Sunday, August 23, 2009

House Rules : Gambler's Ruin Part Deux

Independent Events and Chance :
Each roll of the dice on the casino floor, every time you want to throw snake eyes in Vegas, you are hit by a little thing in probability called : Independent Events.
Independent Events refers to the fact that every time you attempt to gamble in a game of chance [i.e. chance based games as opposed to poker etc.] your chances with every attempt remain the same - the probabilistic return on a coin toss is 1/2 for a fair coin, 1/37 of 1/38 for a game of roulette and so on and so forth. Hence the word "hot-streak" is a misnomer.
Games which have no memory are the ones which cannot be beaten without an element or elements of unfair play. That's why black-jack is so different, and that's why to an extent "counting cards" in black-jack actually works - because its a memory based game.

Engineers with background in DSP : Digital Signal processing would know that signals processing is a memory based system : i.e there is an element of causality because of the interference of a signal with a channel during transmission. This memory is required to be extracted to nullify the effects of the channel : i.e. for inter-symbol interference and noise reduction.
But games of chance are just that - once a dice rolls, it rolls without caring about the past - its only statistically after rolling the dice a few hundred thousand or a million times, we can determine the actual distribution of each event and the standard deviation for the same.
Even after this, if you play craps, you have as good a chance to win on the next roll. There is still the element of "house advantage" that causes the dreaded Gambler ruin. The house advantage is not simply based on statistics of winning alone. That is, its not just the odds against the gambler at the casino. The main factor is the payout factor.
Take the two-column roulette example. Bet $13 per column, $26 total. A win nets you $12. But the odds were 26-to-12, so a bet with no house advantage would pay $12. The casino's profit comes by grabbing the $26 when you lose but forking over a lousy $12 when you win.

Casinos make money in the following ways:
1. EDGE : It's the fraction of the overall amount bet that the casino would earn if every set of decisions fell precisely into statistical line. So theoretically, they could do worse or better in a short period of time, but remember, this is a statistical average, not an intstantaneous prop!
Consider the two-column roulette bet again. In 38 spins, the house expects to win 12 rounds at $26 each for $312 in all, and to lose 26 rounds at $10 each for a total of $260. The total bet would be $26 x 38 or $988 while theoretical "take" is $312 - $260 or $52. The edge is $52 divided by $988 or 5.26 percent. A particular series of 38 rounds may not give the casino 24 wins and 14 losses. But, over 1000's of such throws and the house can haul their 5.26 percent to the bank in humvee-limos :-) : Do the math!

2. Return % : It is the very opposite of EDGE, and relates to the amount that the owner is going to get back on his investement in a % term of course. Here to you could weigh in how much you would make over 10's or 100's of pulls of the slot machine lever. This is for the casinos to figure out the money thats going to be drained out of their enormous pockets.

US Government stipulation ensures that the machines that people muck around with actually have a chance of giving a return on their hard earned quarters. But that's a pittance compared to what the casino stiffs you for.

Beating Las Vegas : The Gambler's ruin & Winning Strategy

People head out to Vegas with often elaborate schemes to beat the house at a game of black-jack or roulette. Other card games like poker involve a certain degree of understanding of the game's nuances and are not a pure guessing game.

The Gambler's ruin is a true and hard fact buttressed by probabilistic evidence.

Let two players each have a finite number of coins (say, n_1 for player one and n_2 for player two). Now, flip one of the coins (from either player), with each player having 50% probability of winning, and transfer a coin from the loser to the winner. Now repeat the process until one player has all the pennies.

If the process is repeated indefinitely, the probability that one of the two player will eventually lose all his pennies must be 100%. In fact, the chances P_1 and P_2 that players one and two, respectively, will be rendered bankrupt are
P_1 = (n_2)/(n_1+n_2)
(1)
P_2 = (n_1)/(n_1+n_2),
(2)

i.e., your chances of going bankrupt are equal to the ratio of coins your opponent starts out to the total number of pennies.

Therefore, the player starting out with the smallest number of coins has the greatest chance of going bankrupt. Even with equal odds, the longer you gamble, the greater the chance that the player starting out with the most coins wins. Since casinos have more coins than the gamblers, this principle allows casinos to always come out ahead in the long run. And the common practice of playing games with odds skewed in favor of the house makes this outcome just that much quicker.

Its an interesting argument. Your lucky streak is a terminal short-run phase. The longer you stay in a winning streak the less likely you are to cash out. Hence the moment you hit a jackpot, make for the cash counters, because its not going to last.

