Everything Everywhere Daily: History, Science, Geography & More - Gamblers Who Beat the House

Episode Date: July 28, 2024

You have probably heard the expression, “The house always wins.” This is usually true….in fact, it's almost always true. If it weren’t true, then casinos wouldn’t exist. Every game in a casino is designed to give the house an edge so that in the long run, with enough players, they are mathematically guaranteed to win money.  However, there have been a few occasions where people have figured out a way to use the rules in their favor to win big.  Learn more about the gamblers who beat the house on this episode of Everything Everywhere Daily. Sponsors Available nationally, look for a bottle of Heaven Hill Bottled-in-Bond at your local store. Find out more at heavenhilldistillery.com/hh-bottled-in-bond.php Sign up today at butcherbox.com/daily and use code daily to choose your free offer and get $20 off. Visit BetterHelp.com/everywhere today to get 10% off your first month. Use the code EverythingEverywhere for a 20% discount on a subscription at Newspapers.com. Visit meminto.com and get 15% off with code EED15.  Listen to Expedition Unknown wherever you get your podcasts.  Get started with a $13 trial set for just $3 at harrys.com/EVERYTHING. Subscribe to the podcast!  https://link.chtbl.com/EverythingEverywhere?sid=ShowNotes -------------------------------- Executive Producer: Charles Daniel Associate Producers: Ben Long & Cameron Kieffer   Become a supporter on Patreon: https://www.patreon.com/everythingeverywhere Update your podcast app at newpodcastapps.com Discord Server: https://discord.gg/UkRUJFh Instagram: https://www.instagram.com/everythingeverywhere/ Facebook Group: https://www.facebook.com/groups/everythingeverywheredaily Twitter: https://twitter.com/everywheretrip Website: https://everything-everywhere.com/ Learn more about your ad choices. Visit megaphone.fm/adchoices

You've probably heard the expression, the house always wins. This is usually true. In fact, it's almost always true. Because if it weren't true, casinos couldn't exist. Every game in a casino is designed to give the house an edge so that in the long run, with enough players, they are mathematically guaranteed to win money. However, there have been a few occasions where people have figured out a way to use the rules in their favor to win big.

Learn more about the gamblers who beat the house on this. episode of Everything Everywhere Daily. What if your perceptions about the past were wrong? ThruLine is a podcast that takes you back in time to uncover the parts of the story that may have gone unnoticed. It effectively turned day into night. And how it shaped the world now. Time travel with us every week on the ThruLine podcast from NPR.

Let me start out by noting that this episode is not about people who cheat. There are many ways to beat the house if you're willing to cheat. You could mark cards, you could play with loaded dice, you could set up a magnet under a roulette wheel, or you could just get a dealer to work with you to guarantee you win. Of course, if you take this route, you might wind up in jail or in the basement of a casino with a guy named Vinny who has a monkey wrench. This episode is about the people who won and didn't cheat. They found ways around the rules or loopholes in the rules, which allowed them to beat the house and make a tremendous amount of money. We might as well start out with one of the men who developed the most famous system of

getting an edge over the house, Edward Thorpe, the father of card counting in Blackjack. Contrary to popular belief, card counting is not cheating. Casinos have a vested interest in wanting you to think that it's cheating, but it's not. Card counting is nothing more than paying attention to which cards have been dealt, which cards are remaining in the deck, and then betting accordingly. Thorpe received his PhD in mathematics in 1958 from UCLA and then worked at MIT from 1959 to 1961. While he was there, he began conducting mathematical research into Blackjack. He used an early IBM-705 computer to run simulations which were based on a 1956 paper published by John Larry Kelly Jr., a researcher at Bell Labs. His paper proposed a method of

sizing a sequence of bets. Thorpe realized that, that by betting at the correct times, it was possible to eliminate the house advantage in Blackjack. Here I should briefly explain Blackjack for those who aren't familiar and why the house has an advantage. The goal in Blackjack is for a player

to achieve a hand value closer to 21 than the dealer without exceeding 21. Each player is dealt two cards and can choose to hit, which is to take an additional card, or to stand, keep their current hand. Number cards are worth their face value, face cards, kings, queens, and jacks are worth 10, and aces can be worth either one or 11.

