The Wizard Himself - FAQ

Contrary to popular belief I think cracking your knuckles is totally safe. My chiropractor has cracked my back and neck lots of times and I’m better for it.

I’m tired of professional gamblers referring to those who work in or for casinos as the "dark side." Casinos provide thousands of jobs across the country, revenue to government, and a source of entertainment to millions. I don’t remember the source but I read that something like 90% of visitors to Las Vegas leave with a gambling loss, yet 95% leave happy. The other side is quick to argue that casinos contribute to the problem of compulsive gambling. Yes, there are some compulsive gamblers who abuse what should be done in moderation. However I believe that the majority should not be denied the opportunity to place a bet because of the problems of a minority. In other words I believe that the benefits that come from legalized gambling far exceed the costs.

I fully admit I consult for casinos and gaming businesses. I have to because this site doesn’t make enough money to support my family. My bankroll is not large enough to make a living as a professional gambler. However I make no apologies for what I do. To answer your question, yes, if the right offer came along I would consider employment in casino management.

Don’t get me started.

Briefs.

You accessed my strategy quite well. I intended to bet the minimum through most of the hour to avoid the house edge grinding me down. The producer was not happy with such a boring strategy so I tried to act more excited than I normally would be. The reason I picked a single number as opposed to an even money bet is that I wanted volatility. I knew if I ended close to my starting point of $10,000 I would probably lose. So I wanted a bigger shot at getting ahead. I stuck with 23 the entire time, although towards the end I added 5 as well. I’m Glad you liked the show.

It is my policy not to count in Las Vegas. Since I live here I don’t want to make any enemies out of prospective clients. So I am allowed to play blackjack at all but two casinos locally. However last January I went to Reno and Lake Tahoe for a few days and was told not to play blackjack at four different casinos.

Baccarat (at the big tables) is the only casino game in which players are allowed to damage the cards. An explanation I heard is that Asian players bend the cards anyway as they slowly peak at them that they only use each card once. Therefore as long as the dealer is replacing the cards after one usage the casino may as well let the players do anything with them. Being able to identify cards is of little value to baccarat players anyway because the dealer doesn't take a hole card (as the dealer does in blackjack) and the player has no choice as to whether to hit or stand. However, there are also gaming regulations that stipulate that the tapes must show all the cards in case of a dispute, which isn’t possible if the player tears them up first. In the show you mention the player didn’t know this and I think both parties handled it badly, which led to the hard feelings that the show captured. Had I been the casino manager I would have explained what I just said and then asked the player to lay the card face-up on the table before ripping it into tiny pieces.

On a related note yours truly will be on The Casino sometime this season. The story is some college students try to parlay $1000 into $5000 as quickly as possible. They seek my advice on how to do achieve this goal.

Update: That episode never aired. Probably because of me.

Yes, I’m going to be on an upcoming episode of The Casino. I do not know the air date. In the show I serve as an advisor to some college students on how to parlay $1000 into $5000. About American Casino, I agree, it is a better show.

The only time I might play for fun is if I am entertaining somebody visiting Vegas and am just out gambling with them. Otherwise I always look for an edge. I also play new games sometimes just to ensure that I understand the rules correctly. I don’t want to give away all my secrets but card counting and positive expectation video poker are definitely two games in my bag of tricks.

But it is so much fun.

Yes, to all of those things. If some of the shadier casinos find you provided false information they will use it as an excuse not to pay you. Besides, these pieces of information are not that hard to come by for someone looking to abuse or steal your identity. Recently Crazy Vegas casino asked for my Social Security number, which I thought was going too far. I gave them a phony one. When asked for my mother’s maiden name, by anyone, I give the name of my cat.

Yes, I wrote a gambling book manuscript four years ago. I shopped it around and only Huntington Press agreed to publish it. However three years and four revisions later and it still isn’t out. There is already a glut of gambling books on the market so I agree with Stanford to not waste your time. Since I wrote my original manuscript I have learned that the name of the author is much more important to selling books than the content of the book itself. A no-name has almost no hope of publish a book on gambling, or anything. If you want to publish a book you should do something else to become famous first.

[Update: The Wizard’s book Gambling 102 was published in Spring 2005.]

