Monte Carlo methods – Why it's a bad idea to go to the casino • Hacker News Board

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#51

Post by noego » Fri, Jul 05, 2019, 4:16 AM UTC

55555 wrote: post #11

It's more complicated (worse) than this. That the house has a small edge only tells a small part of the story. When people go to vegas for a weekend, they might have a number in their head they are willing to gamble. If they dont, then that number is their bank account balance. Then they start flipping coins, and often they keep doing this until they go bust. They rarely cash out when up but they always lose when the…

You hit the nail on the head. If you simply play the pass-line and free-odds on craps, the house edge is extremely small. And yet, most people lose far more than predicted by the odds. The problem is exactly as you stated - people don't have a defined exit-strategy, and their implicit exit-strategy is to keep playing till they lose everything. Which is guaranteed to happen 100% of the time even if the house-edge was 0.

An approach that I've found to be useful, and have personally used in Vegas:

- Always start off each session with a fixed $X in chips, even if you're flush from previous winnings

- If at any point during the session, you get to $2X or $0 in chips, end the session immediately and cash out everything. Even if you're on a "hot streak"

- Bet large enough that you will get to $2X or $0 in a short/moderate period of time. The longer your session drags on, the lower the likelihood of getting to $2X

- Once a session has ended, have a cooling off period. Eg, no further gambling until after the next show/meal

If done right, gambling can actually be extremely cheap. With a house-edge of 0.5%, you can gamble $10,000 and only lose $50 on average. This makes it far cheaper (and more exciting) than eating out or going to shows.

The usual disclaimers still apply: only gamble what you can accept losing, no more

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#52

Post by [deleted] » Fri, Jul 05, 2019, 4:33 AM UTC

[deleted]

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#53

Post by Spooky23 » Fri, Jul 05, 2019, 4:34 AM UTC

stordoff wrote: post #39

scarejunba wrote: post #21

Earlier quoted context omitted.

More likely it's just numbers, right? If 1024 people flip coins ten times in a row, it's expected that one of them gets 10 heads. But he's not a genius, right? Of course you should always back yourself. So more power to you if you're winning in this way. At least you get to keep playing :)

Derren Brown had an interesting example of this on UK TV a few years ago. It's nothing new, but showing it this way demonstrates how you can get drawn in: > The System, a Channel 4 special in which Brown shared his "100 percent guaranteed" method for winning on the horses, was first shown on 1 February 2008. > The show was based around the idea that a system could be developed to "guarantee a winner" of horse races.…

Horse racing isn’t blackjack, and there are better ways to get an edge. One former colleague had a hobby/obsession. He collected a ton of data and employed a bunch of strategies based on horse, jockey and particularly trainer performance.

One example where he had a good yield was playing shitty races (there are different tiers of horse races, from fancy ones like the Belmont Stakes to down to older or younger horses) in bad turf conditions. He’d look at what horses scratched and which trainers usually scratched and make different bets as the odds would be screwy and in his favor.

He bought toys with his winnings, and his process was making him a decent buck, at least until he retired and we lost touch.

If casino gambling hadn’t gone mainstream, there would be a lot of interesting activity in throughbred racing — now it’s a legacy backwater sport.

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#54

Post by eric_h » Fri, Jul 05, 2019, 4:45 AM UTC

RomanBob wrote: post #47

55555 wrote: post #11

It's more complicated (worse) than this. That the house has a small edge only tells a small part of the story. When people go to vegas for a weekend, they might have a number in their head they are willing to gamble. If they dont, then that number is their bank account balance. Then they start flipping coins, and often they keep doing this until they go bust. They rarely cash out when up but they always lose when the…

This is a common misconception about why casinos win. That 'casinos have infinite bankroll so they cannot lose' isn't actually an argument because casinos have limited bankroll. If they would allow me to play a +EV game I can crush them even if they had infinite bankroll by varying my betsize. The 'random walk' argument only works for fixed bet size.

> If they would allow me to play a +EV game

If a business offered a positive EV gambling game, it wouldn't be called a casino and would only last as long as the venture capital lasted.

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#55

Post by salty_biscuits » Fri, Jul 05, 2019, 4:46 AM UTC

bathyspheric wrote: post #42

roenxi wrote: post #2

I have a pet peeve about Monte Carlo methods; although it might be more fairly characterised as a rookie mistake I saw once. MCM are not strong if the tail variance isn't an important feature of what is being modeled. I've seen simulations where the modeler starts with an analytic model - from which they could trivially calculate the mean and variance of a KPI - then used a MCM simulation to find out essentially what…

Can I ask if I understand your use of `tail` in tail variance? Do you mean tail as in extremes of a distribution, or tails, as in losses. I'm very interested in using MC techniques to model extremes of a distribution, like 1-in-1000 year events from a Weibull distribution, but my (naive) algorithms spend a lot of time in the fat belly of the curve rather than out in the tails, but perhaps (probably) I'm holding it wr…

You want to look up about importance sampling. There are lots of ways to do it, the two most common are via scaling or translation.

