Your Bad Habits Make Me Happy

April 24, 2013

 

This past weekend, a college friend made the inevitable trek to the home of CYC World Headquarters: Las Vegas, Nevada, The Happiest Place on Earth. Let’s regale you with a little background on both parties, visitor and destination respectively.

Our college friend (whom we’ll call Alan, because that’s his name) got a full-ride scholarship to a prestigious school. Not because he was deformed or Togolese or anything, he was just that smart and accomplished. Today the honorific “Dr.” is part of his occupational name, although he’s not a real doctor, just a clinical psychologist. He has several impressive designations and professional affiliations, and what appears to be a very comfortable couch.

Alan's couch

Alan’s couch

Our world headquarters is located in the 2nd-most-visited city on the planet, and no one has ever gone to Mecca to have a good time. 40 million people fly, drive, or crawl through the desert to Las Vegas every year, most of them with the motivation to live up to the stereotype. Don’t just drink, guzzle. Don’t just spend money questionably, spend it stupidly. Don’t just stay up late, stay up all night and into the morning. Don’t just eat, eat as much as you can for a flat rate.

So what happens when an extroverted Ph.D. with time on his hands meets a city with an endless capacity for separating people from their wealth? We got together shortly before his flight left and got the answer. (Which should give you a hint right there. Alan was “unavailable” for all but the very end of his visit.)

Alan spent $176 on taxis in 3 days, which is more than any rental car would have cost. If you’re saying, “Yes, but you’re not factoring in parking,” get out of your provincial East Coast metropolitan mindset and hear us out. Parking in Las Vegas is almost all free, it being the one city that’s figured out that drivers will be more inclined to stay in the neighborhood and patronize a merchant or two when said drivers aren’t constantly racing back to the meter to avoid getting cited.

Of course, the upside to taking a taxi is that you can have a blood alcohol level of .99% and no cop is going to care. Keep that in mind, it’s what the fiction authors like to call foreshadowing.

Alan and his traveling companion* “Mark” played blackjack and slot machines. Blackjack, as you may know, exists. That means the casinos that offer it must do so so they can…well, let’s phrase it as a multiple-choice question.

  1. lose money
  2. make money.

If you answered b), Congratulations! You understand how gambling works, at least in theory. Now come to Las Vegas so you can effectively answer a) in practice.

Alan lost at the tables and on the machines, as you do. $450, if his rough estimate is to be believed. (Alan admitted to being hung over during our conversation, as if his sweater-and-thick-jeans-in-90º-heat ensemble wasn’t a subtle clue.)

He also lamented that he couldn’t find a cocktail for less than $15, which made us shake our heads and, moments later, smile uncontrollably.

Alan is not what we’d think of as a lush. There were plenty of those in college, easy to identify and smell, and he was not among them. And of course, there’s his profession, which presumes that Alan can function highly. We didn’t delve into it during our short conversation – it’s impossible to without sounding like a psychologist – but we’re guessing he’s a “Vegas drinker”. What happens in, etc. The adult equivalent of the girl who’s not a smoker, but “only smoke(s) when (she) drink(s),” making her a de facto smoker if not a self-identifying one.

We’re not sure what Alan and his companion spent on food, or even if he/they ate, but Alan did choose Powerade over water and coffee at the donut shop where we said our helloes and goodbyes. The money quote was, “Going to need those electrolytes for the plane,” and who but a winded marathoner would talk like that? A man who got too many dealer 19s, too many gins & tonics, too many ultraviolet rays and not enough sleep.

Not counting airfare and the hotel, Alan spent hundreds if not thousands of dollars in less than 72 hours. He took only photographs and left only footprints, if by footprints you mean fat wads of cash. He returned home without incident, and sent an email of thanks for our modest display of hospitality. (A lift from his hotel to the airport, and on this topic Las Vegas is again a city of forward thinkers. The airport is half a mile from the Strip.)

Nevada is one of 6 states that levy no income tax. Alan, God bless you and every one of your 39,999,999 profligate fellow travelers. Come back sometime. Anytime.

 

*A heterosexual friend. You thought otherwise, but why?  

Filed Under: Bad Examples Tagged With: , , ,

Take The Underdog

June 20, 2012

This passed for sexy in the ’70s. Explain to us again why all women aren’t lesbians?

