One of the things that separates Video Poker for Winners software from its competitors is the bankroll calculation module. (Each of the major video poker trainers has features the others don’t. Serious players often own two or three such trainers and use them for different purposes. Compared to the money you run through the machines, the price of each trainer is very small and the potential benefits very large.)
I recently participated in an email exchange with someone who was trying to understand the “Risk of Ruin” (ROR) part of the bankroll calculator. This is a long-term calculation, presuming that the current conditions will remain forever and ever, amen.
A man (I’ll call him “Sam”) said he played 9/6 Jacks or Better with an effective cash back rate of 0.84%. He didn’t give exact details, but indicated that this included double points, a scratcher, his usual monthly mailer, and one type of comp he is able to monetize. Whether or not his calculation was correct, I accepted it as a given.
He said he was willing to play with a lifetime 5% chance of going broke, and the software calculated that he needed a $34,800 bankroll to accommodate this level of risk. He had that much–barely. (If you haven’t used Video Poker for Winners to calculate ROR, I strongly suggest you try to duplicate this number (slightly rounded) on the software. I suppose it’s tautological but a feature on any software isn’t useful unless you can actually use it.)
As occasionally happens to each of us, Sam went through a losing streak and dropped almost two royals. One month after he had the $34,800 bankroll, his bankroll slipped to $27,000. While still an enviable bankroll to many, the software then calculated that he had a 9.8% ROR.
Sam found this confusing. Since one month is clearly within a lifetime, why isn’t his ROR still at 5%? How could his ROR almost double?
The problem comes in thinking of ROR as a calculation related to YOUR lifetime. It isn’t. It relates to a particular set of numbers and assumes those numbers will last forever. Surely Sam doesn’t think that the 0.84% slot club return will last forever. Casinos change promotions all the time. A year from now, double points at that casino may be a thing of the past. A new director of marketing may have a totally different idea on how to run things. Perhaps at that time there will be a different game that seems more attractive to Sam.
Risk of Ruin is a type of snapshot into an idealized future with very restrictive assumptions made — including perfect play on your part. A ROR calculation can’t foresee that you are actually going to lose $7,000 in the next month — or win $5200 — although embedded in the calculation is some small probability that each of these things will actually take place.
So if ROR can’t really predict what’s going to happen, what good is it?
I’m glad you asked.
The ROR figures give you a better ballpark estimate of your risk than most of us could come up with otherwise. When I started out, I didn’t have the ability to make these calculations. I personally used (and advocated in print) the formula that you needed between three and five royals to survive the swings. This formula was probably better than nothing, but was very simplified. At the time, however, it was the best formula that I had.
If someone in Sam’s situation had a bankroll of only $16,000, a ROR calculation would have shown that he had more than a 25% chance of going broke. A bankroll of $16,000 would be equivalent to four royals and smack in the middle of my “three to five royals” simplification. Having a 1-in-4 chance of going broke is certainly a bigger risk than I wish to fade.
The ROR figures also allow you to compare the bankrolls needed for different games. For example, 9/7 Triple Double Bonus has almost the same EV as 9/6 Jacks (99.578% versus 99.544%), but with a 0.84% slot club the 5% ROR figure for dollar single line TDB is more than $173,000 — almost five times as high as the $34,800 required as for 9/6 Jacks. You need to be WELL financed to survive the swings in this game.
Additionally, the ROR figures allow you to see how the slot club rate affects the required bankroll. Let’s say the slot club (including all monetized benefits) “only” paid 0.60%. While this is a larger cash back rate than you can find in most casinos, the 5% ROR figure for dollar 9/6 Jacks is $98,300 rather than the $34,800 figure you needed with a 0.84% slot club. That’s a HUGE difference in ROR for a relatively modest change in the slot club. This should help clarify why it is important to play on days with promotions.
In games like blackjack, you have great flexibility on your unit bet size. Often you can bet $5 or $1,000 or even more at the same table with the same rules. In video poker this is often not the case. At many casinos, the games they offer for quarters are not the same ones as they offer for dollars, which in turn are not the same ones they offer for $5 and higher. If the best games are only offered for, say, $1 Triple Play, it’s convenient that we now have software that allows us to calculate the bankroll needed to play that game. It isn’t a question of whether you can “man up” and stand the risk psychologically (although that’s certainly part of it and a subject we’ll address another day). It’s whether your bankroll is large enough to survive typical swings.
The history of gambling is replete with stories of people who have gone broke — including me, once, back in the late 1970s. You do NOT want to become one of these “repletes.” Paying attention to ROR calculations to verify that you are not overbetting your bankroll is an important part of successful long-term gambling. Ignoring these figures is, well, an unnecessary gamble.
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