The Economics of Everyday Things - Card Counting (Replay)

Episode Date: October 7, 2024

Casinos think they can stop skilled gamblers from eking out a tiny edge at blackjack. Is that a losing bet? Zachary Crockett doubles down. SOURCES:"Ben," former professional card counter.Bill Zender, co-founder of Bill Zender and Associates casino consulting firm. RESOURCES:"Blackjack Player Sues Ameristar Casino, City of Black Hawk Over Alleged Detainment for Card Counting," by Megan Ulu-Lani Boyanton (The Denver Post, 2023)."Why Does the House Always Win? A Look at Casino Profitability," by J. B. Maverick (Investopedia, 2023)."Counting the Cost," by Bill Zender (GGB News, 2022)."Nevada Supreme Court Orders Casino To Pay Card Counter," by I. Nelson Rose (Gambling and the Law, 2017)."Counting Cards Is Legal, But ..." by Mark Pilarski (Detroit Free Press, 2016)."Card Counter Sues Planet Hollywood Over Detention, Confiscated Casino Chips," by Carri Geer Thevenot (Las Vegas Review-Journal, 2015)."Real People Behind Story of '21' Discuss Film's Facts," by Ed Symkus (The State Journal-Register, 2008).Blackbelt in Blackjack: Playing 21 as a Martial Art, by Arnold Snyder (1997). EXTRAS:"How to Make Your Own Luck," by Freakonomics Radio (2020)."The Economics of Sports Gambling (Replay)," by Freakonomics Radio (2020)."Could the Next Brooklyn Be … Las Vegas?!" by Freakonomics Radio (2015).21, film by Robert Luketic (2008).

10 is minus 1. It counts plus 15. 5. That counts as 16. This is a scene from the 2008 film 21. An MIT student is playing blackjack at a casino in Las Vegas. He's assigning a value to each card that hits the table. And he's keeping a running count in his head

that somehow gives him an advantage. Jack plus 12. Nine still plus 12. Blackjack. Woo! He uses this system to rack up hundreds of thousands of dollars in winnings, until the casino notices his hot streak.

At that point, security guards take him into a back room, beat him up, and threaten to kill him if he ever comes back. That movie was very loosely based on the story of the MIT Blackjack team, a group of students and recent graduates who taught themselves the technique known as counting cards. In movies like 21, card counters are often portrayed as mathematical savants who rob casinos blind until they're caught. Casinos have bought into this mythology. They've taken drastic measures to stop card counting. But those measures have come at a steep cost. A lot of the casinos spend so much time and effort to try to deter card counting, they actually cut their own throats, nip-rizzin' away their dollars to try to save pennies.

For the Freakonomics Radio Network, this is the economics of everyday things. I'm Zachary Crockett. Today, card counting. When you walk into a casino, you're probably going to leave with less money in your pocket. You can get lucky in the short term at a slot machine or at the roulette table. But over the long run, the house is always going to win. You're not going to put a game on the floor and let people come in and beat you. I mean, that's stupid. That's Bill Zender. He runs a consulting firm that helps casinos make more money. He says that the casino has a mathematical advantage over you. It's called

the house edge, and it's expressed as the percentage of your bets that you're going to lose over time. The house edge changes from game to game of course, and let's say you've got a game like roulette for every dollar I wager, in theory I expect to lose 5.26% of that. For slot machines, the house edge is generally anywhere from 5 to 15%. Lottery type games like Kino can be up to 40%. Those games are pure chance. But some gamblers want to feel like they have a little more control over their destiny. And they tend to head to the card tables.

A game like Blackjack is a little bit different. Blackjack is based on the rules. In Blackjack, you're playing against the casino. You and the dealer are each trying to get as close to 21 points as possible without going over. She deals two cards to you and two to herself. You can take more cards, one at a time, until you decide to stop.

Each card is worth a certain number of points. A 6 is worth 6, face cards are 10, aces are 1 or 11, you can play them either way. It can get a lot more complicated than that, but those are the basic rules. Even if you have zero experience playing blackjack, the house edge is only around 2%. That slim margin means that if you can find a tiny advantage, you might come out ahead. There's a small portion of the gambling public that has the ability to beat the casino's counting cards on a long-term basis.

I call those people professional card counters. I spent about 15 years of my life as a professional card counter. That's a guy I'll call Ben. He does not want to use his real name, because card counters are not welcome in Vegas. In Blackjack, you can actually learn how to play the game in a way where you take an edge over the house, legally. Ben grew up in Detroit in a pretty straight-laced household. His parents hated gambling.

So of course, as soon as he could legally do so, he went to a casino. I had no idea what I was doing. I think the first table I walked up to was a craps table. I gave them the 20 bucks. They're like, here, roll these dice. And I rolled them, and they were like, you lost everything. I was like, here, roll these dice. And I rolled them and they were like, you lost everything. I was like, oh, awesome. So then I went to a blackjack table with my friends.