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#56

Post by wincy » Fri, Jul 05, 2019, 4:48 AM UTC

noego wrote: post #51

55555 wrote: post #11

It's more complicated (worse) than this. That the house has a small edge only tells a small part of the story. When people go to vegas for a weekend, they might have a number in their head they are willing to gamble. If they dont, then that number is their bank account balance. Then they start flipping coins, and often they keep doing this until they go bust. They rarely cash out when up but they always lose when the…

You hit the nail on the head. If you simply play the pass-line and free-odds on craps, the house edge is extremely small. And yet, most people lose far more than predicted by the odds. The problem is exactly as you stated - people don't have a defined exit-strategy, and their implicit exit-strategy is to keep playing till they lose everything. Which is guaranteed to happen 100% of the time even if the house-edge was…

You can bet Don’t Pass and have everyone glower at you, but have even better odds.

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#57

Post by eric_h » Fri, Jul 05, 2019, 4:49 AM UTC

TBurette wrote: post #50

A while ago I wrote a similar interactive article to prove that the martingale betting technique at the roulette doesn't work : [1]. The martingale is when you bet 1, double the bet each time you lose, start again at 1 when you win. The aim was to create a single page anybody could link to that proves without a doubt the abysmal odds of making money off the roulette with the martingale technique. Instead of pre-writt…

All of that is completely invalidated by that one time I hit 13 on the roulette table at two different casinos and quit gambling up $1500 ;)

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#58

Post by virgilp » Fri, Jul 05, 2019, 5:07 AM UTC

RomanBob wrote: post #47

55555 wrote: post #11

It's more complicated (worse) than this. That the house has a small edge only tells a small part of the story. When people go to vegas for a weekend, they might have a number in their head they are willing to gamble. If they dont, then that number is their bank account balance. Then they start flipping coins, and often they keep doing this until they go bust. They rarely cash out when up but they always lose when the…

This is a common misconception about why casinos win. That 'casinos have infinite bankroll so they cannot lose' isn't actually an argument because casinos have limited bankroll. If they would allow me to play a +EV game I can crush them even if they had infinite bankroll by varying my betsize. The 'random walk' argument only works for fixed bet size.

I actually made a simulation of this because it seems obvious - you can actually double your bet each time you lose, and this basically guarantees that you eventually win each time!

Turns out, you have to go surprisingly high for this to be true/effective on the long run. And the casino will cut you off way below the limit (i.e. there's of course a maximum bet). Plus, with this strategy, each win is a small one... but when you lose (hitting the max bet), the loses are significant.

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#59

Post by roenxi » Fri, Jul 05, 2019, 5:08 AM UTC

bathyspheric wrote: post #42

roenxi wrote: post #2

I have a pet peeve about Monte Carlo methods; although it might be more fairly characterised as a rookie mistake I saw once. MCM are not strong if the tail variance isn't an important feature of what is being modeled. I've seen simulations where the modeler starts with an analytic model - from which they could trivially calculate the mean and variance of a KPI - then used a MCM simulation to find out essentially what…

Can I ask if I understand your use of `tail` in tail variance? Do you mean tail as in extremes of a distribution, or tails, as in losses. I'm very interested in using MC techniques to model extremes of a distribution, like 1-in-1000 year events from a Weibull distribution, but my (naive) algorithms spend a lot of time in the fat belly of the curve rather than out in the tails, but perhaps (probably) I'm holding it wr…

I meant tail as in the extremes of the distribution. My point was more that once you've assumed that your events follow a Weibull distribution then the opportunities for MCM to add more insight are limited if the task at hand is to predict what the distribution and its parameters are. Obviously if you simulate a Weibull distribution you will get results in line with the info box on the Wikipedia page for the Weibull distribution, and you need to effectively assume parameters to simulate. Simulating a distribution just creates a very error-prone calculator the obscures the assumptions. I've seen people do exactly that thinking it was somehow helping - it is surprisingly easy to accidentally simulate a normal distribution, for example, because if you add a whole bunch of uncorrelated random things together (with identical distributions) then the result is normally distributed. You don't need a simulation to tell you that, and it is easier to mull over without simulation.

If I were using simulation it is because I think that something fishy happens in extreme events (eg, maybe stock returns all starting to become highly correlated in a liquidity crisis, destroying i.i.d assumptions). Or as other commenters mentioned because the thing being simulated has a distribution that is not analytically tractable. But there has to be some phenomena in there that is more complicated than standard distributions or a steady state Markov model, because they are more productive models when they work.

> Is there a way to constrain the MC sampling to the tails of a distribution?

You could sample 100 numbers at a time and drop out the middle 95? The question is maybe not well posed.

Re: Monte Carlo methods – Why it's a bad idea to go to the casino

#60

Post by spaceflunky » Fri, Jul 05, 2019, 5:11 AM UTC

It's (relatively) easy to show the math on why casino games are impossible to win, but what about sports betting? Does the house always have the advantage? Perhaps it's slightly better for the gamer?

FWIW I was looking a betting website recently [0] and they were offering DOUBLE your initial deposit for signing-up, up to $1000. So to reiterate, they are willing to give up to $1000 for FREE just for creating an account. All I can imagine is that they would only do this if the numbers are vastly not in your favor.

[0] I'm not going to post the name of said website.