Welcome to issue #45 of The Davem Dish. Every week I share what actually works in investing based on my 20 years of wins, losses and expensive lessons. You’ll also get my thoughts on solopreneurship because the same principles apply — keep it simple, stay consistent and focus on what matters.
When I turned thirty, I had a great idea to supplement my corporate salary and help fund my portfolio. I was going to moonlight as a “professional” blackjack player!
So I spent about six months really learning the game — memorizing basic strategy, reading Beat the Dealer, running simulations, and practicing with small stakes in crappy casinos. This was back when I had a steady paycheck, an annual bonus and few expenses, which is a long way of saying I had the financial flexibility to try something most people would call a little crazy. I didn’t want to gamble for fun per se, I wanted another investment vehicle.
My strategy ended up being basic strategy with a momentum twist: press my bets when the table ran hot, pull back (or play two hands to break up the rhythm) when it ran cold, follow rules for when to raise or lower bets, and walk away entirely if the cold spell didn’t break. The simulations said this gave me a slight edge, something like 1%, which meant I’d need to play a lot of hands and bet a lot of money for it to add up to anything. So eventually I put real money on the line and went for it. I started with a $10,000 bankroll, added to it over time, and played regularly for a couple of years with a goal of making a 10% return. And eventually I hit it.
Why did I even go down this path? Why didn’t I just work more hours, try for a promotion, or get a second job to increase my income?
For the same reasons people pile into parlays, prediction markets and same-day options today. I believed I had an advantage, I enjoyed playing, and it was fast — the get rich quick fantasy. A good day at the table could pay off in an hour, while waiting for the market to reward my stock picks can take months or years.
But the edge with my blackjack strategy that I was so proud of probably wasn’t there, and the irony is that Beat the Dealer explains why. Basic strategy still leaves the house a small advantage (roughly half a percent, depending on the table rules), and pressing hot streaks doesn’t change the math, because one hand has almost nothing to do with the next. The only reliable way to flip the edge in blackjack is counting cards, which still only gives you a slight advantage, and I wasn’t doing it. So I hit my 10% target with a system that, mathematically, shouldn’t have gotten me there. In other words, I got lucky. The good outcome that convinced me the process worked was just the hot hand fallacy, overconfidence and outcome bias all rolled together, and they’re the same biases that crush investors who mistake a lucky stretch for skill. (How hitting my goal helped my overall investing discipline is a story for my next post.)
Now compare my little experiment with someone who actually had an edge. Stu Ungar was considered one of the greatest poker players who ever lived. He won the World Series of Poker Main Event three times (before poker became super popular), and at the poker table, where you play against other people, there is skill involved. Except Stu wasn’t content being a great poker player. He thought he could win at sports betting too. It didn’t work out. One Thanksgiving weekend he won $1 million playing poker, and over that same weekend he lost $1.8 million betting on football. A bad cocaine habit didn’t help him any, but the pattern that drained his bank account was carrying a card player’s confidence into games where he had no edge at all. His daughter later said, in so many words, that he was a terrible sports bettor and would have had a much easier life if he’d stuck to the card games he was great at. Two months after his last Main Event win in 1997 he was broke, and he died the following year at 45.
So if my small, imaginary edge couldn’t keep me disciplined, and Ungar’s real one couldn’t protect him at the sportsbook, what chance does someone placing parlays from their basement have?
This Isn’t a Lecture
I’m not here to tell you to delete DraftKings or swear off the casino. I still bet on sports and occasionally hit the casino. Betting can be fun — a quick hit of dopamine with a result tonight instead of in five years, and there’s nothing wrong with spending some money on entertainment, the same way you’d spend it on concert tickets or a night out on the town.
The problem shows up in two places. The first is when betting gets confused with investing. When someone starts treating a hot streak on parlays or a few good calls on Kalshi like a wealth-building strategy. The second is when the fun money leaks into the money that’s supposed to be compounding for your future. Both are easy to slip into, and have been happening to very smart, very competitive people for a long time.