I offered a straight no-bet analysis to Mr. Rainsong for $1000 but he declined. He felt very strongly that he would win. The less evidence there is for anything, the stronger the faith of the believers. I charge more than $2000 to analyze most games but this was just a simulation. All I had to do was modify my existing blackjack simulator to fit the rules of this procedure. Not surprisingly Mr. Rainsong has had lots of interested buyers in his system despite the fact that it failed my test. All I can do is tell the truth that systems don’t work over the long run. Whatever the masses do with my advice is up to them.

Mathematically they of course have the same expected return. However I would play the 10-play because the volatility is less and I think it is more fun.

I spend a lot of time analyzing bets and do okay at it but it isn't enough to live on. Last year for example bets I made won $26,843.14. However I lost $9,491.50 backing other gamblers where I thought I had an advantage. I'm working on increasing my bankroll and more research in profitable areas to hopefully making gambling a greater portion of my income in years to come. It should be emphasized that gaining an edge over the casino is possible but requires a lot of hard work for fairly small advantages. Assuming I do reach the day where I can live off of gambling I still plan to keep the website going and teach my casino math class at UNLV. However I'm trying to phase out of consulting and hope to give that up completely as soon as other income replaces it.

A new game trial period permit was required. This is opposed to a "variation" permit, which is less expensive. For a new game the cost is $3000, I had to fill out lots of forms, including an employment and residence history going back 20 years. The waiting time was six months, which was shorter than what I was expecting.

For family living the nicest areas are indeed Henderson and Summerlin. Personally I live in a master planned community called Peccole Ranch, which borders Summerlin. In my opinion the west side, where I live, is better because:

1. It has an Orange County, California, look and feel to while much of Henderson looks like it was made from a cookie cutter.
2. The west side is higher in elevation and thus cooler in summer.
3. Henderson suffers from the noise of landing airplanes.
4. The west side is right next to the mountains, which offer outstanding hiking and climbing.
5. The future growth of the west side seems to be better planned.

If you ask someone from Henderson they will claim Henderson has less traffic, but there are two sides to that issue, and I think the west side is better in that area too. I’m sure I will hear from somebody from Henderson over this, and am happy to print a rebuttal in the future, because I believe in presenting both sides.

The worst parts of Vegas are around downtown, gradually getting better as you move further away. For something in the middle there is lots of growth on the south side of town along the I-15 and the north side along the U.S. 95.

The reason has nothing to do with team loyalty. My program rated them the fifth best team at the close of the 2004 season, and that I carry that power rating over into the 2005 season. However maybe it is too slow too react to recent history. Something for me to think about.

Because it is so much fun!

I was recognized in Reno when counting once, although it may have been by dealer who knew me personally and tattled. It is a long and bizarre story. Aside from that I don’t play often, nor for high stakes, so the threat I pose is fairly small and not worth the fuss of memorizing another face.

I cringe and keep silent. It is my policy to not offer unsolicited advice. Why pick an argument? Also, I’m not trying to convert everybody to proper strategy. The casinos need some bad gamblers to subsidize the good ones.

Thanks for the kind words. Yes, I gave Casino Life permission to use my material. I’m happy they gave me a good plug. No, they didn’t pay me. I also have never been paid for my appearances on the Travel Channel here in the United States. I do it for the fun and the publicity.

I knew somebody would eventually write about that. It wasn’t I who showed that machine. The producers didn’t understand I was referring to 9/6 Jacks or Better. Later in the editing room they showed somebody pointing to a 9/6 Double Double Bonus Poker game, which has a return of 98.98%. That is much worse than 9/6 Jacks or Better, at 99.54%. An embarrassing moment for me, much like the many incorrect edits I had no control over, in my old Casino Player articles.

Yes, I do indeed bet on elections. In 1996 I made my biggest bet to date on Clinton over Dole at even money. That was also one of the best bets I ever made. I have been betting every election ever since, most of the time against friends. At major online sites that take political bets, I think it is a close to efficient market. In other words, I think the market is basically right, and the odds can be used to estimate the probability of each candidate winning. Currently I think that TradeSports is a good source for election odds. As I write this, on September 29, 2007, the odds given equate to the following probabilities of victory.

Normally I would say this is out of my area. However, as a former government actuary for eight years, I know a thing or two about taxes. From what I’ve read, most of Warren Buffet’s income is defined as capital gains, which is taxed at only a 15% rate. Like it or not, the tax laws allow it. What puzzled me is why his secretary was paying as much as 30%. According to this video, he was counting “payroll and income taxes.” By “payroll taxes” he obviously meant Social Security and Medicare taxes. Let’s see if 30% is a reasonable total federal tax rate for his secretary.

