Casinos: Bound to Lose

Winning money sounds quite like a dream, and millions chase it. There are numerous ways to chase money. Some easy, some hard; some long term, some short; some ethical, some not; some with high risk, some not so much. The choice of picking your path to money, whether to save or invest or spend, requires rational calculations. But humans aren’t always rational, are we?

With the global market reaching a value of nearly $465,763.9 million in 2020, having increased at a compound annual growth rate (CAGR) of 2.1% since 2015 and expected to reach $674,703.9 million in 2025 at a CAGR of 7.7%, it is indicative that we are collectively quite irrational; since the profits of casinos are nothing but the cumulative losses of the players. The gambling industry openly survives on the irrationality of human beings.

Gambling dates back to the Paleolithic period, before written history. There are various shreds of evidence that indicate that it’s been a thing since the dawn of humankind and ancient texts like Arthashastra also include mentions about gambling regulations. What was started off as a lottery game has now evolved to myriad forms of sports betting, puzzling poker games, extensive lotteries and fancy casinos, all of them even expanding to virtual settings in the contemporary world. Not all gambling games are chance-based i.e. based on pure luck, some happen to be skill-based and are influenced by one’s experience and abilities.

Welcome to the Casino

One enters a casino expecting the unexpected, wanting to be the next Archie Karas, who turned his $50 to $50 million at a poker table in Las Vegas. Sounds like a dream everyone would want to live, but, you wouldn’t want to live his following nightmare where at the same poker table he lost it all.

Casinos include a mix of chance-based (like slots and roulette) and skill-based (like poker and blackjack) games. Whatever one plays, it starts off with hopes and optimism; and it is not necessarily from the inside, but also triggered by externalities provided by casinos. All businesses aim to keep their customers happy and casinos are no different, they aim to flow as much dopamine as they can in the brains of people who are blinded by the money.

The environment and ambience are set perfectly to achieve the target. Confusing pathways, hard to find exits, absence of clocks and windows are not put together by an incidental architect but are deliberately designed to cut one off from the outside world. The layout places services like restrooms and counters on opposite ends so that would be prompted to stop and play en route. Some casinos also spray scents, pump pure oxygen and even pheromones in air systems to provoke aggressive gambling behaviour. Solely the “pleasant” smells created an increase in the revenue by about 50% in a couple of casinos. The vibrant and bright lighting, colourful and vivid designs, with catchy music always on contribute to sensory cues. Scientists from British Columbia found that people made riskier decisions and were less able to interpret information about their probability of winning when exposed to such cues. A lot of theories associate colours with moods and so, casinos primarily pick red and yellow, the warm tones that are supposedly good at stimulating the brain to act. If all this isn’t enough to keep one hooked, casinos also offer freebies and ‘comps’ which stands for complimentary. These include drinks, food, passes for events, hotel stay and more if you are a high-roller. Whatever they spend, they make plenty more from the same customers they treat.

The House Always Wins

Breaking down all the math, the odds of all games are always in favour of the house. Whatever game one picks, probability indicates that you will lose. Even playing more won’t increase the chances of winning since every time you play, the math is against you. In fact, a study published in the Journal of Gambling Studies stated that “the more hands a player wins, the less money they are likely to collect, especially concerning novice players”.

While playing on a slot machine, the odds range from 1 in 5,000 to about 1 in 34 million chance to win the top prize, even when the maximum coin play is used. Yet, people continue to play since they overestimate their chances of winning. There is established literature that argues that individuals are not good at assessing small risks and that these estimations are influenced by a number of factors (Tversky and Kahneman, 1974). A similar outlook is seen in people towards overestimation of the likelihood of terrorist attacks or plane crashes.

This establishes the ‘Illusion Of Control’ where they tend to believe a certain level of control lies with them, even with pure luck-based games, which in reality is not true. ‘Near-misses’ and ‘losses disguised as wins’ contribute to this illusion. Near-misses, as the name suggests, happen when the outcome is close to the jackpot like if a horse you bet on came second. Such instances make the player believe that they are close to winning and gets them to play again. Losses disguised as wins occur when there is a reward, but it’s lower than the amount staked. So ultimately it’s a net loss, but it gives the individual a feeling of accomplishment and the visual cues in machines give sound and visuals the same as an actual win. Numerous studies have also analysed how little things like picking one’s own cards and throwing the dice also add up to this feeling of control.

A customer account supervisor at one of the largest gambling companies in the world revealed “With the 21st-century technology the gambler does not really know what’s going on and behind the scenes, all this math going on that analyses the betting and ensures that the company wins. It will always win.”

Problems and Ethics

Gambling is found to trigger the same reward circuits in brains as done by drugs and so, getting in a neverending spiral of gambling, ultimately leading to gambling addiction isn’t rare. Pathological gamblers keep chasing money in order to get back what they have lost and experience withdrawal symptoms upon trying to stop, similar to a drug or alcohol addict. Gambling addiction has contributed immensely for gambling to be considered a vice. Moral and ethical questions have been raised towards casinos and the gambling industry in general, mostly in terms of addiction, but also about the very foundation: in order for you to win, someone loses. A question was revealed from a customer-service job interview in an online casino company. The interviewee asked whether the candidate had issues working in an industry without a moral compass and remarked that one would have to throw their ethics out the window because that’s what this kind of work demands.

Although today, more and more countries are legalising gambling and casinos due to economic benefits including the potential revenue the industry can generate, the employment opportunities it manages to bring and the tourism it can attract. With regulations, awareness, government interventions, setting up of control authorities, the industry can work on its ethical concerns. But one has to keep in mind what lies behind the flashy lights, how algorithms are developed for you to lose. If you can understand your odds right, it might be fun to go for a casino night!