Blackjack Team Money Management

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Blackjack Team Play
THE BACKSTORY

These are the other 3 articles in this series
Team Play - Introduction
Team Play - Money Management - Part 1
Team Play - Money Management Part 2

Lately, I've received a lot of questions from readers about how a Blackjack team should manage its money. I suppose this comes mainly from the popularity of the book, "Bringing Down the House" by Ben Mezrich (Free Press, 2003) that tells the story of the M.I.T. Blackjack team, which apparently won millions by counting cards in Las Vegas. I was part of a team back in the early '80s that was also very successful at Blackjack in the Atlantic City casinos, but we didn't invent the tactics used. It all began in the mid-sixties with a team that Ken Uston later wrote about in his book, "The Big Player", which is now out of print. But even Ken Uston didn't invent the idea; it was "Al Francesco" who came up with the strategy, according to the book. Be that as it may, the concept of team play using a Big Player, which is only one approach, is very powerful and many of the techniques used in the past will work today. In case you're not familiar with how a "big player" team works, let me show you how we did it.

There were about 8 or 10 of us who had taken a Blackjack course that was being offered in New Jersey around the time the first casino opened in Atlantic City in 1978 and the person running the course had chosen some of the brighter students to train as instructors, because the demand for it was almost overwhelming. While I didn't become an instructor, I did buy the first franchise of the school and my brother became the instructor for that. While doing all this, we met these other guys and put together a team that consisted of 6 counters or "spotters" as we called them and one Big Player (BP), plus an extra person who did both spotter and BP duty.

The concept is simple. We would all go to a casino (by this time there were four in A.C.) and each spotter would get a seat at a different Blackjack table in a pre-determined area so that we'd have six tables covered, all of which were relatively close to one another. The spotters, of which I was one, would be dressed like your average working stiff and we would seldom, if ever, bet above the table minimum. But what we spotters did do was give a non-verbal signal (hand on chin, light up a cigarette; stuff like that) when the count got "good", which would call-in the BP to our table, assuming the BP wasn't already playing at a different table. Needless to say, the BP acted as though he didn't know the spotter, but he (all of our BPs were men) would act like a gambling fool, bouncing from table to table, drinking, chatting up the "pit critters" and so forth. Most of the time we would have the BP play two hands of $200 or one hand of $300, if there weren't two boxes open at the table. When the count dropped to "even", as I call zero, we would signal the BP to leave and he'd go to find another "hot" table. The beauty of our system (and I don't know if the M.I.T. team did this or not - I haven't read the book) was that our BP did not have to know how to count - although he did - because we spotters would tell him how to play his hand with more non-verbal signals, like riffling our chips if we wanted him to hit. It didn't take us long to figure out an even better way of doing it.

Because our BP was an advanced player who knew all of the Basic Strategy variations, like standing with 12 versus a dealer's 3 when the True Count (TC) is 2 or more, all the spotter had to really do was tell the BP to either play Basic Strategy or make the variation play. As you hopefully know, every hand at Blackjack has a proper way it should be played; we call that Basic Strategy. In addition, each hand has one and only one variation. For example, in the case of A-3 versus a dealer's 4, Basic Strategy says to hit. But, if the TC is 6 or more, the proper play is to double A-3 vs. 4. Like I said, there is only one variation to this hand. You're never going to stand with A-3, regardless of what the dealer's showing and you certainly can't split it, so it's either hit or double.

Our BP played Basic Strategy unless the spotter told him otherwise. It was beautiful! By doing it this way, the BP played 90% of his hands just the way a "pit critter" would expect him to, but when he varied, like standing with a 15 versus a dealer's 8 (TC of 10 or more), he basically looked like a gambler, because who else is going to stand with a 15 against a dealer's 8? By having the BP always use Basic Strategy as the "default" play, the only signal we spotters needed to give now was the "vary" signal, which could be an open palm on the table, a finger outstretched, etc. By placing the signal with our hand, the BP never had to make eye contact with us and that was good for camouflage - the last thing we wanted was for the casinos to discover that we knew each other. Because the BP would always flat bet, we didn't have to give any signals for that - if he could get two hands, he'd bet $200 on each, but if he could get only one spot, he'd bet $300. Of course, as our bankroll grew, those bet sizes changed and I'll show you that in a few minutes. Our first bank was $10,000 and it took us less than 20 hours of play to double it. That's about $500 an hour, folks - serious $$$ today and very serious $$$ in 1980, when gas was 80 cents a gallon! Great fun, that. Anyway, I'm not here to reminisce, but thanks for indulging me on my trip to the past.

