Tuesday, January 6, 2009

Why Gambling is a Really, Really Bad Idea

 It may sound like fun, but playing with your income is no joke.

Some folks wonder why I am against gambling. Others, who have taken courses in probability, don't need to ask why.  Gambling is a form of a stupidity tax - it takes money away from people too dumb to deserve it, and transfers it to folks who are smarter than they are.

Life is all about risk-taking, so in effect, we all gamble every day, with investments, jobs, purchases, and even homes. Insurance is one form of legalized gambling that serves a function in society.  However, with all these risks, there are smart bets, there are safe bets, there are dumb bets and there are risky bets.  Smart folks take only the smart and safe bets, but might take a risky bet if the odds are good.  But they never take a dumb bet.  Gambling is about the dumbest bet there is.

There are many forms of legalized gambling in the United States now.  In my youth, gambling was largely illegal, except for Las Vegas Casinos, and the occasional Bingo game at the Catholic Church. Since then, gambling has expanded across the country, to the point where most folks live within a 30-minute drive of one Casino or another.  Government-sponsored gambling, in the form of lotteries, is legal in almost every State now.

By the way, why was gambling was illegal for so long in the US?  The answer is simple: Gambling did nothing to add to the bottom line of our country.  Rather than promote productivity, gambling only wastes capital and assets. The money spent building gambling casinos pales in comparison to the amount spent at the tables.  In terms of real job creation and growth, it is a false illusion.  It creates only dead-end and low paying service jobs.  Gambling destinations attract organized crime, prostitution, and drugs.  If you doubt this, spend some time on the Las Vegas strip - or better yet, a block off the strip.

And gambling ruins lives and families.  Since it caters to a part of the brain that triggers compulsive behavior, gambling can ruin a person financially.  Only people with the strongest of wills can resist the siren song of the shiny, loud casino.  However, like much of our society today, financially we cater to the lowest common denominator, and if someone wants to ruin themselves through payday loans, car leases, credit cards or compulsive gambling, then that is their "right" to do so.  Society has no right to interfere!

Just don't smoke while you're doing it, though.  That, we have laws against!

When you consider how anti-gambling our society was in 1965 or even 1975, it is amazing how the landscape has changed since then.  So long as a Casino can be said to be "good for business" or a lottery "helping the schools", then these forms of legalized gambling can be sold to the public.  I will not address the political implications of these actions.  It is the human suffering caused by gambling that is the subject of this article.

Gambling acts as a stupidity tax, which means that it is a tax on the poor.  And if you are not poor when you start gambling, you soon will be.  It is an unfair tax, in some ways, as it panders to the weaknesses of the human psyche, weaknesses that are often caused by more by chemical imbalances in the brain than by any moral failings. See my article, Are We Really In Control of Our Own Destiny?  As noted in that article, it has been discovered that certain chemicals, when given to people, cause them to gamble their life savings away.  It has less to do with self-control than with chemicals in your brain.

The mythology of gambling is shrouded in style and class.  Not a James Bond movie goes by without Bond, in his evening jacket, playing Poker or Baccarat in some elegant Casino, with stylishly dressed women sipping champagne or exotic cocktails.  The gambling industry plays up this angle, trying to cloak "gaming" (as they euphemistically call it) in a shroud of elegance and class.  If rich and sophisticated people gamble, it must be good, right?

The reality, as anyone who has been in a Casino knows, is that most people gambling are middle class or lower.  The mythology of the "high roller" coming to Vegas to gamble away a million bucks or more is just that - a myth.  The rich didn't become rich by pissing away their money on games or playing games with their money.  Most of the folks in the Casinos are regular folks, usually lower middle class or poor.

There are a number of forms of gambling, of course, and each has its own proponents and arguments why their form is a "good bet" compared to the others.  But in reality, they are all losing bets.

Wheel games are considered the ultimate sucker's bet.  These include the roulette wheel, the wheel of fortune type (or money wheel) vertical wheels, and the slot machine.  All of these games are pure probability.  You cannot put "English" on the wheel or otherwise alter the outcome.  Studying the wheel or machine cannot improve your odds.  For every dollar gambled on such machines, the house pays out less than a dollar.  Thus, over time, if you gamble on one of these fixed-odd machines, you will eventually leave with nothing.

This doesn't stop people from claiming to have "a system" for gambling with such machines. Slot machine mavens will follow you around the slots, and if you play a machine for a while and it does not "pay off", they will jump in behind you, convinced the machine is "due" for a payoff.  In reality, each spin of the slot machine, like the spin of a roulette wheel or wheel of fortune, is probabilistically independent from its preceding roll.  There is no system, period.

If you flip a coin 9 times and it comes up heads every time, what are the odds it will be tails the tenth time? 50/50.  Each flip is an independent event.  If you fail to grasp this, then you shouldn't play with your money by gambling.  Slot machine players would argue that the coin is "due" for a tails, as there was so many heads before.  But coin flipping and slot machines don't work that way.

