Categories Casino & GamingTips & Advice

What Warren Buffett Can Teach You About Gambling

Warren Buffett is arguably the world’s greatest investor when considering where he started versus where he is now.

The Oracle of Omaha’s last full-time job paid $12,000 per year in 1954. Today, the Berkshire Hathaway chairman is worth an estimated $87.5 billion.

Buffett is a perfect model to follow for any investor who wants to get rich. But his investing strategies can also be applied to improving at gambling.

How is this the case? Especially when Buffett seems to despise gambling?

“I’m not a prude about it, but to quite an extent, gambling is a tax on ignorance,” Buffett once said. “You just put it in and guys like me don’t pay the taxes – it relieves taxes on those who don’t gamble.”

The closest that the 87-year-old billionaire has come to loving gambling is an Onion piece, which offered a satirical story on how he lost his fortune playing roulette.

But even though Buffett isn’t the biggest gambling fan, his tips and investing habits can teach you a great deal on the matter. I’m going to cover different advice and investing strategies from Buffett that can improve your gambling winnings.

Realize That Slot Machines Are a Losing Bet

Many gamblers play slot machines, including myself. It’s fun to spin the reels, watch the colorful graphics, and hope for a big payout.

Unfortunately, slot machines are also one of the worst bets in the casino. They combine a high house edge with a fast pay rate to separate you from your money.

Buffett is fully aware of how slots are a bad bet. And he used this casino game to teach his kids a lesson about the pitfalls of gambling.

“I bought a slot machine a long time ago and put it on the 3rd floor of my house,” he recalled.

“I could then give my children any allowance they wanted, as long as it was in dimes, and I’d have it all back by nightfall. I wanted to teach them a good lesson. My slot machine had a terrible payout ratio, by the way.”

Land-based slots normally pay worse than other casino games. This is especially the case with the ever-popular penny slot machines, which have payback ranging from 10%-15%.

This doesn’t mean that you should completely cut out slots if you enjoy them. But I recommend dedicating a smaller portion of your bankroll to these machines and looking for games with high payback.

Be Disciplined and Patient

Warren Buffett did an interview in early 2018, where he warned investors about treating the stock market like casino games.

He delivered this message at a time when many investors were borrowing money to purchase stocks and cryptocurrencies. He instead advised that people be patient and invest in winning companies with products that already have strong sales track records.

“A lot of people like to gamble in the stock market,” he said. “It is insane. To risk starting all over again and losing everything is madness.”

Buffett’s interview came just after the stock market saw a 10% drop for the first time in two years. And he believes that much of it had to do with a record $665.7 billion in investments on borrowed money (a.k.a. margin debt).

“There’s no reason to borrow money against stocks unless you are in a hurry to get rich and willing to go broke,” he explained.

Buffett also addressed the hysteria surrounding Bitcoin and other cryptocurrencies by saying, “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending.”

He advised that the only way to survive a rough market is to invest in companies that have a track record of weathering a bad economy.

Relating this to gambling, many players are too concerned with quick riches. Therefore, they stay glued to progressive slot machines or develop risky video poker strategies based on chasing royal flushes.

If this is what you enjoy doing and you have the money to do so, then go ahead and chase big slots jackpots or make a blackjack side bet. But you need patience and discipline if you want to win more money from gambling in the long run.

Perhaps your goal is to lower the house edge and boost your chances of winning more in any given session. In this case, studying basic blackjack strategy or video poker strategy can help you trim the house edge to 0.5%.

The casino still has an edge in these situations. But you have a better opportunity to win because you’re nearly in a coin-flip situation.

Maybe you want to become an expert at skill-based gambling and earn long-term profits. You have several available routes for doing so, including the following:

  • Ace sequencing (blackjack)
  • Card counting (blackjack)
  • Daily fantasy sports
  • Poker
  • Shuffle tracking (blackjack)
  • Sports betting
  • Wheel tracking (roulette)
  • Video poker (games with over 100% payback)

Much like Buffett’s investing habits, you’ll need to be even more patient when learning to profit from advantage play.

The casino doesn’t want you to beat house-banked games like blackjack and roulette. Therefore, they’ll do everything possible to keep a skilled player from winning, even if it means banning them.

Poker and daily fantasy sports are difficult because you’re competing against human opponents. This means that you’ll need to invest a tremendous amount of time into learning strategy and being better than other players.

Sports betting sees the house create lines that are used to draw 50/50 action on both sides. Therefore, you need to consistently find value in lines and beat the 10% house vigorish.

Study the Market (Casino Games) and Execute Your Plan

Playing games with low house edges like baccarat, blackjack, and craps gives you a strong chance to win short-term profits. But since you’re still at a disadvantage to the casino, you can’t expect to win in the long run.

Therefore, you must consider an advantage-play method or game if you want to become a gambling pro. And looking at how Buffett amassed his investing fortune is a good general model to follow when improving your play.

Here are the key points of Buffett’s investing strategy and how you can apply them to skill-based gambling.

Value Investing

Buffett closely follows the blueprint Benjamin Graham, who became famous for the concept of “value investing.” This term refers to looking at the future earnings power of a stock to figure out its true value.

Graham used this method to look for undervalued companies with growth potential. Buffett does the same thing, only with more advanced concepts.

A skilled gambler can use this same concept to find value in different situations.

