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The Cumulative House Edge

If you don’t pay your credit cards off every month, the interest accrues.  The following month you are paying interest on the interest you were charged the previous month and so the vicious cycle goes.  If you don’t do something to end the cycle, what started out as a small credit card bill with a negligible interest charge can become an out of control monster that is devouring huge chunks of your paycheck every month.

The same thing happens in the casino.  There is a finance charge imposed upon you every time you pull the handle of that slot machine or bet on the next spin of the roulette wheel or make a bet on any outcome of any game.  This finance charge is known as the ‘house edge’.  Its effects are cumulative just like the interest on your credit cards.  The more you play, the larger the bite that will be taken out of your bankroll.

For a simple example, the house advantage on roulette is 5.26% but for the sake of easy computation, let’s call it 5%.  Now suppose you have a $100 bankroll and are making $5 flat bets on red or black with every spin of the wheel.  On the average, after making 20 bets, you will only have 19 units of $5 left or $95.  Well, you might think that you didn’t get hurt too badly and maybe things will get better.  So you continue to play.  After 20 more spins on the average, you will lose another 5% or $4.75 (5% of $95 you had left).  As you continue to play and continue to flat bet, your bankroll dwindles and if you continue to play long enough, the cumulative effect is to completely erase your bankroll.  But when flat betting, you can often play a long time before this happens and there will usually even be times when you hit a good run and may even get ahead.  But even then, as we have discussed before, unless you stop playing for the rest of your life, the house edge simply picks up where it left off the next time you play whether that is next week or the next spin of the wheel.

Now consider what happens if you are using a progression to chase your losses.  As you raise your bets, you are exposing even more money to the house finance rate and though you may be lucky and get away with it at times, the ultimate effect is that your bankroll will be depleted even faster because, once again, the house edge is cumulative.

It boils down to this.  The mathematics of all gambling games are such that you cannot bet the same amount on every decision and expect to win.  In fact, you cannot bet on every decision and expect to win period unless you have some way of knowing when the odds favor the house and when the odds are favoring the player.  Then you bet small when the odds are against you, and bet larger amounts when the odds are in your favor.  Either that, or you must have a bet selection method that will identify bets that have a better than even chance of winning and make those bets only, even if they only appear intermittently.