I was just like, OK, how hard could it be? So I started playing and I was just doing really poorly. One of my friends looked at the dealer and said, oh, man, you know, you're really killing my friend. And the dealer went, no, he's killing himself. I went home and I was like, well, I gotta figure it out. ["The Black Jack Forum"] Ben joined Black Jack Forums on the internet.

He read books with names like Black Belt and Black Jack. He studied the history of the game and learned that math wizards and MIT professors had been enthralled with it for decades. The rabbit hole was deep, and Ben went all the way down it. What's it called? I have a very addictive personality, so I'll learn something and then get really excited about it. The first thing Ben came across was a basic strategy chart. It shows you every possible combination of your cards and the dealer's cards, and says what to do in each situation. I'd say if you're playing perfect basic strategy,

you can play at a 0.5% disadvantage. That's probably one of the lowest house edges there is, and that's probably why people like it. Casinos welcome the use of basic strategy. They sell little cards with those charts at their gift shops. Because even when the player follows the chart flawlessly, the casino still has an advantage. To do any better, Ben realized he'd have to learn how to count cards.

It actually is quite simple. You're trying to figure out the percentage of... Ha ha. Okay. quite simple. You're trying to figure out the percentage of... okay. You're trying to... you're trying to figure out kind of what's left. 10, jack, king, queen, and ace. So you're keeping track of the low cards and the high cards, but then like the neutral cards. Seven, eight, and nine. If five comes out, that's another plus one. So you add a plus one to your, you were already at one. So now you're at, if a 10 comes out, that's minus one,

three, four, five, six, seven, eight, nine, 10, 11, 12, 13, 14, 15, 16. So this sounds insane. It sounds impossible. It's a bit confusing, but essentially, I kinda got lost in my train of thought here. Yeah, the game is quite complicated now that I have to explain it.

Okay, properly explaining card counting strategy would require a mini-series. But in the simplest terms, it's a way of keeping track of what cards have been dealt and what's still in the deck. You don't try to memorize every card. You just assign a value to each card that's been placed on the table. Whenever you see a 2, 3, 4, 5, or 6, you add a plus 1. If you see a 7, 8, and 9, they're worth 0. Then a 10, jack, king, queen, and ace are worth minus 1. You keep a running count of the total in your head for all the cards played over many rounds.

A higher count means there are more face cards and aces left in the deck. That gives you a better chance of getting 20 or 21. So when the count is high, you place bigger bets. When the count is negative, you back off. When you learn how to count cards, basically you do it alone in your room with a deck of cards. You just have a deck and you just start flipping cards and you're like plus one minus one plus one minus one zero zero plus one. Eventually you get really good at it and you're like you know what this is really like not that hard.

But pulling it off in a crowded casino is a different story. There's people screaming, there's the dealers yelling at you, and then the waitress comes up and is like, oh, your drink's $17. You're like, wait, I had 18 or was it 17? Then you forget and you're like, wait, was it plus five or minus five? It can really get away from you quickly. If you manage to keep track of the counts without a single error, you can end up with a very slight advantage over the casino.

People think, oh wow, you're a card counter, you must win every time. Like you must be so rich, it's wonderful. But your edge on average is probably around like maybe 1% over the house, which is really low. That 1% edge turns Blackjack into a volume proposition. If you want to make any real money, you have to play tens of thousands of times, over hundreds of hours. Ben played full-time for 15 years, and he says he never made more than $100,000 a year from card counting. I would say the best card counters in the world make, you know, maybe low six figures, but the majority

of card counters make way less than that. So, an expert full-time card counter costs a casino a hundred grand a year, which might be a decent living for the card counter. But if you're a casino, is it really that big of a deal? The threat of card counting is completely overblown by casino people. Everybody thinks there's a card counter lurking around the corner. It's not like that at all. There's probably less than 200 in North America, and nobody's getting rich on this.

In the U.S., casinos are a $60 billion a year business. When you think about the context, the financial threat from a couple hundred card counters is almost laughably small. But casinos treat it very seriously. Card counting costs the industry millions of dollars a year, but it's not the guy sitting at the table that's doing it. That's coming up. Before he was a consultant, Bill Zender played nearly every role in the casino business.

He started his career as a blackjack dealer. He spent several years as an enforcement agent with the Nevada Gaming Control Board. And he served as a vice president of a major casino on the Vegas Strip. For most of that time, he was given strict instructions to stop card counters. He could usually sniff one out pretty easily because he could count cards himself.

I'm counting the cards in parallel, and I get to a situation and I'll say, okay, in this next hand, I would bet more money. Let's see what the player does. Over the years, Zender says he caught 230 card counters. And he had a process for dealing with them. I would approach them. I'd introduce myself. I'd ask them to do me a favor, pick your chips up, come away from the table with me for a little bit.