In 2007 the highest tax bracket was taxed at 35%, but that only applies to income above $349,700. The income up to that point is taxed much less. Let’s assume his secretary is single, with no dependent children, and her salary was $100,000. First, let’s subtract the minimum deductions. In 2007 the standard deduction for single filers was $5,350. The personal deduction was $3,400. So, we’re left with $100,000 - $5,350 - $3,400 = $91,250 in income subject to income taxes. For single filers in 2007, the tax rate was 10% on the first $7825 in income, then 15% up to $31,850, then 25% up to $77,100, and 28% up to $160,850. So, her income tax would have been =0.1×$7,825+0.15×($31,850-$7825)+0.25×($77,100-$31,850)+0.28×($91,250-$77,100) = $19,660.75. That is only 19.7% of her income. All my assumptions like her income, filing status, and not itemizing worked against her, or for a higher tax rate.

Now let’s do Social Security and Medicare. In 2007, the Social Security tax was 6.2%, up to incomes of $97,500, when it completely shuts off. The 2007 Medicare tax rate was 1.45%, with no cap. So, her combined Social Security and Medicare tax would have been 6.2%*97,500 + 1.45%*100000 = $7,495. Counting those taxes, her overall tax rate would have been ($19,660.75 + $7,495)/$100,000 = 27.2%. Still we’re 2.8% short of 30%.

My best guess is that she is also considering the fact that ultimately she is the one paying the employer’s matching Social Security and Medicare tax. For those who don’t know, Social Security and Medicare taxes are really double that deducted from your checks. The employer pays the other half. However, some, including me, would argue that ultimately it is the employee who pays both. If the employer didn’t have to pay that tax, he would have more money to pay his employees. It is easy to feel that way when you’re self-employed, like I am, and have to pay both shares. If you double the Social Security/Medicate tax, the rate is now ($19,660.75 + 2×$7,495)/$100,000 = 34.7%. I assume the 4.7% difference is because she makes less than $100,000, is married, has dependents, itemizes deductions, or some combination.

The Social Security and Medicare taxes would not apply much to Warren Buffet. First, the Social Security cap of $97,500 would be insignificant to him. Second, those taxes apply to wages, not capital gains, as he defines most of his income to be.

So, that is my best guess as to the math behind Mr. Buffet’s statement.

Update: Shortly after this column appeared I received the following response. In the interests of fairness, I present the following argument that Mr. Buffet is paying too much in taxes.

I read with interest your answer to the ’outraged’ person who thinks it is so unfair that Warren Buffet pays less percentage in taxes than his secretary. I was disappointed in your answer, which does not correct the misinformation that implies that Mr Buffet pays less tax than his secretary.

First, as you noted, investment income is indeed taxed at 15%. This is in effect double taxation as the earned income that Mr. Buffet invested was taxed at his marginal rate of 36%. Comparing apples to oranges (work income vs investment income).

Second, one should not look at the percentage. In gambling terms, one should look at the ’payout’ instead. I am very certain that Mr. Buffet paid millions of dollars in taxes in the same year that his secretary paid thousands of dollars. Shouldn’t your reader be more outraged that one citizen of the country is paying 1000’s of times more than other citizens for the same government services? Once could just as easily say "I heard that Warren Buffet paid 1,000,000 times more taxes than his secretary, that is outrageous!"

Just thought I’d point out that only looking at "percentage" and not "actual payout" is a fallacy. Similar to many of your gambling fallacies.

Best Regards,

Kevin A. (Dallas)

1. The two-player table was done by a brute-force looping program, that cycled through all 1225 possible opponent cards, and 1,712,304 possible community cards. For three to eight players, looping would have taken a prohibitive amount of time, so I did a random simulation.
2. I write almost all my programs in C++, including both programs I just mentioned. The rest are in Java or PERL. I mostly copied and pasted code from other poker-based programs. The new code only look about a day to write.
3. Yes, I started my site as a hobby in June 1997. It wasn’t until January 2000 that I accepted advertising, and tried to make a business out of it. It has gone through three different domains over the years. Here is what it looked like in May 1999. The purpose of the site has always remained the same, a resource for mathematically-based gambling strategy. Through the years, I have just been adding more games and material. One experiment was providing my NFL picks for the 2005 season, which was an abject failure.

