Risk and Reward: The Science of Casino Blackjack

142 Pages·2009·2.6 MB·English

Risk and Reward
N. Richard Werthamer
Risk and Reward
The Science of Casino Blackjack
123
Dr.N.RichardWerthamer
43West16thStreet
NewYorkNY10011
USA
[email protected]
ISBN978-1-4419-0252-8 e-ISBN978-1-4419-0253-5
DOI10.1007/978-1-4419-0253-5
LibraryofCongressControlNumber:2009926050
MathematicsSubjectClassification(2000):(Primary)91A60(Secondary)60J60,60-02
(cid:2)c 2009SpringerScience+BusinessMedia,LLC
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Preface
How did a physicist like me get involved with blackjack? I skied in. As a young
doctoralcandidate at the University of California, Berkeley, I would occasionally
join my friends on ski trips to the Lake Tahoe area. Always on a student’s tight
budget, we found that we could stay inexpensively in Reno motels and that the
cheapest meals were at the coffee shops astutely placed at the back of the town’s
casinos.Ifoundithardtopassallthegamblingfrenzywithoutjoiningit.Fortunately
for that budgetand my financial peace of mind, I was usually lucky in winning a
fewdollars.Once,Ipaidformyentiretripwithanunlikelyhitatroulette.
When I learned that an optimized method for playing blackjack (what is now
calledBasicStrategy)hadbeenpublishedinascholarlystatisticsjournal,Iquickly
lookeditupintheuniversitylibrary.Blackjackbecamemygameofchoiceforsub-
sequentTahoeexcursionsand,inlateryearsafterskiingandIhadpartedcompany,
fortripstootherdestinationswithcasinos.Butmyrealrecreationofchoicebecame
blackjackanalysis!
My originalmotive for exploringits mathematicswas to see if the articles and
books I had chanced upon were correct, or if I could find a better way to win.
Visionsofbigmoneydancedinmyhead!Later,asIcametoappreciatetherealities
involved,myinterestshiftedtothemathematicsforitsownsake,complexenough
to be a challenge even for a professional scientist yet easy enough to yield to a
sustained effort on almost every issue. Also, I wanted to verify (or, as sometimes
happened,falsify)claimsaboutthebestwaytoplay,assertedintheliteraturewith
littleornoproof.
When I had finally addressed all the questions that occurred to me, my first
instinctasascientistwastowriteuptheresultsandpublishtheminasuitableschol-
arlyjournal:an archivalrecordforotherpractitionersofappliedmath.YetIcame
torealizethattheresultsweresufficientlyinsightfulaboutplayingactualblackjack
intherealworldthattheywouldbeevenmorevaluabletothewidercasino-going
public.Toreconcilemyinternaldebatebetweenthesetworeaderships,Idecidedto
servebothatonce.Theoutcomeisthissingletwo-partbook,whichfirstdescribes
all its conclusions in completely non-mathematicalterms for the many that enjoy
gambling,and then also providesdetailed derivationsof those conclusionsso that
v
vi Preface
they can be followed and checked by the more mathematically inclined. Some of
the derivations rely only on algebra; others take varying levels of calculus and/or
probabilitytheory.
Whentalkingtofriendsaboutmyblackjackproject,theyinvariablyaskwhether
Ihave“testedmytheoriesinacasino.”Irespondthattheconclusionsdrawnfroma
mathematicalproofareintrinsicallytrue,anddonotneedfieldtestingtobevalid.I
suggestthattheyshouldratherbeaskingwhetherIhave“applied”thetheories;and
Iaddthatanalyzingblackjackisatleastasentertainingformeasplayingit.Ialso
pointoutthatthecashoutcomeofplayingseveralhundredhandsatanactualblack-
jacktable,whichwouldoccupyafullevening,islittlemorethananunpredictable
statisticalfluctuationratherthanatestofthemethods.Manymillionsofhands,sim-
ulated on a computer,are neededto approachsignificantconclusions.I am happy
tohaveexaminedthegameincomprehensivedetail,withouthavingriskedasingle
dime-eventhoughIhavenotwonone,either!
Severalleadingauthoritiesonblackjackhavebeengenerousinsharingtheirtime
andknowledgewithme.StanfordWongandAnthonyCurtiswereencouraging,and
introduced me to several other prominent figures. One of them, Don Schlesinger,
intensivelyreviewedmorethanoneearlierdraftofmymanuscript,therebyprompt-
ing major revisions and expansions. More recently, Stewart Ethier graciously did
the same, with similar results. It is a pleasure to acknowledgetheir help and sup-
port.Additionally,IhavebenefitedfromcommunicationswithSergeiMaslov,Kim
Lee,SteveJacobs,MichaelCanjar,andNormWattenberger.
