From Card Counting to Wall Street

June 10, 2022

From Card Counting to Wall Street

June 10, 2022

About This Episode

Today’s guest for this episode is Kamal Gupta, and he and Tristan share a fun conversation about Kamal’s life as a professional gambler, his time on Wall Street, and his new book called Play It Right: The Remarkable Story of a Gambler Who Beat the Odds on Wall Street. His insights about how to achieve success in any endeavor by bringing the odds in your favor are very simple, logical, and inspiring–as is befitting the math enthusiast that Kamal is.

The 18 Seconds that Changed His Life

Kamal shares his story of how his experience as a professional gambler counting cards while playing blackjack landed him a job on Wall Street.

“It’s hard to believe how such a short period of time can change someone’s life, but that is what happened to me,” Kamal says. For more than two years, he would travel the world playing blackjack, and he was very successful at it. At the time, he thought he would spend the rest of his life as a professional gambler. But due to a series of events, he ended up sending his resume to a couple of investment banks, including Lehman Brothers.

During his interview with Lehman Brothers, he had no idea what the job entailed. However, when the bond traders at the firm learned of his professional gambling background, they interrogated him about it. 

When they asked Kamal how long it took him to count a deck, he said it took him 14 seconds at the time. He had no idea that his card-counting skills would be put to the test right then and there by Lehman's bond traders. They handed Kamal a poker deck and gave him 18 seconds to figure out which card was missing from it. He was surrounded by a small crowd, which added to the pressure.

Kamal took 16 seconds to go through the deck using the advanced card-counting system he learned as a professional gambler, and he only had two seconds left to figure out which card was missing. He said it was a nine, and the man holding the missing card flips it over and displays it to the crowd—it's the nine of clubs.

“And I breathed a huge sigh of relief while maintaining an attitude of ‘Well, yeah. Of course.’ What else would it be? It’s nine of clubs. I mean, it was obvious,’” Kamal recounts, laughing.

Soon after, they handed him an envelope containing a letter of employment offer. And that’s the story of how a professional gambler got a job on Wall Street.

His First Few Years on Wall Street

When Kamal began on Wall Street, he didn’t know a single thing about bond trading. In fact, he didn’t know that when he walked inside Lehman Brothers' office, he’d be working in the bond market. His background before playing blackjack was in computer science, and he had to learn bond math from scratch.

“To me, stocks, bonds, it was all the same. I never heard the word “mortgage-backed security” before, until they showed up at Lehman,” Kamal says.

He made a lot of mistakes at the beginning, and Kamal knew he was a complete outlier in the way he got hired on Wall Street.

“The average path to a junior trader position on Wall Street is someone who went to Ivy League school, possibly getting a business degree. And all these people who show up on Wall Street had, all their lives, dreamt of working on Wall Street—that’s what they’ve always wanted,” he says. “But in my case, [a few years prior to stepping foot in Lehman's office] I’d taken a vow that I would never work on Wall Street…”

May the Odds Be in Your Favor

When asked what Wall Street had that he didn’t want to be part of, Kamal admits that before, and even during his career on Wall Street, he believed that it was a den of thieves.

“The whole concept of ‘greed is good’ was something I never subscribed to… Even while I was gambling in Vegas, it was never about greed for me,” Kamal says.

For him, his professional gambling career was more of a mathematical and moral crusade against the unfairness of the casinos [and the system].

He says, “Yes, you had to win money. Otherwise, there is no proof that you’re beating the house. But to me, it was about beating the house more than anything else. For me, money is a side-effect of a game played well.”

He believed he could never run with the “greed is good” crowd. His philosophy when playing blackjack is the same as how he lives life and sees the world in general.

In his book, Kamal wrote something along these lines, “The game was the perfect combination of three things that I cared deeply about–numbers, taking calculated risks, and fighting against unfairness.” And it is still something that he deeply believes in.

He’s always had an affinity for numbers, and his love of math was influential in his success, both in blackjack and in his Wall Street career.

“But the other two things are my core life principles, which are taking calculated gambles and risks and fighting unfairness. In fact, everything I’ve done in my life has followed those two principles,” Kamal shares.

And so, he had a miserable time in his first few years as a junior bond trader at Lehman Brothers. He later came back with a newfound resolve to find a way of taking calculated risks in this industry as well, just as he did in casinos.

For Kamal, calculated risks (in blackjack, the financial market, and in life) are captured in one facet of the game, which is that the odds have to be in your favor.

