Parity Hedge System explained

In response to an email query, I wrote a long, rambling dissertation on the problems with the “Parity Hedge System.” The first tip-off that this isn’t a legitimate winning system (other than the fact that there is no such thing as a legitimate winning system) is that it’s posted on Quatloos, the self-described “Cyber-Museum of Scams and Frauds” Here’s a little quote from the PHS page:

The originators of the Parity Hedge System were too smart to make themselves known. It is believed that they were nuclear physicists and theoretical mathematicians who were working at the Nevada Test Range, located just north of Las Vegas. During the daytime, they put their skills to the test by creating new and unusual types of hydrogen bombs and measuring their yields. In the evening, they made their way into Las Vegas where they put their statistical know-how to the test on the Blackjack and Craps tables. This was a group of very sharp young minds who had studied under such geniuses as Von Neumann and Teller, and who knew how to “think outside the box”.
Quatloos! — Quatloosian Guide to Gambling: The Parity Hedge System

First of all, you should be generally skeptical of any “guaranteed” system to make money on negative expectation games. The only way to consistently do this is cheating, which has risks all its own. Blackjack skill play, of course, is possible, given the fact that it’s a game with dependent outcomes (cards played earlier can’t be played again, which has implications). There’s no way that I know of to design a guaranteed winning system for games with independent outcomes, like craps, because each roll has nothing to do with previous ones. Mathematicians, desperate gamblers, and scammers have been trying to develop winning systems for about 250 years, and no one’s succeeded yet.

Even though the my understanding of casino math says that a winning system is impossible, I’m hardly a mathematical genius, so I’m willing to entertain the possibility that smarter people than me have discovered such a system. It’s really unlikely (not that there are people smarter than me, but that these people could figure out a way to beat the casinos), but for the sake of argument I’m willing to suspend my disbelief in everything I know about the math of casino games. So let’s see how the Parity Hedge System story stands up to some non-mathematical scrutiny.

First of all, this is NOT an urban legend that’s been circulating around Las Vegas for years. I haven’t come across any mention of it in any source, including the Nevada Test Site Oral Histories. If scientists from the Test Site really did invent such a system, someone would have talked about it. Apparently the story started with the Quatloos page. I wouldn’t think that anyone would be gullible enough to believe an implausible story told on a site dedicated to scams and frauds, but, as my book sales have demonstrated, I’ve got a feeble understanding at best of the book-buying and web-reading psyche. A few other sites picked up the story, thinking it was real, and from there it entered the folklore.

While the story as told might make sense superficially, it is obvious that whoever wrote it doesn’t have much experience in the casino industry, because many details are wrong. I suggest you read the story in full right now, then come back here for my critique.

First of all, the purported CCTV photos are all wrong–I used to work CCTV, so I know a few things there. First, they don’t have date/time stamps, and second, they are positioned incorrectly. The top shot, showing the shooter, is from an impossible angle–there’s no way that’s a ceiling-mounted CCTV camera could make that image. The 2nd is wrong, too. When filming a craps game, you don’t shoot the near side of the table from a near side camera, because, as you can see, the shooter will block some of the layout. Instead, you shoot from the opposite side. Unless you are specifically looking at the shooter for cheating (in which case this angle is useless, anyway), you are tight on the layout, mostly looking at arms placing bets and watching the dice and payouts.

I don’t buy the “Japanese businessman” angle, either. First of all, if his disappearance is a verifiable fact, why isn’t he named? It can’t be to protect him, since he’s already dead. It subtracts from the veracity of the story. Wouldn’t his family be seeking justice, or at least some closure? And even though Spilotro and many others are now dead, many of his associates turned state’s evidence to avoid prosecution, and federal wiretaps captured a great deal of information about what he and others were doing in Vegas. An event as infamous as the cold-blooded murder of a rich foreigner whose only crime was winning would no doubt have set off rounds of chatter; under pressure from the Japanese government, the FBI doubtless would have investigated. And don’t say that “the casinos” hushed it up for fear of bad press–nobody can get in the way of a juicy crime story. Natalee Holloway, anyone?

