A gambler who loathes risk, Bill Kaplan ran his famed MIT Blackjack Team like a business and left the table with more than $10 million in winnings. Can the lessons learned in Las Vegas work for a real company?
Released last spring, the film 21 tells the story of five brilliant, attractive MIT students who form a blackjack team and use their affinity for numbers to take Las Vegas for millions. The students lead a double life. During the week, they cram for exams, enter robotics competitions, and work minimum-wage jobs. Then Friday rolls around, and it's all pole dancing, wily pit bosses, and fat bankrolls. Most reviewers found it tedious, but 21 topped the box office for two weeks; it eventually reaped more than $140 million worldwide. Apparently, audiences like to see people beat the system.
The movie had no tougher critic than Bill Kaplan. That's because 21 is his story. Kaplan founded the MIT Blackjack Team -- the film's subject -- in 1980, and an earlier version in the late '70s. Over 15 years, he trained more than 100 players in card counting, the frowned-upon but legal technique his teams used to relieve casinos around the world of some $10 million. He also raised millions of dollars for stakes, performed sophisticated risk analysis to optimize betting, and constantly developed new strategies to elude detection by casino personnel. Using those and other techniques, Kaplan turned gambling into a profitable, predictable business. His investors achieved 100 percent average annualized returns, while advanced players earned as much as $500 an hour.
But Kaplan, now 53 and a player in the less glamorous game of updating corporate e-mail lists, gets nary a mention in 21. Nor does he appear in Bringing Down the House, the 2002 book on which the movie is based. Both tell the fictionalized story of Jeff Ma, a rank-and-file player in the '90s who took center stage after talking about the team to a writer he met at a party. "When the book came out, it was a New York Times bestseller," Kaplan says during an interview in his Victorian home in Newton, Massachusetts. "My wife said, 'I can't believe you didn't do a book. You started this. You ran it. And there's a book about Jeff Ma? He's on a book tour? He's meeting Kevin Spacey?"
The Tuesday after the film opened, Kaplan and the 20 employees of his company, FreshAddress, took the afternoon off to see it. As Kaplan watched his thunder stolen again, his patience evaporated. "It was time to set the record straight," says Kaplan, his irritation masked by the pleasant, modulated tone that helped him avoid the attention of pit bosses. "I started this, and it was a success because of the business principles I put in place. This is my story."
From 1977 to 1993, Kaplan formed and managed three blackjack ventures. He ran the first -- a Vegas-based team of eight to 12 -- from his apartment while attending Harvard Business School. The MIT team, launched in 1980 with some neophyte counters he met in a Chinese restaurant, grew to 35 members over six years. The third venture, in 1992, was a limited partnership that raised $1 million and recruited 75 players. Every weekend, teams swarmed the tables in Vegas, Atlantic City, New Orleans, and Monte Carlo. (Casinos comp high rollers, so luxury hotel rooms, lobster dinners, and even airfare were usually free.) Kaplan both played and managed until the mid-'80s, when he became so widely recognized he could no longer walk into a casino. After that, he and his partners mostly stayed put and handled strategy, logistics, and finances remotely.
When you meet Kaplan today, it's hard to imagine him among the fleshpots of Vegas. A former professional squash player, he is the accomplished product of Andover and Harvard. Kaplan started playing blackjack as an intellectual exercise and always enjoyed the theory of the game as much as its application. He recognizes the drama of his experiences and when prompted will produce tales of backroom intimidation by casino personnel. But he naturally reverts to math talk and will cheerfully explain such arcana as how standard deviation influences bet size. It's not surprising that Ma's story is the one that made it to the screen.
Kaplan no longer plays blackjack, even recreationally. And it was never his sole pursuit: In 1980, he launched Linden Properties, a real estate development firm. As Kaplan got older, professional gambling seemed increasingly at odds with his domestic life, which by the time of the limited partnership included a wife and two small children. "This was supposed to be a second job, but it had gotten huge," Kaplan says. "We were getting calls from players at 2 in the morning: 'I've just been kicked out of a casino. What do I do?" In 1993, he cashed in his chips to give full attention to the resurgent real estate market.
Real estate has proved to be even bigger than blackjack. Over the years, Kaplan bought and developed about $100 million worth of property for tenants that include Bank of America and Walgreens. In 2000, he joined FreshAddress, which had been founded a year earlier by a pair of entrepreneurs, Austin Bliss and Bob Mack. They spent several years developing and patenting software designed to track address changes; today, the company is profitable on sales of more than $5 million. But Kaplan doesn't plan to stay small. He and his partners are discussing how to make more from clients like CVS, Reader's Digest, and, ironically, the Venetian Hotel Resort Casino. "We're going to do one thing and win by doing it better than anybody," says Kaplan. "It's like blackjack, where we stayed ahead of the casinos because we knew more about it than anyone else."
In fact, both his ventures are a lot like the blackjack teams, as Kaplan tells it. What he has accomplished in real estate and is trying to accomplish at FreshAddress draw extensively on such strategies as performance analysis and extensive intelligence gathering, skills he mastered while running the teams. The underlying goal, he says, is to "rejigger the risk-reward equation such that you can lower the risk for yourself while the market-determined reward remains the same." Here, Kaplan explains his approach to business, based on 15 years of winning at blackjack.
