Why the House always wins, how to reduce your risk at a Casino?

"Risk comes from not knowing what you're doing." - Warren Buffett

Why don’t fortune tellers or mathematicians keep winning at casinos? Grounded on mathematical probabilities and statistics, casinos are challenging everyone out there to come and beat it 24x7. With anonymity and cash operations, the gaming industry takes on a lot of operational and financial risks. Yet, the U.S. gaming industry set a record in 2022 with more than $60.42 billion in revenue, a 13.9% ?? from 2021 and 38.5% ?? from 2019. Casinos are able to avoid people walking out with pockets full of winnings because their risk management is some of the most rigorous and effective in the world. In this article, we'll explore why the house always seems to win, and what you can do to reduce your risk and increase your chances of winning.

Do casinos play fair? Yes ??

In addition to regulatory oversight, they go through regular maintenance and inspections, and testing by independent laboratories. Moreover, it is not only fair but also in the casinos' favor to make sure that things are truly random. Casinos test their RNGs (Random Number Generators) to ensure that they are truly random and not biased in any way. Casinos typically contract with independent testing laboratories, such as Gaming Laboratories International (GLI) or Technical Systems Testing (TST), to test their slot machines. These laboratories use sophisticated equipment and software to analyze and verify that the game is operating in a purely random and fair manner.?This testing involves running millions of simulated spins and analyzing the results to ensure that they conform to statistical randomness.

Casinos are often mistakenly grouped with other forms of gambling, such as street vendors who use deceptive tactics to cheat customers out of their money. For example, on the streets of Paris and London, vendors may use a three-cup game to scam unsuspecting customers out of their money. The vendor places a ball under one of three cups and then shuffles them around, asking the customer to guess which cup the ball is under. However, the vendor uses sleight of hand to remove the ball from the cup, making it impossible for the customer to win. To make matters worse, the vendors often have accomplices who act as "winning customers" to provide distractions and act as lookouts in case the police show up. It is important to avoid these types of scams, as they are designed to cheat customers and are illegal in many jurisdictions. While these types of scams are designed to cheat customers, it is important to note that legitimate casinos operate under strict regulations and oversight to ensure fairness and transparency in their games.

If Casinos play fairly and why do smart people avoid them? Not sure ??

Despite the fact that casinos play fairly, many intelligent people choose to avoid them. For instance, during the American Physical Society's annual meeting in Las Vegas in 1986, the MGM Grand Hotel and Casino, the largest single hotel in the world with 6,852 rooms, had its worst financial performance, leading the city of Las Vegas to allegedly ban the APS from hosting future conferences. Although some may think that the 4,000 astrophysicists won big, they simply chose not to gamble. In his book Starry Messenger, Neil deGrasse Tyson compares gambling to entertainment and believes that people should not be judged for their losses at the casino just as they are not judged for the cost of a Broadway show. He even admitted to betting on prime numbers, which may seem rudimentary to some. However, there are other betting strategies, such as the Fibonacci system, which can provide better odds for short-term play and be more interesting than simply betting on prime numbers.

Many intellectuals avoid casinos because they cannot tolerate losing, which can deflate their egos after being the smartest person in the room for most of their lives. They may also believe that they cannot come up with better risk management techniques than the casino, leading to their reluctance to gamble.

What is the gambler's fallacy?

The gambler's fallacy is a cognitive bias in which individuals believe that past random events influence future outcomes, even when this is not the case. It is the mistaken belief that if something happens more frequently than normal during a given period, it will happen less frequently in the future. The opposite of this fallacy is also true - if something happens less frequently than normal during a given period, it will happen more frequently in the future.

This fallacy can occur in many different types of gambling situations, including coin tosses, roulette spins, and slot machine payouts. For example, a gambler may believe that if a roulette wheel has landed on red for several consecutive spins, black is more likely to come up on the next spin. However, each spin of the roulette wheel is an independent event, and the previous spins have no bearing on the outcome of future spins.

The gambler's fallacy can lead people to make irrational and risky decisions in gambling, such as increasing their bets after a losing streak in the hope of recouping their losses. However, the fallacy is based on a flawed understanding of probability, and the odds of winning or losing are the same in each independent event.

This type of thinking can lead to poor investment decisions and financial losses in the stock market as well when investors make decisions based on the belief that a stock's price will eventually "correct" or "revert to the mean" after a streak of gains or losses. For example, an investor may see that a particular stock has been performing well for a number of days and believe that it is due for a correction. The investor may then decide to sell their shares based on this belief, even though the stock's past performance does not necessarily indicate future trends. Alternatively, an investor may see a stock that has been performing poorly and believes that it is due for a rebound, causing them to hold onto the stock for longer than it should. It is important to distinguish Technical analysis which is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. While it is not necessarily a gambler's fallacy, it can be subject to the same type of cognitive bias.

