12/22/2018 0 Comments Decision Making and Chance Part2So you start out by betting $1, and if you lose you bet $2, and then if you lose again you bet $4, and eventually you'll win, thereby covering your losses. So that's an interesting strategy that people use in various types of investment situations, namely, you start losing, bet more. You can show that that's not a good thing to do. In fact, it's really not a good thing to do in a losing game. One of the reasons it's not a good thing to do is the house has a betting limit, and if you have an unlucky sequence of losses, you can't double your bet because they won't let you bet that much. Another problem is if you have a betting limit, if you have an unlucky sequence of losses, you might run out of money before you can double your bet and come out ahead.
Anyway, so that's sort of the quick tour roulette. Now, if you talk about roulette betters, you could say a roulette better who makes a profit after 10 bets would be lucky. But a long-run profit would be very weird. The math says that's really unlikely to happen. So a possible explanation where somebody makes a long-run profit in roulette, they're cheating. So they have some scheme worked out, and they're not really playing according to the regular roulette odds. On the other hand, you can also detect if a roulette better is losing more than he or she should https://casinoslots-sa.co.za/online-casinos. In fact, if a roulette better is losing after 10 bets, so what, they're unlucky. But if they lose in the long-run and repeated bets faster than they should, faster than chance predicts, 5.3 cents per bet, that would also be weird. That would be equally weird, as weird as the winner. And then possible explanation for that, the better is being cheated. So there are two different kinds of weird. Weird good and weird bad. But anyway, where do you draw the line between luck and something else is going on? So statisticians, that's sort of the basic question of statistical inference. Traditionally, 5% is a cut-off point, which is called statistically significant. If what you observe has less than a 5% chance of happening under ordinary circumstances, you conclude that something else is going on. So in roulette, it's simple, you can make probability calculations and answer this statistical question. Is what you've seen weird, or is it just within the bounds of chance? What about betting on football games? What's the chance that the 49ers will win next week? Well, 49ers started out looking pretty good in their first couple games, but what's going to happen next week? Well, football is not like roulette. The same experiment is not repeated under identical independent conditions, and so the law of averages and various probability models don't necessarily apply. So you can't make these cut and dried mathematical statements about the persistent football better goes broke, which you can say about roulette, or craps, or Keno, or any of the casino games of pure chance. Well, football betting is an interesting industry. It's about a $10 billion industry right now, almost entirely illegal. AUDIENCE: How are illegal industries such as this measured? How do you-- where does the $10 billion come from? DR. MICHAEL ORKIN: Surveys. There are trade organizations that do surveys and find out-- in fact, I'll give you a link in a minute. It's a good question. But they're illegal-- Well, here's one answer. Football betting is illegal in this country, except in Nevada. Football betting is legal just about everywhere else in the world. So internet gambling is very popular. And internet gambling is legal, except here. So that's sort of an interesting legal issue, as you probably know, because if you bet on a football game here, you're violating some Federal law, but if you're playing in an online casino, that's perfectly legal, that's located in Costa Rica, or Jamaica, or Canada. So legal is sort of this strange term in this world. But yeah, how do you come up with a number like? So there are trade organizations that do surveys and find out things like that. So a typical football bet, not all, but a typical football bet is done with a point spread. So a point spread is a handicap given to the inferior team. And who decides that it's an inferior team? Well, in some sense the bettors decide. So here's how it works. Let me go to the third bullet point. First week of the season, the 49ers played Arizona, and the Niners were nine point underdogs. So that means if you bet on the Niners in that first week, you get nine free points tacked on to their score. So it turns out San Francisco lost that first game, 37 to 27, but if you add nine points, the Niners win. So people who bet on the 49ers in that first game won their bets. And the people who bet on Arizona, even though Arizona won the game, lost. So that's fine. Now, the casino has to make a profit, so they pay 10:11 odds. So that means if you make an $11 bet with a point spread, and you win, you make a $10 profit. So now how does that ensure that the casino is going to make some money?
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