Bringing down the house - the MIT blackjack team

(Credit: waffler) 

The MIT Blackjack Team was a group of students and ex-students from the Massachusetts Institute of Technology who attempted to beat casinos at blackjack worldwide. The team and its successors operated from 1979 through the beginning of the 21st century.

The origin of the MIT Blackjack Team was a mini-course called 'How to Gamble if you Must', taught in January 1979 at MIT. A number of MIT students attended this course and learned about blackjack and card counting methods. Determined to put their newly-discovered knowledge to work, the group resolved to travel to Atlantic City in the spring of 1979 to win their fortunes. Failing miserably in this endeavor, the group went their separate ways when most of them graduated in May, but two members maintained an avid interest in card counting. These people decided to give their own course on card counting in January 1980, and created a course-listing in the MIT Independent Activities Period Guide, published in early November of 1979.

In late November of 1979 a person known only as 'Dave', who claimed to have been a member of Ken Uston's Blackjack team, contacted the organizers, and proposed forming a team to travel down to Atlantic City and taking advantage of the New Jersey Casino Commission's recent ruling that made it illegal for the Atlantic City casinos to bar card counters.

The team, consisting of four players and an investor who put up most of its $5000 in capital, went to Atlantic City in late December after months of intense training, and over the next few weeks doubled and then redoubled its capital.

This was the beginning of the actual MIT blackjack team. The team members recruited a number of additional MIT students as players. The players continued to play in Atlantic City through May of 1980 but sustained consistent losses during this period. Frustrated and bewildered by their inability to win at the game, the original players suspended play and new trainees dropped out. In May of 1980, Dave was ousted from the group because of disagreements over whether certain shuffle-tracking techniques were mathematically correct or based on false hypotheses, as well as personality conflicts.

Fortunately, one of the original MIT players, Mr. M as he is known in the History Channel documentary on the MIT Blackjack Team, overheard a conversation in May 1980 about professional blackjack at a chinese restaurant luncheon buffet. Mr. M introduced himself to the speaker, Bill Kaplan, a 1980 Harvard MBA graduate who had been running a successful blackjack team based in Las Vegas for the prior three years. Mr. Kaplan had earned his AB at Harvard in 1977 and deferred his admission to Harvard Business School for a year, during which time he moved to Las Vegas and formed a team of blackjack players based on his research and own statistical analysis of the game. Staked by the funds he received as Harvard's outstanding scholar-athlete upon graduation, Mr. Kaplan generated a 35+ fold ROI in less than 9 months of play during this "year off."

Mr. Kaplan continued to run his Las Vegas blackjack team as a sideline while attending Harvard Business School but, by the time of his graduation in May 1980, the players were so "burnt out" in Nevada, that they were forced to hit the international circuit. Not feeling he could continue to manage the team successfully while they traveled throughout Europe and elsewhere, encountering different rules, playing conditions, and casino practices, Mr. Kaplan parted ways with his teammates, who then splintered into multiple playing teams, none of which proved particularly successful.

Getting back to Mr. M's encounter with Mr. Kaplan, after hearing about Mr. Kaplan's blackjack successes, Mr. M asked Mr. Kaplan if he was interested in going with a few of Mr. M's blackjack playing friends to Atlantic City to observe their play in the hopes of figuring out what they were doing wrong. Given the fortuitous timing of Mr. Kaplan's parting with his Las Vegas team, Mr. Kaplan agreed to go, in the hopes of putting together a new local team that he could train and manage.

Mr. Kaplan observed Mr. M and some of his friends spend a weekend in Atlantic City and the trip was a disaster. Each of the players utilized a different card counting strategy, one more complicated than the next, and their consistent counting, playing, and betting errors resulted in their playing the game with a negative expectation. Moreover, the players spent the majority of the weekend arguing over unimportant mathematical formulas such that they put in very few playing hours at the tables. Upon returning to Cambridge, Mr. Kaplan detailed all of the problems he observed to Mr. M, which accounted for the losses the MIT players had been sustaining.

Mr. Kaplan said he would back a team and run it with Mr. M but it had to be run as a business rather than as an ad-hoc group of bright kids interested in the game but without any formal process or management. The original players initally were averse to the idea. They had no interest in having someone tell them what counting strategy to use, being put through "trial by fire" checkout procedures before they were allowed to play, subjecting themselves to being supervised in the casinos, or having to fill out detailed player sheets for every playing session. However, they had already given up playing and Mr. Kaplan's persuasiveness and success record coupled with their keen interest in the game enabled logic to rule.