Players can also double down, doubling their bet and receiving one more card or split the pairs into separate hands. The dealer follows a set algorithm, usually hitting until reaching at least 17. If the player's hand exceeds 21, they bust and lose the round. Blackjack, or a natural 21 occurs when the first two cards Zeltarn ace and a 10 card value, which typically wins the round and pays out at higher odds. You could if you wanted to

follow the same algorithm that the dealer has to follow, but there's a problem. If both you and the dealer bust, the house wins because you bust before the dealer. That is basically where the house gets its edge. Thorpe realized that

the odds of beating the dealer were highly dependent on what cards had been dealt from the deck and which cards were left. When the deck was heavy in face cards and aces, the odds of winning shifted to the player. If the deck was full of lower number cards, it was advantageous to the dealer. With the mathematics of his theory established, Thorpe needed to test his ideas. He found a professional gambler named Maddie Kimmel to underwrite his experiment in casinos in Reno and Lake Tahoe. Starting with an initial bankroll of $10,000, the pair managed to make $11,000 in profit over the course of the next two days.

Word spread quickly amongst the Nevada gambling community that a mathematician had figured out how to beat the casino. Thorpe eventually went directly to the public with his method in his landmark 1962 book, Beat the dealer. The book sold over 700,000 copies and made the New York Times bestseller list. Thorpe's discovery, however, did not end with him. With the publication of the book, the cat was now out of the bag. Casino, figured out ways to limit the power of card counting by using multiple decks of cards. If you use multiple decks and reshuffle well before the decks are exhausted, then knowing what cards are left is difficult to do.

This made it harder to count cards, but it was not impossible. The fact that it wasn't technically cheating didn't matter to the casinos. It was possible to tell if someone was counting cards based on their betting profile, and if they think you're card counting, they can always ask you to leave without any reason. One group from MIT took card counting to another level. Rather than having one person counting cards and making suspect bets, the MIT group worked in teams. Multiple people would play at different tables counting cards. They would look and act totally normal, never varying their bets.

When the card shoe became advantageous to the player, they would signal one of their teammates who played the role of the whale. They would then sit down at the table and begin making big bets. After the shoe was exhausted, they would get up and move on, possibly letting someone else do big betting. This was much more difficult for the casinos to catch because there wasn't one person who was betting erratically. For almost 20 years, the MIT card counting team

ran a professional operation with investors who earned a return on their investment. From 1980 to 2000, the team made millions of dollars. However, car counting isn't the only way to beat the game of Blackjack. A business executive named Don Johnson made $15 million from casinos in Atlantic City over a six-month period in 2010 and 11 by playing blackjack without card counting. How did he do it? His system wasn't something that you or I could probably do.

He took advantage of the casino's willingness to bend over backwards to attract players who bet large amounts known as whales. After the financial crisis of 2008, many casinos in Atlantic City were desperate to. for business, and the easiest way to bring in money was to attract a small number of whales. Usually they would give perks to the whales, including free flights on private jets, free accommodations, and dining. However, if you bet enough, they also might be willing to refund some of your losses. The house might lose a little bit of its margin doing that, but they make up for it with the large bets. Johnson wasn't interested in the normal perks given to whales. He privately negotiated a series of rule changes to the game,

that he could play under if he agreed to bet a large amount on each hand. These rule changes included that the dealer had to stand on 17. He had the option of late surrender, which means he could forfeit his hand and lose only half his bet after the dealer checks for blackjack. He could double down on any of the first two cards, and he could double after splitting with resplitting aces allowed. The house could use only six decks, and they would refund him 20% of any loss, over 500,000. All of those rules individually were not unusual. They could be found at other

casinos. But Johnson realized that all of these concessions taken together gave him a 0.26 advantage over the house. He first negotiated these terms with the Tropicana in Atlantic City, and because the casinos were so competitive with each other to bring in Wales, he got the same terms from the Borgata and the Caesar. He ended up winning 6 million from the Tropicana, 5 million from the Borgata, and another 4 million from Caesars. Because he was often playing $100,000 per hand, the dealers made several errors in his favor because they were unaccustomed to dealing with such high-stakes games. Another high-profile case of someone taking advantage of the casino is Phil Ivy. Phil Ivy is one of the greatest professional poker players in the world.

