I’ve known a few people with gambling problems. Some research indicates that 4% of active gamblers develop a problem.
A gambling problem is never good. Observing their gambling issues stimulated my interest in the psychology of gambling and how it affects those people.
More interesting is how the same psychological traps that gamblers fall into also affect business decision-making in a broader sense. There is a wider application than just the “controlled” setting of gambling games.
Decision theorists have developed an entire field of study called Game Theory that, in part, looks at this. Applying game situations and their related learning to non-gambling decision making.
Gambling games in casinos, by definition those based on chance, are designed and managed by extremely sophisticated professionals to draw in gamblers so the casino (gaming sponsor) can make money.
Gambling sponsors treat gaming as a deadly serious business and bring in the best available experts to advise them on how to win. Most gamblers treat it as entertainment. Entertainment is probably the best way to look at the activity. Who can win in such a situation – where someone else controls every variable affecting the long-term outcome.
Any individual that thinks they can outwit the casino/game sponsor, in the long run, is wrong. There are very limited exceptions for a small number of extraordinary individuals who practice and study the game relentlessly for a long period of time. Card counting in blackjack is one example. See the movie “21” for an example of what it takes to beat the gaming sponsor in blackjack. It’s extremely difficult. And that movie understates what is required.
There are only two other exceptions, not including dice (craps), roulette, slots, etc.
Don’t think you can win consistently over time playing someone else’s game.
A brief mention of degenerate gamblers is probably appropriate here. These are people who enjoy the risk without paying attention to the reality of the odds/probabilities. Or who engages in gaming without adequate preparation. It is emotionally driven.
An example would be being drawn into a random dice game while walking through a casino. Or increasing the size of a bet while losing. “Chasing” prior losing bets. And other examples.
A dead giveaway that someone has a gambling problem is when they admit to gambling, but claim in the long run they ‘break-even”. No one breaks even in the long term. The probabilities don’t allow it.
Upon entering a casino you become a citizen of a domineering surveillance state. There’s some perverse comfort in that simplicity. Like windows and clocks, ambiguity has no place there.
There are clear rules. As long as you follow them, you are in good standing with the gaming provider. It may resemble an Orwellian nightmare, but Orwell never had the experience of lucky streaks and likely didn’t even imagine the sophisticated psychological manipulation that a casino/gaming provider utilizes.
I think it is fair to say that if a person is being “comped” for a room or a meal, they are engaged in degenerate gambling. Casino management calls this behavior “degenning.” The same phenomena occur in business decisions too.
I am reminded of a story. I was visiting Las Vegas for a computer industry trade show many years ago. On checking into the hotel, the hotel staff said they don’t like computer people and their trade shows. I asked why. They said computer people don’t gamble. I replied that computer people have taken too many probability courses in college and know better.
Another funny saying about gamblers I heard as a child. Gamblers often think they can beat the odds by using a “system”. But the joke among gamblers is that “The casino can take all my money but they will never get my system!”. No one is going to beat the house.
What use is all of this on a blog essentially about business topics and decision making? Gambling and games, its specific games and psychology, offers good lessons on business decisions. It’s so good, that a whole field of behavioral psychology grew up around it.
My opinion? Don’t play someone else’s game, where they set the rules and the environment where the game is played. Know what the rules and probabilities are in any game. Mathematical illiteracy has a cost.
The following posts will discuss how this can be applied to business decisions, which is simply another situation of decision-making under uncertainty. Except the uncertainty is not in such a controlled environment and stacked against the decision-maker – that’s you.
