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When You Win, You Lose!24 August 2002
When I first started my gaming career, my mother took me aside and said: "Be careful. The casinos will win in the end." I asked her why and she replied: "Because the casinos are the casinos."
Now, she didn't know about odds and edges, speed and number of decisions; she knew one thing: "The casinos will win in the end." I pressed her further. Did she think nobody ever won? Did everybody walk away a loser every day and every night? "No," she said, "people win but then they lose. They win but then they lose."
Without fully understanding the math behind her statement, my mother had cut to the quick of why casinos win in the long run and why almost all players lose in the long run. It is a very simple concept really: The casinos win when the players lose, of course, but the casinos win when the players win as well!
There is nothing diabolical about this, as you shall see, and it works like this:
Games are structured in two ways to give the casino the edge. The casino can win more decisions than the player, or the casino can tax the player's winning bets. In craps, for every 495 decisions, a Pass line or Come player will win 244 decisions but will lose 251 decisions on average. That seven-decision shortfall on the part of the player means the casino has a 1.41 percent edge on the game. (Just divide 495 into 7 and you get 0.0141414.) That means for every $100 bet this way, you can expect to lose $1.41 in the long run. As house edges go, this is comparatively quite low. So the Pass line and Come bets would be considered good bets to make.
If we take a look at the worst bet on the craps table, the Big Red or Any 7 bet, we see how the casino utilizes a tax to generate profits. In 36 rolls of two six-sided dice, the 7 will come up six times on average. That's because the 7 can be made in six different ways (1:6; 6:1; 2:5; 5:2; 3:4; 4:3). The probability of getting a 7 on any given roll is therefore six in thirty-six or one in six. That means for every 7 that shows, five non-7s will also show. That makes the odds on the 7 appearing five to one. In a "fair game," defined as a game where nobody has an edge, a winning Any 7 bet would pay $5 for every winning $1 wagered. The player would lose $5 on the five $1 bets he lost, win $5 on the one bet he won and -- everybody goes home even (in the long run).
Unfortunately for the player, the casino can't make any money on the Any 7 bet if it pays off at five to one. So when you bet the Big Red or Any 7, the casino does not pay you the true odds of the bet. Instead it pays you four to one. So you lose five times ($5) and win once ($4) and you are down a dollar. In a very real sense, the casino keeps that extra dollar for itself! So when you win you also lose.
In roulette, we see the same kind of tax being imposed. On the American double-zero wheel, there are 38 pockets for the ball to fall into, the numbers 1 through 36 and the 0 and 00. The probability of any one pocket hitting is one in 38. The odds of winning are therefore 37 to one. The casino pays out $35 for every winning $1 bet, in essence keeping $2 for itself. That becomes the casino edge on roulette, 5.26 percent. (Just divide 38 into 2 and you get 0.0526315.) Again when you win, you lose.
Card games can be much more complicated to analyze than other games as the number of combinations that can be made with a deck of cards are enormous. However, blackjack falls into the first category of games -- the casino wins more decisions. Approximately 48 percent of the decisions are won by the casino, 44 percent by the player, and 8 percent are ties. So how is it that blackjack is such a close game? Because on those 44 player wins, the casino will sometimes pay more than even money (a blackjack), or it will allow the player to increase his bet in player-favorable situations (doubling down and splitting pairs). That makes up some of the shortfall the players face. But it isn't enough to make the game a positive one for the players, who will still face about a half percent edge in multiple-deck games (if they use the correct basic strategy, that is).
Now, students of business should not be shocked that the casinos attempt to structure all their games so that they have the edge. After all, no one is shocked to learn that the local department store actually makes a profit on you when you buy your hardware, underwear or cookware, or that your local stationery store marks up its newspapers, magazines and books, or even that your local supermarket has the audacity to make a profit on your hunger by charging you more for the food than it costs them. When you buy a television set, no one thinks he is getting it for what it really cost to build. For businesses to function, they must make profits. That's a no-brainer.
Sadly, some other no-brainers, in a misguided effort to keep the rest of us from having fun, often articulate the notion that somehow or other it is immoral for the casinos to charge a tax on their games, or to structure their games so that they win more decisions from the players than they lose, in order to guarantee a profit for their owners and investors. Why is that immoral? What's not to understand? Business is business. The casinos aren't interested in gambling on their games, they want the math on their side. By analogy, what's the sense of making a new product if you sell it for less than what it costs you? The casinos sell their games to the players and it is up to the players to get the best bargain they can, just as it is up to shoppers to be cost conscious when they make a purchase.
Certainly, my mother was right when she said: "The casinos win in the end," because if they didn't, there wouldn't be any casinos at all -- and where would that leave all of us casino-thrill shoppers? There are only limited thrills to be had at a Home Depot, after all.
This article is provided by the Frank Scoblete Network. Melissa A. Kaplan is the network's managing editor. If you would like to use this article on your website, please contact Casino City Press, the exclusive web syndication outlet for the Frank Scoblete Network. To contact Frank, please e-mail him at email@example.com.
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