why I wrote "The House Advantage", my new book. Because blackjack is this perfect petri dish for using analytics. Imagine that you could model situations and always know how the person you were modeling or playing against was gonna act. You always knew perfectly.
And so what he did is he took this knowledge with him to MIT and he applied it. And he had one of the first computers ever, an IBM 704 computer, and actually did simulations on blackjack where he simulated a deck of cards with no twos in it, with no threes, with no fours. And what he found is that the high cards- 10's, face cards and aces- are valuable for the player. Meaning, when there's a lot of those left, it's good for the player.
And you start investigating, you see that the casino keeps 15% of the take on blackjack , and 1-1/2% on craps, about the same on blackjack . Horse racing is something in the upper teens percentage.
Card counting is actually something fairly simple. The idea is that blackjack is a beatable game because blackjack has a memory, which means that the deck changes as you play, which is different than roulette.
It doesn't matter how many times you spin red, it's not going to change your chances of getting a red or a black. But in blackjack , if all the aces come out of a deck, you can't get blackjack . So the odds do change as you play.
So you could be creative and not suck. I was playing blackjack in Vegas many years ago and sitting by some grizzled old guy.
situan per-situation perfectly. So what makes blackjack beatable? Well, blackjack is the only game in the casino that's subject to something called "conditional probability." If you contrast blackjack to roulette- And one of my favorite stories from roulette and it's in "The House Advantage". Is this time that I went to Vegas with my friend, Brian, and this is after the whole blackjack thing was done for me. And I walked up to the blackjack table and Brian actually
to play that game still? decision.” So in blackjack , if you think about it, we have this played out and simulated so many time that we knew it was the right decision.
to play that game still? reason that blackjack is beatable and the reason that blackjack became popular was because it was a game that could be beaten.
So- Come on that's funny. No one ever laughs at that joke anymore. Maybe that joke is too far for people now. They don't remember that-anyways. So what is a professional blackjack player? This first thing that people say is, "Isn't that illegal?" And it's actually been tried and I have a whole passage in the book.
I bet two hands of $8,000. The first one I get blackjack and on the second one I get a pair of tens and the dealer has a six up. So the blackjack I get paid $12,000. OK, Great. All rejoicing. The pair of tens, I actually have the opportunity to split but no one in their right mind splits tens with $50 on the table let alone $8,000. But, actually, the math called for me to split
The other kind of bias that actually comes into play is something called "omission bias" or "inactivity bias". And so in blackjack , what's interesting is-is people make mistake-so many mistakes when they play blackjack . And they make a lot of mistakes based on inactivity versus activity. So think about it. You have 15 and the dealer has a 10 up. What do you guys do in that situation?
OK? This is something absolutely new in human history. My father-in-law was always with the blackjack , we played, or bowling.
So if had gone to MIT in a 10-year period and were betting big, an alarm would go off in the security booth. And that's how they eventually cracked the MIT Blackjack Team. So moving forward, I wrote this story up.
Rachel is going to start by playing a stripper, called Ginger Lee, that Anthony Wiener used to have conversations with on Twitter and DM. Then she's going to switch into a blackjack dealer, from Las Vegas, named Lisa. And then, eventually, into a Texas single mom named Megan, who all of whom were involved with Anthony Weiner in one way or the other.
And today we are thrilled to host Jeff Ma. And Jeff is one of the legendary members of the MIT Blackjack Team, which is a group of students and affiliates whose study of statistics became legend. And is the subject of movies such as "21" and the book "Bringing Down the House".
So, "Bringing Down the House" was the first book, and "The House Advantage" which is over there is my new book. But I like to tell these stories about playing blackjack with celebrities, which was a lot of fun. I have some good stories with all these guys. And my first story actually comes from the opening night of the Bellagio. I had the pleasure of playing blackjack with Kevin Costner. And Kevin was there with his group of friends.
ago. And where do you think NBA players went when they couldn't- they went to casinos. And so I had the pleasure of playing blackjack with a bunch of the Ni-the Knicks, John Starks, Patrick Ewing. So I sit down at a table with John Starks and John is-goes nice guy drinking Merlot. Which I thought was really weird for, we're, we're all from the Bay Area so we drink wine, we love wine. But for a NBA, big, burly NBA player at the casino drinking wine, it
So, I'd like to talk about and this is from the first chapter of my-of my new book. The most important lesson I ever have learned at the blackjack table. And it comes from Caesars Palace. I was 22 years old. I walk up to the table and I'm using math. Again, to basically-I'll explain this all later and and most of you guys probably understand the concept. But I'm using math to beat the
Is this time that I went to Vegas with my friend, Brian, and this is after the whole blackjack thing was done for me. And I walked up to the blackjack table and Brian actually asked me to sorta coach him to play blackjack . So I was kinda sitting next to him, just tellin' him what to do. And over about two hours we won a couple thousand dollars. So it's Friday night in Vegas, and I'm like, “Let's go spend the money somewhere.” So we get up and we start walking over to go cash out the chips and all of a sudden
So the point is that roulette every spin is independent and the same thing is true of craps. Right, every roll of the dice is independent. But, in blackjack , if I take all four aces out of a deck of cards, hand you that deck of cards, what do you think the chances of you dealing yourself blackjack are? Mike, what do you think the chances are?
of staying in this relationship is easier, right. Maintaining status quo is easier. So when you think about making decisions as we did in blackjack , you have to think about inactivity and activity equally. So as I thought about this whole thing I was reminded- How many of you guys are sports fans. All right, so a handful of you, again.
to play that game still? You know it’s a lot harder in blackjack , and certainly like our movie, our book and this book don’t really help. But, it’s -- the thing about the casinos is that the
And this was the story that was passed down from when I was four or five years old. I would hear my aunts and uncles and my mom and my grandparents talking about Blackjack Ketchum, Blackjack Ketchum. I didn't really know anything about the guy until I got older and started to research and found out that he was a little touched, I think,
When I was writing the book, he didn't want to be known as the blackjack guy. And then we made the movie "21," he did want to be known as the blackjack guy, so now I use his real name. I went up to Jeff.