However, this story isn't about poker. In August of 2012, he was in London with a woman playing Baccarat at Crockford's Casino. Baccarat, if you're unfamiliar with it, is a very simple game, which you bet on whether you or the dealer will get cards closer to nine. Over two nights, he won $7,300,000, or about $9 million. At the end of the first night, after playing in a private room, they were up $2 million. When they retired for the evening, they made a very unusual request. They asked the casino to keep the same deck of cards for when they came back the next day. The casino agreed, which was very unusual.

Normally, casinos destroy every deck of cards the day after they're used. Phil claimed that he was superstitious, and the casino wanted to honor the requests of such a high-profile and high-spending client. The next day, he and his friend got the same deck of cards. And now they began asking for cards to be turned around 180 degrees before being put back into the shoe. By the end of the night, Phil was up the 7,300,000 pounds. However, the casino thought something was off, so they refused to pay him his winnings beyond the one million pounds he initially staked. It turns out, there was an error in the cards that the casino was using. In the printing of the cards, some ink bled onto one of the sides of the cards, which gave

them a hint as to what the card was. Phil sued the casino for his winnings and the casino said that he was cheating. Crockford's actually won the lawsuit, but Phil Ivy wasn't cheating by any strict definition of the word. He didn't fix the deck. The cards were provided by the casino. He just took advantage of their error. I'm going to end with what is perhaps the biggest win of them all, and this one didn't take place in a casino. It took place at a horse track. Betting on horse racing is a type of parameutual betting. Paramutual betting is when all the bets are put into a pool and the odds payouts are determined by the bets. The house, in this case the racetrack, simply takes a fee from whatever is bet. The betters are in effect betting against each other.

While the house isn't playing against you, the odds of winning in the long run at the horse track are pretty slim. However, one man managed to crack the code. His name was Bill Benter. Benter was a mathematician and an avid card counter. He read Edward Thorpe's book at a young age and was eventually banned from every casino in Las Vegas in 1984. He then met a professional gambler named Alan Woods, who had experience in horse racing. With Woods' horse racing experience in Benter's computer programming background, the two moved to Hong Kong and began developing a computer model for predicting horse racing. The model wasn't just about who would win.

Like Thorpe's original investigation into blackjack, much of it involved what to bet on and how much. They used the Hong Kong Jockey Club as their base because the track there provided so much data about the races that it was much easier to create the model. After several years of modifying their model, they implemented it in 1988. That year, they made $300,000. And in 1989, they made $3 million. Bentro and his team kept strict secrecy about what they were doing for years. Their approach was highly disciplined, only betting as the model told them to do. They kept up the betting for a couple of decades.

Their biggest payday took place in 2001 when they hit the triple trio, which is picking the top three horses in any order in three different races. They won the equivalent of $15 million U.S. dollars. Edward Thorpe, the man I mentioned who started this episode, wrote in 2017 that Benter's organization may have made as much as a hundred million dollars in some years and has made over a billion dollars since he first began betting on his model in the 1980s. What all of these examples show is that while it's possible to beat the house, it is not easy to do. It usually requires a very mathematical approach and the right opportunity to exploit it.

And even then, unless it's a paramutual betting system, you're probably not going to get away with it for very long. The executive producer of Everything Everywhere Daily is Charles Daniel. The associate producers are Benji Long and Cameron Kiever. I want to give a big shout out to everyone who supports the show over on Patreon, including the show's producers. Your support helps me put out a show every single day. And also, Patreon is currently the only place where Everything Everywhere Daily merchandise is available to the top tier of supporters.

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