mLife Math – the bet, the ROI, and the next step

Whenever I get a new offer through from mLife I want to write about the gig again.  The reason is that it’s just working.. and better than expected.  I’m going to try to explain again how it works, as some people are still confused, and the run down the math via Net Present Value of the original investment.

The investment

I committed to spending $4,000 at Aria during TravelCon.  The theory was that I wanted to present myself as being a big player, and would reap rewards beyond the program rules.  The $4,000 was an investment in the theory that I could create enough interest in me to receive upfront comps in advance of that value.  I described it as a bond, which kicks off ‘coupon payments’.

People asked me a lot of questions about the $4,000 and the word investment.  To try to frame it correctly, my goal was to try to lose the entire $4,000 in as fast a slow way as possible.  I know this sounds odd, but think of the word ‘bittersweet’ and you’ll get the idea.

Casino gambling is very misunderstood, the way to game it requires a real understanding of probability and variance.  The best way to explain it is that if you find the best game in the house, with a 99.9% (or higher) return, you can still lose exactly 100% of what you bet.  That’s true even if the return is 150%.

How to lose $4,000

If I wanted to lose $4,000 in an even manner over 2 days, I could simply find a slot machine that was $4 per spin, and spin it 1000 times, 500 on day 1, and 500 on day 2. That could do the trick. Betting any higher could result in losing faster.  The challenge is that time is limited.  In Vegas I only had a little time to create a good impression. Furthermore, they calculate on a per diem basis (this catches many people) and it is triggered by any use of your card.  What many people mess up on is that they cash in a few comp dollars on the day of departure, thus making a 3 day trip into 3 comp divisor days.  If they walked without cashing their comp, they have 2 comp divisor days.

The divisor creates a marked number for you, the ADT (average daily theoretical win) which is a baseline for many comp equations.

An example

If I spend $4,000 over 2 days I get at worst 1000 $4 spins, my daily average is $2,000 in spins.  If I decide to cash in the comps I earned for that on day 3 it then divides my value per diem to $1333. Comps are based on that number, so it is important to not drop it. Walking out of the casino with some unredeemed comps would show me as a $2000 player. The comps do expire (6-12 months depending on tier) but it can be worth the risk.

Coin in (the basis for comps) doesn’t care if you win or lose.  If I were to play a $1000 slot machine and put $1000 in it on the first spin, and keep winning $1000 per spin, I would have a massive coin in.  100 spins would equal $100K and put me instantly into mLife Platinum status from zero. However, if just one spin doesn’t pay out $1,000 I’d need more cashflow.

The challenge for Vegas was that time was against me, so I took on a lot of risk, more towards the $1000 example above, but I thought it might pay off, and also I helped goose the payoff by creating room charges that could be wiped clear (in theory).

This would mean if I failed miserably, and lost $4,000 cold, hopefully I could reclaim $800 or so on day 1, and the rest of the $3,200 as fast as possible.  The reason for the pace is that duration matters both in terms of the required rate of return of the $4,000, but also in how quickly they catch on that I don’t play big next time around, and pull further offers.

Note, as a hedge, I set stop loss limits at $2500 on day 1 and $1500 on day 2 of my trip. The rationale here was that I was able to demonstrate I’m ok with losing $2500, but in the end I got ‘fed up of losing on your crappy machines’.  I felt the random tilt towards day 1 vs planning to lose $2K per diem gave me an edge.

The math

I recently explained how you can calculate value from XNPV. It’s a super important concept for any investor. I want to show it in action here for the mLife gig.  I’m going to use a $4,000 investment. I’m also going to have to try to assign a value to the comps I’ve been offered since Vegas:

Comped bill for the trip

• Aria room and dinner, snacks, lunch, spa etc comped for the trip
  • Retail value $1,000 my value $800

The Cove Atlantis

• 4 Nights upfront comped.
• $300 resort credit
• $200 slot play
  • Retail value $3,000-4,000 my value $1,000

Cruise on Royal or Celebrity

• 3-7 nights inside cabin to Caribbean or Bahamas
  • Retail value $2,200 my value $1,000

mLife Comp Beau Rivage

• comp flights for 2 pax to Biloxi
• comp room (several nights)
• $800 slot play
  • Retail value $1,200 my value $600

mLife Comp ‘Big Game Day package’

• Suite for 3 nights and entry to a debaucherous Super bowl event with food and beverage
  • Retail value $1,700, my value $500

mlife Comp Vegas

• Suite for 3 nights
• $500 slot play
• $400 resort credit
  • Retail value $2,200, my value $1,000

Note that all offers are current and active, so it would be best to ‘cash them in’ all at once, for various future dates. I tried to put realistic, yet ‘rough’ pricing on them.  Since they are all Q1 events, that impacts the Net Present Value (a fast ROI). Since I’ve not booked any of them, I’ve spread them over 1 per month time frames, taking them sooner makes their value greater.

As you can see, based on the number of offers from mLife (and how I valued them) the result is a positive $886.  Making this quite a solid investment..

Discount value

This is where it gets personal.  You have to look at the offers and decide how much to deduct (or to add) for someone crafting the reality of your travel.  For some, this screams limitation, but for others, having offers mailed to you that may fit your wishes is a great thing.  As I mentioned during my presentation, I love to get the option to say ‘no way’ and you cannot say that without options.

The price of saying no

Let’s pretend I’m not stoked about going to Biloxi, what would that do to the ROI?

My NPV drops to $289.. still ahead (conceptually anyways..)

What if I don’t take the Superbowl too?

See how it is now showing a negative?  If I don’t take these offers, and no more come, I made an error in the investment, and shouldn’t have taken it.

I’m a bad candidate

I also mentioned in Vegas that I was a bad candidate because getting to Vegas is a PITA. I really can’t see me bringing all 3 of us from NY twice in a short period of time, but if I did the same gig and was single in LA, it makes a lot more sense, as the chance to cash in is that much higher.  I knew this going in, but wanted to see how it played out regardless, so took one for the team.

Can you emulate this?

People ask me if they can do this, and I tend to say that it’s probably not for you.  Simply put, it doesn’t sound so smart to try to lose $4,000 in order to get mysterious bennies.  Hopefully, seeing what I’ve been offered in the 7 weeks or so since trying this will give some perspective.  I was planning to show my coin in / tier credits earned also, but I upgraded to Platinum via the Hyatt status match today, and that screen has vanished.  From memory, coin in for the trip was about $55,000, and I was about 33000 tier credits short of hitting Platinum legitimately from that trip.

Going forward, I’m certainly tempted by the offer to head back there and cash in the suite+$500 play+$400 resort credit.  I’ve also got $158 in express comps and $162 in ‘Pointplay’, so it would be a good amount to cash in.  I’m sure we could spend $558 in food with some aplomb, but it is still a bit of a trek.

If I was to go back I would have to make a decision – zero play (only if I’d already booked my other trips!) try it all over again to double down on the comps perhaps gaining Noir, or slow my horses, and just gain Platinum in a legitimate way.  Fake platinum helps that by offering boosts to tier point levels.