Having just returned from a quick trip to Atlantic City, I am reminded of the similarities of Casino Gambling and the traits we see within a more traditional behavioral finance perspective. The phrase ‘No Action on the 6 and 8!’ comes from the game of craps. Specifically related to bets placed on the Don’t Come Line.
In the game of craps every bet (excluding the stick mans proposition bets in the middle of the table) can be bet in favor of the result occurring before a 7 is rolled, or the inverse, that a 7 will roll before that event. This can be seen with a Come bet and a Don’t Come bet (comes before the 7 rolls, don’t come before the 7 is rolled.
The bet works as follows:
- Wager will win on the roll of a 2 or 3
- Wager will lose on the roll of 7,11
- Wager will do nothing on the roll of 12
- Any other number rolled, the wager is moved behind that number, and if the 7 rolls before a repeat, the player wins even money.
The Don’t Come bet is a more advanced craps bet, simply because it is played less frequently. People tend to follow the pack and bet the Pass Line, as such, it tends to be more experienced craps players who will place that bet.
Both the Come Bet and the Don’t Come bet reflect the same rules as the Pass Line and Don’t Pass Line, and all 4 of these different bets have the same basic concept: you must roll once to establish the number we are going to battle over, and then you must battle over it.
The Come Bet has the following rules:
- Wins on 7,11
- Loses on 2,3,12
- Any other number rolled the wager will move in front of that number, and if the number repeats before a 7, the bet wins.
Basically, a mirror. If you look at the first bet you will see the only difference is that the roll of 12 doesn’t pay out on the Don’t Come. This is the house edge.
There’s another very important rule that applies to both bets:
- Come Bet: Contractual Agreement, you cannot remove it until we have a result.
- Don’t Come Bet: No Contractual Agreement, you can remove it whenever you want.
The shout of ‘No Action’ effectively means that the Don’t Come Bet moves behind the number (EG a 6) and the player then decides to immediately remove it and replace it on the Don’t Come line. People do this because 6’s and 8’s roll frequently, and they are scared of losing. All the bets pay even money (1:1) so if they tuck behind a 10 when that rolls they are really ‘safe’.
I know it might all seem like Greek to you, but this is a very common ‘strategy’ for people who play the Don’t Come bet…
The problem is that they opting for an inferior bet, increasing their chance of losing, by thinking that they are reducing risk. The reason why the house rules allow you to remove your Don’t Come bet, or take ‘No Action’ is because this bet puts the house to a disadvantage:
Bet on Don’t Come line wins on 2,3 (4/36 combinations) and loses on 7,11 (8/36 combinations) you are twice as likely to lose than win this bet until you roll a different number, such as the 6, and move behind it.
Once a 6 is rolled there are 5/36 ways to roll it again, and 6/36 ways to roll a 7 and win. The odds are in your favor to win. But the fear of losing pervades, and bad decisions are made.
It’s like insurance in Blackjack
Blackjack has a similar concept – it is known as ‘Even Money’. If you are dealt a Blackjack (Ace and 10) and the Dealer shows an Ace they will offer you Even money rather than 3/2. Invariably people will take the offer of ‘Even Money’ because if that dealer does indeed flip up a 10 and show Blackjack, their bet is a push, and they don’t win. The offer of a guaranteed 1:1 payout is overwhelming. Interestingly that same, savvy player will rarely take that insurance bet out when they don’t have a Blackjack showing.
Mathematically there are 13 cards in a suit, of which 4 are valued as a 10, so there is a 4/13 chance of the dealer hitting Blackjack, and 9/13 chance of not. However, people would rather take an offer of even money every time, losing half of the payout despite the odds being twice heavy in their favor. Statistically speaking, if we bet $1 and took even money for 13 blackjacks we would ‘win’ $13, but if we refused it we would win $13.50.
What goes wrong?
We must remember that gambling is dumb, so is drinking booze and casual sex on Spring Break. My standard advice to people who are going to gamble is to consider the amount you have to play with already lost, and akin to the admission price to a movie or club. That said, you should ideally know what you are getting into, and most people who consider themselves savvy players think they understand things like house edge and how to play, but when there is money involved logic flies out of the window.
Looking at Even Money in Blackjack – the very experienced player would refuse it, but if it was their final bet, or if they pushed forward all of their chips, it would change. That’s a real issue that we see in other places too, like the stock market. People might go into a transaction knowing the rules, understanding what not to do, but suddenly they are involved in an transaction that has their emotion involved, and they break the rules.
One could argue that if you don’t bet above your limit (in either a Casino or the market) you could control this emotion. But that too has problems, for example, a bet of $5000 on Ford might be trivial, and you can hold to your investment policy statements to control the transaction. But what happens if you have 10 bets like that on different firms, and then you get fired? A change in the macro environment can adjust risk tolerance and force you to do something that you know is wrong, but you just want to do this time.
You should have no emotional attachment to your money, be it on the Craps table when the 6 or 8 rolls, or when the market tanks 50%. If you can’t do the right thing regardless of the fear factor, you are playing the wrong game. Create investment strategies that work on autopilot, they free up more time to earn more money, and reduce stress too.