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tv   Sportfolio  Bloomberg  August 23, 2014 12:30am-1:01am EDT

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>> you are little taller, a little broader. you must've been the biggest jockey they had ever seen. his days as a jockey numbered, he found work as a gaming regulator before becoming an employee at the racetrack. >> you work your way up, and you are managing and then you become a ceo of the track and running things for the corporation. i had never really crossed over to the player side that much. >> he wanted to gamble like the pros. >> i watched them as a regulator, observed them as an operator of a racetrack, but never actually participated. >> in 2003, he quit to become a professional horse bettor. he would run sophisticated mathematical equations in an attempt to predict race outcomes. he started playing cards in atlantic city to relax.
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>> i used to play recreationally, not for big money. $25 bets would be $100 bets which would be a huge gamble. >> he became a regular player over time. those bets grew. soon, he was betting $15,000 a game. talk about atlantic city. how do you walk into casinos here and in a span of four months time get $15 million? >> they were desperate for business and overpitching the games. >> atlantic city casinos, owned by mgm, the boyds, and caesar's, began calling don offering $50,000 in free bets to get him into the door. the deals were so good, he said atlantic city was in worse shape
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than any other gambling city. >> vegas has enough critical mass and they have a huge convention center. some fairly major properties that can do a lot of cross marketing with different properties they own around the country now. >> the cross marketing strategy to keep las vegas strong also steals business from atlantic city. vegas casinos anxious to grow profits outside of the strip are pitching small casinos all around the country. states hungry for tax dollars are embracing these casinos. >> i call it a win-win. it will generate hundreds of millions of dollars in revenue. >> let's take the first step in gaming this year. >> new competition means big losses. since 2006, 16 local casinos have sprung up around atlantic city. >> i think they are losing too much of their business now. there is too much competition in surrounding states. it started with delaware. pennsylvania has put a lot of
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pressure on them. new york has gaming now. they are soon to be expanding. it is a matter of time before atlantic city will go back to being a beach town. >> atlantic city is a very challenged place. what is your take on it? >> i am concerned. >> he is jim murren, the ceo of mgm. >> we want to make the city come back. >> are you worried there is a lot of saturation in that market? >> i do. we have to be very targeted. we have to remember lessons learned during the recession and not repeat them. >> mgm's rival caesar's have an appetite for building. ceo gary loveman has built casinos in pennsylvania and maryland that will compete with the company's flagship in atlantic city.
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>> we had so much expansion. it is a complicated problem. in every instance where a state legalizes it and puts pressure on an incumbent state, that is a business problem. >> he argues regional casinos are necessary because they drive business back to his vegas property. a lot of locals are hopefully loyal to the brand. >> you have been treated very well in cleveland and now you want to go to las vegas so you have two options. you can be a traditional purchaser online or you can call your cleveland host who is engaged with his or her people and arrange exactly what you want. that is the proposition. >> it is a proposition that does deliver for vegas and it is part of the reason profits there only declined slightly in the past few years while atlantic city lost 40% of its revenue.
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and it is why atlantic city's casinos were desperate enough to offer high stake gamblers like don johnson whatever advantages they wanted. what happened to the house always winning? >> you are going to see big swings when you let people bet a lot each hand. why not just keep playing? >> find out exactly how don johnson did it coming up. ♪
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>> atlantic city, winter 2010. casino profits are in a freefall. casinos will do anything to win back high rollers. it is the opportunity of a lifetime for don johnson. he is about to stun the gaming industry. walking away with $15 million. the key to the success is what he negotiates with the casino upfront.
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>> if you are playing enough, you can negotiate a discount policy. three hands for $15,000 a swing. >> it may not give a player vip treatment in vegas, but when he bets that much in atlantic city, it gets the casino's attention. >> the right game with the right odds for the right discount policy. >> why do you think they gave you such a big discount and changed the rules? >> they were giving it to other players and they had some success in beating other players. >> the casinos don't realize he's set a trap. he is not a mid-level player. he is an industry insider who knows exactly what terms to negotiate. for starters, he wants big bets. >> they were letting me bet $25,000 a hand by three hands. that is $75,000 a swing which is not hard to win $4 million.
