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The dynamic of tournament blackjack, however, is significantly different.  The basic premise is simple.  All players at a given table start with an equal number of chips (for example, $10k).  After a predetermined number of  hands are played (for example, 21 hands), the player who has the most chips advances to the next round. This means that how the other players fare is very consequential as to whether you win or lose, as success/failure is all or nothing in tournament blackjack.  You either end up with the most chips and advance (even if that chip total is a paltry $100), or you finish with less chips than the chip leader which means you lose (even if you tripled your bankroll from $10k to $30k).

This dynamic creates a very interesting and markedly different change in optimal strategy. At times the best play is one that would normally be a horrible one.  For example, doubling down on a hard 19 in the last round could  be the correct play if that is the only option that gives you a chance to catch the chip leader.  When I competed in the World Series of Blackjack and the Ultimate Blackjack Tour (UBT), I was really put to the test as compared to my card counting days days. During my professional blackjack career the correct decision for every hand and the optimal bet for every round was 100% clear cut.  The same can not always be said for tournament blackjack. For those that have never played in a blackjack tournament before, here are three important principles to start you on the path to becoming an expert blackjack tournament player.

1) To make up ground on the competition become the Contrarian.  If your opponent bets small, then bet more (this is called Taking the High).  If your opponent bets big, then bet small (this is called Taking the Low). Blackjack players are more likely to lose vs win their hand, which is why taking the low provides a greater probability of making up ground as compared to taking the high.

2)  When you’re in the lead, become the Copy Cat. Try to match your wagers with those of your closest competitors. This is the best strategy since there’s a high correlation between player outcomes. For example, if the dealer draws to a total of 21, he will most likely wipe out the entire table. And when the dealer busts, every hand at the table will get paid out. In both of these scenarios, if you’re in the lead and have wagered the same amount as your main competition, then you will maintain your chip leader position.

3) You can’t take the chips with you. As compared to when you normally play blackjack, the value of tournament chips lies entirely in their utility in helping you attain chip leader position. Don’t allow yourself to fall too far behind the chip leader. You are better off going all in with a shot to make up a lot of ground in one hand, rather than straggling along with small to medium size bets in an attempt to survive to the last round with little or no shot to win. Having the lead going into the last round, no matter how small, gives you a significant edge, as the value of your chips are essentially worth more than your competitors’. Since you can’t take the chips with you, when in doubt, Bet The Max, particularly in the last and deciding round.

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The concept of “Kind” vs “Wicked” learning environments was studied and penned by cognitive psychologist Robin Hogarth. A kind learning environment is a domain that provides regular and accurate feedback as to which decisions or actions will result in positive outcomes. Video games, golf and chess are good examples of kind learning environments – players can improve from repetitive practice because each of these domains provide a meaningful feedback loop as to  which decisions or actions will produce the better outcomes.

In contrast, wicked learning environments are those in which the correlation between outcomes and specific decisions or actions is ambiguous, deceptive, or non-existent. Two classic examples of wicked environments are the stock market and the business world. These domains are complex environments with many variables and high volatility. There’s a reason why it’s extremely difficult to beat the market on a consistent basis, and why there’s such an incredibly high failure rate with start-up businesses.

Blackjack is a domain which is completely wicked if you make your decisions like the vast majority of gamblers do – based on intuition, emotions, short-term observation, and blackjack myths.  Blackjack does not lend itself to correlating successful outcomes with specific decisions based on human observation.  For example, we do not have the innate ability to determine from empirical observation whether hitting a player 12 vs a dealer 3 is worse or better than standing as far as the best long-term result.  Fortunately, with the aid of computer simulations, blackjack academics and pioneers such as Ed Thorp were able to determine the optimal playing and betting strategies that can make one a truly profitable advantage player.

Unfortunately, more than 99% of blackjack players do not take the time to seek out, learn and master the strategies that can transform the game of 21 from a wicked, losing domain to a kind, favorable one. Now don’t confuse the term “kind” with easy. Becoming an expert at anything requires not only the right knowledge but also the commitment to practice and master the requisite strategies and skills. But for those who are serious about learning how to play 21 like a pro, there is an proven and established blueprint for success.

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Every person that I have trained that went on to become an accomplished card counter was not only willing, but excited about putting in the time and effort necessary to master the requisite knowledge and skills to become a card counting pro.  My most successful student to date, “Al”, is someone who barely graduated high school, getting D’s in math. During the time that I spent with AL, it became apparent that he was an underachiever when he was younger. At the same time Al would be the first to tell you that he’s anything but a math whiz. But what Al had going for him, was a serious commitment to turning his fortunes around at the blackjack tables. To his credit he did just that.

Many people have a get-rich-quick mentality, dreaming about the potential upside with no focus on the steps it takes to get there.  No matter the endeavor, there are no shortcuts to achieving your goals.