“If the odds are not in your favor, the longer you play the game, the greater the probability that you’ll lose,” he says.

Counting cards turned out in Kamal’s favor, and it took him a while (seven years to be exact) before he figured out how to turn the odds in his favor in financial markets. But once he found his strategy, for the next 20 years he spent managing money for the large hedge funds in the world, he stayed and won with it.

“So taking calculated risks means turning the odds in my favor and staying with the method,” Kamal continues. “Now, fighting against unfairness… Virtually everything in my life has been defined by that.”

Unfairness Enabled by the System

Kamal thought it was unfair that casinos threw out (and sometimes even beat up) card counters.

“So basically, what they are saying is, ‘If you have the audacity to use your brain while playing the game, we’ll not only throw you out, we might even have you arrested or get you beat up.’ Which was insane. How could it be more unfair than that?” Kamal shares.

He believes this unfairness has been enabled by the court system through the innkeepers’ law, or the right of hotels, restaurants, and other similar establishments such as casinos, to refuse service and kick anyone out of their establishment for any reason they see fit.

Kamal shares that he himself has been kicked out of casinos four times, but, fortunately, has never been beat up. Except for that one time when he thought he was “going to get his ass kicked,” most of the time, the casinos were polite enough.

But not everyone was as lucky.

Kamal’s idol, Ken Uston, who wrote Million Dollar Blackjack, and taught Kamal card counting and the whole system he created, got beat up several times.

“That sort of made me really angry. Like, why do they do this to him? All he’s doing is he’s using his brain to play the game according to the rules the casinos have set for themselves, for every player,” Kamal shares.

“So just the fact that he can turn the odds in his favor, and by the way, very few card counters can, but the problem is the casinos are unwilling to tolerate even one of those card counters, as I saw myself, on numerous occasions,” he continues.

To fight the unfairness and beat it, Kamal had to take all sorts of evasive measures to keep playing the game. 

“I decided to play a cat and mouse game out of it. First, there’s just the game of blackjack, which is just math—odds and probabilities. But then there’s another game on top of that which is ‘How to not get kicked out of the casino,’” Kamal says.

It was fun for him, to some extent, thinking up creative ways to fool the casinos into thinking that he’s either not counting cards, or that he is such a loser at it that he’ll end up losing money, so they let him play.

“Either of those is fine; the point is just they have to make you keep playing the game. Because to me, it has always been about the game. That’s why the title of the book is "Play it Right." Because if there is no game, what are you going to play?” Kamal continues.

The Focus Required to Play It Right and Succeed at the Highest Level

Tristan notes that in the book, Kamal describes how he shifts from computer science to blackjack, and then to the financial markets on Wall Street–all three very different fields. And now, he has even entered the publishing world and written a book. He asks Kamal how he was able to succeed in all those endeavors.

“I think that I’m just an addict. I mean, it’s like when I decide to do something, I cannot be swayed from my objective,” Kamal replies.

When he played blackjack, it was literally a 24/7 obsession for Kamal. He said his friends even got sick of him. He would read all the books he could find on the topic (this was before the age of the Internet). Then he got on Wall Street, and it took him one to two years before he found his bearings in the business.

“By then I realized I just hated it. I didn’t want any part in this industry. And I left for three and a half months, thinking that I’m not even sure if I’m gonna come back to this business,” Kamal shares. “It sort of feels like Wall Street has crushed me. It’s broken me and turned me into something I despised—a quitter.”

Kamal thought to himself whether he would let Wall Street defeat him or whether he would go back and fight once more. Spoiler alert: He goes back and fights once more.

After getting married during his three and a half-month disappearance, Kamal returned to the industry. It took him another five years to figure it out. Then he moved to the hedge fund world and managed money for the next 20 years, with a stellar track record at that.

His focus was like an obsession, but unlike blackjack, where he could pick up books to learn how to count cards, there are no such books or papers for learning the financial market.

In hindsight, even Kamal thinks it is insane that it took him six to seven years to figure out how to manage money. “But then, there is no alternative to time in financial markets. You have to go through various cycles to understand what can happen and what could possibly go wrong,” Kamal says.

The secret to his success? “It was basically an addiction and an obsession—with blackjack and mortgages,” Kamal says.

Even with entering the publishing world and writing his book, time was Kamal’s main currency. He worked more than 12 hours a day, every day, to write his book.

Beating the Odds Against His Favor

Kamal had been in the financial industry for 27 years when he left and decided to write a book.

