Quit While You’re Ahead?

In my February 24 blog, I wrote that earlier this year I hit four royal flushes on an 11-day trip to Harrah’s Cherokee — and the four royals spanned all four suits — clubs, diamonds, hearts, and spades — although not in that order. Within a few hours of the posting of the blog, a reader named Mike (actually, his name is listed as “mike,” but I’m going to exercise my author’s prerogative and refer to him with a capitalized first letter) posted three separate times that since I was over-royaled, I should quit gambling or I will surely give it all back. 

I responded to his posts by saying that I would discuss his theory at length soon — and today’s post is that response. 

Mike’s “Quit While You’re Ahead” philosophy is one of the two most popular money management theories out there. The other theory is that when you get ahead you should keep going so as to ride the winning wave as long as it lasts.

These two theories contradict each other. One says when you get ahead you should quit. The other says when you get ahead you should keep going. They can’t both be right.

But they can both be wrong — and my belief is that this is the case. Both theories are wrong because neither one addresses the key factor for gambling success. That key factor is: Are you the favorite to win or not?

If the house is favored to win, then Mike’s theory makes some sense — sort of. Under this environment, you will lose in the long run, whether you are currently over-royaled or not. A better strategy, in my opinion, is to not play at all in this situation.

If, on the other hand, you have the advantage in this gambling proposition, and you have the bankroll to survive the swings, then continuing to bet will lead to financial gains in the long run — again, whether you are currently over-royaled or not.

So the question becomes — am I the favorite to win at Harrah’s Cherokee playing $5 NSU Deuces Wild? I’ve been through this math in previous columns and suffice it to say I’m positive that I have a not-insignificant advantage while playing there. For practical purposes, the advantage is only available for those players who play one of a few varieties of five-coin $5 video poker which adds up to $25 a hand. One of those games is NSU Deuces Wild. There are others. There are also $5 video poker games there where the player does not have the advantage.

One of the key aspects to success at gambling is having the bankroll to survive the swings of the game you are playing. The swings for $5 NSU are not trivial. I’ve had losing trips where I’ve lost more than $20,000. For many players, losses of that size would be disastrous. I’m fortunate enough to have the bankroll to be able to fade those swings.

When Mike talks about me being over-royaled, he seems to believe there’s a video poker scorekeeper in the sky whose job it is to even things out. I don’t believe such a scorekeeper exists. Every hand of NSU I play gives me a 1-in-43,456 chance of connecting on a royal — whether I’ve already had many royals this (week, month, year, lifetime, whatever) or if I’ve never hit a royal at all. How many royals I’ve hit, and how recently, do not affect my 1-in-43,456 chance of collecting a royal on the very next hand I play. 

It’s possible that Mike doesn’t believe the last sentence of the previous paragraph. I’ve based my career on the assumption that IGT machines have random number generators that deal the cards fairly — meaning each unseen card has an equal chance of appearing next. While there have been times my results have been luckier than average (the four royals in 11 days is the most recent example of this) and other times when my results are pretty bad for a period of time, over time the math has worked out. 

I never know how long a winning streak will last. I never know how long a losing streak will last. What I can usually figure out, however, is whether I have the advantage or not and whether I have the bankroll to survive the swings. And when I have both of those things, I’m going to continue to play.

It’s possible Mike doesn’t have access to games where he has the advantage — or the skill and bankroll to play those games if he did have access to them. That could lead to his “Quit While You’re Ahead” belief. And that belief may be relevant in the world he plays in. But that doesn’t mean that people who can find good games should be subject to his belief system.