Real payback is knowing bankroll

Mar 5, 2008 7:00 AM

Winning Strategies by Elliot Frome | Payback is not everything.

When you choose to play in a casino, there are other considerations that must be taken into account before you proceed. Don’t get me wrong, payback is a very significant component of not only the mathematical analysis, but the simple reality of playing any casino game. However, other things must be taken into account, including bankroll, opportunity and volatility.

Here’s a look at some of these can impact you as well.

Let’s say you walk into a casino with $1,000 in your pocket. You come across a Deuces Wild video poker paying well over 100 percent. It is a quarter machine, so you’re well bankrolled for the game.

Your bankroll is very likely to survive any ups and downs long enough for you to take advantage of the fact that the game is positive. But, it is not just about the payback. Let’s pretend that you walk into a casino and you find a brand new game (one that I certainly did not analyze). You roll one die. If it is a 1, 2 or 3, you win even money. If it’s a 4 or 5, you lose. If it is a 6, it pushes. Here’s a game with more than a 116 percent payback.

You notice the sign says $5 minimum to $25 maximum when you sit and play. You’re about to have one of the greatest gambling experiences in your life. What if the sign said $1,000 minimum? Are you just as prepared to wager your entire bankroll on this one roll of a die?

At over 116 percent, the odds are most of you would. If you lost, you’d likely go to your ATM, take out another $20,000 (assuming you have this much) and keep betting. I don’t have to run a simulation to know that under these conditions, you’re going to walk out a winner more than 90 percent of the time.

But, what if the sign said $100,000 minimum? Ignoring for the moment the ability to borrow from all of your friends or go to the bank for a ‘business’ loan, would you be willing to wager what could be your entire net worth on the single roll of a die?

If it is a 1, 2 or 3, you’ll be very happy. If it is a 4 or a 5, you’d literally be broke. In this instance, the bankroll is more important than the payback. I liken this situation to a case where you can beat your wealthy friend at golf 9 out of 10 times. He then offers to bet you $1 million that he can beat you next time out.

You decline, because wagering that type of money is well beyond your means. He then declares that you’re chicken and that he is, in fact, the better golfer.

Let’s take my example a little further. Rather than being a stand alone casino game, it is a bonus game that is available anytime you hit a dealt Royal, paying $10,000-1 on a table game (or video poker). Before giving you the credits, the casino allows you the choice to wager it on the game I described earlier.

Here it is different because the opportunity to play this wager does not constantly exist. If you lose, you can’t just take another $10,000 out of the bank and play continually, knowing that the odds are greatly in your favor. Are you prepared to risk the $10,000 you won for a $5 wager with a very good chance to turn it into $20,000?

For years, video poker machines offered ‘double down’ options in which after any paying hand you could enter a round whereby you could double your payout if you pick the ‘higher’ card than the machine. Some of these games were set below 100 percent, but some gave the Player a true 50/50 chance to double his money.

 The question would be, just how high would you be willing to take it? Casinos had greed on their side with the odds that Players would not look at this situation since they were wagering the casino’s money.

Again, in the situation I have created, imagine if this bonus round were only triggered after Quads or better. How likely would you keep trying to double your money knowing you may only get the chance very few hundred hands? In a computer simulation over many years, it is all the same. However, in the reality of your playing, it can make a very big difference.

Last but not least is the concept of volatility. In simple terms, volatility is how much you can expect your bankroll to go up and down while playing. Volatility is generally much higher when a larger percentage of the payback is given to the hands that are very rare.

If you saw a video poker machine that had a payback of only 70 percent, you’d avoid it completely. Yet, casinos offer a variety of sidebets with paybacks in this neighborhood. The difference is that many of these paybacks offer the Player the opportunity to win very large amounts of money for $1.

Lotteries frequently have paybacks of only about 50 percent, but Players are much more willing to play them because of the opportunity to win millions of dollars. Of course, lotteries also take into account ‘opportunity’ as I described earlier. As most states only draw numbers 1 or 2 times a week, people are willing to throw a few dollars at the chance to win a huge jackpot.

If lotteries ran every five minutes, the paybacks would have to be higher in order for the whole process to work. Otherwise many people would lose their bankrolls too fast and stop playing.

Payback is a significant consideration when deciding to play any casino game. It should not be the only consideration. This is why Expert Strategy includes a component about knowing what to expect. It is from this that we learn the need to be bankrolled properly and take appropriate risks when playing.