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Deadwood South Dakota has a storied history – an illegally founded town whose economy was built on gold mining and bolstered by prostitution and gambling.  Several weeks ago I meet with the South Dakota Gaming Commission regarding claims that a small group of players have brought back the unlawful gambling days of Deadwood by unfairly colluding in poker tournaments. The goal of the South Dakota Gaming Commission was to determine what steps to take to deal with the  public perception that poker games in Deadwood are not on the square.  One of the key objectives of the 2-day consulting was to educate the four casinos in Deadwood on the difference between advantage play which is legal and criminal play which is not.   As a legal rule of thumb, play that meets any of the following 3 criterion is criminal in nearly every gaming jurisdiction in the US.

1)  Alters the outcome of the game – i.e. marking cards, capping bets, switching in loaded dice

2)  Makes use of a device, electronic or otherwise  to gain an advantage – i.e.  video camera or predictive device such as a smartphone program

3)  Involves collusion with the communication of  information that is not available to all players at the table  – i.e. dealer signaling the hole card

The first two criterion for criminal play are patently obvious to most people in terms of both the spirit of fair play and the letter of law.  When it comes to team play however, the legal distinction has to do with the information that is being passed along.  For example, communicating the running count to a teammate in blackjack is legal because this  information  is available to all players at the table.  By law, all cards in blackjack must be shown before being placed in the discard tray; thus, all players have an equal opportunity to keep track of the count.  On the other hand, the passing of pocket card information in poker constitutes illegal collusion since this information is not accessible to all players at the table.

To re-gain the public’s trust in the  poker games of Deadwood, the SD Gaming Commission has decided to write into gaming law  four simple rules:

1)  Poker cards must be replaced at least once a day

2)  No electronic devices will be permitted at poker tables

3)  Player seating at poker tournaments will be determined by a randow drawing

4)   A limit will be placed on the number of re-buys in poker tournaments

These easy-to-implement, low cost measures will significantly reduce the risk of unlawful collusion and other illegal poker activity, and should help to increase Deadwood’s poker tournament revenue to to its previous high from three years ago.

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In winning his first four games on Jeopardy, Arthur Chu has caused a stir among fans of the television show. Chu has employed a number of game strategies that have annoyed and even enraged some of the show’s followers.

1)      Hunting for Daily Doubles – Instead of moving progressively down a category of questions from top to bottom, Chu jumps around all over the board.  He selects the hardest questions first because most of the Daily Doubles are in the bottom 2 rows. If the two hardest questions do not reveal a Daily Double, Chu immediately jumps to another category, regardless of whether that category of questions has not been completed.

2)      Frenetic Paced Play – Chu has also drawn criticism for  aggressively buzzing in as well as cutting off Alex Trebek in mid-sentence on a regular basis.  It’s the opinion of some that Chu  violates the unwritten rules of etiquette when he does not allow Trebek to complete his witty commentary.

3)     Playing for the Tie in Final Jeopardy – In one of his games, Chu had the lead going into Final Jeopardy, and wagered an amount such that if he and the second place contestant both answered correctly, they would tie, and that’s exactly what happened. Many viewers were confused as to why he did not play for the outright victory.

My personal take on Chu’s play – I’m a big fan.  In the game of Jeopardy, Chu personifies an Advantage Player. Hunting and finding Daily Doubles has tremendous value – not just in the potential to double your winnings with one correct answer, but also in preventing opponents from landing them. Chu’s motivation for playing the game at breakneck speed is to answer as many questions as possibile in order to win more money. Accomplished card counters apply the same approach, as well as high powered offenses in the NBA and NFL.  If you have the advantage, then you increase your probabillity of winning by maximizing the number of playing opportunties; whether it’s Jeopardy questions, hands per hour at the blackjack tables, or possessions per game in sports.

As for Chu’s tie in Final Jeopardy, he played it perfectly.  If his competitor had answered incorrectly, Chu would have advanced regardless of whether his answer was right or wrong.  Chu wagered an amount such that the worst case scenario was a tie.  When two contestants tie in Jeopardy, both win and advance. Chu’s Final Jeopardy wager guaranteed that he would move on.  If he had wagered a dollar more, like most Jeopardy contestants would have, Chu could have potentially lost.

Most of the ire directed at Chu has to do with the perceived impact on viewers’ entertainment experience. But should the subjective opinion of some take priority over Chu or any other contestant’s right to play the game strategically within the rules of game to give them the best chance to win?  Chu is not the first player on Jeopardy to use strategy and game theory to his advantage.  There have been a number of others, such as former Jeopardy winner, Keith Williams. You can find detailed analysis on the optimal strategy for Final Jeopardy on his site The Final Wager. Fortunately Chu also has a considerable number of supporters who are rooting for him. Both his fans and critics  will have to wait until Jeopardy airs again on February 24 to see if Chu’s advantage player strategies continue to pay off.