You Can’t Will Your Way Past the House
If you watched The Last Dance, you know Michael Jordan’s story is about will. He outworked people and refused to lose. What some would call an obsession with winning. Turns out he brought that same mindset to the golf course, where the stakes were cash. In 1993 a San Diego businessman named Richard Esquinas published a book claiming Jordan had run up a $1.25 million golf debt to him over ten days. Jordan disputed the number, but the detail that sticks with me is how it reportedly got that big — down $626,000, Jordan wanted to go double or nothing, and lost again.
Golf isn’t blackjack. There’s no house edge on a golf bet, just two players and whoever’s better. But the people taking Jordan’s money were hustlers, and one regular on the course reportedly described Jordan as an easy mark. He was the greatest competitor of his generation, and on the golf course that’s what made him a target. Down big against better players, his instinct was to raise the stakes rather than walk away. That’s a mistake investors make all the time, overestimating their own edge, then doubling down when it isn’t working.
Another famous basketball player, Charles Barkley, has his own version. He’s estimated his lifetime gambling losses at as much as $25 million, including $2.5 million in a single six-hour blackjack session, and figured he’d won a million dollars about seven times and lost a million about 25 times. He’s always said he could afford it, but even the guy who could afford it lost big more than three times as often as he won big.
And then there’s the golfer, John Daly. In 2005 he lost a playoff to Tiger Woods, collected a $750,000 runner-up check, and instead of heading home, he drove to Las Vegas. Within half an hour he’d lost $600,000 on $5,000-a-pull slot machines, which still left him $150,000 ahead on the day (pre-tax). Instead of walking away, he took out a $600,000 line of credit from the casino, lost that too, and left five hours later down $1.65 million. By his own count from tax records, he lost about $55 million gambling over 16 years, roughly five times what he earned on the PGA Tour during that period.
You might say, big whoop, these guys could afford the losses and it’s all relative to your total income. Sure, but the bigger takeaway is the mindset. Jordan’s double or nothing is the bettor’s version of averaging down on a losing stock because you’re sure it’ll come back. Daly mostly blew his runner-up check and then borrowed money to keep playing, while Barkley reportedly kept playing until he won a million or lost it all, which is a target with no exit attached. None of them had a rule for when to walk away.
Put my blackjack years next to these stories and a pattern shows up. Building wealth from any game takes two things: an edge, meaning the math is actually on your side, and exit rules, meaning you decide in advance when you’ll walk away, both to lock in a gain and to cut a loss. My blackjack system had exit rules but no real edge. Ungar had a real edge at poker but no exit rules, so he gave his winnings back somewhere else. Daly and Barkley had neither.
An edge without exit rules gets given back, and exit rules without an edge just slow the bleeding. That’s also why the competitor’s instinct backfires. In sports, effort changes the outcome. Outhustle the guy across from you and you can beat him. A casino doesn’t care how badly you want to win, and neither does the market. No amount of willpower turns a losing investment into a winning one. What works is owning businesses that do the compounding, with a process you decide on before the money is at risk, the patience to wait for the right price, and the discipline to sell. Effort changes the outcome of a basketball game. In the market, your process does.
Who’s on the Other Side
Sports betting is worse than a zero-sum game. Every bet has someone on the other side of it, and that someone now is a publicly traded company that takes a cut of the action and gets better at keeping your money every year. Americans legally wagered about $167 billion on sports in 2025, up 11% from the year before, while sportsbook revenue grew almost 23%, to nearly $17 billion. When revenue grows twice as fast as the amount wagered, it means the books are keeping a bigger slice of every dollar.
A big reason is from parlays. Across the six states that publish the numbers, sportsbooks kept about 19% of every dollar bet on parlays in 2025, and in Maryland it was over 21%. In Missouri last December, FanDuel kept 36% of parlay money compared with 6.5% on straight football bets. Parlays are the product the apps push hardest because they make them the most money.
“Since football season started, I’ve wone five of six bets and I’m up 210%. I should bet more right?”
