Lay all your bets on a winner: Why optimism beats calculation

Richard Farleigh
I WAS so tired at breakfast that, when the waitress asked if I wanted coffee, I just tapped the table a few times. When she asked about sugar, I flattened my hand, palm downwards, and slowly waved it left and right. As a casino worker, she knew the blackjack signals for yes and no. And she smiled as she took the order, no doubt used to customers after their marathon sessions.

A mate and I had played nearly 20 hours straight before grabbing a few hours sleep. These silent responses were now instinctive to us. He was well and truly hungover and he asked me how we’d gone. I realised he’d had too much to drink to remember and I said jokingly: “You’re lucky that I’m honest! And I’ve got to say, you’re a mongrel! You won more than I did.” We’d started with $10,000 (£6,277) each and I’d cashed in over $50,000 worth of chips, $28,000 for him and $26,000 for me. We’d played for fun and done well. It wasn’t luck though; I’d been counting cards.

Counting cards can be easier and harder than people think. You don’t have to remember every card; you really just need to follow one number – the ratio of high value cards to other cards. When this ratio is low, you know there are lots of high value cards remaining to be dealt, and these are the times you can reap profits. Normally in blackjack, the casino wins about 52 per cent and loses about 48 per cent. When the card count is favourable, those odds switch in favour of the player. The idea is then to massively increase the stakes and win some hands before the next shuffle. It’s game on!

The harder part of card counting can be keeping the casino off your back. They consider it cheating and will ban you if they spot you. It can be tricky to disguise your bet pattern, and the turns of your head as you follow the other players. On this occasion, my mate’s drinking and cavalier attitude inadvertently may have avoided eviction.

This was in the mid 1990s, during a period when I had a pretty good run as a card counter. I never pursued it with any seriousness and I pretty quickly lost interest. What was fascinating, though, was the idea of using the right execution to turn a small but persistent advantage into success. It was something I had looked to do far more seriously as a hedge fund manager.

However, now in business, I realised something that astounded me. Miscalculating the odds can be a good thing. People who are slightly over-optimistic typically do better than those who are completely balanced in their viewpoint. The greater drive and perseverance more than offsets the risks that people underestimate. It seems the idea is not to worry too much about the odds and push on regardless. Las Vegas wouldn’t have been built by card-counters.

Richard Farleigh has operated as a business angel for many years, backing more early-stage companies than anyone else in the UK.