The analysis above however states that there are games which are "skewed in favor of the house". If they aren't of course, the casino doesn't make much money now does it - but the question is how does any advantage truly convert itself into "house advantage" - as with two players who have no prior knowledge a priori on the true outcome of every event, and with the expectation that the game itself is player in a fair and unbiased manner how could the house hold the upper hand in a game?

The only way then for a Gambler to beat the house without cheating is to
1. Have some sort of advantage in the game, with the game having an inbuilt bias towards the gambler
2. Have more money bankrolled than the casino and expect that in a truly unbiased and fair contest the casino gets bankrupt in the longest run. This of course does not consider the fact that casinos can close the table if they are losing a lot of money, to protect their own interests, since the gambler too is given a chance to walk away with his profit/loss.

In games where the possible set of sample points are large - even if the payout is unimaginably large, the playing field truly screws the gambler for all his money. This is because his chance of hitting it are speciously low, while the payout for the house is a zero sum game. In 38 holes in roulette for example, its possible that the house pays out 34 to 35 times the original amount, while is still a little less than what the house would make whenever it wins - and it would wild 37/38 times.

Very simply put - if you are consistent in your choice each time - your chance of winning is 1 - (37/38)^n - the longer you stay in the better your chances, and depending on how much money you stake, and when the roulette wheel averages out, your payout will cause you that much ruin.

If the house sets a minimum and maximum bet limit, statistically it can never lose money. For the gambler the odds are always 1/38. For house its always 1/38. This is because each spin is a new spin.

One interesting betting system is the Martingale betting system :
The simplest of these strategies was designed for a game in which the gambler wins his stake if a coin comes up heads and loses it if the coin comes up tails. The strategy had the gambler double his bet after every loss, so that the first win would recover all previous losses plus win a profit equal to the original stake. Since a gambler with infinite wealth will with probability 1 eventually flip heads, the Martingale betting strategy was seen as a sure thing by those who practised it. Of course, none of these practitioners in fact possessed infinite wealth, and the exponential growth of the bets would eventually bankrupt those who choose to use the Martingale.

Hence if you bet x to win >= x, this strategy doesn't seem bad, if the probability of you winning atleast x is a good shot - i.e. you are not unduly biased in losing with respect to the house. Else the Martingale, in my opinion, just doesn't work, when you don't have much of a shot. Since your betting amount doubles each time, it doesn't take too long until you go bankrupt - since your losses mount like crazy. Also the payout amount isn't anything special, you only end up with x at the end of your Martingale run.

Beating the house seems a plausible option iff the game gives the house no more than a 50% chance at winning - and the gambler has a decent enough bankroll, and house doesn't set too high of a limit to wager a bet. The payout is obviously proportional to the amount dropped in, but the odds act solely a multiplier of the initial wager. Winning against the house is never a foolproof strategy, and that's why you have so many people at the slot machines in casinos in Vegas. You might as well lose your $ in quarters than risk it all at the blackjack dealer.

Sunday, July 26, 2009

Discontinuing the Cynic's Window Temporarily

This blog is getting a little too hot for me to handle with my current commitments.

I am temporarily pulling the shutters down on "Cynics Window to the World".

I will resume posting on this blog probably sometime around Christmas or early next decade.

At this moment all I can say is :

Saturday, July 25, 2009

India's Giant step into R&D

There are over a million articles written over Outsourcing and still a million more which exhort developing economies in Asia to move away from what in the West is perceived as low-cost labor to more exhausting and lucrative R&D work. William Gates Junior exhorted Indian companies to do the same during a recent interview.

Seeds of R&D in India
To give an example Texas Instruments started a development centre back in the mid-80's when India couldn't tell silicon chips from potato chips, and even as we are stuck in 2009, in the cusp of ever man, woman, and child owning a cellular phone, India does not have a silicon fabricating facility, period. The fact of the matter is the quality and quantity of work that has been outsourced is multi-pronged. To say there is no R&D work done in India would be a complete fallacy. However, it is a fact that we talk about MNCs setting up R&D facilities in India to hire fresh graduates out of the IITs and NITs in a bid to both get them to work on developmental projects rather than research in the word R&D - if you are looking for outputs from pure academic research as well, India is probably a few centuries behind America, where the Academic-Industry partnership is very strong. Some of the major funders of science and technological innovation in that country are the NSF, and the Armed Forces, alongwith NASA and of course the IBM's and the GE's.