Why does the house always win?

Casinos make sure they always win by ensuring that the odds of winning any particular game are always in their favor. They achieve this by using a combination of strategies, including:

1. Game Design: Casinos design their games to ensure that the odds of winning are always in their favor. For example, in roulette, the addition of a single green zero (or two green zeros in American roulette) gives the casino an edge over players.
2. House Edge: The house edge is the statistical advantage that the casino has over the player in any particular game. Casinos ensure that the house edge is always in their favor by adjusting the rules of the game or the payouts for winning.
3. Betting Limits: Casinos set minimum and maximum betting limits to ensure that players cannot place bets that are too small or too large, and to manage their risk exposure.
4. Surveillance and Security: Casinos use extensive surveillance and security measures to detect and prevent cheating, fraud, and other illegal activities that could result in losses for the casino.
5. Complimentary Services: Casinos often offer complimentary services, such as drinks or meals, to keep players at the tables and encourage them to continue gambling.

Can't you circumvent and increase your chances to win? Yes

We are not discussing robbing a casino since it is illegal and "They got cameras, they got locks, they got watchers, they got timers, they got vaults, they got enough armed personnel to occupy Paris!" as quoted by Reuben Tishkoff in Ocean's Eleven.

However, here are a few that beat casinos without trying to go past their security.

Doing illegal activities:

• Ron Harris, a software engineer for the Nevada Gaming Control Board, used his knowledge to cheat casinos out of millions of dollars. He programmed slot machines to pay out large sums of money when a specific sequence of coins was inserted. Harris was eventually caught and sentenced to seven years in prison.
• Richard Marcus, a professional gambler, who developed a technique called "past posting" to cheat at blackjack and roulette. He would distract the dealer and switch his chips after the outcome of the game had already been determined. Marcus was eventually caught, but not before he had won millions of dollars.

Identifying games that are biased:

• Joseph Jagger, in 1873, hired six clerks to record the outcomes of roulette wheels in the Beaux-Arts Casino in Monte Carlo. He discovered that one of the wheels had a slight bias that caused certain numbers to come up more often than others. He then bet on those numbers and won a fortune.
• Gonzalo Garcia-Pelayo, in the 1990s, studied roulette wheels in Spanish casinos and discovered that they were not perfectly balanced, causing certain numbers to come up more often than others. He then bet on those numbers and won millions of dollars. The casinos tried to ban him from playing, but a Spanish court ruled that he had not broken any laws.

Card counting, which is still legal:

• The MIT Blackjack Team: This group of students and alumni from the Massachusetts Institute of Technology (MIT) used card-counting techniques to win millions of dollars at casinos around the world. They were so successful that many casinos changed their blackjack rules to try and prevent them from playing. The MIT Blackjack Team did not cheat casinos; rather, they kept track of the cards that have been played and adjusted one's bets accordingly to take advantage of situations where the remaining cards are more favorable to the player than to the dealer.

To prevent similar groups from using card counting techniques, many casinos changed their blackjack rules and increased the number of decks used in the game. They also introduced continuous shuffling machines (CSMs) that shuffle the cards after each hand, making it more difficult for players to count cards effectively.

In addition to changing the rules of the game, casinos also increased their surveillance and security measures to detect and prevent card counting. This included the use of facial recognition technology, advanced monitoring systems, and more extensive background checks for employees.

Despite these efforts, card counting is still technically legal, and some players continue to use the technique to gain an edge in blackjack.

How to choose a game with less house edge and apply a strategy to win?

Some casino games have better odds for the player than others. In Blackjack, by using basic strategy and making the right decisions based on the dealer's up card, players can reduce the house edge to less than 1%.

Besides, card counting, there is also shuffle tracking, which involves tracking certain cards or groups of cards through the shuffle in order to predict when they will be dealt. This strategy is also frowned upon by casinos like card counting and is difficult to execute successfully.

One strategy that players can use to increase their odds of winning in blackjack is called basic strategy. The basic strategy involves making the mathematically correct decision for every hand based on the player's two cards and the dealer's up card. By following the basic strategy, players can reduce the house edge to less than 1%.

Here are some basic strategy tips to keep in mind when playing blackjack:

1. Always hit if your hand is 8 or less.
2. Always stand if your hand is 17 or higher.
3. Double down if your hand is 10 or 11, and the dealer's up card is 9 or lower.
4. Never take insurance.
5. If the dealer's up card is 7 or higher, and your hand is 12-16, always hit.
6. If the dealer's up card is 6 or lower, and your hand is 12-16, stand.
7. If your hand is a pair of Aces or 8s, always split.
8. If your hand is a pair of 10s, never split.
9. If your hand is a pair of 5s, never double down.

