Yuchun Lee's big scores
Posted by: Steve Hamm on March 24, 2006
Yuchun Lee won’t say how much money he made as a member of the club of MIT-related brainiacs who regularly make killings at America’s casinos. “It’s good money,” is his only hint. But he’s doing okay at his “day job”—which is running Unica Corp., a software company specializing in marketing programs. Thanks to the company going public last year, Lee’s stake is worth about $54 million. Not bad for a guy who came to America from Taiwan at age 13 and spent his first year on our shores in nowhereville Natchez, Mississippi. Interesting: He finds some parallels between beating the casinos and running a software company.
Lee's family came to the United States after his father tired of the seafaring life as captain of an oil tanker. They settled briefly in Natchez, but then quickly moved on to Houston where the dad got a job as a supervisor in a shipping company. Lee went to MIT for undergraduate and grad school, where he specialized in data mining, statistics, and probability theory. As you can imagine, these studies came in handy later. After a short stint at Digital Equipment Corp. in the heyday from '87 to '91, he and some MIT pals started Unica.
Side trip: From 1994 to 2000, Lee got caught up in the excitement of Strategic Investments, a group of MIT-related people who figured out how to beat casinos at Blackjack. Their capers have been explored in a best-selling book, Bringing Down the House : The Inside Story of Six MIT Students Who Took Vegas for Millions. Lee was intrigued when he saw flyers on the MIT campus recruiting for the club. Over the years he joined two of Strategic Investments’ sub-groups, the Amphibians and the Chameleons. Here’s how it works. Blackjack is the one game in a casino where the players have a decent chance of regularly beating the house. Players can increase their chances of winning even more by counting cards as the dealer deals them out of the deck and knowing when the cards left in the deck are more likely to bust the dealer. For a regular player, the casino has a 1.5% to 3% advantage. When counting is involved, the odds are reversed. (The club has other techniques in addition to card counting, but Lee and I didn’t explore them.)
Road trip: The Amphibians and Chameleons, divided up in teams of 8 to 12 people, would take off on Friday nights for weekends in Vegas or Atlantic City. They’d plant a player at each of a bunch of Blackjack tables and start playing and counting. When a table was ripe, they’d make a signal and another member of the club posing as big-time gambler would stroll in and start playing the table. (Why do I find this more interesting than corporate software?) On a given weekend, a team playing thousands of hands could lose as much as $200,000 or win as much as $500,000.
It's basically a pyramid organization. The early members amassed a ton of money and became the investors in future generations of players that they recruited. At the end of a busy weekend, the players would take half of the winnings, and the investors would take half. It was a blast, especially when Lee got to play the high-roller role. “For me, it’s not about the money. It’s about the experience. You’d be treated like royalty. I was once comp-ed by a casino to drive a NASCAR. I stayed in rooms with three-story waterfalls. They were so noisy you had to shut them off at night,” Lee recounts.
He didn’t even consider himself a gambler. “It’s basically not gambling. We were working,” he says. When he filed his federal 1099 tax forms in those years, he wrote in “applied statistician” as his profession. But, eventually, maturity caught up with him. Lee and his wife had their first child in 2000 and his not-gambling days were over.
About those similarities between casino work and being a software entrepreneur: “In both cases, the people involved are contrarians, they’re very smart, they love the truth, and they love winning against the odds.” Both are all about playing for the long term, he says. The magic of putting large numbers of people to work counting cards is not about one or two big scores; it’s about winning incrementally over thousands of hands. At Unica, Lee put in place a strong foundation of technology and then built a suite of software that handles most of the jobs of a corporate marketer—including storing and tracking information about customers, designing marketing campaigns, and then running them. Even though Lee doesn’t try to grow fast, Unica’s revenues tend to double about every 18 to 24 months. In the fiscal year ended last September, they hit $63.5.
Unica’s no software giant. And its stock is only up a bit since the IPO. But Lee figures that a lot of the 400 companies that have bought discrete pieces of his software and likely to buy more. He’s hoping investors will start to like his odds.