Just how much should a BP bet is the question at hand, but I have to lay out some assumptions to get us started. Let's say you and 5 other people put up $2000 each to start a Big Player-type of team with one BP and five spotters. You obviously have a total bankroll of $12,000 and let's also say that the casino's rules gives it a 0.50% edge "off the top", which is about average. Knowing that, we also know that a counter is even with the casino at a TC of 1, assuming you're using the Hi/Lo count that I teach here. Obviously, there's no value in calling in the BP at TC of 1, because he (assuming your BP is a "he", which doesn't necessarily have to be the case) will lose as much as he will win, at least in the long term. So, we now know that we need a TC of at least 2 before we signal the BP to the table. Fine, but how much should he bet?

There are two basic approaches you can take here; the first being having the BP just flat bet and the other, having the BP vary his or her bets according to the count. The flat bet approach is, as you've seen, really the easiest and ultimately the best from a camouflage point of view, but it will carry a higher risk of ruin factor. I'll let the math explain that. In Lesson 8 of my Blackjack School, I show you how the proper bet size is determined, based upon the total bankroll you have. The bets are based upon what's called the "Kelly Criterion", which basically says you'll enjoy the quickest growth in your bankroll if you bet in proportion to your advantage. In other words, if you have a one percent advantage, bet one percent of your bankroll on that hand. So long as you always bet in that proportion, you'll never go broke if you're playing a game where you have a long-term edge.

Well, that sounds good, but it's not very practical. First of all, if you have a one percent edge and your bankroll is $12,433, your bet should be $124.33. How are you going to do that at a Blackjack table? So we obviously have to do some rounding and that will either slow the growth of our bankroll (if we bet less than indicated) or increase our risk of ruin (if we bet more than indicated). Also, the Kelly Criterion was not developed for playing Blackjack, so it ignores those hands where we split pairs or double. To compensate for that and to allow for a certain amount of rounding, we bet only a portion of our advantage, which in my lessons is 76%. That's a number derived from the rules of the casino, which creates "variance". If you may double on any first two cards, you're going to double more hands than you will if the rules allow doubling only on 10 and 11. Of course, doubling on any two is a better deal for the player because you'll do it only when it's in your favor, but it will cause you to place more bets and, sadly, you're not going to win all of them. The same applies to splitting pairs and double after split. Those rules favor the player in the long run, but they do increase the variance in the short term.

So, rather than bet in 100% proportion with your advantage, bet 76% of your advantage. Consequently, if your edge is 0.50%, as it is at a TC of 2 in a game with a casino edge of 0.50%, then your optimum bet size is 76% x 0.50% = 0.0038 times your bankroll. If the bankroll is $12,000, the optimum bet at a TC of 1 is 0.0038 x $12,000 = $45 when rounded to whole dollars. Because we know that the Hi/Lo count gives us a 0.50% increase in advantage for each increase of 1 in the True Count, it's easy to see that at a TC of 4, we'd have about a 1.5% edge. Multiply that by 76% and we get 1.14%. Multiply that in turn by the $12,000 bankroll and it shows the BP should bet $136.80 at a TC of 4. Of course, you'd round that one way or another, depending upon what you're willing to give up; faster growth or lower risk. But here I am talking about betting $45 per hand, when earlier I was talking about two hands of $200 off a $10,000 bankroll. What's up with that?