I am also indebtedto staff membersof Wolfram Research for their active help
andguidancewithMathematica,thesoftwaretoolformuchofthenumericalcom-
putationandallofthefigureproductioninthisbook.Iamsimilarlygratefulforthe
dedicatedeffortsofeditorialandproductionpersonnelatSpringer.
NewYork,NY N.RichardWerthamer
Introduction
Considering the large number of blackjack books published since that original
statistics paper, more than 50 years ago, it may well be wondered what I could
possiblyadd.BasicStrategy,afterall,hasbeenknownandunchallengedfordecades.
Card counting methods, as a complement to Basic Strategy, have also been fully
developed. But most of the previous publications have shortcomings and missing
pieces, which I fill in and clarify. The result is a systematic description of each
majoraspectofoptimalplay:howbesttoplaythecardsinyourhand,howbestto
assesstheoddsexpectedforthenextround,andhowbesttoadjusttheamountyou
betonthatroundbasedonitsodds.
Furthermore, I emphasize the trade-off between simplicity and performance: I
discuss how easy each aspect of optimal play is to actually use in a casino, and I
recommend simplified versions, where desirable, that give nearly optimal perfor-
mance.Aseriousplayershouldideallybecarryingoutanumberofdistinctmental
processessimultaneously,rapidly,andaccurately;hemaywellwishtodroptheleast
valuableones,to ensurehis fidelityto those moreworthwhile,aswell as to lower
hisstresslevel.
Icontributemuchnewmaterialaswell.Themostsignificantistothatthirdmajor
aspect – how you, as a player, should manage your cash. (I will usually refer to
youinthethirdperson,asPlayer,withmasculinegenderassumed;andthedealer,
correspondingly,asDealer,femininegender.)Ifyouareadvisedtoincreaseyourbet
whenyouhavedetectedfavorableodds,thenitislikelyyouwillimmediatelyask,
“Byhowmuch?”Closelyrelatedishowyoucancontroltheriskofalosingstreak
thatwipesoutthetotalcapitalyoubroughttothecasino.Thisriskdependscritically
onthescaleofyourbettingrelativetoyourcapital:mostplayersprobablylosemore
moneyfrominadequatecapitalizationthanfromanimperfectplayingstrategy.
Almost all previous authors on blackjack either avoid the capital management
issue altogether or give vague, hand-wavingimpressions. Almost no one supplies
ananswerthatseemsconvincing,letalonethoroughlyjustified;andthebetterwork
islargelyinrestrictedWebchatrooms.Incontrast,Idemonstratetheoptimalrela-
tionship betweenthe amountbet on a hand and its indicated odds, and I link it to
yourrisktolerance.
vii
viii Introduction
Ialsofullyanalyzeseveralunder-appreciatedrefinementstobettingstrategy.Two
ofthese,referredtointheliteratureasback-countingandKellybetting,areusually
mentionedonlyinpassing.Athirdisbettingonmultiplesimultaneoushands.Ishow
thatthesecaneachsignificantlyenhanceperformance.Theiruse,infact,isakeyto
thesuccessofblackjackteams.
PartIofRiskandRewardgivesastraightforward,self-containedguidetoblack-
jackforageneralreader,evenabeginningoroccasionalplayer.Itrecommendshow
besttoplaythegame,andwhatresultstoexpect.
Chapter1reviewstherulesofblackjack,alongwithdefinitionsofthekeyterms
specifictothegame.Chapter2thencoversthesimplestandmost-usedtechniquefor
playingahand,widelyknownasBasicStrategy,inwhichPlayerbaseshisactions
onjustthecardsinhisownhandandtheonecardvisibleinDealer’shand.Limited
toonlythisinformation,Playershouldalwaysbetthesameamountoneachround.
Chapter3goesontodescribethemoresophisticatedgroupofstrategiesknown
as card counting.In these, Player tracksthe cards dealt on the previousroundsin
order to estimate the odds on the next round and decide how much to bet. Of a
numberof variantcounting schemes proposedover the years, several of the more
accurateandcurrentlypopulararecomparedandevaluated.
Chapter4isinmanywaysthemostsignificant(andoriginal)in thebook.Sec-
tion4.1relatesthescaleofPlayer’sbetsize,therateatwhichheraisesandlowers
hisbetdependentonthecount,andhistolerancefortheriskoflosinghisentirecapi-
tal.ThewayinwhichthesefactorsandothersinfluencewhetherornotPlayerhasan
edgeoverthecasinoiscarefullyexplained.Section4.2examinesamodifiedbetting
schemethatacceleratestherateofwinning.Italsopointsouttheadvantagesofplay-
ing multiple hands simultaneously. Section 4.3 shows how Player further benefits
fromproperlychoosingthemomentstobeginbettingatatableandtoleaveit.