And they stacked it up on a table. And they said, we're the MIT Blackjack Team. And so I had kind of heard of something called the MIT Blackjack Team.
And they said, we're the MIT Blackjack Team. And so I had kind of heard of something called the MIT Blackjack Team. No one had ever written about it yet.
There had never been a TV show about it. I thought it was like a math class where you learned how to play blackjack . But the reality was this had been going on for 25 years at MIT.
I shipped books, like back end. You know, how to play blackjack , how to read minds, you know, those how to books, like how to grow a garden. I shipped books. Like, I shipped.
fingers she can't even really close her hand because she's been dealing out of the shoe in 21 for 20 years and her hands are now crippled I walked in and put a check on the blackjack table and said money plays and she's like what what what she take a look at the check and um she's like what's this and I'm like it's over Mom you know it's over
that's a good investment decision from a mortgage standpoint. I mean people act irrational, and blackjack is not that way, because you only play against the dealer and you know at all times how the dealer's going to act so you can model the situan per-situation perfectly. So what makes blackjack beatable? Well, blackjack is the only game in the casino that's subject to something called "conditional probability."
I mean people act irrational, and blackjack is not that way, because you only play against the dealer and you know at all times how the dealer's going to act so you can model the situan per-situation perfectly. So what makes blackjack beatable? Well, blackjack is the only game in the casino that's subject to something called "conditional probability." If you contrast blackjack to roulette- And one of my favorite stories from roulette and it's in "The House Advantage".
But anyway so. Why I have this up here is to remind myself and you guys of one of the most difficult decisions I've ever made. Okay. And how many of you guys play blackjack ? So only about half of you guys.
And that's not true, right. A bad decision doesn't always necessarily mean a bad outcome. And separating the outcome from the decision was an important thing that we learned in blackjack . You can make the right decision all the time, but still lose if you just happen to get unlucky and the dealer got a five to make 21.
to play that game still? But confirmation bias is fascinating because it-it-it’s not just the blackjack table.
to play that game still? And the avoiding emotional tilt in life and in business and in blackjack or poker is really important and that’s one of the things that using data and analytics to make decisions
I knew my dad was smart. And you start investigating, you see that the casino keeps 15% of the take on blackjack , and 1-1/2% on craps, about the same on blackjack .
In reality, his name was Jeff Ma. When I was writing the book, he didn't want to be known as the blackjack guy. And then we made the movie "21," he did want to be known as the blackjack guy, so now I use his real name.
And a group of students would train the next group of students. And essentially, this group of six kids had made over $6 million playing blackjack . And I was blown away.
Success in gambling is very similar to success in life and in business. It's all about making the right decisions with the right amount of luck. And so, it's no question that the-that the years that Jeff spent honing his blackjack skills at MIT have given him a basic strategy for success in the-the VC world here in the Silicon Valley. So he'll be talking to us today about his most recent book which is entitled "The House Advantage: Playing the Odds to Win Big in Business".
Actually, it's not that weird 'cause now I kinda have this whole new impression of what NBA players drink. I was in Vegas about two years ago playing blackja-playing craps,'cause I'm not allowed to play blackjack anymore. And Jalen Rose, who played in the NBA for about 56 different teams, comes up to me and we start talking. And it turns out the two of us had a lot of common friends 'cause he was trying to get into sports media and I was in sports media
It's really funny because I'll stand behind my friends now, 'cause I'm not allowed to play blackjack . And they're all pretty smart friends and we'll be sitting there havin' a beer and I'll be like the old guys from the Muppets just making fun of ‘em when they play blackjack . But they'll turn around and they'll ask me. They'll be like, “Hey, I've got this hand-I've got this against this, and the dealer has that-What should I do?”
And decided I didn't want to work there as part of the deal so I am now just out promoting my book. But during that whole time, I was a professional card counter and I played blackjack for a living. And I like to actually make this reference to the guy who invented the internet which is important that we all refer to him; 'cause now we can say that Al Gore has invented two
this is in the 1960's. It's not like people are floating around with laptops back then. And this-this-this-this thing basically told him -- this paper told him that there was an optimal strategy for blackjack , which is this basic strategy thing that I've already alluded to. And what it said was that if you did this correctly, your odds against the casino were about even.
Everyone at that table thought I was an idiot for splitting those tens. Right, there's, to a man they thought I was idiots. And this was a $500 table. So they all had real money out there. And all probably thought they knew a lot about blackjack . But I had to like divorce myself from the-from the feelings of wanting to just assuage them, you know. And just go with it and split them.
And he talked all about the way you guys work hard to try to create aligned incentives within your compensation programs. And that's like what people need to do, because in blackjack we had a really, really great si-set of aligned incentives. We had this pile of cash and chips that we tried to grow into a bigger pile of cash and chips. OK, and that's how simple it was.
to play that game still? Ah, So when you talk about decision making in blackjack , from an objective point
to play that game still? And that scene is based on the story that I told you guys where I lost $100,000 in two hands of blackjack . And when I read that script the first time I went to the screen writer
to play that game still? But he had written six books before and they’re all fictional and I had this great story about what we did playing blackjack .
She's a Bucs fan. It's called Wine, Dine, and Cigars, and we're going to have a blackjack room, we're going to have a trivia room, we're going to have cigars through Davidoffs.