6:5, NOT 3:2!!!!

A rule change is that NOW dealers commonly hit on "soft" 17's.

Another rule change is upping the minimum bet.  For example, at MGM grand in Detroit, the MINIMUM bet is rarely less than $25/hand.  On weekends the minimum bet is $50/hand!!!  As a counter, you want to be the minimum (i.e. $5) and then when the count gets favorable jump you bet up to $100 or $200.  At $25 or $50 a hand, you need to have a bankroll of $5,000+ every time you sit down to play.  How many "counters" can do that?

 

2). Some casinos now use "CSM" or continuous shuffler machines.  After every round of cards being dealt, the cards are fed back into the machine, shuffled, and then dealt out.  Thus, there is almost no reasonable way to count the deck.

 

3). Casinos are much aggressive about "backing off" AP's & counters.  In ALL jurisdictions, counting cards is legal, HOWEVER, in most jurisdictions, a casino does not have to gamble with you.  They can "back you off".  Thus, as a counter, you can't ply your trade....

 

4). Finally, even if you are skilled counter, your advantage will rarely get more than 3% or so on the house.  A good advantage for sure...but a string of bad luck can easily wipe you out.  You need to have HUGE amounts of capital to deploy if you are going to be serious about counting...

 

Thus, while counting cards is not dead, it is a shadow of it's heyday.  AP's have largely moved onto Poker and sports betting for the most part...

 

 

[TwoCitiesCapital]

Listened to it this morning on my way to work... Not that it's really important but from what I understand his technique of 'mastering' blackjack was based on the game where they only use one stack of cards as opposed to multiple now?

 

I used to count cards....

 

The "stacks" of cards are known as decks.  Back in day, Blackjack was either 1 or 2 decks.  At some point in the 70's, the casinos started using 4,5,6,8 decks dealt from a "shoe".

 

This makes counting only marginally more difficult.  You adjust the "count" to reflect the number of decks in use.  In advanced counting systems, the count may change your "basic strategy".

 

What DOES make 4,5,6,8 deck counting MORE difficult is that you have to hold your concentration for longer periods of time.  In single deck, once the deck is shuffled, your count starts all over, in a shoe game, you might have to concentrate & count for 20+ minutes.

 

As time has gone by, casinos have put in many different counter measures to combat counters.

 

1). They are changing the rules & payout on BJ.  For example, BJ pay 6:5, NOT 3:2!!!!

A rule change is that NOW dealers commonly hit on "soft" 17's.

Another rule change is upping the minimum bet.  For example, at MGM grand in Detroit, the MINIMUM bet is rarely less than $25/hand.  On weekends the minimum bet is $50/hand!!!  As a counter, you want to be the minimum (i.e. $5) and then when the count gets favorable jump you bet up to $100 or $200.  At $25 or $50 a hand, you need to have a bankroll of $5,000+ every time you sit down to play.  How many "counters" can do that?

 

2). Some casinos now use "CSM" or continuous shuffler machines.  After every round of cards being dealt, the cards are fed back into the machine, shuffled, and then dealt out.  Thus, there is almost no reasonable way to count the deck.

 

3). Casinos are much aggressive about "backing off" AP's & counters.  In ALL jurisdictions, counting cards is legal, HOWEVER, in most jurisdictions, a casino does not have to gamble with you.  They can "back you off".  Thus, as a counter, you can't ply your trade....

 

4). Finally, even if you are skilled counter, your advantage will rarely get more than 3% or so on the house.  A good advantage for sure...but a string of bad luck can easily wipe you out.  You need to have HUGE amounts of capital to deploy if you are going to be serious about counting...

 

Thus, while counting cards is not dead, it is a shadow of it's heyday.  AP's have largely moved onto Poker and sports betting for the most part...

 

I like to keep it simple and play craps where I can get true odds. No advantage needed - just a little luck and a large enough bankroll to wait for it.