A month ago I posted that note as a joke about my own betting this football season. A few people got the joke and a few did not. Good thing I didn’t take my own advice, because I’ve lost six in a row since. I only wager $5 per bet, so whether I’m up or down for the season barely matters, and that’s the point: it’s entertainment, with tiny stakes. But a 5-for-6 start still felt like I’d figured something out, which is how my blackjack years started too.
At standard odds you have to win about 52% of your bets just to break even, so a hot start over six bets is barely a sample, not proof of skill, and the math catches up eventually. It’s also why the apps push parlays so hard: string eight coin-flip bets together and the house keeps roughly 31 cents of every dollar over time.
With all that said, can sports betting be an investment strategy? Well … not really, mainly because if you’re good enough to beat the sportsbook consistently, they’ll limit you. The books build software to identify sharp bettors (people who show real skill) and cap how much they’re allowed to wager, sometimes to pennies. DraftKings’ CEO has openly said more data makes them faster at spotting the sharp bettors they need to limit. In the UK, where regulators looked at the numbers, nearly half of restricted accounts had been profitable over their lifetime.
Casinos have done the same thing to card counters for decades, and anyone who’s seen a casino movie knows how it ends: once you have an edge, you get escorted away from the table. Whether it’s a sportsbook or a blackjack pit, the house is happy to have you right up until you can beat it.
Think about how backwards that is compared with investing. If you consistently beat a sportsbook, they shrink your bets or show you the door. If you consistently beat the stock market, nobody can stop you from buying more.
The next question is if the house always wins, why not just own the house? DraftKings is publicly traded, and so is Flutter, which owns FanDuel. The answer is a good lesson in why a great story isn’t the same as a great investment. Despite holding the edge on nearly every bet, DraftKings posted the first profitable year in its history in 2025 (barely), about $4 million of net income on more than $6 billion of revenue, with more than $6 billion in accumulated losses still on its books. Flutter lost $407 million in 2025. And now both are spending heavily to build their own prediction markets. Owning the house only works if the house is a quality business at a fair price, and DraftKings and Flutter aren’t.
Prediction Markets: Same Game, Better Marketing
Prediction markets like Kalshi and Polymarket pitch themselves differently. You’re not betting, you’re trading. It’s a market, you’re forecasting, and you can turn what you already know about sports, politics or the economy into a quick profit. The pitch is working. Trading volume across the two platforms hit $24.2 billion in April, up from $1.8 billion a year earlier.
The results look a lot like the casino. A Wall Street Journal analysis of 1.6 million Polymarket accounts found that more than 70% of users lose money, and that 0.1% of accounts (fewer than 2,000) captured 67% of all the profits. The worst-performing 10% of users had lost about $4,000 each on average. On Kalshi, the company’s own spokeswoman said unprofitable users outnumbered profitable ones almost 3 to 1.
The platforms like to point out that there’s no “house” in a prediction market; users trade against each other and the platform takes a fee. That’s technically true, but someone still fills the role. The winners are professional market makers, firms that pay hundreds of thousands of dollars a year for live data feeds and run algorithms that place tens of thousands of trades a day, along with the insiders trying to cash in with non-public information.
The Journal also told the story of a man in Detroit named John Pederson, who was out of work after a car accident and took out a loan to start betting on Kalshi. At first it worked. He turned about $2,000 into roughly $8,000 betting on daily snowfall totals, then grew it to $41,000 betting on sports with a strategy he built with help from AI. Then he put the entire $41,000 on whether a celebrity would say a particular word during a late-night TV appearance. The celebrity actually said it, but the moment was cut from the broadcast, and under the market’s rules only the broadcast counted. He lost everything, and when the Journal interviewed him he was living in a homeless shelter. A hot streak turns into an all-in bet, and something outside your control decides the outcome.