Gamblers, of course, deny all this. They may gamble at such machines for a period of time and walk away with money on some days, and walk away without money on others.  They remember the days they win, and conveniently forget the days they lose.  If you gamble consistently, however, you'll lose, all the time.

(Note, of course, that cheating is one way to win, but probably not a very good idea when you consider that the casino might have ties to organized crime.  If you count cards at Blackjack, you'll be asked to leave.  Similarly, the idea that you can "figure out" the flat spot on a Roulette wheel will also fail, as the house will change the wheel once you start winning.  That is the ultimate irony of gambling - even if you did have one of these mythical "winning streaks", or if you could find a way to cheat, the casino would usher you out the door before you won too much!).

There are other games where your intelligence, and your interaction with others can help you win. Poker and even blackjack, have some interactive features which make it possible to "beat the house", although blackjack remains mostly a probability game.  In Poker, you can "game" your opponent and bluff them and win.  Thus, in an informal setting with friends or acquaintances, it is possible for a sharp card player to make money at poker.

However, for the sharp poker player, playing poker is anything but a game, and it is not gambling.  As I noted in another article, I had a chance once to meet such a fellow, and it was an education.  He lent me a book about playing poker, and I presumed it would tell me about odds of playing hands, card strategies, and things of that sort.

Surprisingly, the book was mostly about how to rope losers into games and keep them there, how to collect on gambling debts, and generally how to use psychology to make money from the game.  The book suggested getting your opponent drunk - making sure his glass was always full, while you drank watered-down drinks.  Once your opponents starts playing sloppily, encourage him to stay in the game, saying things like, "Well, you could always win it back in the next hand!"  So much for the "friendly" game of cards!

If that is your goal in life, to con others out of their money from poker, then go for it.  However, don't expect to be too popular a guy.  Eventually, folks get wise to your game and stop playing. In the old West, they'd shoot you.  It's not much of a life.

If you play poker with such folks, expect to lose and lose heavily.  They have all the cards (sometimes literally) and you have nothing.  They will play on your fears and greed like a violin, and fleece you for every nickel.  Needless to say, after losing a few times, I dropped out of "Poker Night."  There was no way to beat a card sharp like my friend.  And he was really no friend, as it turned out.

Being an amateur poker player is like being a new car customer.  The new car showroom is a machine designed like the slaughterhouses of old Chicago - designed to fleece the customer for his every last nickel.  Sharp poker players are the same way.  You may think you can outsmart the car salesman or the card shark, but odds are, you can't.  The only way to "win" is not to play in the first place, period.

(Casinos are also designed like slaughterhouses.  One casino in Vegas even had a conveyor belt to haul people off the strip and deep into the bowels of the casino, like cows to the butcher.  Once inside, you are assaulted with a cacophony of noise and lights and cannot even begin to think straight.  Start drinking, and well, you're done for.  Trying to get out of a casino is never easy, which is why fires, such as the MGM Grand, can be so fatal.  Exits are not clearly marked, as they do not want to encourage people to leave.)

Sporting events, such as football games, horse and dog racing, boxing matches, and the like are other areas where the law of probability might be trumped by experience or knowledge. Some racing fanatics claim they can study the racing form and figure out who will win a given race, based on the history of the horses, track condition or the like. The problem with sports betting is that a lot of other people have the same knowledge, and as a result, the odds are always set by what people smarter than you are thinking.

You can learn about the horses, or football players, or whatever, of course.  But such an investment in time and energy is not likely to be rewarded by the payoff.  And gambling of all sorts is a huge time bandit.  One friend of mine, who liked to "play the ponies" spent every waking minute at the track, when he was not at work.  He gambled away a fortune over the years, spending money on nothing other than his apartment, a Cadillac, and his meals and clothes.  He never married or had a family or did anything else. T he horses were his life. But he never made any money at it, despite the dedication of a lifetime to the "sport".

So, it is highly unlikely that you will be able to educate yourself enough to win at sports betting consistently.  And moreover, sometimes these events are rigged or fixed (don't act so surprised).  So even if you know all the odds and know all the horses, you can, and will likely lose most of the time.

Note also that the tracks and bookies are not operating these enterprises for free.  Each gambling enterprise has to take a percentage of the action in order to profit (and profit they do!).  So it is not enough to merely win a majority of the time - you have to win consistently and win big to offset the overhead costs.

Lotteries are, of course, a purely probabilistic game - and one with amazingly long odds.  For a dollar bet, you can potentially win millions. Of course, the odds of being hit by lightning are lower.  As in any form of gambling, playing a lottery ticket once in a while can be entertaining and exciting. But the problem occurs when this excitement turns into excitement addiction or a compulsion.

I've bought a lottery ticket on occasion, as a lark.  What is interesting to observe, is who else buys these tickets.  Most of the purchasers are very poor people, poorly dressed, driving run-down cars.  They look as though they can ill-afford to gamble.  And instead of buying one ticket, as I do, maybe once or twice a year, these folks are playing the lottery every week, or even every day, buying 10 or 20 tickets at a time - of all different types.  $20 a week, invested over time, could be $105,115.96 at retirement.  That's a sure thing - compared to a bunch of losing lottery tickets.