Thus, the first "bank" of the MIT Blackjack Team was started on 8/1/1980 with an investment stake of $89,000. Ten players, including Mr. Kaplan and Mr. M, played on this bank. Ten weeks later they had more than doubled the original stake, thereby triggering the time to "break the bank." Profits per hour played at the tables were $162.50, statistically equivalent to the projected rate of $170/hour detailed in the investor offering prospectus. Per the terms of the investment offering, players and investors split the profits 50/50 with players paid pro rata in proportion to their playing hours and computer simulated win rates. Over the ten week period of this first bank, players, mostly undergraduates, earned an average of over $80/hour while investors achieved an annualized return in excess of 250%. Everyone was happy and Mr. Kaplan and Mr. M went on to grow their MIT Blackjack Team into the most successful and notorious team in the history of the game.

The team often recruited students through flyers posted around campus. The team tested potential members to find out if they were suitable candidates, and if they were, the team thoroughly trained the new members. A fully-trained player had to pass an intense 'trial by fire', consisting of playing through 8-10 six-deck shoes with almost perfect play, then undergo further training and supervision in actual casino play.

The group combined the individual player advantages with a team approach of counters and players to maximise any opportunities and disguise the betting patterns card counting produces. In a 2002 interview in Blackjack Forum magazine John Chang, an MIT undergrad trained by Mr. M and Mr. Kaplan in the early 1980's and MIT team co-manager in the 1990's, reported that, in addition to classic card counting and blackjack team techniques, the group at various times made use of advanced shuffle tracking and ace tracking techniques. While the card counting techniques used by the MIT team can give players an overall edge of up to about 2%, some of the MIT team's methods have been established as gaining players an overall edge of up to about 4%. In his interview Chang reported that the MIT team had difficulty attaining such edges in actual play, and their overall results had been best with straight card counting.

The MIT Blackjack team continued as an informal organization throughout the 1980s, growing at times to have as many as 25 players, with a capitalization of as much as $300,000. Recruiting new players from the MIT student body and elsewhere as necessary, it continued to exist until 1990, when casino conditions, player exhaustion and other factors caused the group to stop playing.

Andy Bloch, now a professional poker player, was part of the MIT Blackjack Team. He is most famous for getting second in the $50,000 buy-in H.O.R.S.E Tournament at the world series of poker, and even commented on the MIT Blackjack Team when he was interviewed on ESPN.

In 1992, Mr. M, Bill Kaplan, and John Chang decided to capitalize on the opening of Foxwoods Casino in nearby Connecticut, which they planned to use as a training ground for new players. They signed on as the General Partner and formed a Massachusetts Limited Partnership called Strategic Investments to bankroll the new team. Structured similar to the numerous real estate development limited partnerships Mr. Kaplan had formed, the limited partnership raised $1MM, significantly more money than any previous MIT team. Coinciding with this new funding, the three General Partners ramped up their recruitment and training efforts to capitalize on the opportunity.

Unfortunately, Uston's books alerted casinos to the methods of blackjack team play, and many MIT team members were identified and barred. These members were replaced by fresh MIT students, and play continued. Investigators hired by casinos eventually realized that many of those they had banned had addresses in or near Boston, and the connection with MIT became clear. The detectives obtained copies of recent MIT yearbooks and added photographs from it to their image database.

On December 31, 1993, with substantial winnings in hand but team morale suffering from constant casino bannings and a series of losses, the three General Partners decided to terminate the limited partnership and pay out the winnings to investors and players alike. No longer twenty-somethings with time to kill at nights and on weekends, the General Partners decided not to start up a new venture. The original team disbanded and a few small, less formal splinter groups founded by alumni of Strategic Investments sprung up, including Amphibian Investments, the Reptiles, and the Chameleons. At its height in the early 1990's, Strategic Investments had a total of 80 players and staged an onslaught, never before seen, on scores of casinos throughout the world.

The exploits of three of the players on the Strategic Investments team, who continued to play on in the mid 1990's, are descriptively depicted in the New York Times best seller, "Bringing Down the House," written by Ben Mezrich, an early 1990's Harvard graduate. A movie, based on the book and produced by and starring Kevin Spacey, is currently being filmed in early 2007.

With most of the original team barred, most members retired, having made an amount variously reported as $1 million to $10 million. Some members have used reports of their successes to start public-speaking careers or businesses selling blackjack card counting systems or running blackjack seminars.