Gambling Tips

A pre-requisite to any gambler’s chance of having success is a sound understanding of expected value. Whenever a gamble is made, no matter if it’s at poker, dice, sports betting, or the number of cars that will drive by your house in the next half hour, the value of the bet has a certain expectation.

For example, when played optimally, blackjack has about a 1% house edge. This means that for every $10 you bet, you can expect to win back $9.90. Now, obviously in a single isolated instance, it won’t work out like that. You’ll either win $10 or lose $10. But over the long run, you will lose 1% of whatever you wager. The game is designed that way for the casino to make money.

The “expected value” of all casino games is negative. In other words, you cannot beat any casino game in the long run. The casino (or the “house”) has an advantage in all of the games they offer. Some games, like blackjack and the pass-line on craps have a very low house-edge (less than 2%). Other games like Keno or Roulette have a much higher house-edge. (Note: Roulette in America is significantly worse than roulette in Europe due to the extra green-zero).

Games that are theoretically beatable in the long-run are poker and sports-betting. In the case of poker, you are up against other people, not the casino. The casino takes a “rake” that is usually small enough to overcome if you are significantly better than the other players at the table. (Note: The “rake” in some European-casino poker games is so large that it essentially makes the game unbeatable. As a general rule of thumb, don’t play in a poker game where the rake exceeds five dollars or about four euros).

Sports betting is also theoretically beatable, though very few people are actually successful at doing so.

Expected value (or “EV” for short) helps identify the difference between smart bets and stupid bets. Bets with a significant negative expected value are obviously stupid. For example, if you lived on a quiet street and bet your friend that 10,000 cars would drive by in the next 30 minutes, that bet would have a very low expected value. Since it’s almost impossible for that many cars to drive by, the value of your bet is effectively $0.

However, if your friend offered you the chance to flip a coin where if you win, they owe you $3 and if they win, you only owe them $2, that bet would have a positive expected value. You have a 50% chance of winning $3 and a 50% chance of losing $2 for a total value of $.50 gained per coin flip (3 x .5 + (-2) x .5). In other words, if you flipped that coin with your friend a million times, you could expect to win an amount extremely close to $500,000 (obviously there might be some mild variation in the outcome of the coin flips).

An interesting TV show to watch in order to learn about expected value in practical terms is NBC’s “Deal or No Deal”. To quickly summarize the premise of this show, contestants have a “case” and are offered the chance to accept a flat sum or gamble where one of many different sums will be shown to be an amount that is not in their case.

So a scenario could occur where they are offered $25,000 to quit the show, or they can eliminate one of three sums from their potential “case” amount: $1,000, $10,000, and $100,000.

In this example, the value of the three remaining cases is $111,000 which makes the value of any single random case $37,000 ($111,000/3). So if they were to accept the $25,000 to quit the show, they would be short-changing their “expected value” by $12,000, meaning it’s $12,000 more profitable for them to continue on and take one of the random cases than accept the settlement money (37,000 - 25,000).

If some of the concepts in this article seem confusing, don’t get frustrated with trying to understand. The point is more to put you in the frame of mind that all successful gamblers have: what is the value of each bet?