Crossing the chasm
India has on account of grinding poverty and being young as a nation skipped several crucial steps into building itself in the way the US has. What has happened is, we've skipped the stage of landline phones and moved into cellular phones, we've skipped an entire generation of desktops and moved into laptops and netbooks, we've moved away from wireline services and moved into the digital internet. India definitely has good institutions partly thanks to the initial planning comissions and their utopian goals to solve India's problems, so atleast on paper we could emulate our Western counterparts.

IP enforcement
Westerners who understand the concept of Intellectual Property find it extremely painful to explain such concepts to their poorer counterparts in Asia. At least in India IP protection has in some form both help and infringement-related enforcement, mostly due to pressure from companies that want them enforced. Most of these companies are not Indian. Thankfully we don't have the RIAA and its draconian lawyers, knocking down our doors for illegally downloading music. Piracy bites India in a big way, but unfortunately if you are going to charge exorbitant amounts for music it will probably never sell, and neither will the movie, atleast in India. Promoters and movie producers would be a little kinder with music piracy than they would with movie piracy. We don't have movies run more than a month anymore, and the money they make from the multiplexes in those 30 days can make or break a production house. It needs the protection of the Indian Government. Chinese IP protection on the other hand is horrendous. You get snazzed up i-phones which are cheaper and better than the OEM's, you get phones without IMEI numbers lining up streets in Connaught Place to Chor Bazaar, its an unhealthy and dangerous trend for the world to put up with. Plus Chinese authorities do not or will not understand and enforce intellectual property infringement regulation, of which I am to understand there aren't many.

Why R&D isn't too bad for India
India as an R&D hub would suit Indian mentalities as well - we are a nation which likes to have our food simmered rather than straight off the microwave. However I see some large bottlenecks in the emergence of India as an R&D hub on its own two feet. We have companies which race each other to the bottom in competing for crummy projects. There is no onus to develop a solution, but to provide one for a problem at hand. And this is generally done with the help of 20-somethings fresh out of college, and the projects are again manned by 20-somethings who went through the same grind. There is no scope for excellence, but the onus is on getting the job done, and adding a little sliver to the company bottom line in $-to-Rupee terms.

Pure research works involves a large degree of risk taking and the ability to bounce back if there are no large tangible rewards. In the product development arena, the money that you can get back in return is enormous.
Indian companies primarily are not cut out to work as R&D organizations in the current forms. This is because of the purported hierarchical structures, and massive egos which come into play while executing work of this sort. Homegrown governmental organizations like the HAL, DRDO, ISRO have done well but the number of failures not in public domain would be quite appalling. Indian companies would need a massive organizational thinking to be able to execute a product development initiative. However, its not so much in the execution but also in the marketing and salesmanship of such a product that would affect its future. Brand India is not as big as a 2nd grade East European name, on account of the constant compromise Indian companies makes on the quality of its products made for domestic and foreign consumption - you can even see this in the IT sector with companies very often having problems in their requirements not being met, and this doesn't reflect too well on us. There is no brand equity in brand India for any potential buyers to buy into, but of course things are changing as more and more companies - albiet not Indian - set up R&D facilities in India.
But the basic issues need to be addressed for Indian companies to take a leaf out of. We need to be more serious about time management and quality, and try to pick up these things from the Japanese for their impeccable professional behavior in this regard. If we wish to be taken seriously for what we do, we need to pay serious respect to who we sell our goods to.

Sunday, July 05, 2009

Hand on Cheek

The MP tours his constituency
Surrounded by sycophantic drones
Was pissed by a bank manager
Who wasn't dispersing friendly loans

Quoth he:
"They press my arms and legs
They bring me my tea
How come you don't dispense loans
To folks who are SC and ST?"

Upon which the manager [supposedly]
Opened up his canteena flask
"Bugger off MP" he sipped & said,
"Welfarism just ain't my task!"

Furious was the MP,
Whose writ had been ditched
So he went ballistic on the manager
And slapped him like a bitch

But when the public demanded answers
The MP went meek
"All I ever wanted" claimed the MP
"Was to caress his soft cheek"

Somehow it seemed all-right
Since the repeal of article 377
That the MP would tug another's cheek
And send him straight to gay heaven!

Other arguments by the MP to make a press statement but were weeded out :
1. I just wanted to say : Coochie Coo!
2. I just wanted to tug his cheeks and say : Chooo Chweeeeet!
3. His cheek repeatedly hit my outstretched hand! He hit me! I am the victim!
4. I have split personality disorder. My alter-ego is Harbhajan Singh.
5. What do you mean he is not Ramalinga Raju?
6. I just wanted to show that the man has a lot of cheek!

