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This Blackjack Forum article discusses problems of blackjack team compensation. He provides an example of a professional blackjack team that literally went broke because of its plan for paying team members. Blackjack team compensation, according to blackjack team manager Tommy Hyland, is one of the most complicated problems he's faced in running blackjack card counting teams.
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professional blackjack card counting team compensation and the free roll
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By Arnold Snyder
(From Card Player, August 23,1996)
© 1996 Arnold Snyder

Letter from “Blackjack Team Manager:”

I have taken a giant step in my blackjack playing career — I have formed a blackjack team with some of my card counting friends. Five of us have each contributed equal amounts to a joint bank, and we suddenly find ourselves black chip players. It is fun, even thrilling, to be playing at this level. The upside is the high roller treatment — the comps and personal attention from the casinos; the downside is the increased scrutiny.

On some weekends, we “hire” other card counters to back-count tables for us. In order to protect our blackjack bankroll, we have found counters who are willing to play for a percentage of our win on the nights they work for us, instead of playing for a flat hourly rate. This way, if we have a losing night, we don’t have to pay them at all. They trade this risk for the possibility of winning a lot more than they would get on a flat hourly rate.

Although our blackjack team bank at this point is in the hole, the hired card counters are making out quite well. In fact, it appears they will do better than all of us if it takes us much time to dig out of the hole we’re in. I think we might be paying them too high of a percentage on the nights we win. What percentage should they get?

Answer from Arnold Snyder:

On a blackjack card-counting team, you are making a major error by paying them any percentage at all. You will probably tap out your joint bank in the long run if you use this type of arrangement regularly. By paying “hired” counters or big players (BPs) a percentage of the win on individual playing sessions, you are “chopping the tops off” of your positive fluctuations, while suffering the full force of your negative fluctuations.

Since you don’t require the “hired” counters to reimburse you for any losses on nights you lose substantially, these guys are getting a free roll at your expense. You and your fellow team investors bear all the risk, while you hand over a portion of every random win. This is bankroll suicide.

Let me give you a radical example of how such an arrangement can be ultimately devastating. For simplicity, let’s say your blackjack team consists of four player/investors, all of whom have invested equal amounts (say $10K each) to the joint team bank ($40,000 total) with an agreement that you will all play an equal number of hours, and will ultimately (after doubling your bank) divide your win into quarters.

Now, let’s say you know a number of competent local card counters (or BPs) who will be willing to work on various nights for 10% of your team win on the nights they play. So, each night, you “hire” one counter on this basis. These hired counters have no investment in the bank, so if your team loses on any nights they play, they get nothing — but they also lose nothing (other than their time).

You figure that since, on any given night of play, you will have five players total — the four original player/investors plus one hired counter — each of you will ultimately be responsible for 20% of your win on the nights when you win. So, paying out only 10% of your win to a hired counter sounds like a good deal for your team.

But consider what happens if it ultimately takes you 100 nights of play to double your team bank, just due to the ups and downs of normal blackjack fluctuation. Let’s say on 50 nights your team wins money (with an average $4,000 win on your winning nights); and on 50 nights your team loses money (with an average loss of $3,200 on your losing nights). These would be fairly normal blackjack fluctuations in such a venture and would ultimately result in a $40,000 win, doubling your bank, after 100 nights of play.

But, what happens if you are paying 10% of each win to a hired counter or BP on your winning nights? Ten percent of $4,000 is $400; and $400 x 50 winning nights = $20,000 paid out to the hired help.

This means that if only one out of your five players has this arrangement to collect just 10% of your win on your winning nights, you would literally cut your 100 days’ winnings in half (from $40,000 to $20,000) with this one player collecting half of all your team’s 100 days’ winnings! At this rate, it would take you 200 nights to double your bank, and the hired counter, who put in only one-fifth of the total hours, with no monetary risk, will have profited as much as the other four of you combined!

Furthermore, imagine what happens if your team goes into a period of heavy negative fluctuations — which is not at all unlikely. Blackjack teams experience such losses all the time due to normal fluctuations. Imagine a scenario where you play for 100 days and have 50 winning days and 50 losing days, but your losses averaged $4,000 on your losing nights, and your wins averaged only $3,600 on your winning nights. This means that after 100 days of team play — without the hired counter — you will be down by $20,000, and facing a long period of “digging out.”

If, during this period, you were paying one hired counter 10% of your win on winning nights, the hired help will have already been paid $18,000, and your remaining team bank will not be $20,000, but only $2,000 — hardly a bank at all!

Paying win shares on short term positive fluctuations can devastate a team when it goes into a slump. No team can survive such an arrangement. This is why I say that what you are doing when you pay win shares on short term wins prematurely (i.e., prior to final distribution of the bank) is “chopping the tops off” of all your positive fluctuations.

Think of the logic: In order for a blackjack team to win $10,000, it will go through many winning sessions and many losing sessions. Ultimately, it will hit a point when the total win of its winning sessions will be $10,000 greater than the total losses on its losing sessions. You don’t just win $10,000; you more likely win $110,000, while losing only $100,000. If you are distributing win shares on a session by session basis, you will be distributing win shares on $110,000 when you ultimately had only a $10,000 win!

If you are going to enlist the aid of hired non-investor counters or BPs on your team, you either must determine a fair hourly rate to reimburse your hired help — based on a small fraction of your expected value from their playing; or, you must get the hired counters to agree to play for a percentage of the final win — when you ultimately break your bank — which could be many months later, and which could prove to be substantially larger (or smaller!) than what they might consider to be a fair hourly rate.

The free roll method you have developed to “protect” your team bank, incidentally, is a fairly common mistake for new blackjack teams. Unfortunately, this method protects nothing but the interests of the hired counters, to the ultimate detriment of your team. ♠

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  Blackjack Card Counting Teams and Compensation Issues
Bad blackjack team compensation issues that led to the bankruptcy of professional blackjack card counting teams. This article discusses sound blackjack card counting team compensation options.