One word: Risk. First of all, back in A.C.'s early days the rules were so favorable that the player who used only Basic Strategy actually had an edge over the casino! Consequently, we had an edge whenever the running count was above zero, so a certain amount of over-betting didn't hurt us as badly as it might today. Plus, we were willing to accept a higher risk of losing our bankroll in order to build it up, because we knew we could all kick in more $$$ if we busted out - we wouldn't like it, but we could do it. As it turned out, we didn't have to, but we at least went into it with our eyes open. Earlier I said that the "promise" of the Kelly Criterion was that you'd never go broke if you always bet in proportion to your advantage and that's still true, but it bumps up against reality at a certain point. Kelly assumes you adjust your bet with each change in your bankroll, literally on a bet-by-bet basis and, should you hit a losing streak, your bets would continue to decline to a point where they might be lower than the table minimum. That's a heck of a loss from a $12,000 bankroll, but it can happen.

Because of all this rounding, doubling, table limits and so forth, we use a risk of ruin factor of 13.5% for the Kelly Criterion system of bet sizing that I described earlier. For a bunch of part time counters, it's probably an acceptable risk. For a team whose sole source of income is their Blackjack earnings, it's way too high, by a factor of 10, at least. Yes, I'm saying that a "pro" team should operate with a less than one percent risk of ruin factor, but remember that a pro team isn't interested in bankroll growth; they're much more interested in having the bank throw off a certain amount of current income so everyone can pay their rent. This appears to be a good time to discuss earning rates, so let's do it.

Your expected gain from a bankroll is a function of several factors, namely how much the BP bets on each hand and how many hands the BP plays, all of which is directly tied to your overall advantage. Because the BP seldom or never makes a bet when the casino has the advantage, calculating the team's overall advantage is a bit of a problem. If a team has at least five spotters, there should be enough high counts to keep the BP moving from table to table a vast majority of the time, so it's probably fair to say that the BP will be able to play 40 to 50 hands per hour, but that's greatly affected by the average penetration offered by the "target" casino. If they deal deeply, the BP will get in plenty of hands; if they don't, the BP may have to spend a certain amount of time chatting with the pit critters, going to the bathroom, etc. Poor penetration is compensated for by having more spotters and deep penetration allows a team to work with fewer spotters. Let me explain that.

If a casino offers 80% penetration, the TC will be 2 or more approximately 17% of the time. With five spotters, about 5 x 17% = 85% of the time, at least one table will have a count that the BP can play. Of course, there will be times when 2 or 3 tables have such a count, but the BP can be at only one table, so some opportunities will be lost. Also, there will be times when none of the tables have a count high enough for a "call-in", but those will be rare. But if a casino deals just 65% of the cards, the TC will be 2 or more only about 14% of the time, so 5 x 14% = 70% of the time at least one table will have a count high enough for a call-in. However, if you have 7 spotters, that changes to 7 x 14% = 98%, which demonstrates how poor penetration can be overcome by adding spotters.

For discussion purposes, let's be conservative and say the BP can play 40 hands per hour. If you call in the BP at a TC of 2 and send him or her away when the TC drops below 1, the BP's bets will be made with an average edge of just about 1.7%. (I determined that by running simulations on Statistical Blackjack Analyzer.) From this figure we can determine the optimal flat bet for the BP operating with a $12,000 bank, which is 76% x 1.7% = 0.013 x $12,000 = $156. If the BP plays 40 hands per hour and bets one hand of $150, that's $6000 in total bets per hour. With an average edge of 1.7%, it works out to about $100 per hour expected income from the BP's play. Of course, the spotters will be basically just betting the table minimum, so they will lose at a rate of about 0.50% and, if there are 5 spotters, they'll be playing roughly 300 hands per hour in total. That's $3000 in total bets if they're at $10 tables or a $3000 x 0.50% = $15 per hour loss. Subtract that from the BP's expected profit and we end with an $85 per hour net profit or about $15 per hour per person. Hardly the stuff of riches, but remember, each person has only $2000 invested. If you want the "millions" that the M.I.T. team supposedly won, you'll need a big bankroll like they had; certainly in the hundreds of thousands, anyway. Just multiplying these numbers by 5 which means a $60,000 bankroll, the BP is betting $750 per hand (or even better, two hands of $500 each) and you're in the $75 per hour, per person realm, which isn't bad at all. Of course you realize that the BP is over-betting at the lower counts and under-betting at the higher counts, so going the flat bet route will increase your risk of ruin to about 20%, if not more. But, again, for a part time team that may be acceptable.

