I agree - they state the following:

“You’d never lose the million. If you got to [$500,000 in losses], you would stop and take your 20 percent discount. You’d owe them only $400,000.” ... So when Johnson got far enough ahead in his winning sprees, he reasoned that he might as well keep playing.

I don't quite see how this makes any sense - if you get far ahead in a winning spree, the value of your discounted loss diminishes significantly... doesn't it? For instance, if you won $2 million, the discount is now $100k on a $2.5 million loss, which is only 4% (much smaller than the initial 20% discount of $100k on a $500k loss)