Everything’s Negotiable, Even Beating Casinos at Blackjack

Over at the Atlantic, Mark Bowden tells the tale of Don Johnson, who managed to win \$4 million playing blackjack at Caesars in Atlantic City, \$5 million at the Borgata, and \$6 million at the Tropicana.

How’d he do it? By negotiating favorable odds:

Johnson is very good at gambling, mainly because he’s less willing to gamble than most. He does not just walk into a casino and start playing, which is what roughly 99 percent of customers do. This is, in his words, tantamount to “blindly throwing away money.” The rules of the game are set to give the house a significant advantage. That doesn’t mean you can’t win playing by the standard house rules; people do win on occasion. But the vast majority of players lose, and the longer they play, the more they lose.

Sophisticated gamblers won’t play by the standard rules. They negotiate.

Johnson started negotiating.

Once the Borgata closed the deal, he says, Caesars and the Trop, competing for Johnson’s business, offered similar terms. That’s what enabled him to systematically beat them, one by one.

In theory, this shouldn’t happen. The casinos use computer models that calculate the odds down to the last penny so they can craft terms to entice high rollers without forfeiting the house advantage. “We have a very elaborate model,” Rodio says. “Once a customer comes in, regardless of the game they may play, we plug them into the model so that we know what the house advantage is, based upon the game that they are playing and the way they play the game. And then from that, we can make a determination of what is the appropriate [discount] we can make for the person, based on their skill level. I can’t speak for how other properties do it, but that is how we do it.”

So how did all these casinos end up giving Johnson what he himself describes as a “huge edge”? “I just think somebody missed the math when they did the numbers on it,” he told an interviewer.

Johnson did not miss the math. For example, at the Trop, he was willing to play with a 20 percent discount [i.e., you get 20% of any losses back] after his losses hit \$500,000, but only if the casino structured the rules of the game to shave away some of the house advantage. Johnson could calculate exactly how much of an advantage he would gain with each small adjustment in the rules of play. He won’t say what all the adjustments were in the final e-mailed agreement with the Trop, but they included playing with a hand-shuffled six-deck shoe; the right to split and double down on up to four hands at once; and a “soft 17” (the player can draw another card on a hand totaling six plus an ace, counting the ace as either a one or an 11, while the dealer must stand, counting the ace as an 11). When Johnson and the Trop finally agreed, he had whittled the house edge down to one-fourth of 1 percent, by his figuring. In effect, he was playing a 50-50 game against the house, and with the discount, he was risking only 80 cents of every dollar he played. He had to pony up \$1 million of his own money to start, but, as he would say later: “You’d never lose the million. If you got to [\$500,000 in losses], you would stop and take your 20 percent discount. You’d owe them only \$400,000.”

Just another illustration that everything’s negotiable, at least if you are a big enough whale. The whole article is worth a read.