Risk & Reward

(Note: Do not play the bets listed in Spinning the Wheel – they are far, far, far too complex to manage in real life [though they worked beautifully on the iPad app], and the outside bets weigh down your wins [though they also mitigate your losses]. Keep it simple!!)

I used to say that I don’t gamble, because I never win. That isn’t true at all. Without meaning to be arrogant, I have won the genetic lottery: I’m a healthy, attractive, intelligent, white man. The privilege society affords me for all these traits I had nothing to do with is palpable. The only parts of the equation I lost out on were being straight, Christian, and wealthy (but in all fairness, those “losses” are mitigated by the fact that I won the lottery that allowed me to be middle class born in a place and time when sexuality and religion matter less, and where there are many opportunities to advance and/or make money on one’s own). So, all in all, it isn’t true that I never win, because (as I just demonstrated) I win quite frequently (and often at a large enough scale that it offsets multiple “losses”).

What is the point I am making? That everything in life is a gamble. My friend Ron is trying to become a professional gambler, and he wants to become proficient at Roulette; however, his losses keep overwhelming his wins for the simple fact that he won’t take big enough risks to counterbalance his losses. He is more afraid of multiple medium sized risks than he is motivated by a few large payouts. And yet he took a risk getting married (he’s gay), he took a risk going into insurance sales (but that paid off, and he was one of the best salesmen in the country for his company), he took a risk getting divorced (he has been out for ~20 years now), he took a risk leaving insurance to do massage (though he is a genius therapist with a naturally healing touch), and he takes a risk every time he books a client (they could, conceivably, ALL cancel and/or flake – my experience in late December 2013 – mid January 2014 proves that out). The same is true for me: I took a risk majoring in dance (but I was still chosen in 1998 AND 1999 to attend UCLA – I was one of 10 selected from a pool of 300 applicants for 1998, but I turned them down; however, in 1999 I decided to try again, I was one out of six chosen from a pool of 500 applicants, and that was based on the previous year’s audition – I am the only person that I know of in the history of the UCLA dance program to get accepted twice for one application); I took a risk being an educator (knowing that I dislike children in general, yet still excelled at it); I took a risk on clubs, porn, and escorting…

And all of it has paid off.

To say I don’t gamble, because I don’t win is preposterous. I win with such alacrity that I have always taken it for granted. How foolish of me. At any rate, I have picked up on Ron’s interest in roulette. I love games. I am not a genius at it, but I enjoy chess and other games of strategy. I also have learned a new appreciation for games of chance. The skill in these games is made from the stuff of your personality. Some people are risk averse, and these conservative people are necessary for balance (but left to their own devices nothing would ever grow or change); however, some people are risk resilient, and these liberal people are necessary for dynamism (but left to their own devices nothing would ever stabilize or establish). Chaos and Order, yes? If you are going to gamble, be honest about the type of personality you have, and then try to mitigate your risks (you can’t ever abolish them… such is the nature of life). The only way to avoid all risk is to avoid all activity (risk = life?).

So, back to Ron. He keeps changing his roulette bet around, chasing after a trend that simply doesn’t exist. There are 38 numbers, and any one of them will come up on each spin. The advantage is always to the house. The edge isn’t. The edge is different from the advantage: You might presume that betting red/black is a 50/50 gamble, and that you and the house both have a 50% advantage. But you would be wrong. The numbers 0 and 00 are green, and they don’t pay out on red/black, even/odd, high/low, etc. This is the edge: Because there are 36 red/black numbers, that portion of the board is a 50/50 gamble; however, when you add in 0/00, suddenly you have only a 47% chance of winning an “even” bet. THAT is the edge the house has built in. Ron hasn’t looked at the edges, only the advantages, and he won’t play with bets large enough to matter when his rare wins offset his common losses. I think I have found a bet that works (for me).

It works after thousands of attempts on my roulette app. It worked when I tried it in person this week. I played at a small scale, but the odds don’t change in roulette. You get back a multiple of whatever you put it, and the odds are always the same. So, here is what I have discovered (again, do not use my bets from Spinning the Wheel):