In terms of probability, the lottery is the ultimate sucker's bet, as the odds are long, and the State takes a huge chunk of the money - more than the Casinos.  Scratch games and smaller numbers games (e.g., Keno) have sprung up, which provide more "wins" of smaller pots ($5 to $20, for example).  These games pay off just often enough to encourage more playing.  However, if you keep playing long enough, you end up broke.  Lottery salespeople are encouraged to "pay off" winners of such games with more tickets.  As a result, even if a winner "wins" ten dollars, he usually ends up buying 10 dollars worth of tickets.  Eventually, all he is left with is a fist full of losing tickets and grey scratch-off under his fingernails.

What is sad about the whole gambling industry, is that most of the folks gambling can least afford to squander their money this way. To someone making $20,000 a year, spending even $1000 a year on gambling is a significant percentage of their income.  Gambling serves to keep the poor, poor.

Of course, gamblers have multiple justifications for gambling:

  • You get free drinks, meals, and even hotel rooms in Casinos: As the old saying goes, "there ain't no such thing as a free lunch." Any "free" comp'ed drink, meal, or room is more than paid for by your gambling losses.  If you add up what you've spent at the slots or the tables, you've paid for those "free" items many times over.
  • Gambling can be an inexpensive, affordable vacation: One friend of mine plays the nickel slots, on the basis that it is a cheap way to gamble.  It is a slow way to go about wasting $20, to be sure.  But over time, you are $20 poorer, and have wasted an hour or more in a dimly-lit, smoke-filled room.
  • Gambling losses are tax deductible: Yes, and winnings are taxable.  However, don't count on having too many winnings.  As I noted in other articles, never confuse a tax deduction with making money.  You cannot deduct your way to wealth and prosperity.  It would be better not to have gambling losses at all, than to have a deduction.
  • Professional Gamblers can make a living at it: The myth of the professional gambler is far overstated - very few exist.  While it is theoretically possible to make a living at gambling, it is not possible to do so with purely probabilistic games (e.g., slots).  And guess what? You'll never be a "professional gambler," so what's your point?  Of course, it helps if you can change the rules of the game, if you are a "whale" - but you aren't, are you?
  • Gambling can be fun, exciting and enjoyable: This is, of course, a subjective argument.  I found Vegas to be depressing, dirty, and full of runaways and hookers (often the same people).  It was exploitation of the human condition on an industrial scale.  The buildings were gaudy, tacky, and cheaply built.  Fun?  If you like spending hours in noisy, smoke-filled rooms wasting your estate away, then perhaps so.
  • Poker can be a fun way to while away the time: Marathon poker sessions in a smoke-filled room are the stuff of novels and movies.  In reality, spending hours sitting in a chair, drinking and smoking is about the worse thing for your physical health.  While Brad Pitt may play a poker player in the movies, the reality of the hard-core player is not the washboard abs and muscular physique.  Poker is the ultimate sedentary lifestyle game.

So what can you do to protect yourself from gambling? Here are some suggestions:
  • Don't fall for the myth of gambling as romantic or classy: If someone tries to hawk gambling to you as "fun" and "exciting", tell them the real truth.  If people stop believing the myth, they may be less inclined to get sucked into gambling.  Avoid people who talk up gambling, or at least let them know in no uncertain terms you are against it.  I let my friends know that I think gambling is for fools.  If they are offended, too bad.   But perhaps it may, over time, sink in. Set an example as a role model.
  • Just don't go: If a friend recommends a Casino vacation, Casino cruise, or a trip to a local Casino, find some excuse not to go.  Once you are aboard a Casino cruise, for example, you are basically trapped on board, with no place to go.  Most of such ships have no other actives to pass the time - not even a means of going outside and enjoying the ocean!  Many are nearly windowless.  Casinos themselves are windowless mazes of darkened rooms with flashing lights and noise, designed to trigger base emotions in your brain.  You cannot fight back in such stacked scenarios, so just don't go into the trap.
  • Limit your spending: This can be as difficult as advising an alcoholic to limit their drinking.   Casinos all have ATM machines now, and even banking facilities to allow "gamers" to access their savings while at a Casino.  I went into a Casino once, saying I would spend $20 on the slots and see what it was all about. $50 later, I finally realized that the whole setup was designed to make me want to gamble.  If you do go, take only some cash you want to spend, and leave your credit cards and ATM cards behind.  If you are not tempted to spend it, you might not.

But the best advice about gambling is to leave the risk-taking for other areas of your life. It never ceases to amaze me that people who will gamble at loser's games like slot machines (where you almost never win) will be very conservative with their personal investment and purchasing choices (where a little education and savvy can make you a winner most of the time).  A chronic gambler will drop thousands of dollars in a slot machine, but not invest in the Stock Market on the grounds it is "too risky".

Go Figure!

(Edited April 18, 2012)
(Edited February 21, 2014)
(Updated December 2020)