“The odds of a complete unknown, who has never written even a single page article before, putting a memoir together–let alone having it published, was easily one out of a thousand, if not more,” Kamal says.

But he stayed with it and got incredible help along the way. As a result, he beat the odds and got published.

Finding Your Niche

Tristan asks Kamal what advice he could give, as someone who went “all in” and did it well, to entrepreneurs and business owners who want to do the same and grow their business.

Kamal’s advice is to find a niche. In blackjack, it was counting cards for him, which he didn’t find so difficult. It was harder for Kamal to find his part in the financial market that he can play in and mathematically beat.

“To find that niche was probably the hardest. First, I have to find exactly what game I’m gonna play, and then I have to figure out the method. Because on Wall Street, there are literally a million games you can play,” Kamal shares. “Even though I worked for large hedge funds, I was my own little silo which has nothing to do with the rest of the fund. And I just did my own thing, and thankfully my performance was good enough that everybody left me alone.”

The way it worked for him was to find that narrow slice of the pie where he could do a better job than anyone else could.

“Rather than being everything to everyone, I would narrow my focus to what I can do really really well, and keep perfecting that craft. And once that craft is as perfect as it could be made, then I just keep on repeating it,” he says.

“Once you find your niche, find your method, then repeat until rich.” -Kamal Gupta

Calculated Risks

Tristan asks the question, “What does calculated risk look like so you can either stay away from it or jump into it?”

For Kamal, calculated risk in casinos and the financial market means one thing. But in different areas of life, it could look completely different.

“The simpler answer is on casinos and on Wall Street—it simply means the odds have to be with you. Otherwise, you can’t play the game for any length of time. If the odds are with you, you can keep playing over and over, and you can basically repeat until rich,” Kamal says.

“In different aspects of life, in my case this whole concept of writing a book, the odds were distinctly against me. A thousand-to-one against you is not good odds by any stretch of the imagination,” he continues. “It’s not just that the odds have to be in your favor. Risk and reward have to be in your favor.”

In a nutshell, Kamal’s advice is this: if you have a game you can play over and over again, with the odds against you, but the payoff is worth the risk, you should keep on playing.

When he decided to write “Play It Right”, the odds were stacked against him, but the payoff was something he found worthwhile. He had a story to tell, and it was his way of sharing it with the world.

“By now I’m in my 50s and I have the time to devote to this venture, and I really felt like it was a win to leave something behind. A book that is published is for posterity. It’s never going anywhere. And there is a 0.001% probability that the book will be widely successful. It is a very low probability, but, guess what, the payoff is huge. Not necessarily monetarily, but to gain a sense of satisfaction,” Kamal shares. “Not every pay-off has to be financial.”

For Kamal, the payoff in writing the book was learning how to write and to learn something new, in this case, about the publishing industry. He began all his ventures knowing nothing about the industry and the road, an “incredibly foolish pursuit,” and conquering it is what makes the risk worth it for him.

Taking a Step Back

Sometimes, taking a step back is part of the process of success. In both his bond trading and book writing experiences, Kamal needed some time to quit for a while to reevaluate whether it was worth going back and diving into it.

“You know when you’re in the trenches all day long. Whether it's financial markets or trying to write chapter after chapter. Your focus is extremely narrow,” Kamal says. “I think stepping away from the narrow world you are inhabiting, whether it is the day-to-day trading problems that you are facing, or figuring out what the next chapter is in the story you are going to write, and taking a step back, is important.”

That way, you have time to consider if something is really worth doing, or at least something you really want to keep doing.

Dealing with the Unknown

Kamal believes that the best way to deal with all the uncertainties is to keep life simple.

“The way I deal with unknowns in life is really shrinking my universe. Not in terms of a person or anything like that, but only focusing on a limited set of activities at any point in time. I don’t spread myself too thin,” Kamal says.

“Simplifying life makes it much easier to deal with the uncertainties of the world because you have fewer uncertainties to deal with.” -Kamal Gupta

The 2008 Great Recession

It is on the news a lot recently that 2022 feels like 2008 all over again, especially with the housing market. As someone who’s lived through it and been right in the middle of it, Tristan asks Kamal to recount his experience during the great recession, and his insights on whether history is really repeating itself today.

Kamal says his “personal little 08” happened a few years earlier around 2004 or 2005. He was working for a large Swiss bank and he was convinced that the largest of Swiss banks with hundreds of millions in capital are nothing but ticking time bombs.

