Bringing Down the House - What Blackjack can teach us about investing.
If you have read the book "Bringing Down the House" by Ben Mezrich or seen the movie "21" based on the book, then you are at least familiar with the system employed by a team of MIT students to beat the game of blackjack. For those that have not seen the movie, the system is simple. You have players sitting at several of the blackjack tables in a casino keeping a cumulative count of +1 for cards 2-6 and -1 for 10-Ace (cards 7-9 are 0 points). The objective is to find tables with high positive counts, or said another way, a disproportionate amount of 10-Aces left to be dealt. These tables have a very large positive probability-weighted return, so if you can find 10 tables with 10+ counts you would allocate a large portion of your total capital. If every table has a negative count you don't bet or allocate any capital.
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