Chapter 5 revisits play of the hand, to examineways in which it interacts with
card counting. Section 5.1 considers modifications to the counting technique that
best support a play strategy generalized to become count-dependent.Section 5.2,
in contrast, identifies the best count-independent play strategy for a Player who
systematicallyvarieshisbets.
Chapter 6 collects the key points of Optimal Strategy from earlier chapters. It
summarizesthetechniquesofplaystrategy,ofcardcounting,andofbetsizing;and
it reviews the complex of factors, including casino countermeasures, determining
the amount of money Player might win or lose. It presents the case that casino
blackjack for a single Player is better thought of as an entertainment, which can
beenjoyedwithonlymoderateskillatrelativelytolerableexpense,ratherthanasa
consistentmoneymaker.Ontheotherhand,ablackjackteamcanusetechniquesnot
availabletoanindividualthatmakeitatruebusiness,withattractiveratesofreturn.
Chapter6shouldbescannedbyeveryreader,whetherornothehasdippedintothe
otherchapters.
Part II then details the analysisjustifyingthose recommendations,intendedfor
thesubsetofreaderswhowishtounderstandthegamemoredeeply,and/orfollow
its mathematics. Part II gives detailed, self-containedderivationsof the assertions
Introduction ix
andqualitativedescriptionsofPartI,withChaps.7–10corresponding,respectively,
toChaps.2–5.
The tools used in Chap.7 are almost entirely algebra and basic probability, so
moreadvancedmathematicsshouldnotbeneededtofollowit.Chapters8–10,how-
ever, bring in the machinery of vector calculus; college training equivalent to a
scienceorengineeringdegreeshouldbesufficienttounderstandsomeofthederiva-
tions, while the more sophisticated steps of the others are detailed in step-by-step
appendices. For those readers who desire an added boost, I recommendMorse &
and Feshbach (1953),my own guidebookto applied mathematics and even today
a leading authority. For a recent text focused on matrix algebra I suggest Shores
(2007).
Some further comments are in order on the style of the mathematics. First of
all, I have avoided the use of theorems, formally stated and rigorously proved as
intypicalmathematicspublications.Rather,Itaketheapproachofmostphysicists,
whichis to narratea derivationassuming,withoutexplicitformalproof,that each
manipulationisvalidunlessthereissomeevidentreasontoquestionit.
Furthermore,atmanypointsinChaps.8–10whereaquantityisstrictlyspeaking
arationalnumber(ratioofintegers),Iapproachitsanalysisbyapproximatingitby
adecimalone,justifiedbecausethenumberofcardsshuffledintothepackislarge.
(Illustration:thefraction17/52isarational,while0.327isacloseapproximationto
it.)The movefromthe exactdiscretemathofearlierblackjackanalysts, primarily
basedonprobabilityandstatistics,toapproximatecontinuummathopensthedoor
tothepowerfultoolsofcalculus,andfacilitatesnewresultsdifficulttoobtaininthe
traditionalway.
Supplementingthetextareindicesoftermsandofnotation.Eachentrycitesthe
pagewherethetermorsymbolisfirstintroduced.
Contents
Preface.............................................................................. v
Introduction ....................................................................... vii
PartI Strategy
1 TheGame...................................................................... 3
1.1 HistoryofCasinoBlackjackandItsAnalysis.......................... 3
1.2 Rules,Procedures,andTerminology ................................... 5
2 PlayingtheHand ............................................................. 9
2.1 BasicStrategy............................................................ 9
2.1.1 ExpectedReturnwithVariantRulesandProcedures.......... 13
2.1.2 ExpectedReturnvs.ReturnonInvestment .................... 13
2.2 Composition-DependentPlay........................................... 14
3 TrackingtheCards........................................................... 15
3.1 LinearCounts............................................................ 16
3.2 ChoosingaCountingVector ............................................ 17
3.3 UnbalancedCountingVectors .......................................... 19
3.4 RelatingtheTrueCounttotheExpectedReturn....................... 20
4 Betting ......................................................................... 21
4.1 Yield,Risk,andOptimalBetStrategies................................ 21
4.1.1 Camouflage...................................................... 26
4.2 BettingProportionaltoCurrentCapital ................................ 27
4.2.1 MultipleHandswithRescaling................................. 28
4.3 Back-CountingandTable-Hopping..................................... 29
5 PlayingtheHandWhentheCountandBetVary......................... 31
5.1 PlayStrategiesthatVarywiththeCount ............................... 31
5.1.1 ReconsideringtheCountingVector ............................ 31
5.1.2 CountDependenceofthePlayParameters .................... 33
xi