And I'd basically say that I've been watching your play and you're really good and, you know, we'd rather you didn't play blackjack here anymore. And after a couple of, well, I don't know what you're talking about, they'd finally get the point. And then we'd shake hands and they'd go their way. But Sender says not all casino agents, often called pit bosses, handle the situation with that kind of grace. Some of them actually physically haul them off the game.

Some of them take them in the back room. They want to ID them. They want to take their picture. Sometimes if they get up and say, you know, you can't arrest me, I'm leaving, and then they throw them back into the chair. They're actually kidnapping them, right? The casinos have to understand that you can't do that.

And taking somebody in the back room and trying to intimidate them is not professional. It's not just unprofessional. It's a liability. There aren't any laws against card counting. It's a perfectly legitimate way to improve your odds. Now that doesn't mean that casinos have to tolerate it. In most states, they can kick you out for almost any reason they like. But when they use physical force, refuse to cash out chips, or illegally detain a suspected card counter in a back room, they can cost themselves a lot of money.

These true card counters, they know that you can be the casino two ways. One is across the blackjack tables and number two is in the court of law. I had one player tell me what he does. He said that if they're walking him out, he looks for the biggest, dumbest security officer and makes some kind of a comment to him to see if he can get the guy to grab him up or maybe take a swing at him. And everything is captured on film. Over the years, casinos have paid out millions of dollars in settlements as a result of their thuggish behavior. Ben, the card counter I talked to, has his share of war stories.

Some casinos will go so far over the top that it's almost like a movie. I mean, I've been dragged through a casino floor against my will. Dragged. One of my friends I know got tackled, full tackled, like linebacker tackled. A big one is security will just take you to the back room. It's just a room in the back with white walls. And a lot of times they won't let you leave. They'll call the police on you. They'll demand that you show them your identification, all kinds of stuff to intimidate you. And it's all against the law. In one of those instances, Ben and his friends decided to take legal action.

We called a lawyer in Vegas, who's very well known for suing casinos. And he was like, oh yeah, this is good. And yeah, so we sued the casino for false imprisonment. We sued them for not cashing our chips. We sued them for all kinds of stuff. And the jury voted unanimously for us. The settlement was $200,000, more than Ben or his friend had ever made from playing blackjack.

And that's not the only way casinos can lose money in the fight against card counters. To keep their edge at the Blackjack table, they've changed how the game is played. For starters, they stop players from entering a game after the first hand is dealt. What this does is it basically was set up to prevent people from back counting and jumping in on the games, only when they have the advantage. Instead of dealing one deck of cards, casinos will mix together six of them. They'll either continuously reshuffle these cards, or shuffle once they've dealt out a

certain percentage of them. That makes it much more difficult for card counters to know what's left to be dealt. The more decks you have, the less opportunities a card counter has to have a profitable situation. Those techniques do deter card counters, to an extent, but they also slow down the game. See, the more hands a casino can deal, the more revenue they have. They're concerned about a small sliver of the gambling public. But you've got thousands and thousands of other people come in your casino every year. And what you're doing is you're limiting the profit potential on them.

Normal gamblers go to have fun and excitement. They don't want to play for five minutes and then wait for a 10-minute shuffle. They just leave. Before he turned to card counting, Ben got a master's degree in hospitality management from the University of Nevada, Las Vegas. As a grad student, he did an analysis of a casino in Atlantic City. That casino shuffled cards by hand before putting them into an automatic shuffler. He estimated that adding one extra shuffle cost the casino over $15,000 a year

per table, and the casino in question was adding five extra shuffles. Zender has tried to tell casinos that fighting card counters isn't worth it. He says that if they dropped all the countermeasures, sure, there might be more people counting cards, but the casinos would make up the lost revenue by increasing turnover at the tables. He says most of them aren't buying it. Casino people are very reluctant to change because sometimes if they make a change, it could backfire in the short term. Ben has heard similar stories.

I had a professor at UNLV and he would consult with casinos and he said they would tell him to his face, Oh, you know, you're just an academic up in your ivory tower. You don't know what it's like here on the casino floor. The casino's approach may be irrational, but on their terms, it looks like they're winning. Many card counters, including Ben, have given up the trade.

For the most part, it's just really not that scalable, and that's why I stopped. Once you get like known and you start getting thrown out and put in databases, like pretty much the game's up. What do you do now? Yeah, I work in finance. I'll just say that. For the economics of everyday things,

I'm Zachary Crockett. This episode was produced by Sarah Lilly and mixed by Jeremy Johnston. We had help from Daniel Moritz-Rapson. You ever try to come back in wearing a disguise? Maybe one of those glasses with the fake nose and a little mustache or something? I have never done that, but I know people who have, like, really elaborate makeup, Halloween costumes. People go to, I mean, insane lengths to, like, dress up. And it works.

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