Of Card-Counting, Startups, and the Real Story of the MIT Blackjack Team
(Updated, March 27, 6:45 pm—see editor’s note, p. 2)
The house was on Inman Street, near Cambridge’s Central Square. Peter Woit recalls the morning he came downstairs and found his roommate obviously upset.
“John, what’s wrong?” he asked.
“Have you seen a dirty pink laundry bag?” came the response.
“There was $80,000 in it.”
This was back in 1987 or ’88—still pretty early days for the MIT blackjack team. In fact, in those days John didn’t even think of it as the MIT team because it included players from around Boston and even other schools, like Princeton. John was John Chang. He had graduated from MIT a couple years earlier with a major in electrical engineering and gone on to become one of the lead organizers of a group of young card-counters who were largely having their way in Atlantic City casinos and making occasional forays to Las Vegas. For his day job, Chang worked in Kendall Square, right above Legal Sea Foods, as senior software engineer at a computer aided design company called Premise.
In case you missed all the trailers and ads, the opening of 21—the movie adaptation of Bringing Down the House, the smash 2002 book about the MIT blackjack team—is set for tomorrow. But we wanted to tell you some parts of story that you haven’t heard if you read the book, that you won’t see if you go to the movie—and that reveal how intertwined Boston’s innovation history and MIT’s blackjack legacy are. For instance, one of the founders of Premise was Chang’s fellow card-counter Jon Hirschtick, who after selling the firm to Computervision in 1991 would go on to found the software design firm SolidWorks, one of New England’s big success stories of the 1990s (it was sold to Dassault Systemes for some $316 million in stock in 1997).
But this is Chang’s story. He’s the guy on whom the book’s Micky Rosa character, played by Kevin Spacey in the movie, was at least partially based (you can find his blog here, and the April issue of Men’s Vogue also has a piece that quotes him at length). In 1988, he had already been playing blackjack for some six years, and he would stay with the team as manager or coach for another 15 years or so. More than any other person, Chang embodies the MIT team. It turns out he’s living in Vegas these days, still playing cards occasionally. How do I know this? Well, the Peter Woit mentioned above is the famous Columbia University mathematician who wrote the book, Not Even Wrong. He is also the brother of Xconomy publisher Steve Woit. (See what I mean about intertwined?) Earlier this week, I spoke with Peter, who put me in touch with his former roomie.
Chang, 50, is a Chinese-American who grew up in various suburbs in New Jersey, Pennsylvania, and upstate New York. He arrived at MIT in 1975 (yes, it would take him 10 years to graduate, but that fits with his persona, as you’ll see). He found school somewhat unappealing, it seems safe to say. Then he found blackjack.
“I was an MIT student not knowing what I wanted to do with my life,” Chang relates. He had been at the school so long, he says, “My parents thought I was in grad school, but I wasn’t.” Then one day in 1982 he was walking down MIT’s famous Infinite Corridor when he saw a hand-written poster offering students the chance to make $300 during the upcoming spring break through card-counting. The poster, he says, was taken down by MIT authorities within hours. “Somehow the MIT administration looks askance at such activity,” Chang says. But it turned out about 30 people had seen it and showed up at the meeting in the ping pong room of the Student Center to learn more from a former MIT student who co-managed the group. Chang wasn’t a super mathematics whiz, and he wasn’t by initial appearances particularly adept at card-counting either. He wasn’t even that keen on the whole endeavor—”lackadaisical” is his description of his attitude. But in the end, only about five people stuck with the training and qualified for the job. “I was just good enough,” Chang says, adding, “There’s no way when I got into it that I thought I was going to [keep] doing it.”
But all that changed when he tasted the thrill of beating the house in Atlantic City. “Once I got in the casino, I thought, ‘Oh this is actually a lot of fun.’ Unlike most of my classes at MIT, which started out with such promise but they hit you with a ton of work.”
Indeed, conventional work was never a big thing for Chang. (As an aside, I asked him if he had a day job now. There was a slight pause, and then he said, “Naahhh.”) But gambling was another story. “I advanced very quickly after that, just because I had the enthusiasm,” he says. He spent a lot of time practicing, and even found his Asian background was an advantage in that it allowed him to go unrecognized by casinos looking for card counters. “I’m Chinese, and when you go into a casino, it’s like you’re in an Ivy League college in terms of representation of Chinese or Asians—it’s too many.” And, he says, casinos definitely hold some stereotypes that further help his cause. “Being Chinese helps a lot in terms of being able to bet large and not get suspicion.”
Chang was not part of the first wave of MIT blackjack players. Students had been playing informally for years, and the first more serious groups seem to have formed soon after the first casino opened in Atlantic City in 1978. But it was still early days when Chang joined. The leaders at the time were J.P. Massar, the MIT alum who had put up the recruiting poster, and Bill Kaplan, a Harvard Business School graduate. Chang and Massar later bought the house in Inman Street together, using part of their winnings.
Massar is a blackjack legend in his own right. Chang says Massar was far more intense than he was about the game. “J.P.,” he says, got so stressed out training team members that he once left a bag with $125,000 in cash in an MIT classroom. Massar also took up professional poker and coached 2002 World Series of Poker winner Robert Varkonyi, another MIT alum. For his part, Kaplan had initially seen his acceptance to Harvard Business School revoked when officials learned of his role as a card counter. He had fought the decision and eventually was reinstated. Kaplan had also done his undergraduate studies at Harvard, where one of his classmates turned out to be future Microsoft CEO Steve Ballmer. At a class reunion in the 1990s, the two met up again. By that time, there was such an incredible buzz about the MIT card counting team that Kaplan was the class hero for some, not Ballmer—at least according to what Chang heard. “Steve Ballmer’s the billionaire in this class, but everyone is asking Bill about blackjack.”
