The Making of Donald Trump (20 page)
What Trump liked about the gaming business was easy money, big easy money. Luring high rollers was one path to fat profits. But it was also a risky one. His former Trump Plaza casino partners, the company that grew from the Holiday Inn lodging chain and owned Harrah’s casinos, preferred to target mid-level gamblers, especially slots players, who came, lost, and then came back again and again. This model generated steadier, lower-risk profits. When a Harrah’s customer slipped her frequent player card into a slot machine, an automated message told a bartender to prepare the player’s favorite drink. Soon a waitress would arrive with the refreshment, addressing the customer by name. One year, when the Holiday Corporation owned or franchised 1,589 Holiday Inns and other lodgings, it still earned twenty-eight cents out of every dollar of profit from its one Atlantic City casino.
Trump was more interested in flashy scores from big-name players than the secure profits that could be earned with intense management. He definitely wanted to lure The Warrior from his mansion near the foot of Mount Fuji—a house known locally as Kashiwagi Palace—to Atlantic City. When Trump flew to Japan in his aging Boeing 727 for the Mike Tyson–Buster Douglas world heavyweight championship fight in February 1990, he met The Warrior briefly. Trump presented his fellow real estate speculator with an autographed copy of his myth-making autobiography
The Art of the Deal
.
Casino executives in London, Las Vegas, and Darwin, Australia, all pursued Kashiwagi, one of that rare breed of gamblers known as “whales,” because they risked $1 million
or more during each casino visit. Kashiwagi—with his marathon multimillion-dollar sittings—remains, by far, the biggest whale ever beached in Atlantic City. Like the rest of the casino whales, Kashiwagi lived a financial life every bit as mysterious as the real denizens of the deep. The size and true source of his fortune were unfathomable.
Kashiwagi told Ernie Cheung, Trump’s specialist in Asian marketing, that he was on a round-the-world gambling spree during which he was willing to risk $50 million. Other casinos desperately wanted to lure him to their floors. Caesars Atlantic City Hotel and Casino (which then vied with Trump Plaza as the top money winner on the Boardwalk) had invited Kashiwagi to drop in. Steve Wynn, the golden boy of Las Vegas gaming, wanted Kashiwagi to visit the Strip and try his luck at his brand-new Mirage, a giant ivory-trimmed gold box featuring a volcano out front, white tigers just off the casino floor, and, lest anyone forget its elemental purpose, a huge, shark-filled aquarium behind the registration desk. In this highly competitive market, Trump won Kashiwagi’s action—though not in ways that would burnish his image as a deal artist.
The Warrior had visited Trump Plaza once before, twelve weeks earlier, when he won $5.4 million in one long day at the tables. Two months before that, Kashiwagi had flown to Darwin, where he had won the Australian equivalent of $19 million at the Diamond Beach Casino, bankrupting it. The Darwin results weighed on Trump, but he wanted to win back what he had already lost to The Warrior and more.
But, as Wynn and other casino executives knew, Trump did not understand the math of the games any more than he seemed to understand casino and hotel operations. For Kashiwagi’s second visit to Trump Plaza, Trump paid $5,000
plus expenses to secure the advice of a mathematician who knew as much about casino games as anyone else on earth. Jess Marcum was an owlish little man who had helped invent radar in his youth, then became a founder of the RAND Corporation (the Air Force think tank), and later worked on the neutron bomb.
Though he didn’t understand basic casino math, Trump did grasp one basic point: he was vulnerable to being cheated by players. Trump suspected that Kashiwagi had rigged the February baccarat game. Marcum and Glasgow studied videotapes made by cameras hidden in the smoky gray domes dotting the casino ceiling. Marcum quickly determined that Kashiwagi was no cheat. What fascinated Marcum were the subtle changes in Kashiwagi’s face when he lost and how he never varied the size of his bets. “Turn off the [video tape] machine. I know how to beat him,” Marcum said. “This guy loves a challenge. He’s a natural for the freeze-out proposition.”
The freeze-out, a double-or-nothing game, would have prevented Kashiwagi’s earlier Trump Plaza payday. Double-or-nothing would appeal to The Warrior’s love of a challenge, Marcum figured, and to his sense of honor. Most important, a double-or-nothing game would require him to keep gambling until he’d lost his entire pot. At the time, New Jersey mandated that casinos close for a few hours each day, and Marcum knew that Kashiwagi might contrive a reason not to return. A firm agreement, Marcum counseled, was required for the freeze-out proposition to work.