Monday, June 29, 2009

The six blind men of Hindustan

Perecption and points of view vary from individual to individual.
We had a poem about this topic in my school English text-book.
I am reproducing this poem, of course, I claim no credit for it - and I hope to have credited the person correctly at the end of his/her poem...

Here goes :

The Blind Men and the Elephant



Key Ideas: Hindu, respecting difference



It was six men of Hindostan,

To learning much inclined,

Who went to see the elephant

(Though all of them were blind);

That each by observation

Might satisfy his mind.



The first approached the elephant,

And happening to fall

Against his broad and sturdy side,

At once began to bawl,

"Bless me, it seems the elephant

Is very like a wall."



The second, feeling of his tusk,

Cried, "Ho! What have we here

So very round and smooth and sharp?

To me, 'tis mighty clear

This wonder of an elephant

Is very like a spear."



The third approached the animal

And happening to take

The squirming trunk within his hands

Then boldly up and spake:

"I see," quoth he, "the elephant

Is very like a snake."



The fourth stretched out his eager hand

And felt about the knee,

"What most this mighty beast is like

Is mighty plain," quoth he;

" 'Tis clear enough the elephant

Is very like a tree."



He fifth who chanced to touch the ear

Said, "Even the blindest man

Can tell what this resembles most;

Deny the fact who can,

This marvel of an elephant

Is very like a fan."



The sixth no sooner had begun

About the beast to grope

Than, seizing on the swinging tail

That fell within his scope,

"I see," cried he, "the elephant

Is very like a rope."





And so these men of Hindostan

Disputed loud and long,

Each of his own opinion

Exceeding stiff and strong,

Though each was partly in the right,

And all were in the wrong!



John Godfrey Saxe (1816-1887)

Saturday, June 27, 2009

RIP MJ & Thank you for the Music!

Three generations swung to his music.

Three generations saw a dancer like nobody else.

He crooned with energy that a 100 strong men could not have mustered. Yes, he was not just just a once in a generation performer, he was also the performer of the past century. Some people might throw in names like the Beatles, or even Elvis - no disrespect - none of them had $%^t of this guy.
He left them all behind with his cool moves, and a singing style that made it hard to decipher words, but you know what - people never really cared about what he was really singing about : It could have been about ghosts ghouls and goblins [as in Thriller] or it was about something touching [I'll be there] or it could be the raunchy seductive. His amazing singing skills were on display primarily as a child artiste. But if you want to know a man who was born to rule the mother of all stages of the world, then it was MJ.
Whaddaman, the ultimate performer.
Hhe could sing in that amazing voice, he could moon walk, and then stand on his toes.
His live shows could only be described at 2 hours of continuous adrenaline pumping through his veins. This man cut across so many geographical borders, that I wont have any trouble believing that even people in far flung North Korea, Ulan-Bator, Swaziland or Peru would have trouble connecting with this man - his music and his novel dance moves. Heck even my dad knows a few of his songs, so universal is his appeal!

The man leaves behind a personal void for me as well. I spent some of my early years in NY before I came back to India - Michael's Thriller on LP is one of my most prized posessions [although I honestly don't know if it is still around - the cover with him lying done, and on the inside is a picture of him and a tiger. MJ's music videos were trailblazing and way ahead of his time : Even when I see some of his videos [thriller, black or white, smooth criminal, scream], I can honestly tell that modern day music-videos are flaky and made more by studio honchos and less by imaginative people.

The man screamed and "Shamon-ed" his way into our hearts and minds. His controversies may have dimished MJ the man - but MJ the artiste truly lives on. And for once a supposed child molestoer actually has my sympathies because quite frankly his father treated him and his brothers like a bunch of performing poodles.

I hope history is kind to you MJ and you've meant so much to me - as a child of the 80's. I swear : 50 years from now we can look back and say - there has since been no other and there probably never will.
I see no harm in letting my guard down and shedding a tear for you.
Since the days leading to your tragic end, I hope you've find peace at last...



Tuesday, June 23, 2009

Trust

Bonds of trust
Lay cruelly mangled
In your web of lies and deceit
Whither is loyalty
When all you do is cheat

Bonds of trust
Of an Unholy alliance
What was between
Just me and you
Is now lain out for all to see

Bonds of trust
Easier broken than mended
For my wounds so deep
Are not easily forgotten
To your own you've tended