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i did not have $4 million to lose. that was the key. >> he doesn't have $4 million to lose because he negotiates himself a discount -- a 20% rebate on all of his losses. if he gambles $4 million, he will only lose $3.2 million and that matters over the entire course of play. >> i haven't worked in a property that has been dumb enough to get themselves in that situation. >> he negotiates with high rollers. >> some casinos have not paid enough attention. they haven't thought through it all. >> don't casinos have mathematical models they put in place to make sure someone like him can't come in and walk away
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with nearly $6 million in one night? >> they need to make an evaluation on you as a player, some kind of track record or past performance where they now judge you as a player and say this is a player we think we can beat. >> why would the casinos think they could beat don? in the case of don johnson, why is it that your casino would be willing to negotiate terms that would not be as favorable to you but would benefit the player? >> we try not to do that after a certain point. we are doing this hopefully in a completely mathematical way. >> a record of his past performances -- does it get logged into a computer so if a person plays extremely well, there is a note on their profile? >> yes. >> the note on don's file says he was a mediocre player. how did you suddenly become such a great blackjack player?
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>> it probably helps to have some friends who understand the mathematics behind each of the games. >> shortly before taking atlantic city for millions, he hooked up with a team of ivy league math phds. did they help figure out how to best stack the odds? >> different mathematicians have different skills. >> the mathematicians turned down a request for an interview with us. don says they coached him, making him into what the casinos consider the perfect blackjack player. what are the odds i will get versus the odds you are getting? >> you will probably play a game that is 300% worse. >> the odds a player like me to beat the house is about 49% so while i may strike it lucky, the longer i play, the more likely i will lose.
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but still, i believe in the statistical analysis, i do. statistical analysis says even though the house has the edge, i can improve my odds if i improve my game. i want to win. >> you want to win. you need to do some studying before you go in. everybody can get the basic strategy card, it will make you at least a better than average player. >> this is a basic strategy table. it lists each card and tells players when to hit, hold, and double down. casinos do not allow a lot of these so once don secured the right advantages, he turned his attention to the rules of the game. >> you tweak two or three things one way or the other enough and the game goes from being negative to positive. >> once he negotiates his edge, it is time for battle at the blackjack table. >> they make a mistake that is in your favor, you will collect on that.
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those are like free bets. >> the art of casino warfare when "the player" continues. ♪
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>> every casino gambler knows when you play at the blackjack table, the odds are not in your favor. the house always wins and the rules are set in stone. but what if you could change the rules and twist the odds? >> if you change one of the rules one way or the other in favor of the house or the player, it will change the odds of the game. >> don johnson did what gamblers dream about. he turned the table on the dealer and the casino never saw it coming. >> some players have desires or wants. >> he is the ceo of boyd gaming. his marketers were so anxious for don's business, they allowed him to tweak the rules of play.
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>> whether they want to touch the cards or don't touch the cards. if it does not affect the odds of the game, it is not in violation of regulations. >> when you played at the borgata, the rules you've negotiated helped line your pockets with $5 million. walk me through the rules they gave you. >> standing on soft 17. if the dealer gets an ace-6, they have to stand on that hand. if i am sitting on 19 or 20 or 21, you will win. doubling on any two cards. some places have rules that would not allow you to do that. they've only let you double if you have a 9, 10, or an 11. splitting hands up to four hands. you are going to split the hand because you have two 2's. you can split them against the dealer's.
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you can split up to four times and i have done it. it happened that night at the tropics. i had an $800,000 hand and it hit. >> the 20% discount, his rules, and the big bets he negotiated -- the house still had an advantage. not satisfied with those odds, he figured out how to tip the game in his favor. >> you need to be better than the dealer. >> if you can beat the dealer, you can beat the house. >> there aren't enough players that they will deal $100,000 a hand to. they are nervous. >> and he insists on side bets and hand signals like "surrender." if the dealer does not notice his gesture, it is a free bet for don. you had to establish up front
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all these rules before you even walk in to play? >> yes. a lot of the dealers are not used to dealing these rules and they often make a mistake that is in your favor and you will collect on that. i like the pressure. >> this man has been a dealer at caesars palace in las vegas for eight years. he sees a lot of highrollers like don. what is the biggest winnings you have seen? >> one million. >> how does the dealer know if a player is trying to trip him up? >> if it is a brand-new customer, you deal them out. >> when the odds are nearly 50/50, it comes down to this -- psychological warfare between the gamblers and the dealers. how does that unfold? if you are the dealer and you start noticing that the bets are getting sizablely larger, do you get your floor manager?
