It was a growth industry. Today, according to the American Gaming Association, commercial casino gambling—not including Native American casinos or the hundreds of racetracks and government-sponsored lotteries—is a $34 billion business in America, with commercial casinos in 22 states, employing about 340,000 people. Pari-mutuel betting (on horse racing, dog racing, and jai alai) is now legal in 43 states, and online gaming netted more than $4 billion from U.S. bettors in 2010. Over the past 20 years, Johnson’s career has moved from managing racetracks to helping regulate this burgeoning industry. He has served as a state regulator in Oregon, Idaho, Texas, and Wyoming. About a decade ago, he founded a business that does computer-assisted wagering on horses. The software his company employs analyzes more data than an ordinary handicapper will see in a thousand lifetimes, and defines risk to a degree that was impossible just five years ago.
Johnson is not, as he puts it, “naive in math.”
He began playing cards seriously about 10 years ago, calculating his odds versus the house’s.
Compared with horse racing, the odds in blackjack are fairly straightforward to calculate. Many casinos sell laminated charts in their guest shops that reveal the optimal strategy for any situation the game presents. But these odds are calculated by simulating millions of hands, and as Johnson says, “I will never see 400 million hands.”
More useful, for his purposes, is running a smaller number of hands and paying attention to variation. The way averages work, the larger the sample, the narrower the range of variation. A session of, say, 600 hands will display wider swings, with steeper winning and losing streaks, than the standard casino charts. That insight becomes important when the betting terms and special ground rules for the game are set—and Don Johnson’s skill at establishing these terms is what sets him apart from your average casino visitor.
Johnson is very good at gambling, mainly because he’s less willing to gamble than most. He does not just walk into a casino and start playing, which is what roughly 99 percent of customers do. This is, in his words, tantamount to “blindly throwing away money.” The rules of the game are set to give the house a significant advantage. That doesn’t mean you can’t win playing by the standard house rules; people do win on occasion. But the vast majority of players lose, and the longer they play, the more they lose.
Sophisticated gamblers won’t play by the standard rules. They negotiate. Because the casino values high rollers more than the average customer, it is willing to lessen its edge for them. It does this primarily by offering discounts, or “loss rebates.” When a casino offers a discount of, say, 10 percent, that means if the player loses $100,000 at the blackjack table, he has to pay only $90,000. Beyond the usual high-roller perks, the casino might also sweeten the deal by staking the player a significant amount up front, offering thousands of dollars in free chips, just to get the ball rolling. But even in that scenario, Johnson won’t play. By his reckoning, a few thousand in free chips plus a standard 10 percent discount just means that the casino is going to end up with slightly less of the player’s money after a few hours of play. The player still loses.