Gambling, Expected Value & Complaining About Poker Bad Beats

@jeff_steinke

@jeff_steinke

Casinos

@jeff_steinke

I ♥ Casinos

@jeff_steinke

I ♥ Casinosthings you don’t want your finance & operations guy saying!

@jeff_steinke

I ♥ Casinosthings you don’t want your finance & operations guy saying

?

@jeff_steinke

To be sure, this is NOT what I mean

@jeff_steinke

BUT FIRST,WHY LISTEN TO ME?

@jeff_steinke

The idea that excellence at performing a complex task requires a critical minimum level of practice surfaces again and again in studies of expertise. In fact, researches have settled on what they believe is the magic number for true expertise: 10,000 hours.

- malcolm gladwell, Outliers

“

1. 10k Hours

@jeff_steinke

1. 10k Hours

Nearly 40 casinos,

…across 12 states,

…and 5 countries.

@jeff_steinke

1. 10k Hours

Podcasts (300+ ep, 3hrs ea) 1,000 hrs

Books, Blogs, Forums (1.5/day)

800 hrs

Playing - Live (12 yrs, 25-30/yr, 6hrs/ea)

2,000 hrs

Online (2004-2011, 100/yr) 2,000 hrs

Watching 500 hrs

…well, getting there

@jeff_steinke

2. William Huevelmann

DNA• Accountant• Blackjack Player• Card Counter

…me in a few years?

@jeff_steinke

I’ve got a ways to go…

@jeff_steinke

WIZARD OF ODDS

@jeff_steinke

Jeff Walks Into a Casino…

…I care about three things:1. House Edge2. Variance3. Hands per Hour

@jeff_steinke

1. House Edge

@jeff_steinke

2. Variance

@jeff_steinke

3. Hands/hr

@jeff_steinke

Why I Play Pai Gow Poker

• House Edge = 1.5%– Lower than most games • e.g. Roulette is 3-5%

– Although it’s higher than Blackjack (<1%)

• Variance = .75– One of the lowest in the casino– Slots variance is 8.74!

http://wizardofodds.com/gambling/house-edge/

@jeff_steinke

Why I Play Pai Gow Poker

@jeff_steinke

Math, Math, Math

How much will I lose – yes, I WILL lose – playing $5/hand Pai Gow for an hour?

1.5% * $5 * 34 hands/hr = $2.55

@jeff_steinke

Is this worth $2.55/hr to me?

…what’s the catch?

@jeff_steinke

*Also

• Ask for help!• The easier the game, the worse the

EV• Keep your wits• Don’t tilt

…If the last 10 roulette rolls were red, what are the odds the next roll is black?

@jeff_steinke

Jeff Walks Up To a Poker Table…

@jeff_steinke

Let’s Play Some +EV Poker

A situation…

How can we use what we’ve learned so far to make our decision?

@jeff_steinke

Let’s Play Some +EV Poker

First, how can we win our hand?

FLUSH

@jeff_steinke

Let’s Play Some +EV Poker

And how many diamonds are left in the deck?

9

@jeff_steinke

Let’s Play Some +EV Poker

So, what’s the probability we hit our FLUSH?

9/46 = ~19%

@jeff_steinke

Let’s Play Some +EV Poker

Second:

1. What will it cost us

AND

2. What can we win?

$150 to win $600

@jeff_steinke

Let’s Play Some +EV Poker

That means we’re getting 4:1 odds (600:150).

OR that we MUST win 1 out of 5 times, AT LEAST 20% of the time to profit $$.

@jeff_steinke

Let’s Play Some +EV Poker

What should we do?

Since we only win 19% of the time but need to win at least 20%, we should FOLD**.

This is a –EV play, losing $7.50 each time(pW)(pot size) – (pL)(bet size) = .19($600)-.81(150) = -7.50

@jeff_steinke

**Advanced Topics

Ok, so maybe we shouldn’t always fold:

• Direct vs Implied odds

• Putting opponents on a hand

• Don’t let opponents draw for cheap

@jeff_steinke

WIZARD OF OPS

@jeff_steinke

Jeff Walks Into the Office…

Brett asks, “What’s our cash flow going to be in September?”

Jeff responds, “Well, what’s in our pipeline?”

@jeff_steinke

Jeff Walks Into the Office…

• Sold a THD project for $100k• Havertys project for $100k that we

think we’ll win• InGame is “about” to get funding and

wants to start another $100k phase

@jeff_steinke

Jeff Walks Into the Office…

What’s our cash flow going to be in September?

• THD = $100k * 100% = $100k• Havertys = $100k * 50% = $50k• InGame = $100k * 10% = $10k

So, our EV is $160,000

@jeff_steinke

WIZARD OF ADDS

@jeff_steinke

WEBER!!!

The silver bullet marketing machine has found a guaranteed way to get new customers

Do we follow Weber’s advice and start buying these adds?

@jeff_steinke

Catching On Yet?

Same two questions:

1. What’ll it cost us?

2. What’ll we make?

@jeff_steinke

EV in the SaaS World

What does our silver bullet cost?

• $5,000/mo• 80,000 impressions• .1% convert

Our CAC = $5000 / (80k*.001) = $62.50

@jeff_steinke

EV in the SaaS World

How much will we make?

• Monthly Churn = 5%

Customer Lifetime = 1 / .05 = 20 months

@jeff_steinke

EV in the SaaS World

How much will we make?

• MRR = $12

Our LTV = 20mo. * $12/mo = $240

@jeff_steinke

Do We Make This Bet?

Is LTV > CAC?

It’ll cost $62.50 for each new customer, but we’ll make $240 in revenue,

Netting $177.50, which is +EV!

Gambling, Expected Value & Complaining About Poker Bad Beats

@jeff_steinke