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Bob Dancer writes a video poker column for beginners to experts. He also writes a column with Jeffrey Compton, "Player's Edge", featuring information on promotions at various Las Vegas casinos. Player's Edge is published each Friday in the Neon section of the Las Vegas Review-Journal. Click here to send Bob Dancer an e-mail.

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May 06, 2008

A Hypothetical Example

I participate on the Internet forum vpFREE. MC, a regular contributor, posed the following --- addressed to me personally.

Bob, I've been having a little fun over on FREEvpFREE the past few days. I devised a hypothetical offer out of fun, but then it struck me, I wonder what you would think if you got a piece of casino mail with the following offer:

Brand X Casino sends you an offer that you and Shirley can play $25 denom single-line 9/6 Jacks or Better, with 1% cashback. That's one percent.

But it's stipulated that you must make a deposit at the cage for as much as you want. Maybe there could be a cap, like $2,000,000 or something. This money will be your playing bankroll.

You can play for as many or as few hours per day as you want. When you cash out for the day you have to redeposit all moneys back into your casino account.

You have to take your cashback and deposit it back into your casino account on a daily basis.

Neither you nor the house can quit the play or change the rules of the play until your account is depleted or you have $1,000,000 more in your account than you started with.

What would be your opinion of an offer like that?

This appears to be a too-good-to-be-true situation. (It IS hypothetical, after all). If we're talking about IGT machines in Nevada (which I trust to be fair), and I trusted the casino to honor its commitments, this is virtually a "can't lose promotion."

Assuming I put up a $2,000,000 deposit, there is a 0.004% chance of losing everything if I played forever. Although I don't have the tools to calculate the exact number, the chance that I'll lose everything before ever being ten royals ahead is smaller yet.

Putting up $2,000,000 may or may not be a problem. It would be slightly more than half of my bankroll, but convincing Shirley that a 0.004% chance (one in 250) is a reasonable level of risk to lose more than half of our bankroll would be problematic. Since this is merely hypothetical, there's no reason to rattle her cage about this and let her seriously consider the loss of $2,000,000. Although I think I could convince her that this is a good idea, I really don't know for sure. But insofar as I'm concerned, this would not be a problem.

And even if she said 'no' to $2,000,000, she'd probably say 'yes' to half of that and I'm pretty sure that I could find backers to make up the difference. I'm hardly the only one who could work out the math and who also believes that my skill is sufficient to play this much with a miniscule amount of mistakes. (Even if I made more mistakes, a half-percent advantage leaves room for a lot of forgiveness.)

What if the limit you could deposit were $3,000,000 instead of $2,000,000. This would reduce the chance of going broke greatly. I'm not sure exactly how much. Video Poker for Winners only shows 4 digits accuracy and it gives a probability of zero that I'd go broke. Obviously the risk is greater than zero, but how much greater, I don't know. But $3,000,000 is much too high a percentage of my bankroll to invest in one project, no matter how "guaranteed" it seemed in advance. Forget about Shirley saying "no." I'd veto the decision before she ever heard about about.

Depending on how fast the machine was and how fast W2Gs are paid, I'll be able to play $80,000 -- $100,000 an hour. This puts my hourly "wage" in the $400 to $500 range, meaning that it will take between 2,000 and 2,500 hours to collect my million bucks. A full time year of play can do this. There's nothing else in my life where I can reasonably expect to earn anywhere near that much. And even if I ran bad and it took me two years instead of one, earning only a half-million per year would be a pay raise for me.

MC offered this to Shirley and me, but it will actually be me only. Shirley rarely plays anymore. She has health concerns and casinos are too smoky.

Someone on vpFREE asked about the interest on the money. That's largely irrelevant. Even a 10% return (which is higher than I generally earn), that's "only" $200,000 --- and an expected win of "only" $800,000 for a year wouldn't change my mind any. This is not to say I'm indifferent about whether or not I receive this $200,000 but merely that whether I do or not will not affect my decision.

Please note that there are additional factors that bankroll calculators (including Video Poker for Winners) ignore. If you're comparing putting up $20,000 to play for quarters versus $2,000,000 to play for $25 credits, the programs come up with the same percentage change of going broke.

But it's not the same at all. Investing $20,000 from a total wealth of less than $40,000 is quite a bit different from investing $2,000,000 from a wealth of less than $4,000,000. If you go broke from $40,000 there are things you can do to reasonably expect to recoup your wealth. If you go broke from $4,000,000, there are far fewer ways to recover.

Age is also a factor. I'm 61 years old. I have limited options on going to work for a decent salary, so I'm hesitant to "risk it all." A 25-year-old, on the other hand, has a lot more options --- including going back to school to prepare for a career, or moving back in with Mom and Dad. It is quite sensible for seniors to be more conservative with their "investing" than their kids are.

Someone else mentioned whether or not I'd have RFB with my play. Again, that would be nice but hardly important. Even if it were a ways away from my home, renting a home in the area and buying my own food would be a small part of my expected $1,000,000 win.

There would need to be lifestyle changes. I likely would decide I didn't have enough time to write any articles or books, but hopefully I wouldn't be shortsighted enough to "forget" to take Shirley dancing. That might end up being a very expensive mistake.

So far I've been assuming that this would take about 2,000-2,500 hours of play. That, indeed, would be the average amount. Since there is some chance of going broke, then obviously there is also some probability that this will take two, three or more years. What then?

Once we start playing, however, we MUST keep going, no matter how low our cash-on-hand gets. Going down in stakes is not an option, according to the rules of the game. Even if we get down to $125 (i.e. one bet), we have to go ahead and bet it. Since we won't collect our money until it's over (if at all), delaying the finish of this event makes no sense.

So generally speaking, the answer to this question is "YES! YES! YES!" There are an infinity of ways it could be restructured so it wouldn't be such a no-brainer decision. I don't want to make a career of answering hypotheticals, but once in a while this is sort of fun.