I can sympathize with your dilemma. When I graduated in 1988 with a bachelor’s degree in math and economics, I had no idea what to do with it. The actuary exams looked daunting at the time, because I didn’t study statistics deeply at UCSB, and somehow I didn’t feel actuarial work was my calling in life. However, after accomplishing absolutely nothing for a solid year after graduation, I gave a second look at the actuary exams. With the help of a tutor, I gave the exams the old college try, and passed the first three with high grades in a little more than a year. That eventually led to nine years of actuarial work at the Social Security Administration, where I finished the rest of the associate exams. That said, I offer the following advice.

First, don’t dismiss the actuarial field lightly. If you are smart enough to get a math degree, you are smart enough to pass the exams. Maybe you’ll need to teach yourself some statistics, but I think you can do it. Actuarial work may not seem terribly exciting, but the profession is consistently highly rated for good working conditions and compensation.

Second, at least consider the National Security Agency. They hire lots of mathematicians to analyze a sea of chatter gathered from listening in on phone calls all over the world. If you take their screening test, don’t volunteer too much information or let them fluster you. This comes indirectly from people who flunked it.

Third, most mathematicians in the gaming business work for the big slot machine companies. There are not a lot of jobs in that field, but not that many people know such jobs exist either. Contrary to what many people think, the casinos don’t hire designated mathematicians. Overall, I think actuarial work is better paying and more interesting.

Finally, don’t put down a math degree. You’ll probably never use what you learned in the more advanced math classes, but the accomplishment itself shows you should be able to learn what you’ll need to for an entry-level position in any one of the fields I mentioned.

I think the odds are better than that with a good educated guess. Here is my basic strategy for picking the exact outcome of any NFL game.

1. Using the total and spread, estimate the total points of each team. For example, if we use a total of 57 and a spread of -5 for the Super Bowl, letting c=Colts points, and s=Saints points then...
   
   (1) c+s=57
   (2) c-5=s
   Substituting equation (2) in equation (1):
   c+(c-5)=57
   2c-5=57
   2c=62
   c=31
   s=31-5=26
   
   The problem with stopping here is sometimes you get values that are unlikely to be scored by a single team. For example, the probability of a single-team total of 24 is 6.5%, but the probability of 25 is only 0.9%. The table below shows the single-team total probability, based on the 2000-2009 seasons. So we’re going to estimate the total points for each team based on realistic combinations of field goals and touchdowns.
   
   
2. Assume the favorite kicks 2 field goals.
3. Assume the underdog kicks 1 field goal.
4. Subtract the field goal points from each. In the Super Bowl example, this would leave Colts = 25 touchdown points, Saints = 23 touchdown points.
5. Divide touchdown points by 7, to get estimated touchdowns. c=3.57 TD, s=3.29 TD
6. Round the estimated touchdowns to the nearest integer. c=4, s=3.
7. Following this method, we get for total points c=(4×7)+(2×3)=34, s=(3×7)+(1×3)=24.

Using this method on all 6,707 games from the 1983 through the 2009 seasons would have resulted in 69 correct picks, for a success rate of 1.03%. The last time it would have been right was the Titans/Colts game in week 13 of 2009. That game had a spread of Colts -6.5, and a total of 46. The score was Titans 17, Colts 27.

This question was raised and discussed in the forum of my companion site Wizard of Vegas.

Thank you for asking. For the benefit of other readers, I challenged myself to ride a unicycle 50 miles within eight hours by my 50th birthday. I am proud to say that I achieved it! In fact, 53 miles in 7.5 hours. I have a very long and boring video about it.

To answer your question, high on my list is to do the Fargo Street challenge on a unicycle. For those who don't know, Fargo Street is the steepest street in Los Angeles and second steepest in the United States. I already easily did it on a bicycle on July 18 as a test run and made a video of that.

Besides that, here are some other challenges on my bucket list:

• Climb Mount Rainier
• Climb Mount Adams
• Climb Pico de Orizaba
• Climb Mount Aconcagua
• Clinb Mount Kilimanjaro
• Hike the John Muir Trail
• Hike the Appalachian Trail
• Unicycle the Camino de Santiago.
• Unicycle New Zealand (from north to south)

I'm never offended by a healthy degree of skepticism. To satisfy those skeptics, I created this follow-up video. Enjoy.