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There's a lot in this article that doesn't add up. For example this quote: "So my philosophy at that point was that I can afford to take an additional risk her

by harryh 15y ago

There's a lot in this article that doesn't add up. For example this quote: "So my philosophy at that point was that I can afford to take an additional risk here, because I’m battling with their money, using their discount against them." If he's already up significantly (battling with their money) the discount isn't likely to come into play. And he's still playing a negative expectation game so every hand he plays he should expect to give back a little of his gain. I don't think we're getting the real story here.

fragsworth 15y ago
I agree - they state the following: “You’d never lose the million. If you got to [$500,000 in losses], you would stop and take your 20 percent discount. You’d owe them only $400,000.” ... So when Johnson got far enough ahead in his winning sprees, he reasoned that he might as well keep playing. I don't quite see how this makes any sense - if you get far ahead in a winning spree, the value of your discounted loss diminishes significantly... doesn't it? For instance, if you won $2 million, the discount is now $100k on a $2.5 million loss, which is only 4% (much smaller than the initial 20% discount of $100k on a $500k loss)
- acak 15y ago
  He went in with $1M, odds of 50/50 and a 20% discount once the losses are over $0.5M. Lets assume for simplicity that all hands he plays are equal ($0.1M according to the article) Because the discount kicks in at $0.5M of losses, he should plan to lose bets for $0.5M first. This is a setup. Now he needs play to win the bets for remaining $0.5M he has. Because the odds are 50/50, after a few rounds of playing with the $0.5M he has, he's going to have lost half the hands, and won half of them. While he gets 2x for his wins, he gives up only 0.8x for his losses. Net = 2x - 0.8x = 1.2x. He just had to rinse and repeat with the $0.5M he was left with. Though I'm sure he brought in a lot more money once the $0.5M loss kicked in the discount. Just note that this explanation is a simplification. 50/50 odds (technically 49.75/50.25 according to Johnson) have to be accompanied by an even performance on double-downs and splits.

by harryh 15y ago

fragsworth 15y ago

I agree - they state the following: “You’d never lose the million. If you got to [$500,000 in losses], you would stop and take your 20 percent discount. You’d owe them only $400,000.” ... So when Johnson got far enough ahead in his winning sprees, he reasoned that he might as well keep playing. I don't quite see how this makes any sense - if you get far ahead in a winning spree, the value of your discounted loss diminishes significantly... doesn't it? For instance, if you won $2 million, the discount is now $100k on a $2.5 million loss, which is only 4% (much smaller than the initial 20% discount of $100k on a $500k loss)

acak 15y ago
He went in with $1M, odds of 50/50 and a 20% discount once the losses are over $0.5M. Lets assume for simplicity that all hands he plays are equal ($0.1M according to the article) Because the discount kicks in at $0.5M of losses, he should plan to lose bets for $0.5M first. This is a setup. Now he needs play to win the bets for remaining $0.5M he has. Because the odds are 50/50, after a few rounds of playing with the $0.5M he has, he's going to have lost half the hands, and won half of them. While he gets 2x for his wins, he gives up only 0.8x for his losses. Net = 2x - 0.8x = 1.2x. He just had to rinse and repeat with the $0.5M he was left with. Though I'm sure he brought in a lot more money once the $0.5M loss kicked in the discount. Just note that this explanation is a simplification. 50/50 odds (technically 49.75/50.25 according to Johnson) have to be accompanied by an even performance on double-downs and splits.