 

This post doesn’t have a lot to do with personal finance, but we did the research and needed to present it somewhere. Just as George Will takes a break from his political columns to write an annual column on baseball, consider this our indulgence. Plus you’ll learn something. If you know the rudiments of sports gambling, start reading again where it goes red.

Like all wagering, sports gambling is largely stupid from the bettor’s perspective, a way for the book to earn a 4.5% return on your money in the length of time it takes to play a football or basketball game. The most common bet in those particular sports involves invoking the pointspread. You don’t bet on a team to win, you bet on a team to cover said spread. For instance, on Thursday the Oklahoma City Thunder and Miami Heat will play Game 5 of the NBA Finals. Miami is a 3½-point favorite, meaning that if you bet on Miami, they need to win by at least 4 for you to collect. If they win by less than 4, or lose, you lose too. Conversely, a bet on Oklahoma City means they can’t do any worse than lose by 3. If you bet on “Oklahoma City plus three and a half”, to use the jargon, you’ll be ecstatic if they win, and no less happy if they lose by up to 3. In short, when the game ends, we subtract the point spread from the favored team’s score for betting purposes.

Of course, many games’ outcomes are determined well before the final buzzer. The point spread is the means by which a game that threatens to be uncompetitive can attract a bettor’s interest. Say San Antonio, the team with the regular season’s best record, is favored to beat historically abysmal Charlotte by 20. But if San Antonio is leading 121-100 with :30 to play, even though the game itself was long ago decided, every wager is still very much alive. If you had San Antonio -20, only to see Charlotte hoist up a meaningless basket at the end of the game, you’re going to be homicidal. And if you took Charlotte +20, you’re going to be overjoyed. That’s an example of the infamous backdoor cover, which can turn otherwise rational sports viewers into frothing lunatics. The ultimate backdoor cover happens when time expires just as the final shot goes in.

Which brings us to our study topic. Oklahoma City’s James Harden hit a buzzer-beating backdoor cover earlier in the playoffs, which made us wonder how common they are. We went through all 990 regular season games, looking for last-second baskets that didn’t affect the game’s outcome but that did affect the line. We found 5 that turned a wagering loss into a win (or vice versa) and 2 that turned the game into a push (game lands exactly on the spread, all bets refunded.) All the buzzer-beaters were 3-pointers, and all were hoisted up by the losing team:

There were 3 more that weren’t shot at the buzzer, but were close enough. Again, all were 3-pointers shot by the underdog:


Is this just esoterica, or are there any practical lessons to learn from this? No and yes.

First, understand that the sports books’ job is not to predict who’s going to win and by how much. Rather, their job is to place the pointspread at the precise location where they estimate they’ll be as much money wagered on one side of the game as on the other. From their perspective, in a perfect world tomorrow night’s game would have exactly $x bet on Miami and exactly $x on Oklahoma City. That way, the books would guarantee that they’ll receive their standard 4.5% cut on the game’s handle, regardless of who wins.

What, you thought it worked differently? You thought sports books try to determine who’ll win a game, cross their fingers that people will bet on the other side, then hope to collect all the money? Of course they don’t do that, that’d be gambling. And if anyone knows that gambling is stupid, it’s casino executives. To quote the tobacco company CEO, “No thanks, I don’t smoke. That stuff will kill you.” They’d much rather take a guaranteed 4.5% return than virtually no chance at a 100% return.

That being said, a team that’s ahead and is just waiting for the game to end isn’t going to put up pointless shots. That’d be rubbing the opponent’s face in it, kind of. On the other hand, the opponent wants to save face and keep things as close as possible if the opportunity presents itself. Even if “close” has little meaning: losing a game by 7 isn’t any different than losing by 10. A team that’s up by an insurmountable amount isn’t going to bother contesting the opponent’s desperate, low-percentage shots. The leading team’s attitude is go ahead, have at it: just make sure you use as much of the shot clock as possible, so the game isn’t unnecessarily prolonged and so we can all go home.

Thus, taking the underdog is ever-so-slightly a better play than taking the favorite. Enough that it made a difference in around 1% of games this year. Favorites never cover on last-second shots that don’t affect the outcome of the game, while underdogs sometimes do.

That’s if someone has a gun to your head and order you to gamble. Voluntary gambling remains ludicrous.