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>> the dealer has the power to do many things. slow down the game, call a supervisor, take a break, change dealers. >> do they try to change the circumstances of the game when you are winning that much? >> of course, they do. it is not an easy thing to do to sit there and play for hours and hours and maintain the type of focus to not make mistakes. if you make mistakes, you will not get free play. >> it requires a lot of discipline? >> a lot of discipline. >> can you encourage them to make mistakes? is there something that you do when you sit down that effectively helps to intimidate the dealer or distract them? >> there are all kinds of distractions for dealers. i had porn stars play with me.
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during the avn awards. i have had 5 to 8 different girls that would pose as a girlfriend. >> does it work? >> there is always a circus going on. the more it looks like one giant party, the better it is for my side of the table. if there was a distraction, they make a mistake, what is the worst that can happen? i get a free bet. >> there is a reason a dealer does not want to say no to a gambler no matter how outrageous his behavior. >> all of our income is based on tips. what we make hourly is minimum. >> even if the dealer talks a big game, don says the player is in control. >> they don't deal this type of game often enough to protect themselves from making mistakes. if they make three mistakes in a night, i have $300,000 in free bets. you make too many of those mistakes in a night, you can't beat me, especially if you are giving me a 20% discount,
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especially if you're giving me $50,000 of free bets to start out with. >> you know when they made a mistake? >> i have caught every mistake they made that was not in my favor and made them give me the free bet because those are the rules of the game. >> he has won hundreds of thousands of dollars in free bets by outwitting the dealer. it allows him to finally erase the house advantage. add in the special rules and discounts he negotiates before the game, and don now has an edge over the house. the more he plays, the more he wins. it is how don johnson took $4 million from caesars in a year when the casino giant posted some of its worst losses ever. it is how he beat the borgata out of $5 million. the ceo who authorized his spending limit at the tropicana
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got fired. it is how he took on the casino industry in atlantic city, won $15 million, and became the legendary gambler who beat the house. can don's success be replicated? might he strike again? find out how don johnson believes he will gain his next edge over the casino. ♪
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>> he is a celebrity in vegas, a favorite at the club, and a household name at the casinos. but don johnson is now banned at nearly every table at the strip. his $15 million win in atlantic city may have catapulted him to superstar status in vegas. but now, the casinos want his advice more than ever. he has hit the speaking circuit. >> you need to determine whether their skill level has changed.
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>> despite all the advice he offers up, don says many of the casinos are still vulnerable. i heard you actually won another $2 million at the tropicana? did they not learn their lesson? >> they were still letting people bet big. >> gaming profits have not rebounded since the recession. what do you think some of the biggest lessons for you were in 2008? >> this used to be a place where gamblers would go on vacation. >> while the casino companies turned vegas into a playground, today it is a nonstop party that is bringing back profits lost on the casino floor. >> last year, these clubs did $160 million. it was the only part of my business that was growing. >> to boost gambling revenue,
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wynn and his rivals tap into the lucrative chinese market where gambling is part of the culture. 70% of your revenue comes from there. >> it is good to be at the right place at the right time. >> it is a two-way street. one asian casino is doing great in vegas. they're hoping to lure people into the u.s. and they are planning the first asian casino on the strip. >> las vegas still represents the greatest vacation package available to world travelers. so i see las vegas surviving. >> don johnson is not so sure. do you see anything on the horizon for vegas? >> i think it will be a long time before vegas comes back to its peak days. i don't think it is happening any time soon. >> he is still studying vegas, trying to exploit its inefficiencies from his home in
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pennsylvania. he is building a software program using data that maps the gaming industry's weak points and reveals where a player like him should strike next. >> i find it intriguing. it's fun. i love it. i enjoy it and i will continue doing it. >> in another life, do you think you could've worked on wall street? >> i'm not done yet. ♪ >> do you like vegas?
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why do you like it? >> you can love and hate vegas at the same time. ♪
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