EXPLAINING HOW PROFESSIONAL GAMBLING WORKS – USING A ROULETTE WHEEL
What is Gambling?
Gambling is an investment, involving a risk of loss, and a chance of profit.
Investing a stake on the outcome of a random event, with the hope of making a positive return.
What things are examples of gambling?
Wagering on Sports (typically referred to as ‘betting’).
Playing Casino games (typically ‘gaming’).
Buying lottery tickets.
Investing in individual company shares, or the stock market.
Entrepreneurial activity – investing in companies.
Is ‘Trading’ different?
The term ‘trading’ is commonly applied to gambling where the success of the trade does not depend on a final outcome of the event or market.
‘Traders’ seek to profit from movements in markets, rather than waiting for the outcome of an event to see if they win or lose.
A football match or a hand of poker has a denouement, a result.
The price of gold does not.
So the techniques and practicalities of ‘trading’ and ‘gambling’ are different.
But the same fundamental principles that will lead to success are the same.
What is Professional gambling?
Fundamentally it is making a profit from investments.
But it’s a bit more than that.
It is possible for an amateur gambler to make a profit if they hit upon a single big win. Like a lottery jackpot, or a 15 team football acca.
And every gambler will have wins and losses, periods of success and failure.
So you’re a professional gambler if you make a profit over a ‘long’ term, as a result of gambling with the odds of success in your favour.
A ‘long’ term can mean different things, but let’s say three years is a reasonable period for us to use as a definition of ‘long term’.
Why do most gamblers lose?
Almost all gamblers lose over a long term.
But every gambler who gambles over say a three year period has a mix of wins and losses.
The difference between a winning gambler and a losing gambler is ultimately nothing to do with the outcomes of the random events. It is to do with the price at which they bet.
A professional poker player doesn’t get dealt better cards than everybody else. It is how he bets, what hands he bets on that makes the difference between long term gain and loss.
Amateurs bet with the odds against them. Professionals bets with the odds in their favour.
Success at gambling is determined by the odds at which you bet, not by what you bet on.
Understanding, and embracing randomness is the foundation of professional gambling.
Understand randomness, and you can then understand ‘value’.
Nothing is absolutely certain.
Anything that can happen, will happen. If you wait long enough.
Randomness is how our universe works.
Everything is random. It’s just that some things are much less random than others. There are patterns to randomness.
Ask a professional gambler if the sun will rise in the East tomorrow.
He will answer, ‘probably’.
There is a chance, albeit infinitesimally small, that the sun won’t rise in the East tomorrow.
A massive undetected asteroid may smash into our moon this evening, affecting Earth’s gravity and rotational axis.
A distant black hole may suck our sun into it.
The large hadron collider in Switzerland might malfunction, generating an explosion that knocks Earth out of its orbit.
The North Koreans might blow up our planet with nuclear bombs.
All of these things may be monumentally unlikely.
But if it is possible for them to happen, then they will happen. One day. And it might be today.
A professional gambler’s job is to work out how likely things are to happen.
So in theory, say he estimates that the chances of the sun not rising in the East tomorrow are a trillion to 1. If someone offers him odds of 2 trillion to 1 then he would bet on it.
The bet represents ‘value’. The odds he is getting are greater than the actual chance of the random event occurring. The odds are in his favour.
Now obviously there are rather a few practical issues with actually betting on such a thing. Not least that you will probably have perished in a hellish fireball before you can get down to the bookies to collect your cash.
But it’s a useful, if extreme, example of the principle of professional gambling.
It’s about betting with the odds in your favour.
It doesn’t really matter what those odds are. So long as they are greater than the real chance of the random event occurring.
And the outcome of the random events doesn’t ultimately matter, so long as you are taking a long term view.
What creates success at gambling is collecting, as a profit, the difference between the true odds of an event occurring, and the odds you took.
Predictions are useless.
Although they can certainly be fun to make.
The biggest misconception about professional gambling is that it’s about making predictions.
Predicting what the outcome will be of the random events.
People believe that gambling is about predicting what will happen and then backing that prediction with cash. They think professional gamblers are just better at making the predictions.
But this isn’t true. Professional gamblers don’t make predictions.
Making predictions is what amateurs gamblers do.
Professional gambling is essentially about working out HOW LIKELY random events are to occur.
There’s a big difference.
A professional gambler recognises that the universe is subject to randomness. Anything that can happen, might happen.
So the sun may not rise in the East. Barcelona might lose at home to Eibar. The slowest horse might win the race. Number 26 might come up 10 times in a row on a roulette wheel. The lottery numbers might be 1 2 3 4 5 6. Mike Tyson might get knocked out by Buster Douglas. IBM might go bust……
Amateur gamblers bet for entertainment. For the thrill of taking a risk, and being able to watch while success or failure is determined by randomness. Part of the fun is receiving a prize at the end if the bet wins.
But also part of the appeal is being able to say ‘I was right!’ I looked at the random event, and I figured it out. I KNEW that was going to happen! I backed my prediction, and I won’.
Therin lies the reason bookmakers, casino and lottery operators make a profit. They provide entertainment. The give amateur gamblers the opportunity to make a prediction – to take a chance on the random event falling their way.
Professionals are different. They don’t bet for entertainment. Their only motivation is profit. It’s a business.