The deal had two parts. First, whatever money Kashiwagi brought to the table would be matched by a credit line, in effect doubling the gambler’s pot. Second, once play started, Kashiwagi had to play one day after another until he either
doubled his stake—his combined personal and borrowed money—or until he lost his last chip.
Marcum had been fascinated with gambling ever since a friend took him to see the horses run at Hollywood Park in 1953. Marcum quit RAND and started placing bets in Las Vegas. Within two years he had become wealthy. He was eventually banned from every betting parlor in town because he hardly ever seemed to lose. He had even managed a casino, but that was thirty years earlier, when he was young enough and foolish enough to think a great mathematical mind made for a great casino operator. With Trump, he was collecting a nice fee for advising a casino owner on how to run a game.
In May 1990, when Kashiwagi and his entourage arrived in Atlantic City for the second time, the casino expected him to bring $22 million in checks that could be verified easily and cleared through the banks. Instead, the only check that the casino would take—in a briefcase full of checks—was $6 million drawn on a Singapore bank. Kashiwagi asked for $12 million in credit. He got $6 million.
The maximum bet was set at $200,000 per hand, double what anyone else in Atlantic City had ever been allowed to wager. The Warrior was ready. Kashiwagi strolled across the bold red-and-gold Trump Plaza carpet to the high-roller area. An aide carried the fortune in chips in boxes under his arms. Uniformed security guards cleared a path, and onlookers gawked at how royally the big players were treated.
At Trump Plaza, Kashiwagi neatly arranged his huge cache of baked white clay discs flecked with red and blue. The chips cost $5,000 each and covered a large portion of the baccarat table. He put twenty in a stack, seven stacks to a row. Seventeen rows plus one extra stack of chips made $12 million in all.
That day, in all of the dozen Atlantic City casinos, all other
players combined would lose only two-thirds the amount of money sitting on this one table. The $8 million the casinos would rake in would represent the losses of nearly one hundred thousand visitors to the seaside slum that calls itself the Queen of Resorts. One man had $12 million to gamble at Trump Plaza.
The neat stacks of chips drew hushed crowds to the low black marble wall that separated the high-roller tables from those for the hoi polloi. So impressive was Kashiwagi’s play that hardly anyone noticed an elderly Hong Kong businessman with more than $1 million of chips at the baccarat table just to The Warrior’s right.
Kashiwagi took a final puff on his Marlboro Light and set it down in the clean ashtray. The most voluptuous cocktail waitress in the casino appeared at his side. She bent low in her tiny black velvet suit, cut to resemble a merry widow, exchanged the ashtray for a clean one, and handed The Warrior a moist towel hot from a microwave placed on a table nearby just for him. The fifty-three-year-old real estate baron cleansed his face, returned the towel, and with a subtle nod signaled the dealer to begin.
Like Ian Fleming’s James Bond, Kashiwagi favored baccarat. The object is to get nine points. Face cards and tens count as zero, aces count as one. There is no skill involved. Gamblers make only one decision: to bet for or against the bank. The game’s fascination lies in the speed with which money changes hands, which explains why the French call their version
chemin de fer
, or “the railroad.”
For six days Kashiwagi steamed down this track, betting $200,000 on each hand at the rate of seventy hands an hour, Trump fretting the whole time. Kashiwagi’s bet never varied from opening until the casinos closed for four hours
at six in the morning. The mandated closing was intended to give gamblers a chance to get a grip on their pocketbooks before the casinos picked them clean, a chance to get off that railroad.
Kashiwagi had no such concerns. He left the table only for meals, accompanied by his aides and a squad of casino security guards. A nearby restroom was closed to all other patrons, an
“OUT OF ORDER”
sign on the handle of a mop stuck in a bucket outside the door.
Most gamblers vary their bets. They believe in streaks. When they feel lucky, they double down; when they feel the cards are running against them, they cut back. Marcum thought this was all hokum at baccarat, in which probability, not skill, determines the outcome.
“There are no such things as lucky streaks,” Marcum said, “but all gamblers believe in them.” Almost all. Kashiwagi liked to make the same flat bet with every hand. He called his chips bullets, and he liked firing as many bullets as he could each time. Marcum knew this was the smartest way to bet. It was pure math.