For example, you can consistently search for overlays in daily fantasy and poker tournaments to get more value from your buy-in. Another example includes studying several factors to find a sports bet that’s offering incredible value.

Finding gambling value isn’t easy, or else everybody would do it, and there’d be no potential edge. Buffett’s value investing isn’t easy, either, because he uses multiple tenets to define value in a company.

One of Buffett’s tenets involves looking at if management is truthful with shareholders. This sounds easy in theory, but it’s hard to do in practice.

The same reigns true for various concepts in poker, sports betting, ace sequencing, and daily fantasy sports. But if you can master the tough aspects that others can’t, then you’ll have a leg up on the competition.

Do the Math

Every advantage player must use math to some degree when playing casino games. This can be as simple as counting cards or as difficult as creating and testing advanced sports betting strategies.

But the key is that you sit down and learn the math, no matter how hard it may seem.

Buffett himself uses a mathematical concept called return on equity (ROE), which helps him look for low-leverage companies and high profit margins. He also looks at other math, including owner’s earnings (cash flow available to shareholders) and economic value added (a.k.a. economic profit).

The point is that Buffett has specific math concepts that he routinely uses to get the most valuable investments. And gamblers should also learn the relevant math in their preferred game to improve their advantage.

Focus on the Long Term

Buffett isn’t a day trader who worries about short-term market volatility. Instead, he focuses on finding the best value in companies and earning long-term returns.

The only time that Buffett cares about the short term is when he wants to gain more value before buying stocks.

For example, he might buy when seeing value in $50 per share. And he’ll purchase even more if the price drops to $45.

A skill-based gambler needs to have the same long-term focus when they have an edge.

A poker player who knows that they can beat certain stakes doesn’t freak out when they have three losing sessions in a row. Likewise, a skilled video poker player who’s on a full-pay Deuces Wild machine (100.76% payback) knows that losing money over a few hundred hands means nothing.

One key here is to make sure that you have a large enough bankroll to survive short-term volatility. Provided this is the case, you don’t need to worry about what happens in the short run if you have the skills.

Be Aware of Your Skill Level

Buffett made a fortune by investing in individual companies with great growth potential. He makes correct predictions more times than not and earns a big profit.

But not everybody is Warren Buffet, who puts lots of time and effort into picking stocks. Instead, the average investor has a day job and must focus on their other responsibilities, too.

Therefore, Buffett suggests that smaller investors put their money into a low-cost S&P 500 index fund, instead of trying to buy individual companies that will increase in value.

The same philosophy is true in gambling, where you need to be aware of your current level. If you have a $500 poker bankroll and are inexperienced with the game, then you don’t want to jump into $10/$20 no-limit Texas hold’em cash games.

Instead, you should test your skills in $0.10/$0.20 NL hold’em or even lower stakes. This gives you a chance to learn the game and improve your skills without risking too much money in any single cash game session.

Don’t Play House-Banked Games with Your Skill-Based Winnings

One of the biggest problems I’ve seen with successful advantage players is that they like to gamble their money afterward. Their mindset is that they’re doing so well that they can afford to be loose with their profits.

But do you think that Warren Buffett enjoys putting millions into volatile penny stocks just because he’s made billions on the stock market?

Buffett has a funny story about how he knew he’d be successful with investing. And it involves watching some of his fellow investors playing casino games.

“On my honeymoon I traveled out west,” he recalled. “When I visited the casino and saw all these smart well-dressed people participating in a game with the odds against them, it was then that I realized I won’t have a problem getting rich!”

I’m sure that these smart people were also successful on the market just like Buffett. But rather than reinvesting as much profit as they could, they were gambling on house-banked casino games.

Sometimes you may feel like playing a slot machine or craps after a big poker session or sports betting win. And this is fine if you keep the stakes low and look at it as pure entertainment.

But don’t gamble a serious chunk of your skill-based winnings just because you feel good in the moment. Chances are that you’ll regret all those gambles at some point in the feature.

Recreational Betting Isn’t a Financial Sin – Buffett Is Proof

Don’t let Buffett’s harsh words on gambling discourage you from having a good time. After all, Buffett himself placed a sports bet for the first time in 2017.

The longtime Omaha resident visited MGM Grand Las Vegas, and he bet $550 that the University of Nebraska would beat Fresno State by over 12.5 points.

This was a pure gamble because Buffett isn’t a sports betting pro. Furthermore, backing a favorite at -12.5 is a risky proposition.

Nevertheless, Buffet’s wager came through when the Cornhuskers beat Fresno State by a score of 55 to 19.

If you have the money and feel like making some recreational bets, then it’s not the worst thing in the world.


Despite making and winning his first sports bet, Warren Buffett isn’t going to hang out at casinos on a regular basis. He’s against casino gambling and even used slot machines to teach his children about money management.

But Buffett does gamble to some degree with stocks, even if he takes a skilled, long-term approach. Based on his knowledge, discipline, and bankroll, Buffett is guaranteed to make profits over time.

Gamblers should take the same mindset into playing casino games. This is especially true if you have an interest in skill-based gambling and want to make profits.

Buffett’s investing strategy doesn’t correlate directly to playing the best poker hands or knowing what variables to look for in a sports bet. But the overall principles can be applied to many disciplines, including gambling.

Of course, you can also use his actual gambling advice and apply it to recreational betting. Namely, you should keep your slots play to a minimum and avoid blowing too much on house-banked casino games.

Jeff Harris :