Filed Under: Math Tagged With: , , , , ,

Hop On And Rotate

April 13, 2012

Red always beats black. Or is it the other way around? Damn, so confusing

 

The vast majority of people on a casino floor, outside of the troglodyte simpletons populating the banks of slot machines, have no idea what they’re doing. We’re serious. Most blackjack players at least comprehend the idea of approaching 21 without going over, but don’t understand about insurance, splitting pairs and doubling down.

Most craps players don’t grasp the rules of the game, couldn’t tell you the payouts, and aren’t in the least dissuaded that they’re resting their fortunes on a literal roll of the dice. Show them the Wikipedia entry for craps, and they’d give up before the 4th paragraph. They just want the shooter to not roll a 7 or 11 (or if they’re being contrarian, to roll a 7 or 11.)

 

If the jargon in this post is already too much for you, good for you. We mean that. Consider yourself advanced, if not “lucky”, that you don’t know how these ridiculous games of chance operate. Lotteries are stupid, but they’re an unsubtle form of stupidity. Casino games, most of which are slightly more complicated than lotteries, fool the more innumerate among us into thinking that they have a chance.

 

To summarize, if you don’t feel like reading any further: there are only two places in the casino where you can make money gambling, and even in each of those it’s an overwhelming challenge. That’d be the race & sports book, and the poker tables. There are good reasons why there are scatteringly few professional race/sports bettors and poker players.

 

In the former case, the margins are tiny. You need to hit 55% to break even (on pointspread sports bets), which means you might as well find a way to spend your time that’ll cause you less heartburn. At 56%, betting on sports is barely worth your while. At 59%, you’re one of the best in the world, and no one on the planet can consistently hit 60%.

 

As for the latter, poker, indeed there’s an element of skill to the game. You have to read your opponents, and calculate odds faster than a dealer can deal. But the single biggest determinant of who’ll win any particular hand is still random chance. An inept player holding pocket aces is in a far better position than is Scott Seiver with an unsuited deuce and 7. In some form, that’s another example of a tiny margin. At a table full of pros, there are few consistent winners. But at a table full of pros with a single non-pro, there’s one consistent loser. Do you really want to take the chance that it won’t be you?

 

That’s why so many neophyte and “intermediate” gamblers gravitate toward roulette. It’s got a big shiny wheel. It’s suspenseful, the ball’s counterclockwise spin building anticipation as it decelerates. Roulette just feels like gambling.

 

It’s also crushingly stupid.

 

38 spaces, each of which is as likely to be hit as the next. (That’s the integers from 1 to 36 – each of which is either red or black – plus 0 and 00.) And each of which pays the same – 36 to 1.

 

We’d say “think about that”, but there isn’t much to think about. Put $1 down, and you’ll lose. Put another $1 down, you’ll lose again. Do it 38 times in a row, and you’ll win. You’ll win $36.

Makes it all worthwhile, doesn’t it? Collect $36 for every $38 you spend? How can you lose?

 

For the really, really mathematically disinclined among you – like Chelsea, the Utah 80 mph girl – this is bad. You’re losing $1 out of every $19. And there’s nothing at all you can do to improve your odds.

 

Any red (or any black) pays even money, as does any odd (or any even). There are several other bets you can make that incorporate multiple numbers. For instance, you can place a bet on all the numbers from 1 to 12 (or 13 to 24, or 25 to 36.) Each of those comprises exactly one-third of the numbered spaces, and pays 2-to-1. Which would appear to be fair on the surface, if you were to discount the 0 and 00.
And why wouldn’t you discount them? They have zeroes on them! Doesn’t that make them meaningless?

 

Those zeroes make the house rich. And make you correspondingly poor.

 

“Yes, but what if you win?” Fine, what if you win. Last week we lambasted the idiots who waited in line for Mega Millions tickets: here in Nevada, which doesn’t participate in lotteries, residents of Las Vegas had to drive 70 miles round-trip to the California border (or 100 to the Arizona border) to spend up to 4 hours waiting for tickets. The 3 people who won can make fun of us. The other dozens of millions of losers who bought tickets can grab a piece of this and slide off.

 

Dumber than smoking? Maybe. At least gambling doesn’t directly impact your health, although you might think twice about that if you spend a few minutes breathing the fumes at the Golden Nugget.

 

If you make $57,000 a year, betting on roulette is the equivalent of having an intruder poke a revolver in your ribs and walk off with $3000. Happy gambling.

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**The Carnival of Financial Camaraderie #30**

Filed Under: Bad Examples, Math Tagged With: , ,
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