15 May 2011

Gambling (putting money at risk?)

As a professor of Statistics (and Information) I often got comments from students, fellow professors, and the general public that I was pretty good at gaming (gambling), implying that (a) I gambled, and (b) that I could figure and therefore manipulate the odds to my favor. Well, yes, I do have knowledge of how odds are set, and of how "gaming" works. Believe me, it's NOT gambling to the casinos, the horse and/or dog tracks, and the states who sponsor lotteries. For them, it's a SURE THING. And also believe me, there is no way to (legally) manipulate the odds. The people who set the odds are also smart and they know what they are doing.

First, most forms of gaming (gambling) require some form of device, such as dice or decks of cards or roulette wheels. All of these devices have been around for quite a few years. All of them have been shown, through repeated use and study, to produce "random," or fair results. By fair or random we mean that what will occur next cannot be predicted. Not producing fair or random results can mean that you can take advantage of what is coming and bet that way. The famous scene from "Casablanca," where Ric tells the young bride where to place a bet, and to let it ride, comes to mind. Ric's roulette wheel was not fair. So what does all of this mean? In the "long run" (over a very large number of trials or uses) the device had better produce fair or random results. That (BTW) is how computer gaming devices are evaluated.

Second, casinos (or other forms of gaming establishments) must have the capital necessary to withstand short-term winners. Casinos will, in the long-run (on average), win and make money. Let's take the example of roulette again. I like roulette because it is easiest to visualise. Roulette pays 35-1 to win, but there are 38 spaces on the wheel (1-36, and 0 and 00). So with a fair, random wheel the "house" (the people backing the wheel with capital) will win, in the long-run, 3 of 38 times (38 - 35 = 3). These "odds" are immutable. But what about the person who bets less than 35 times and, through luck, wins? That is where capital necessary to withstand short-term winners comes in.

Third, it's not gambling when:

  • Casinos have a built-in winning percentage, often called odds. EVERY device in a casino is there for one reason - to make money. The odds for every device is calculated. As the device is used (money fed in and/or bet) it returns a large portion of what is fed in. It keeps a small portion of the money fed in. From that small portion kept the casino must pay its expenses and make, for the owners, a profit. Casinos set the proportion kept low so as to give the appearance of winning and to keep customers returning. Speaking of profits, where do you think the money for hotels/buildings/parking/pools/dining rooms and kitchens, as well as operating capital comes from? It sure isn't from the meals they serve!
  • State sponsored lotteries typically take half of the income brought in from selling tickets before a cent is paid to winners. The chances of winning the lottery are much longer than being struck by lightning! Lotteries are an indirect tax on the poor who make up the largest percentage of regular players. And I have to laugh when politicians (of both parties) try to justify them as helping education. While it is true that most of the money from lotteries goes to fund education, what politicians will not say is that other sources of educational funding are being cut off. The net result is that the lotteries have no effect on education.
  • Paramutual betting (horses or dogs) is no different. The track owners takes a fixed percentage off the top (usually set by politicians), then returns what is left in the total bet pool to the betters. This is how odds are set. A summing of all the odds for any single race will not be 100%. It will sum to the percentage total less what the track will keep. Again, the track owners must have the capital necessary to pay the short-term winner.
  • Sports pool gaming, regardless of sport, does not rely upon a specific gaming device. But it requires much studying and information. Most people, who get emotionally involved, will not do the work of studying or availing themselves of information. So in the long run (the average) the people who will do the work (that's their job) to study will win.

The only winner at gaming (gambling) is the person who avoids it or treats it as a form of intertainment.

And if you have a system and enough money, casinos will send a car for you.

I am reminded of the scene in "Paint Your Wagon" (1969 movie - the only musical worth watching IMHO) where Ben Rumson (played by Lee Marvin) is showing Horton Fenty (played by Tom Ligon) around "No Name City." Ben sees Rotten Luck Willie (played by Harve Presnell) and asks how he's doing. Rotten Luck Willie responds, "I haven't won a hand in three weeks!" Ben warns Horton to stay out of Willie's casino. Horton responds that he doesn't gamble. "Neither does he" (Willie), says Ben.

But that's just my opinion.


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