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Wednesday, April 14, 2004

The more you play the more you lose

A completely different subject today...

It always amazed me to see how many people are fascinated by casinos and gambling. I went to a casino only once in my life, for a big 5 minutes… I felt sick. People were stressed and aggressive, the place was noisy and cheesy. A nice wrap-up of what gambling is all about http://www.canoe.ca/NewsStand/WinnipegSun/News/2004/04/14/420252.html

Gambling business models are based on a very simple rule: the average profit probability is negative. That means that if you bet 1$ the average return will be less than that. Knowing that, your best chance to make money is in your first bet. After that it constantly decreases.

An example: If you play a game where you get 0.25$ back for every 1$ played, you have, on average, 1 chance out of 4 to recover your money. Simple enough. If you play 1$ twice, you get 1 chance out of 16 ((1/4)EXP2) to recover. So when you keep playing, your chances to recover all the money invested decrease constantly following an exponential function. Even with a game with a better probability like ¾, the more you play the more you lose.

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