Sittin’ at the Table

Going to Vegas probably isn’t the best way to get a good financial education, but that’s what I did in the early to mid 2000s.

I started visiting Las Vegas when I found out that there were some bigger jiu jitsu competitions there where I could compete against entirely different people. I could earn a few bucks by refereeing at Grapplers Quest, then write about the event on BJJ News, my website for covering jiu jitsu events and news.

Then, the UFC invited me to cover their events (“invited” is a strong word choice here, but they gave independent media press passes and very good seats for a few years there). Independent media were disproportionately responsible for keeping the UFC alive before it burst onto cable TV in 2004. I was a small part of that movement.

Since I essentially got a free ride to Vegas, I figured I might as well gamble a little. I think a part of me just wanted to misbehave a bit, just because we were away from home and… well, it was a little bit surreal that Aaric and I were actually covering the UFC as journalists.

We were half celebrating, half Bukowski-ing our way through our upper twenties and early 30s (Aaric was a few years younger), and my friend Klint came out a few times as well to encourage us—not that any of us needed any encouraging, mind you.

Growing up, I had always had a funny relationship with money. Most kids I knew who collected comic books (or anything, really) didn’t do it for the same reasons I did. I was thinking about future values from an early age, not really smelling the roses, exactly.

I regarded comics as little more than a certificate of stock ownership or a bond, albeit with very cool art. Over time, this morphed a bit as I learned more and more about comic books, superhero storylines, and genuinely creative artwork, but the idea of a speculative investment was never far from the center for me.

This may set the stage a bit for how I approached gambling. Now, I’m pretty good at math! My dad was a math teacher, so I understood that the odds were stacked against you, but I also understood that the casinos would bring you free drinks as long as you were playing.

This was a very potent combination.

I remember my friend Dan talking about a gambling strategy based on a childhood friend he watched take everyone’s money. This kid claimed he could make a particularly tough basketball shot, so he would bet another kid that he’d make it. If he missed, he’d say, “Double or nothing”, and then if he missed that one, he’d do it again.

Gamblers call this the Martingale strategy, which might or might not be named after a person named Martingale (or possibly Martindale).

You can probably already see the fallacy in this approach, but just in case it’s not completely clear, trees do not grow to the sky. If you had a $10 bet and doubled it once, that’s $20. Double it again, $40, then $80. Double the bet seven times and you reach $1280.

You’re thinking: you can’t lose seven times in a row! I’m saying: oh yes you can.

In fact, in a game like roulette (which was my game of choice), the simplest bet that’s close to “even money” is when you bet on red or black, but in American-style roulette, there are two additional ways to lose besides landing on the opposite color—zero and double zero.

So, you have 18 red numbers and 18 black numbers, and the ball has an equal chance of dropping into those slots. That means there are 20 ways to lose and only 18 ways to win in the Martingale system, so when you double down, you have a 47.37% chance of getting your money back, not 50%.

If you double down seven times, you only have around a 1.13% chance of losing all eight spins. Remember, though: you’re only looking to win $10 (and hopefully a ton of free drinks, if you’re me circa 2004 or 2005). Is it worth risking up to $1280 to play this game? If your bankroll goes up to infinity, you could just keep going, but this was a very hard limit for me, and it was already pretty dumb given how broke I was.

And yet, I was drawn to Vegas like a moth to a flame, only all the moths got free drinks and nobody really knew who they were.

I was pretty sure I was going to lose anyway, but I needed to feel it first hand. Don’t get me wrong—I didn’t want to lose money! It’s just that I realized I needed to accept that, and I badly wanted to understand how financial risk worked. I wanted to understand it on a visceral level, not just a theoretical one.

After a lifetime of frugality, this was the most extravagant expense I had allowed myself to have, but I also felt like it was important and worth it. I paid the price for it by losing my shirt and then having to scramble to pay some bills for a few months, but I believe this personal loss helped me to avoid more serious business losses in the next few years.

Because I had felt that particular acute feeling already, I was motivated on a subconscious level to avoid it in the future. There was also something powerful about moving your own very real money through a theoretical thought experiment like doubling down.

Gambling helped me to prepare for the emotional aspects of investing. I could now take a hard look at money and know I’d survive if an investment went to zero. This allowed me the freedom to take small risks here and there, so buying and selling stocks when the time came was a lot easier, and not nearly as intimidating as it might have been otherwise.

You’re probably thinking: wow, this guy is really good at reframing, almost to the point of deluding himself. Maybe that’s at least partially true, but I don’t have any desire to replicate this experience (no longer drinking helps a ton), and I genuinely feel as though I’m much better off for having had the experience.