Gambling has a rich mythology. From the earliest days of human society, casting lots—often by drawing straws or tossing dice made from the knuckle bones of sheep—was a way to ask the gods for answers. The high priest who wanted influence soon learned to become a “sharper,” positioning the straws just right, shaving the dice, or even devising elaborate rules to ensure that more than random chance would determine the outcome. In many societies, it was a serious crime for anyone but the high priest to touch the instruments used to divine the will of the gods. This imbued the dice with a sacred quality. It also made sure no one could tell if they were loaded.
Most devoted gamblers still believed in that great and fickle
goddess, Lady Luck. Many regarded casinos as a perverse kind of religious sanctuary in which their wins and losses revealed to them the Almighty’s judgment. To such players, a casino was a temple of chance. In that respect, Marcum the mathematician was an atheist. In a confidential report to Trump, Marcum calculated that even with Kashiwagi’s bold and smart betting style, the odds were five to one that the high roller would lose his bankroll before doubling it. The trick was to negotiate a deal that kept Kashiwagi at the baccarat table until he doubled his money or went broke.
On each bet the odds favored the house by a tiny margin. Again, the only decision in baccarat is to bet with the player or with the bank. The odds on a “player” bet favor the house by 1.36 percent; a “banker” bet favors the house by 1.17 percent. But the house also takes a 5 percent fee, called
vigorish
, on winning banker bets. Kashiwagi randomly switched between player and banker.
Marcum had endeared himself to the casino industry by inventing a new baccarat bet, the tie, which was lucrative beyond even the greedy imaginings of casino owners. Gamblers who bet that the bank and the player will get the same score—that is, a tie—have a chance to win seven dollars for each dollar they bet. But the odds of a tie are eight to one. That gives the casino a whopping 14.4 percent advantage on each tie bet. At Caesars Palace in Las Vegas, tie bets accounted for just 3 percent of baccarat wagers but 10 percent of what the house raked in. “It’s a sucker’s bet,” Marcum told me. It was one bet Kashiwagi never made.
Even with the slim house advantages on the player and banker bets that Kashiwagi made, the player’s bankroll should shrivel. The house advantage works like the reverse of compound interest, which makes a dollar saved grow over time.
After 10,000 hands, Marcum’s calculations showed, Trump could expect to win 5,125 bets to Kashiwagi’s 4,875. At that point, Kashiwagi would be out $50 million. The Warrior’s actual $12 million stake would, in theory, disappear in many fewer hands.
“Probability is like a wave,” Marcum explained, running his hand in a continuous up-and-down motion in front of his chest to indicate endless waves. “Because of the house advantage, over time the player dips lower and lower until he stops crossing the midpoint and ultimately loses all his money, unless he quits first.”
Marcum’s pages of handwritten numbers showed that after the first hour of baccarat, there was a 46 percent chance that Kashiwagi would be ahead. But after seventy hours of play, the likelihood that Kashiwagi would be winning would have shriveled to just 15 percent.
On the second day of Kashiwagi’s marathon play in May 1990, however, his curve remained well above the line. Alarmed, Trump flew down from Manhattan the next day accompanied by global arms merchant Adnan Khashoggi, an Arab prince, and four vivacious blondes. Khashoggi was well-known in gambling circles, especially for all the unpaid markers he had left behind at the Sands in Las Vegas, which its chief executive blamed for that casino’s collapse in 1983.
Trump, Khashoggi, and the others checked into Trump’s Castle hotel, a few miles from the Boardwalk. That evening they limoed over to Trump Plaza. Trump introduced Khashoggi to Kashiwagi, saying they must have met because they traveled in the same circles. They had not. If he had paid more attention to the social aspects of running a casino—especially making big customers feel at ease—Trump would have known this.
Khashoggi sat down at the high-limit blackjack table next to Kashiwagi’s baccarat table and began to play. Trump hung around, pumping hands and cocking his ears to every adulatory word from the gamblers beyond the marble wall. His behavior looked more like nervous pacing than his usual glad-handing.
Casino owners, favored by the odds, are not supposed to begrudge lucky players their winnings, they are not supposed to “sweat the action.” And if they do sweat, they should do it from their executive offices, watching on a remote television screen, their anxiety hidden from the player. Within a quarter hour, Trump had grown restless and left.
