MJ: Considering Overhead/Expenses into BR

[MJ]

I am trying to figure out how I can use CVCX to create an optimal betting ramp that takes expenses into consideration.

Let us say I have a 30k BR, Win Rate = $50/Hr and expenses = $10/Hr. So, I lose 20% of his expectation per hour due to expenses. The Kelly-factor for this game WITHOUT taking expenses into consideration is 0.5.

If expenses are paid out of the BR, the counter is essentially playing to a Kelly-factor of 0.8. But, what if I want to play to a Kelly-factor of 0.5 AFTER taking expenses into account? Now, I must lower the K-f so the new Kelly-factor becomes 0.3125.

So, if I input the new K-f into CVCX, 0.3125, I am really playing to a K-f of 0.5 after expenses are deducted from expectation but the software does not know this! In reality, I will only retain 80% of what the Expected Results calculator reports and would have to recompute the ranges of SD as a result.

If what I wrote above is correct, how can I use the Trip Ruin and Goal calculators to figure out probabilities that take expenses into consideration for x hours played? Same question for the Actual Results calculator. By ignoring expenses, we do not see the big picture.

Look at it this way; if a typical trip costs $50 in expenses and I get in 5 hours of play per trip, then the hours to double BR goes from 1002 to 1225. That amounts to an extra 45 trips just to cover the cost of expenses! This also assumes 100 hands/hour, which is optimistic.

I don't think there is enough emphasis placed on this crucial topic. By not taking expenses into account, we make the fatal mistake of underestimating ROR, N0, HTD, and overstate win rate.

Could penalizing my EV by 20% on BJRM 2002 address these issues? It would be nice to see all the widgets on CVCX expanded to give the user an option to factor expenses into the calculators.

Any comments are welcome.

MJ

[Norm Wattenberger]

If we can come to an agreement on a method or two of including expenses; I'll create an expenses widget. (Widgets can affect all calculations including other widgets.) Reducing EV is definitely not the way to go.

[MJ]

> If we can come to an agreement on a method or two of
> including expenses; I'll create an expenses widget.
> (Widgets can affect all calculations including other
> widgets.) Reducing EV is definitely not the way to go.

Glad to hear you will entertain the idea. You already added one widget which factors in expenses, it works quite well!! Would it be possible to take the user input for this widget, and extend it to all the other widgets so the information given reflects the player expenses?

It should be interactive just like some of the other widgets in the software, so if expenses are altered than the relevant widgets and betting ramp will change in conjunction with expenses.

Set it up so that the optimal bet schedule for a given kelly factor selected by the user will take the expenses into account.

For the Hours to Gain widget, consider adding an additional column which multiplies Expenses/Day x #Days so the user is given precisely how much his expenses will cost him!

Other than that, I am not sure what else can be done.

Here is something for players to think about. If hourly expenses are even 50% of hourly earnings, than for a counter playing at 0.5 kelly that means they are affectively playing to 1.0 kelly. That is an increase in ROR of nearly 575%!!

MJ

[Don Schlesinger]

You can't handle expenses in the manner you suggest. They are not subject to any variance, while your playing results are.

If you win at, say, a 1% rate, and expenses are a certain fraction of that, the expenses are fixed and will be a constant, whereas the return will not be.

I think it's wrong to do it your way. I would consider expenses separate from all the playing calculations. My bankroll would be uniquely for playing the game; the money to pay for expenses would come from another source. The funds for the two shouldn't be commingled. If you decide to eat filet mignon one night instead of hamburger, you shouldn't have to change your bet size. Seems foolish to me.

Don

[Blackjack Knight]

> You can't handle expenses in the manner you suggest.
> They are not subject to any variance, while your
> playing results are.

> If you win at, say, a 1% rate, and expenses are a
> certain fraction of that, the expenses are fixed and
> will be a constant, whereas the return will not be.

> I think it's wrong to do it your way. I would consider
> expenses separate from all the playing calculations.
> My bankroll would be uniquely for playing the game;
> the money to pay for expenses would come from another
> source. The funds for the two shouldn't be commingled.
> If you decide to eat filet mignon one night instead of
> hamburger, you shouldn't have to change your bet size.
> Seems foolish to me.

> Don

Perhaps expenses and playing calculations should not be comingled but perhaps in certain situations there is a better way to consider expenses?

If someone were facing monthly large fixed expenses they could set aside funds out of their bankroll but then for how many months?

If they work the expenses into their play then wouldn't they have a better idea of how often or at what level they need to play?

[MJ]

> You can't handle expenses in the manner you suggest.
> They are not subject to any variance, while your
> playing results are.

Well there must be a way to fuse the two.

What if you figured out the cost of your expenses to double the bank and than added that value to the starting BR? For example, if playing at 0.5 kelly with a 20k BR, the CVCX Hours to Gain widget indicates the excess trips required to double the bank due to expenses cost the player $4k. Now, if you started the BR with a 24k bank, but STILL played to 0.5 kelly (with the same betting ramp as the 20k BR), would that yield the proper betting ramp on CVCX?