Everything is subject to randomness, so there is no such a thing as a ‘sure thing’ or a ‘certain winner’.
Professionals work out how likely something is to occur, and then bet if they can find odds that are greater.
It’s got nothing to do with making predictions. Predictions are useless.
Anybody can predict that the sun will rise in the East, or that the stronger team will win the match. There is no value in making those observations. The value comes in discerning the patterns in the randomness.
HOW likely is it that the sun will rise in the East.? HOW likely is it that Eibar with beat Barca?
The answer is always a number. The observation that it’s ‘very likely’ or ‘very unlikely’ has no value to a professional gambler.
Some things are very random – like which slot in a roulette wheel the ball will end up in.
Some things are very non-random. Like where the sun will rise tomorrow.
But they are both random. Anything that is possible to happen within those events, could happen.
A Roulette Wheel
If you want to understand the maths and the fundamentals of professional gambling then a roulette wheel is a great place to start.
A roulette wheel is a random number generator.
The wheel is spun and the ball is rolled, and it has an equal chance of ending up in any of the 37 slots.
The true odds of the ball landing in any of the 37 slots is 36 to 1.
36 chances of it not landing in our slot. To 1 chance of it landing in our slot.
Expressed as a % those odds are 2.7% (100 divided by 37).
As a ‘decimal’ price it is 37.0.
The casino makes a profit by offering odds of less than those ‘true’ odds.
A casino is a professional gambler.
[There is no fundamental difference between ‘taking’ or ‘placing’ bets. The principle of what generates a profit is exactly the same.]
It offers odds of 35 to 1 about us predicting which slot the ball will land in.
It makes a profit, over the long term, by keeping the difference between 35 to 1 and 36 to 1.
That’s all. There is nothing more to it. That’s all professional gambling is. Betting with the odds in your favour.
The difference between 35 to 1 (36.0 or 2.7%) and 36 to 1 (37 or 2.8%) is 2.78%.
Over a long period the roulette wheel wins for the casino 2.78% of all the stakes that are placed (assuming no flaws in the wheel, or skullduggery).
For every £100 placed in bets, the casino wins £2.78, when you look at it over a long term. Which they do.
The result of any individual spin is irrelevant. The profit the wheel makes on any spin, in any hour or even any day is not relevant. All that matters is that they win £2.78 of every £100 in stakes put down in bets over a long term like three years.
On roulette the margin in the casino’s favour is the same no matter what the gambler actually bets on. It can be a bet on a single number at 35 to 1, or any of the splits, columns or rows. Red or black.
The difference between the true odds and the odds the casino offers all come out at 2.78%
It’s not a big margin in normal business terms. But spin the wheel often enough and the long term profits start to become big.
Big enough to build the city of Las Vegas. All built on the difference between 35 to 1 and 36 to 1.
The casino has no idea where the ball will land on each spin of the wheel. It doesn’t make predictions.
The Pit Boss
In the casino you will see a guy standing behind the roulette wheel, looking cool in his black suit and cufflinks. All-knowing, all-seeing.
He’s the Pit Boss.
What a guy, what a dude.
He’s standing inside but he’s wearing shades. He’s watching the wheel. He knows. He knows where that ball is going to land.
And if a really big bet gets placed on the number that’s about to come up, he’ll nod to the croupier who will reach under the table and press a button that changes the result.
All utter bollocks.
A casino Pit Boss is, in fact, a fairly low level casino employee. He’s only there to stop the croupier from stealing the casino’s money. And to keep the wheel spinning.
He has no idea where the ball is going to land. And there is no magic button.
All he knows is that his bosses want the wheels to keep spinning. The more spins the better.
He maybe doesn’t even know the maths behind it, that the casino is winning 2.78% of all the money that gets placed on the table. He doesn’t need to know that. All he needs to know is that the odds are in the casino’s favour, so he needs to keep the wheel spinning.
There is no legitimate way (i.e. without cheating or stealing) to make a long-term profit from betting against a casino on a roulette wheel.
In the short term of course randomness dictates that you might well have a good run of wins. But the odds will get you in the end, if you keep playing long enough.
The Casino is a Professional Gambler
So a casino operating a roulette wheel is a professional gambler.
It doesn’t make predictions.
It is only concerned with how likely something is to occur.
It recognises that the outcome of each spin is subject to randomness.
It makes a profit from working out how likely each possible outcome is to occur.
And it only bets when it gets odds that are greater then the true odds.
It bets with the odds in its favour.
It makes a long-term profit.
What happens in the short term is irrelevant.
It has nothing to do with luck.
You want to be a professional gambler?
If you aspire to be a professional gambler then a great place to start is to figure out how a roulette wheel works.
I’ve just touched on the maths here.
If you get it, great.
If you don’t – take a bit of time to work it out. Figure out where the 2.78% number comes from.
That 2.78% is the margin.
The fact that the casino has the 2.78% margin in its favour means that every bet is takes is ‘value’.
If you understand the 2.78% then you understand what professional gamblers mean when they talk about ‘value’.
It has loads of different meaning to other people.
But understanding the concept of ‘value’ is the first step on the path to becoming a professional gambler.
Welcome to the path!
Come with me, I’ll show you the way!