You should play with 10% of your available bank (e.g. $100). You should place 10 bets in the center of 10 numbers (you can include 0 and/or 00 if you wish, but they don’t pay out more or come up with more or less frequency). Each bet on each number should be the same amount, ergo each bet is 1% of your available bank (e.g. $100 bank = $10 total wagers per spin = $1 per number). This is the math: By placing 10 bets you have a 26% chance of winning. That’s “reliably” one win in four spins, but notice that although the house has a nearly 75% advantage, on the 25% advantage you have, there is a 1% edge in your favor. THAT is what matters: Knowing that you can win with enough consistency for it to be worth the trouble, you can play and rest at increment. Remember that a single bet pays 35-to-1 in roulette (Note: Avoid split, corner, street, and column/dozens bets… yes, they win more frequently, but they pay out less, and therefore you lose your edge). This means that every three losses are offset by a win (e.g. 3 losing bets = -$30; 1 winning bet = +$35; yield = $5). Remember also that you can expect statistically over time to win one time in four bets… This is convenient: Loss, loss, loss, win = small profit. Do not go beyond 10 bets, or you will encounter the law of diminishing returns: 11 bets is a 29% chance (note that the house has a 4% edge on your “one third” chance of winning, but you have a 4% edge on your “one fourth” chance of winning). Eleven bets no longer works: 11 bets = $11 but a win is still only $35. You do NOT have a one-in-three chance of winning, and when you do win your margin will be smaller (e.g. 3 losing bets = -$33; 1 winning bet = +$35; yield = $2). With 12 bets at a 32% chance (you still do NOT have a one-in-three chance, the house retains a 1% edge on your “third”) it’s even worse (e.g losing 3 bets = -$36; 1 win = +$35; yield = -$1). Too few bets gives you a huge margin when you win, but you will have far more losses before a win, and that means a lot of time to get to the same place as 10 bets (e.g. 5 bets takes twice as long to get to the same wins/losses as 10 bets). Beyond that, the rest is multiples.

This is what I have learned: Start with $100 that you can afford to lose. You don’t care if it goes away, but if it were to grow, that would be lovely. Play with $10 per spin, $1 per number (pick 10 numbers you like and stick to them – don’t chase the ball… sit still and let it come to you. I have chosen 5, 6, 7, 9, 11, 12, 14, 18, 28, and 29). Play this until your bank is $200 (Note: You don’t have to place a bet every time the dealer spins the wheel… Take frequent breaks. Jump in and out, rather than playing every single spin). When your bank reaches $200, play $20 per spin and $2 per number. Continue in this manner. In real life I built up to playing with a $500 bank, $50 per spin, $5 per number. At home on my iPad app, I have worked this pattern all the way up to a $100,000 bank, $10,000 per spin, and $1,000 per number. The odds don’t change, the risks don’t change, the rewards don’t change. All that changes is the scale. If you can keep that in mind (and know when to start and stop playing), then (when luck is on your side) you can win.

And that, altogether, is a very valuable life lesson.

Author: Devon Hunter

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  1. In your example of 4 bets you would have a loss of $4. You lose $30 on the 3 losing bets and win only $26 (not $35) on the winning bet because the $1 you put on the 9 other squares is lost.

    In reality itโ€™s a loss of $2.11 every 4 bets on average because the chance your bet will win is not 25% but a little over 26% as you noted. There is no way of overcoming the house edge of 5.3% in the long run, whatever the betting strategy, since it is a game of pure chance.

    Maybe a better analogy to life than roulette would be poker, since instead of purely random events you deal with people, psychology (analogy with charm? ๐Ÿ™‚ ) and your own calculation of probabilities – as in life.

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    • Damnation! I knew I was leaving something out – otherwise it would be too easy, and everyone would play roulette… I like your analogy.

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  2. Nevertheless, I agree with the gist of your post: start with a fixed amount that you are entirely comfortable losing, your “bank”, stop when you’ve lost it all or when you’ve been lucky and won a certain amount. You can apply whatever fun betting pattern you like based on your risk/reward preferences.

    It’s quite possible to have a fun and fairly long session this way, and sometimes double or triple your bank if you’re lucky to avoid a long losing streak. It’s no different to spending $50, $100 or whatever on a night out and drinks, and sometimes having unexpected upsides. Oh, maybe there’s another analogy there…!

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  3. Hey Greg – I played again yesterday, and had another winning day (though it was much more dramatic and dynamic – my swings in fortune were far greater… At one point I was down 75% of my bank). What I found was that during Act 1 there would be huge stretches where my numbers didn’t come up AT ALL. I was trying to wait for one of my numbers to come up, wait 3-4 rolls to skip the losses and jumping back in when I thought my numbers would come back. There was a patch of 19 spins that yielded nothing but losses (I played 6 in a row – about 4 spins while I was resting, the 6 I bet on and lost, and then about 9 more before one of my numbers came back). By then I was too gunshy to bet again and my numbers came up SEVEN times back to back, but I was too scared to bet and missed them all. At that point I threw my hands up and walked away to do dinner. For Act 2 I tried to offset my statistical expectations with a little more information from my instinct. By the time I got up to rest I was down “only” 10% instead of down 75%. For Act 3 I tried to remember that this was supposed to be fun and allowed myself to count spins between my numbers, but allowed my sense of play to override the cold counting and the zealous instinct… My numbers cycled back around, I was up 10%, and I decided that with that gain I would put my intact bank aside, and play one more. If I lost I would leave breaking perfectly even, if I won I could make up in one bet all the time it took to get to this point. I quintupled my bet, waited for my numbers to come back, bet on my lucky number 11, and left up 40%. It’s all chance of course, but finding the balance between head, stomach, and heart seems to be what keeps it manageable.

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