Second, the part about the JBM wiring money to casinos just does not ring true. If he’s a courted high roller, he’ll be playing on credit. Before he comes out, he’ll talk to a host and agree to play for a certain time and a certain amount, and in exchange he’ll get the requisite comps. It’s not standard practice for a known player with a long history (like JBM) to play with cash. He’d just sign a marker than settle up after he returns home.

The $10 million daily losses at several casinos (in JBM’s final gambling spree) is simply impossible given the time frame and the betting limits. I don’t have time to break down the math behind it, but let’s say you’re betting $10,000 a roll, averaging about 50 rolls an hour, which is typical. If you win EVERY roll, you’ll be up $500,000 after an hour. You’d have to win EVERY roll for 20 hours to leave with $10 million. That’s just impossible, and another detail that confirms the PHS is a hoax.

So even if JBM won every bet, which is patently impossible, he couldn’t have made as much money as Quatloos would have us believe. If the system guarantees only a “slight” edge over the casino, it’s clear that this story is fiction. Again, betting $10,000 a roll, with a 2% edge over the house (as opposed to the house’s usualy 1.4% edge over you for pass line bets), you’d be up, on average, $10,000 after an hour of play. There’s some room for volatility, but given the amount of play–several sessions at several casinos–it’s impossible that the player could be that far outside the standard deviation. He’d be more likely to spontaneously turn to gold in the middle of a roll.

In any event, disappearing a wealthy foreign national would be bad business for everyone. I just can’t see casino bosses risking an international incident–and the scrutiny it would bring–over a few bucks, even if it was in their nature to kill winning patrons, which it’s not. And if he really was taking them to the cleaners, there was a simple solution. Just comp him dinner, take him to a show, then walk out with him to the casino, and say, “Mr. Businessman, we’re happy to have you play at the Dunes. Any game but craps-you’re just too lucky for us.” It happens to skill BJ players all the time (well, minus the dinner and show).

The apres gets even more ridiculous. Supposedly Benny Binion master-minded the whole casino counter-attack, even though his casino wasn’t at risk. I’m not saying that Binion was the kind of guy who always preferred a diplomatic solution (he almost joyfully admitted to several murders), but killing a winning gambler runs against his whole philosophy. He was a real cowboy, in the wildest sense of the word, who took pride in taking any bet, no matter how big, and paying off winners. Plying a big winner with a free room, a big dinner, and maybe even some feminine companionship to convince him to stay and play some more? Sure. But murdering a player? That’s just not cricket.

But let’s say, for the sake of argument, that it did go down as described, though that defies every proven fact and even much of the myth about casinos and the personalities involved. The penultimate paragraph is the last straw. First of all, Binion didn’t die in the “early 1990s.” He died on Christmas Day, 1989, which is an easily-verifiable fact: you can see it right here on the Social Security Death Index. And Sandy Murphy wasn’t Binion’s wife–she was his girlfriend. Two flubs in one paragraph = no strong commitment to fact-checking. Finally, the thought of Murphy and Tabish injecting him with heroin to get him to reveal the whereabouts of the “secret system” is laughable. I’m no expert in forcing confessions, but I’d think that shooting someone up with an opiate is a less reliable way of getting information than, say, torture. And Tabish and Murphy don’t seem like the kind of people who’d hijack a complicated betting scheme to make some money. Steal a vault full of silver, sure. But running a gambling system designed by nuclear physicists? I don’t think so.

So I think we can safely consign the Parity Hedge System to the fiction shelf.

If you haven’t done so before, you should really check out Quatloos! It’s got all manner of scams, from the now-venerable 4-1-9 to tax protesters and investment scams. You’ve got to admire the pure cheek that went into the PHS page, though apparently it’s not as transparent a hoax as its creators thought.

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