House of Edges: Triple Criteria, Stockdale Paradox and Surviving the Cut [Strategic Guide to House Edge] (Part Two)

While we live our lives in perpetual efforts to improve or alter our reality for better and to avoid inevitable defeats or shattering routs life will throw at us, gambling often provides us with a myriad of opportunities to explore the absolute forms of wins and losses.

As we covered in Part One, all of our gambling endeavours happen in the house of edges, a remarkable institution of human habits and knowledge, as well as appropriate opposites.

To cherish any hope to prevail as we play, we often need to ask ourselves tough questions and preserve discipline to face the most difficult facts of our gaming reality.

Inspired by Socrates’ test of triple criteria and embracing the wisdom of the United States iral Jim Stockdale, we continue our exploration of the house edge of casinos and games.

Built-in Gain or Average Loss Ratio?

First off, the house edge is a mathematical process governed by time.

The longer you play, the more you can expect to have casinos’ profits to be closer to the house edge. Initial wins and losses can, therefore, be astronomical in the beginning. In addition, it doesn’t mean it will happen every time. You may be well ahead or down at the start of a gambling session, but as you continue to play in the long run you get to be closer to an average percentage of the house edge.

If patrons’ don’t play in the long run, in a way, the house edge doesn’t mean a thing. This makes it a particularly sharp edge.

In the example, slot machines have 5% to 12% house edge and they have an extremely fast rate of play. If you believe that on every spin you can expect 88% to 95% returns, it will get very ugly in a hurry. To top it all off, slots do not require any skills at all; it’s not like you can compensate bad luck with expertise.

On the other hand, you may also make a huge win right at the start of spinning reels’ session. In that case, by all means, just take your money and leave. For, in the long run, the game will work its way out to balance the house edge, which is to say, you might experience quite a downhill ride afterwards. (That’s what volatility is all about.)

Bottom line: the time is the house edge ruler, it’s what makes it tick.

Secondly, to paraphrase Michael Shackleford, The Wizard of Odds — the house edge is not the ratio of funds lost to total money wagered but the ratio of an average loss to initial bet.

Since you won’t keep your bets fixed and your starting wager will not be the ending wager, it makes house edge relative to original and not the average wager.

For instance, if you’re playing baccarat — a very rapid game with a low house edge, 1.06% to 1.24%, except for the rare tie when it skyrockets to 14.36% — you might assume that for each $10 wager you’ll lose 10¢. Since you really don’t know what your wager will be, the house edge information is applicable only to the initial bet but in reality, it may be impossible to apply for the whole gambling session.

In 1990, the baccarat whale Akio Kashiwagi won $6 million from Donald Trump’s Taj Mahal in a matter of hours. Once Trump got advice from a government think tank to keep the game as long as possible for the house edge to kicks in and result with a win, he courted Kashiwagi to make a return visit. Gambler was to play his $12 million until he either doubled it or lost everything. Six days later, Trump was up $10 million.

Bottom line: to understand and interpret the house edge properly is fundamental for gambling success.

Tick-Tock Effects Casinos’ Have Nothing With

Thirdly, the house edge is defined by games not by casinos — all of them have the same house edge on games, give it or take few tenths of percent here and there. But, it doesn’t mean the casino will not try to influence it.

This is where rules come into the house edge picture. The best illustration is blackjack and subtle modification to the rules which casino managers reached out to in order to increase their advantage.

Having a very low house edge (well under 1%, even close to 0.3%) and rather well-developed strategy to win, twenty-one has been a pebble in the casino shoe for quite some time. By modifying rules to mandate additional compulsory card on dealer’s soft 17 and by adding 6:5 variant to their offerings, casinos in effect restored the house edge on a perfectly-played strategy to 2 percent. (On the side note: by all means, avoid playing 6:5 option. You will not see a high-roller involved in anything except the 3:2 variant.)

Bottom line: always evaluate the house edge in conjunction with games rules; what big letters give, small ones take away.