There are also different betting systems that involve changing the amount of the bet based on the outcome of previous hands.

Martingale system: The Martingale system is a popular betting system that involves doubling your bet after every loss. The idea behind this system is that eventually, you will win and recoup all of your losses. For example, if you start with a bet of $10 and lose, you would double your bet to $20 on your next hand. If you lose again, you would double your bet to $40, and so on. If you win, you would go back to your original bet of $10. Here's an example:

• Bet 1: $10 (loss)
• Bet 2: $20 (loss)
• Bet 3: $40 (win)
• Profit: $10

Paroli system: The Paroli system is the opposite of the Martingale system, where you double your bet after every win instead of every loss. The idea behind this system is that you will take advantage of winning streaks and minimize your losses during losing streaks. For example:

• Bet 1: $10 (win)
• Bet 2: $20 (win)
• Bet 3: $40 (loss)
• Loss: $10

1-3-2-6 system: The 1-3-2-6 system is a betting system where you increase your bet in a specific sequence, and if you win all four bets, you start again. For example:

• Bet 1: $10
• Bet 2: $30
• Bet 3: $20
• Bet 4: $60
• If you win all four bets, you start again at $10.
• If you lose any bet, you start over at $10.

D'Alembert system: The D'Alembert system is a betting system where you increase your bet by one unit after every loss and decrease your bet by one unit after every win. The idea behind this system is that you will eventually have more wins than losses, and the bet sizes will even out. For example:

• Bet 1: $10 (loss)
• Bet 2: $20 (loss)
• Bet 3: $30 (win)
• Profit: $0

Fibonacci system: The Fibonacci system is a betting system where you follow the Fibonacci sequence (1, 1, 2, 3, 5, 8, 13, 21, etc.) to determine your bet size. You increase your bet after every loss and go back two steps in the sequence after every win. For example:

• Bet 1: $10 (loss)
• Bet 2: $10 (loss)
• Bet 3: $20 (loss)
• Bet 4: $30 (loss)
• Bet 5: $50 (loss)
• Bet 6: $80 (win)
• Bet 7: $30 (win)
• Profit: -$10

It's important to note that while these betting systems may increase your chances of winning in the short term, there is no guaranteed betting system that will ensure a profit in the game of blackjack.

You can also apply these in other games like Roulette. However, Roulette typically has a higher house edge than some of the other casino games. The house edge in American roulette, which has two green zeros, is 5.26%. The house edge in European roulette, which has only one green zero, is slightly lower at 2.7%.

Here are some games other than Blackjack that offers better odds for players:

• Video Poker: Video poker machines typically have a much lower house edge than slot machines. By using an optimal strategy and playing at machines with favorable pay tables, players can reduce the house edge to less than 1%.
• Baccarat: Baccarat is a simple game that offers relatively good odds for players. The house edge on the banker bet is less than 1%, making it one of the best bets in the casino.
• Craps: Craps is a game where the player can make a variety of bets with different odds. By focusing on bets with a low house edge, such as the pass line bet or the don't pass bet, players can reduce the house edge to less than 1%.
• Pai Gow Poker: Pai Gow Poker is a game where the player is dealt seven cards and must make two poker hands, one with five cards and one with two cards. By using optimal strategy, players can reduce the house edge to less than 2%.

Key Takeaways:

• Casinos are able to avoid people walking out with pockets full of winnings because their risk management is some of the most rigorous and effective in the world.
• Casinos play fairly and go through regular maintenance and inspections, and testing by independent laboratories.
• The gambler's fallacy is a cognitive bias in which individuals believe that past random events influence future outcomes, even when this is not the case. It can lead to poor decision-making in gambling and investing.
• Casinos make sure they always win by ensuring that the odds of winning any particular game are always in their favor, through game design, house edge, betting limits, surveillance and security measures, and complimentary services.
• The house edge varies between different games and can be reduced through skill or strategy.
• Blackjack has a low house edge that can be reduced further by using basic strategy and card counting.
• Roulette typically has a higher house edge than some of the other casino games.
• Other games that offer better odds for players include video poker, baccarat, craps, and pai gow poker.
• There are different betting systems that players can use to increase their chances of winning, but there is no guaranteed betting system that will ensure a profit in the game of blackjack.
• The Martingale system, Paroli system, 1-3-2-6 system, D'Alembert system, and Fibonacci system are some examples of betting systems.
• Gambling should be done responsibly, and there is always a risk of losing money.