Money Management 4: Systems & Randomness vs Certainty


In our previous installment, we looked at why people gamble. We looked at why many of us are trying to escape the tight and restrictive frameworks and structures that govern us for much of the day, every day. We also looked at why taking control of our gambling might, in itself, increase the pressure we feel, by forcing us to take full responsibility for what we do.

On the face of it, we should have few qualms about this. We work hard, and we get strong results back. The problem is, in betting, you don't necessarily get rewarded for hard work. Indeed, some of the simplest systems are the best, while many complex mind-blowing systems meet only with abject failure. It's this inability to make hard work equal success that leaves so many substantial minds so confounded by betting. And the reason for this is that most of us never get to grips with the randomness that surrounds us at all times, no matter how good our system is.

Randomness vs Certainty

In the long-term, a system that contains an edge should be a winning one. Short-term, though, everything is random and impossible to control. This is the peculiar contradiction that makes it so difficult for many serious players to gamble. We must construct our own systems and be prepared to judge ourselves on their success. And yet, at the same time, we must accept that on a bet-by-bet basis, we have no control whatsoever. The cards will fall however they will. Sometimes they will spell success, and other times they'll indicate failure. But if we're to be successful, we mustn't derive any mental pain or triumph from these individual bets. The only thing that matters is whether the sequences are proving winning ones over the long-term. Provided they are, victory will be ours. Individual runs, though, should make very little or no difference to us.

Part of the problem is our belief that, just because we're using a degree of skill and knowledge to pick out patterns from seemingly random sequences, we must somehow be able to influence the cards themselves. We tell ourselves that the next hand should be winning, and we're disappointed when it doesn't. This causes us pain, and makes us unhappy and more likely to lose control of our emotions. This is daft. After all, if I said you could find a coin and flip it 100 times, and I'd give you �1.20 every time Heads came up, as long as you gave me �1 when Tails appeared, you would probably think this a good deal. Assuming no trickery was involved, you'd expect to make a nice profit from these 100 flips. However, you wouldn't be surprised and immensely-pained every time Tails came up. You'd be sure to know that Tails is likely half of the time, so its regular appearance would be expected by you. Somehow, though, when we play cards, losing sequences that are in the natural order of things will bother us and distract us, even though we should be anticipating them arriving on a regular basis. Our winning system doesn't alter the fact that 'losing' cards will be commonplace.

Working Hard at Systems Gets Results?

It's certainly true to say that many losing players fall into such a bracket simply because they don't understand the systems they're using. If we do sufficient research, we'll know already about the various losing runs and how frequently they may pop up. We'll already have noted just how frequently we lose. Seeing thousands of cards and grasping how commonplace losing runs will be should help allay some of our fears, and will be the first step in getting ourselves mentally ready.

In truth, if you haven't already tested your system with tens of thousands of cards, you may not have a working system at all. And that would cover lots of other players, many of whom only have a loosely-worked system that, deep down, they know to be flimsy. You have to have a system that you know will succeed in the long-term. If there's no long-term edge, you can't expect to win. And you also can't expect to fool yourself. Deep down, you'll only have confidence if you believe implicitly that the system itself genuinely works.

However, it's also true to say that, even if we've done our homework, we may still be likely to feel pain almost every time a losing hand is played. It's not hard to be calm when we're looking at a long sheet of figures. But when we're betting significant sums in real-time, it's all too easy for the red mist to descend in the event of a losing hand. Our remedy may well be to go back to the drawing board, and try to make our system 'better'. This, though, will probably exacerbate our problems. By doing hard work, we believe we can 'force' the cards to turn in our favour. This belief, though, will only make us even more frustrated as we try and fail to control the forces of randomness.

The truth is, there is no answer to randomness. What we have to do is to embrace it, and acknowledge that it exists.

Placing a Bet Means Buying a Chance of Success

What we need to do, in fact, is to look at the cards in a completely different way. It's not about any individual card winning or losing. When we place a bet, all we're doing is paying some money in exchange for a chance of success. That chance of success may be very low. Even if we have been card counting, and believe the decks to be in our favour, we may perhaps anticipate winning 51% or 52% of the time. What we're doing, then, is placing a 50% bet when we believe the outcome has a 51%/52% of winning for us. A good part of the time, we'll lose that bet. But our long-term 51%/52% aim should secure us profits over a significant period.

A 51%/52% probability means we should be remaining neutral throughout the game. Losing or winning hands are almost equally likely, so we should derive no reaction from either coming up. The outcome shouldn't matter to us, because, provided our system is sound and has an edge built in, those losing or winning hands truly don't matter to us. They don't matter to us any more than it matters whether coin-toss number 57, in the above example (see Order From Chaos), comes up as Heads or Tails. The entire 100-coin sequence might perhaps be of significance (although probabilities experts would argue that a sample-size of even 100 is no basis from which you can draw conclusions), but an individual flip is of virtually no consequence at all.

Quite simply, having an edge means that you have a slightly higher chance of success with your next bet than you would by playing randomly. Whether you do win or not is in the Lap of the Gods. Betting is a numbers game, and every hand or spin or race is a unique event where your selection might win or might lose. Think about that philosophy, and write down the sentiments on a piece of paper. Then read out those comments several times a day. It's important that you view the game in exactly that way, and that you learn to accept the meaninglessness of individual turns. By all means celebrate or commiserate at the end of a long set of results (100, perhaps, or 1,000 or 5,000.), but don't attach any importance to isolated cards or minor sequences.

If your system has an edge, the game will pay you in due course. But you have to be able to bet without question or hesitation when the edge is apparent. And you must be completely prepared for a losing card. You're paying for a bet where the probability of it winning more than compensates you for the cost of the bet itself. Whether or not it really does win is totally irrelevant.

 

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