Finally, there is a question of a strategy implemented by the player and its correlation to the house edge. This is simple — even the best house edge works only if you implement the proper strategy. Any deviation from the execution of the perfect playing option directly reflects on the house edge.

By flawlessly executing a well-known playing strategy in blackjack you can reduce the already low house edge to zero. Then again, a lousy craps player making wrong bets will face the house edge significantly higher than 0.42% to 1.39% per roll, on average (excluding hard 6 and 8, and hard 4 and 10 bearing 2.78% in states).

Bottom line: the way you treat the strategy defines the way you’ll be treated by the house edge.

At the end of the day, the outcome will reflect on your payroll, your gambling experience, your wellbeing, and happiness of all the people around you.

You’re Behind the Wheel, Not on the Plate

This is why having a quality measuring stick in the form of an educated approach to gambling is so applicable to the first edge any player will face right at the doorstep of any gambling dome, online or offline.

The house edge is not given, the be-all and end-all fact that defines your average loss or chances.

Instead, it is just an indicator of games which offers you the lowest amount of risks: you will probably lose less money by playing games with a lower house edge than playing ones with a higher one.

So, why don’t we all play only low house edge games?

Because games with a lower house edge are infinitely more difficult to master. They require more time, learning, training, and dedicated effort invested in becoming a knowledgeable player. Table games are the best example.

Casinos are well aware of this, which is why they offer jackpot opportunities to slot players.

Playing their trump card of patrons’ desires for fast profits in conjunction with, dare we say, laziness — sometimes it’s easier to can’t than to can — gambling houses and game developers may bleed you dry in a matter of minutes or hours at online slots. Surely you might also win something, but in the bigger picture, you’ll be depleted while chasing reclusive jackpot.

The irony of theoretical statistics is, you’d have to spin almost 100,000 reels before you’d come close to the house edge percentages thus probability to win. Considering the money you’d have to invest to do so — you’d become a poor man.

In addition, have you noticed there’s no jackpot at table games?

Here is why: casinos and patrons hosting and practising blackjack, craps, baccarat, or roulette know all too well an ‘invisible jackpot’ can be won by making clever, astute bets while playing in a disciplined way and utilizing only the right opportunities.

This, in turn, is what makes these game so hard to master.

(On the side note. Poker is no exception. While you won’t find the house edge by definition in this game — casinos play the role of a dealer with no participation — they’ll take a percentage of the pot or some form of hour-based fee for running a game. Called the rake, it’s generally between 2.5% and 10% of the pot in each hand, depending on the operator.)

Bottom line: as it’s the case with anything related to gambling, when it comes to the house edge — the buck stops with you.

You are in charge of choosing games wisely enough to have the proper balance of skills level, luck, and your payroll, just as you are responsible for permanently increasing your knowledge.

Good Practices + Proper Tools = Improved Reality

Naturally, this is often easier said than done. That’s when Socrates’ triple criteria and the Stockdale Paradox comes in handy.

As you evaluate the house edge, we’re often more susceptible to optimistic expectations of the outcomes than to logical approach to reality. Now, it’s a great thing to have, indispensable for our progress. But…

As Philip K. Dick, author of science fiction novel Do Androids Dream of Electric Sheep? (which gave us Blade Runner movie franchise) writes:

“Reality is that which, when you stop believing it, it doesn’t go away.”

In gambling, it means we should never neglect all difficulties lying ahead of us; we have to evaluate them prudently and responsibly by using credible and sustainable tools at our disposal.

To ask yourself simple questions on the lines of criteria of truth, goodness, and benefit — ‘is this a fact, is it good for me, will it help me’ — is to dive into the essence of the challenge. To answer them correctly while not breaking under the pressure of hopes is to surface with the core of the solution.

On the other hand…

To avoid conducting such internal Q&A process, or to play deaf on answers is to face the certainty of playing the game which is, ultimately, shagging you. That’s unacceptable — only your lover should be doing that.