> If you win at, say, a 1% rate, and expenses are a
> certain fraction of that, the expenses are fixed and
> will be a constant, whereas the return will not be.

That is why expenses should be somehow factored into the equation. If you read the first post in this thread, I explain why. Players need a way to get a sense of their
risk and expectation in conjunction with the cost associated with their play. Otherwise, they may very well be playing to 100% ROR and not even be aware of it.

> I think it's wrong to do it your way. I would consider
> expenses separate from all the playing calculations.

In your opinion, what percentage of hourly earnings should hourly expenses be?

> My bankroll would be uniquely for playing the game;
> the money to pay for expenses would come from another
> source.

But what if the funds to pay expenses DO come from the BR? Players should at least have some clue on proper bet sizing for these situations. Perhaps the widgets can be reworked to account for expenses. If players opt not to consider expenses, fine, they may simply put expenses as $0. There, now everyone is happy. :-)

> The funds for the two shouldn't be commingled.
> If you decide to eat filet mignon one night instead of
> hamburger, you shouldn't have to change your bet size.
> Seems foolish to me.

I don't know about that. In order to see the big picture, we need to see how expenses will take their toll on the BR.

If a player wishes to play to a Kf of 0.5 after considering expenses with a fixed bank, and his hourly expenses are 20% of his hourly earnings, do you agree that his new kf should be 0.3125? CVCX does not realize the player has expenses so we must lower kelly accordingly.

MJ

[Norm Wattenberger]

CVCX currently handles expenses as separate. But I think it would be useful to merge them in for those that wish to look at it as all one pile. I think this could be done by reducing the EV at each count. Of course this could not be done evenly. The TC frequencies must be taken into account as well as the units bet at each TC to result in an even reduction in average win rate per hand. And the adjustment would be an iterative process as the bets at each count would affect the adjustment to the EVs and the adjustment to the EVs would affect the bet amounts.


Blackjack Scams

[Wantabe]

I believe you are talking about trip expenses. What I do is bring my expected expenses plus my trip BR. I calculate my win/loss for the trip by:

money I have after trip - money I brought(expenses+BR) - any pre-trip expense(ie airfare)

Expense are just the cost of doing business.

Comments?

Wantabe

> I am trying to figure out how I can use CVCX to create
> an optimal betting ramp that takes expenses into
> consideration.

> Let us say I have a 30k BR, Win Rate = $50/Hr and
> expenses = $10/Hr. So, I lose 20% of his expectation
> per hour due to expenses. The Kelly-factor for this
> game WITHOUT taking expenses into consideration is
> 0.5.

> If expenses are paid out of the BR, the counter is
> essentially playing to a Kelly-factor of 0.8. But,
> what if I want to play to a Kelly-factor of 0.5 AFTER
> taking expenses into account? Now, I must lower the
> K-f so the new Kelly-factor becomes 0.3125.

> So, if I input the new K-f into CVCX, 0.3125, I am
> really playing to a K-f of 0.5 after expenses are
> deducted from expectation but the software does not
> know this! In reality, I will only retain 80% of what
> the Expected Results calculator reports and would have
> to recompute the ranges of SD as a result.

> If what I wrote above is correct, how can I use the
> Trip Ruin and Goal calculators to figure out
> probabilities that take expenses into consideration
> for x hours played? Same question for the Actual
> Results calculator. By ignoring expenses, we do not
> see the big picture.

> Look at it this way; if a typical trip costs $50 in
> expenses and I get in 5 hours of play per trip, then
> the hours to double BR goes from 1002 to 1225. That
> amounts to an extra 45 trips just to cover the cost of
> expenses! This also assumes 100 hands/hour, which is
> optimistic.

> I don't think there is enough emphasis placed on this
> crucial topic. By not taking expenses into account, we
> make the fatal mistake of underestimating ROR, N0,
> HTD, and overstate win rate.

> Could penalizing my EV by 20% on BJRM 2002 address
> these issues? It would be nice to see all the widgets
> on CVCX expanded to give the user an option to factor
> expenses into the calculators.

> Any comments are welcome.

> MJ

[MJ]

It seems like you have a good idea how to incorporate expenses into the equation. It certainly won't hurt. Any idea when you will include this feature?

MJ

> CVCX currently handles expenses as separate. But I
> think it would be useful to merge them in for those
> that wish to look at it as all one pile. I think this
> could be done by reducing the EV at each count. Of
> course this could not be done evenly. The TC
> frequencies must be taken into account as well as the
> units bet at each TC to result in an even reduction in
> average win rate per hand. And the adjustment would be
> an iterative process as the bets at each count would
> affect the adjustment to the EVs and the adjustment to
> the EVs would affect the bet amounts.