He says there were two reasons: CDOs (collateralized debt obligations) and subprime mortgages.

“I got up and bolted from the firm because I knew it was going to blow up, and I didn’t want to be around the Titanic when it sank,” Kamal says.

Prior to that, he had been working with the mortgage market, and was involved in more conservative mortgages backed by the US government. But those two businesses, CDOs and subprime mortgages terrified him. 

At that time, when he got himself out of that business, he thought the problem was with just one Swiss bank. He wasn’t aware that the problem was pervasive within the entire financial industry.

It took him a couple more years to figure out that everybody was on this boat, and that the health of the entire financial system hinged on this tenuous belief that housing prices in America would go up forever.

“And nothing goes up forever. Just because it [housing] has almost always gone up in the past–and I’m not a believer in historical business–doesn’t mean it will continue in the future. But somehow everyone in the financial universe has bought into this fantasy,” he shares.

By the time 2008 hit, and most of the financial institutions imploded, Kamal had already gotten out, relatively unscathed.

He did experience his first loss, after a 103-month winning streak, but he had returns of 16%, a stellar success considering the situation at that time.

“It’s a testament, more than anything, to my strategy and the method I spent seven years trying to figure out,” Kamal says.

And Kamal says he thinks the risks for the financial industry are greater today than they were back in 2008. Because financial institutions have grown exponentially over the last decade, their books may be hit twice as hard, if not more.

“The larger the number of assets you have on your books, the more risk you’re carrying,” he says.

As for the housing market, Kamal says, “I don’t expect a housing crash… However I do think, the best days of housing [from the pandemic boom] locally are behind us. And the gains, if at all, going forward are going to be far smaller than what they have in the last 2 to 3 years.”

He thinks that the housing market has already reached its peak, but there are no clear signs of a housing crash or of a financial crisis caused by a housing crash.

“Back in ‘08, literally everything was based off of the housing market, from CDOs to subprime mortgages to just the way the lending business worked back then,” Kamal says. “Right now, yes, housing has done well. But it hasn’t done as well as it has done in the six years leading up to the crisis, to give you an idea.”

In the six-year period from 1994 to 2000, housing and median household income both grew by  30%. But from 2000 to 2006, the six years before the crisis, housing rose to 80% while income was left behind at 15%.

“The huge bifurcation between housing and income, that’s what caused the crisis. I mean, that’s what caused the bubble—because people couldn’t afford the homes, making the system more and more unbalanced,” Kamal explains. “That dichotomy is less severe today. Because incomes are actually going up these days.”

He also laments the fact that people “freak out” because their wages have gone up. “I mean, no one complains if you have asset inflation on stocks and bonds, but heaven forbid the common man has more money in his pocket. We must do something to slow the economy down.”

He sums up his opinions about the issue like this: “I think the system is still extremely risky, but I’m not worried from a housing crash standpoint.”

Making a Difference in Your Narrow Slice of the Pie

One of Kamal’s guiding principles is to combat unfairness.

During his time on Wall Street, he managed to fight the system by being a “shadow negotiator” for individuals against large corporations.

“To me, just like casinos take advantage of gamblers, large corporations take advantage of individuals. And the balance of power over the last 25 years has dramatically tilted away from individuals in favor of large corporations… Workers have far fewer rights today than they did 25 years ago,” Kamal says.

He helps anyone negotiate better terms with large corporations by sharing with them his methods for negotiation, and he has lots of stories about it that might come out in the second book he is planning to publish.

“It’s a very small way of making a difference, but I think this is something like what we were talking about when finding your own niche. This is something I can do better than most people. So I continue to use my negotiating skills to help out as many people as I can,” he shares.

What’s Next for Kamal?

Kamal says he is definitely in the book writing phase of his life now.

“I don’t think my brain is capable of doing much more at this stage of my life other than writing stories on paper, or telling stories verbally,” he admits.

He’s halfway through writing the second book, but he doesn’t know for sure yet if and when it will be published.

Right now, he is just enjoying the absolute freedom of waking up every morning and being able to do whatever he wants, and not being driven by anybody else’s clock.

https://open.spotify.com/episode/3PZLyx8w41gcsKdO2wyadM?si=cmNQyM0zQq-vi9ap94FSFg

DISCLAIMER: The people interviewed are well-trained experts and highly skilled in their areas of practice. They take many safety precautions prior to attempting the activities described. The activities or research discussed in these podcasts should not be attempted without qualified supervision and training with professionals.

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