The Game Where the Math Works
Here’s what makes the stock market fundamentally different from everything above. When you buy shares of a great company, you own a piece of a business that sells things, earns profits and generates cash. That business keeps working for you whether or not anyone else shows up tomorrow to buy your shares at a higher price. And nobody has to lose for you to win. The person who sold you a stock at $50 might have bought it at $20 and walked away with a great return. You might hold it to $150 and do the same. Both of you won — just on different timelines. Sports betting is a negative-sum game once the sportsbook takes its cut, and prediction markets are close behind once you account for fees and the professionals and insiders waiting on the other side. Investing in real businesses is the only one of these where the pie actually grows.
It’s also the only one where your edge can’t be taken away from you. Your edge as an individual investor isn’t secret information — it’s structural and behavioral. You can be patient when professionals can’t, buy when others are forced to sell, and follow a process instead of your emotions. Nobody limits your account for doing that well.
I wrote a few weeks ago about how being right matters far less than people think. Using simple numbers, an investor who’s right only 40% of the time can still make money, as long as the losers are cut short and the winners are allowed to run. Those same ten positions at a better hit rate (I’ve averaged about 65% over my last 100 investments) produce dramatically better results. Try getting that kind of math out of a bet where the house keeps 31 cents of every dollar before the game even starts.
The research on what betting actually does to people’s finances makes the point. A study published through the National Bureau of Economic Research followed about 230,000 households across 26 states and found that once online sports betting became legal, bettors’ net deposits into brokerage accounts fell by roughly 14%. The money didn’t come out of movie nights or other gambling; it came out of investing, at close to a dollar of investing lost for every dollar bet.
Just $100 a month invested at 8% grows to roughly $59,000 over 20 years. That’s the cost of a casual betting habit, and it’s not the movie ticket you skipped. It’s the compounding in the stock market you gave up.
Containment
If you’re going to bet (I still will), the goal isn’t to quit. It’s to contain it, the same way a good investing process contains risk.
Here’s how I’d think about it:
Give fun money a fence. If I had $10,000 to put to work, about $5,000 would go into index funds as the foundation, $4,000 into individual companies bought with a process, and $1,000 would be fun money I fully expect to lose. I think that’s realistic, because pretending people won’t want some excitement is how the excitement ends up leaking into everything else.
Keep it separate. Fund the betting account once, from the fun bucket, and don’t top it off from your checking account mid-season.
Never bet with borrowed money. More than half of prediction-market users are doing it, and almost nine in ten of them lose.
Set your loss limit before you start. When you hit it, you’re done for the night, the week or the season. That’s a stop loss for your fun money, and it works for the same reason my stop losses work in my portfolio: the decision gets made before your emotions are involved.
No double or nothing. Chasing losses is how you end up with receipt for a cash advance from the casino ATM or worse, a lawsuit over unpaid markers.
Stop when it feels like work. If you’re building models and researching edges, you’re no longer betting for fun. You’re trying to beat a house that will cut you off the moment you succeed.
The only difference between gambling and investing that really matters shows up when it’s time to leave. Good investors decide in advance when they’ll walk away, while gamblers decide at the table.
Know Which Game You’re Playing
The stock market is the one place where you can build a real edge and contain your risk inside the same process, which is why these days I spend more time in my brokerage account than at the blackjack table. So go ahead and have some fun this football season, or basketball season, or whatever sport you enjoy. Just keep the fun money small, keep the real money working, and know which game you're playing before you sit down.
Cheers,
Andrew
Most investors carry at least one gambling habit into their portfolio without realizing it: chasing a loss, holding a loser while hoping for a bounce, or sizing up after a hot streak. I built a free 3-minute assessment to help you spot which patterns show up for you.
Take the “Can I Really Beat the Market?” assessment here:
The content provided are personal opinions and presented for educational purposes only, as of the date published or indicated. Davem Advisors LLC is not a bank, licensed securities dealer, broker or investment advisor. Displayed returns are unaudited. Nothing stated constitutes a recommendation or advice as to whether any investment is suitable for a particular investor. You alone are solely responsible for determining whether any investment, strategy or service is appropriate for your objectives. Past performance is no guarantee of future results. Inherent in any investment is the risk of loss.