Problems

Hopefully you weren't beginning to think that the casinos are just ignoring the playing tactics I've described above and allowing any team to come in and carry off their excess $$$, because you'd be wrong. One of the biggest counter-measures (pun absolutely intended) against a Big Player team is for the casino to post "no mid-shoe entry" signs on their tables. What this means is that a player may bet a hand from the current shoe only if s/he placed a bet on the first hand after the shuffle. If someone else comes along to play at that table, s/he must wait until the shoe ends. This is a restriction that the average gambler likes, because gamblers believe a new player will "mess up the order of the cards", which might cause them to lose. That's just superstition of course, but it has made the "nms" rule somewhat popular, especially at higher-limit tables.

Another problem with team play of any kind is verifying skills. When we were running teams back in A.C., the word got out in the Blackjack "underground" and we were contacted by many people who claimed to be counters, but who basically just wanted to gamble while someone else picked up the tab. Of course, when we showed them what they'd be tested on before they even got to meet the others on the team (count down a single deck in 15 seconds or less, 6 decks in under two minutes, all with 100% accuracy, score 95% on a test of 50 Basic Strategy variations, etc.), most just went away. While we had very high standards, don't forget that most of our team members were teaching others how to count. But that doesn't mean your team today shouldn't have similar standards because the games available now are much less favorable, so the team's overall skill level could have a big impact on how well you do. Each team member has got to have confidence that every other team member is a competent counter or the team will likely fail.

That brings us to the biggest problem of all, finding team members. I often get asked this by readers and my answer is always the same: grow your own. If you approach people you already trust outside of Blackjack to be on your team and offer to train them, you'll be a lot happier once the team gets rolling. Because the team itself is responsible for training new members, the newbies are trained to the team's standards and there can be little, if any, doubt about their skill level. If you have a "rookie" on the team, few will be surprised when s/he makes a rookie's errors and that cuts down on team turmoil and dissention. Another frequent question is how one can get on a Blackjack team. Of all the Blackjack teams I know of today, none need new players, because they're all pretty much are making plenty of $$$ and they're naturally suspicious of newcomers, who they think might work for a casino or is out to rip-off a team's $$$. Again, I say, grow your own.

The last problem I'll discuss is when you call in the BP, s/he bets and the cards are dealt, all Aces and faces, so the count has dropped into the cellar. Well, if you want this to work, you must tell the BP to leave after playing only one hand. That's why you need a BP who can pull off the "wild-ass" gambler routine, because the pit critters will get suspicious at some point, otherwise.

Refinements

As you gain experience, you might add several tricks to your bag that can enhance your income, especially if you started with a relatively small bank, like the $12,000 I used as an example earlier. While I don't recommend it, one thing you can do is have the BP "ramp" his or her bets. If you call in the BP at a TC of 2 and your bankroll allows for a $45 bet at that point, if the BP bets, say, $50 and then increases the bet as the count rises, it'll lower your risk quite at bit, but it does create communication problems (how to tell the BP to bet more), which in turn creates a camouflage problem.

Ramping the bets the spotters make can, if done properly, reduce their expected losses down to a breakeven point, if not a profit. I'm not suggesting that the spotters use a 1-12 bet spread like I recommend in my lessons for a 6-deck game, but just a 1-4 spread, which could get them closer to a breakeven point. The downside is that this will increase the team's variance, which is good on the upside and not so good if they lose, plus it can sometimes be just the excuse a spotter, who's really a gambler deep down inside, needs to justify "chunking" some big bets out there. We did later employ this in our team structure but only after working it out in such a way as to put obvious limits on it. With the BP making flat bets, it's not like the spotter is correlating his bets with the BP, but a sharp pit critter might pick up on that.

I could go on and on, but I'll stop now and try to remember to do a future article about how to play in a non-BP team or how to play online casino blackjack. Just so you know, there's not a huge difference, but the nice thing about a team of individual counters is that sound money management principles allow each of them to play as though the team's bankroll was theirs alone.

As always, if you have any questions, either email me or - better idea - post them on our message forums. By doing that, many more people can benefit by our discussion. I'll see you here next time.