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Americans spent $58 billion dollars on lottery tickets in 2011 in hopes of defying the odds and striking it rich.  The tremendous popularity of the lottery despite it’s horrific return on investment has led some to cynically label the lottery as a stupidity tax.  However, a group of MIT students figured out how to turn the lottery from a losing proposition into a lucrative enterprise.  They recognized that about every 3 months when the Massachusetts Cash WinFall  jackpot reached roughly $2 million, the payoffs for smaller prizes would significantly increase if there was no winner.  Like a card counter waiting for the odds to swing into the player’s favor, the lottery group would wait until the jackpot reached a level high enough to produce an advantageous investment opportunity.  By purchasing $100,000 worth of tickets, they virtually guaranteed they would win. The MIT lottery syndicate purchased over $40 million in tickets from 2005 to 2011, winning approximately $48 million.

Lottery officials learned about the profitable loophole but didn’t take action because the professional gamblers generated millions in revenue for the lottery.  After the the loophole became public in 2011, lottery officials enforced a $5,00o limit on the amount of the tickets that retailers could sell per day. Earlier this year the Cash WinFall game was stopped. More details here…..

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I get asked fairly often about continuous shuffle machines (CSM’s) and their effect on the game of blackjack. With CSM’s, no discard tray is needed because the dealer continuously places the played cards into the shuffle machine (for example, after a player busts a hand). This provides a constant randomization of the cards which negates the benefit of card counting. Fortunately, at the vast of majority of blackjack tables you will not find CSM’s. The casinos that do employ CSM’s, use them only at a select number of tables – usually low minimum tables.

What saves card counters from the prospect of casinos using CSM’s at all their blackjack tables is the superstitious and unknowledgeable nature of gamblers. Many blackjack players refuse to play at tables with CSM’s, especially the bigger bettors. They don’t trust CSM’s because they believe that CSM’s rig the game or increase the casinos’ advantage. The reality is that the average blackjack player does have cause to worry about CSM’s but not for the reason they believe. CSM’s do not increase the house edge. In fact, if you play perfect basic strategy CSM’s actually lower the house advantage by a tiny bit. Where CSM’s really hurt the average gambler is that they allow the house to deal more hands per hour because there is less downtime. Since the dealer never has to shuffle the cards, more hands are dealt per hour which means blackjack players bet more often and of course lose more money. Ironically it is the typical blackjack player who lacks the knowledge & skill to beat the house who is unknowingly helping card counters by preventing the spread of CSM’s.

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I was invited to speak at Def Con about a different kind of hacking – my experience with the MIT Blackjack Team. After a showing of the movie 21, I spoke about how our team exploited an inherent vulnerability in the game of blackjack – it’s dependent event nature.  The expertise of hackers is exploiting vulnerabilities & weaknesses in computer systems.  The parallels were very evident to the audience.  They also appreciated the underdog aspect of how a bunch of college kids took on the “Man” and won.  The energy and camaraderie at DefCon reminded me of my college days as well as my card counting experiences.  During the course of my talk and Q & A session  I received  a number of rousing ovations. Def Con has a strong spirit of sharing, learning and fun.  During  the convention many presentations were made on a wide range of hacking subject matter, such as breaking wireless encryption keys and finding back doors to hardware. There were also contests such as Capture The Flag, a competition in which teams of hackers must both attack and defend identically configured servers. While I was at Def Con I was interviewed by The Verge, a technology focused publication.  Among the topics discussed was the similarities between the culture of hackers and the culture of advantage players.  Video of the interview to come. In the meantime, you can check out a Card Counting 101 tutorial that I provided for the Verge. You can also view the video in my video gallery.

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Last week I met with Michael Covel, author and president of Trend Following, a privately owned firm specializing in trend trading research.  Michael recorded our lunch meeting as he interviewed me about my experiences with the MIT Blackjack Team. We were both struck by the similarities and connections between trend trading and card counting. Expected return, risk management and a systematic approach are just some of the strong commonalities. Michael was kind enough to give me a copy of his documentary, Broke, along with several of his books. Since our meeting I have read The Complete Turtle Trader: How 23 Novice Investors Became Overnight Millionaires.  It was a fascinating read and I hope to interview Michael myself to learn more about trend trading and how investors can best navigate the often treacherous waters of financial markets. More to come on trend trading as well as the amazing story of the Turtle Traders. Below is a link to the interview, part of Michael’s podcast.

http://trendfollowing.libsyn.com/webpage/mike-aponte-interview-trend-following-manifesto-with-michael-covel

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