(Editor’s note, March 27—John Chang passed on the following clarification and correction, courtesy of Kaplan: The year was 1992, Kaplan’s 15th Harvard reunion, and it turns out Ballmer had heard tales of the blackjack team through some Microsoft employees who had played on it. Said Kaplan, “The real story is that Steve (Ballmer) came up to me and said he was ‘so fascinated by the story of my blackjack team and wished he could have switched places with me and started and run the team.’ I told him I was ready to swap bank accounts whenever he was ready.”)
Before too long Chang, who finally graduated from MIT in 1985 (he did his undergraduate thesis, which you can find here, on blackjack), became the senior person on the MIT team. He says he got the leadership role, which included recruiting, training, and compensating players, almost by default. Few others stuck with blackjack through the many ups and downs associated with card counting—including not just dry spells, but some scary back-room encounters with casino security staff. Says Chang, “People would go, ‘It’s not worth it, ah forget it.’”
Throughout the 80s, there were no more than a dozen people on the MIT team at a given time. But by the early 1990s, the school probably had 80 people either playing or in various stages of practice or “checkout,” in which players must demonstrate their capabilities before being sent unsupervised to a real casino. A West Coast MIT team even started up. The efforts were funded largely by player investments (most of it from the older players) and a few outside investors. One very small stakes investor in the early days, says Chang, was open source software pioneer Richard Stallman, who had worked at MIT’s Artificial Intelligence Lab before resigning in 1984 to develop a free Unix-like operating system known as GNU.
A big crisis came just before a July 4 weekend, probably in 1994. At the time, teams tried several different blackjack strategies—not just card counting but things like card steering and ace tracking—and profits were far below what was expected. Chang says he came to the realization that they really needed to focus on card counting. “I just canned all these games. I said screw that,” he says.
“After I made all these changes, we just won like gangbusters immediately. It was kind of astonishing really,” says Chang. In fact, it was largely about the next few years—1994 to 1998—that Bringing Down the House was written. Things reached a climax the night of June 28, 1997, with the famous “Bite Fight,” the boxing match where Mike Tyson bit off a piece of opponent Evander Holyfield’s ear. There was a riot in the MGM casino, with tables tipped over and chips flying. “The MGM was the center of the universe for the card counting community for a couple years. Players from all over the world would descend on the casino at that time,” says Chang. He estimates that at least a half-dozen teams from around the world, including several from MIT, were in the casino that night. “It’s like everybody was there.”
So much money was being bet in those days, he says, that teams didn’t draw that much attention even when players bet big. “At the moment of the riot, I was at a table betting $9000 at each of two hands and my action was not drawing any special attention,” he says. “Every single player at that table was playing yellow chips, which are $1000 each.”
But over time, the once close-knit teams fell apart. They were partly victims of their own success, says Chang. Everybody seemed to want bigger stakes or for their investments to grow faster, he says. A number of players decided to form new, smaller teams.
Chang draws a lot of parallels to the challenges businesses face. People become dissatisfied with their compensation as the company grows. Or they miss the entrepreneurial environment and go off to find it again somewhere else. “I guess this is the essence of startups,” he says. And it wasn’t like he had much leverage to convince people to stay. “I had not hidden anything from anybody. It was all transparent, so it was easy to break away. We had no contracts. We didn’t have golden-handcuff-type benefits. You didn’t vest, anything like that.” Chang estimates the MIT teams took about $10 million out of casinos over the years. “Although it seems like a lot of money, it’s not really a lot of money, not in a business sense,” he says.
Chang made investments in several teams that broke away from the big group but still wanted him involved as an advisor or in some other limited capacity. But before too long, he says, even that attitude changed and “a lot of my investment in these groups had been returned to me.” He didn’t really care that much about the money—it was beating the casinos that turned him on. “I just found it very fun, and once I got the money I was like, ‘Well it’s a trophy,’” Chang says. “I wasn’t going to use it for anything. And so when people gave it back to me, I really had no idea what to do with it…It was just like lying around in my apartment…I didn’t even know how much it was.” When Laurie, his fiancée at the time, came out to help him move west, she began cleaning his filthy Cambridge digs and discovered more than $150,000, mainly in chips, tucked into various nooks and crannies, bags and jars. Chang was mortified. Each time she found something, he says, “I’m like, ‘Oops…Please, please don’t tell anybody. I swear, there’s nothing more.’ But of course there was.”
By around 2003, the MIT teams had “fizzled out” in the face of lower profits and increasing scrutiny, says Chang. In 2004, though, he and Laurie moved to Las Vegas. “I had avoided living in Las Vegas for years,” Chang says. He thought of it as a cheap town, with no culture, and a joke of a university. But then he realized he actually knew more people there than in Boston.
He and Laurie play occasionally, but he makes it sound relatively tame—until, of course, Laurie’s recent arrest (after speaking with her, I’m not sure I’d want to be with the casinos on this one). It has definitely gotten harder to beat the casinos, which are much more on the lookout for card counters than we he got started and have taken steps to keep the odds more in their favor. But on the other hand, says Chang, the betting limits are also higher. “The actual profitability, that’s unclear. You may be able to make more than ever.”
So what about Bringing Down the House and 21? “It’s kind of a weird thing, you know, to have a movie and book that you’re a pretty main character in and yet not to be acknowledged in any specific way by the author or the producers,” Chang says. “We were never invited by the producers or anything to participate in anything.”
Still, he did go to a premiere of the film in Las Vegas a few weeks ago. Jeff Ma, the MIT grad who served as the model for Kevin Lewis, the main character in the book, even introduced him to the real Kevin—Kevin Spacey.