Wednesday, July 9, 2008

When Gambling Becomes a Sucker's Game

I have no moral objections to gambling in general. As long as someone can afford to lose what they gamble and don’t have an addiction, it’s OK by me. But I do have a moral objection to the way some games of chance are offered to the public as I’ll explain.

The last time I put some money into gambling, I contributed to an office pool for a multi-zillion dollar Powerball lottery. As much as I knew it was a total rip-off with impossible odds, I could never live with myself if everybody else in the office got filthy rich and were able to quit their jobs, leaving just me behind. Highly unlikely, but I just couldn’t take the chance!

I still abstain from gambling mostly because I hate the idea of losing any of my money. But I fully understand that for many, it is a welcome fun break from the drudgeries of life. And I have to admit that I am fascinated by all of the blinking lights and sounds and excitement of the players enough to enjoy a walk through a casino — but not enough to want to place a bet.

But as strange as this may seem, although I do not play, I still enjoy reading and learning about different games of chance along with which ones give the best chance of winning and which ones give the least. After all, for those who play, it’s a lot more fun to win, right?

But when figuring out which game to play whether it’s in a casino or otherwise, one needs to first find out if the game is both honest and fair — which are not the same thing when defined here.

Honest means that there is no manipulation of the game like for example, loaded dice. This is what most of think of as sucker’s games. But in general, casino games and state lotteries can be trusted to be honest since they are so heavily regulated. Casino operators are already making good money so there is no need to risk getting caught cheating and lose their licenses.

Fair means that there is an adequate payoff to the player in relation to how much is wagered. Games can be honest while at the same time not be fair. Just about all games of chance are unfair for the player in different degrees since the game exists first and foremost to make money for the house. The players are allowed to make enough money to give them a delusion that this is not so. But when the game becomes overly unfair, then it too becomes a sucker’s game that quickly drains the money of its players. And this is where I have a moral objection.

To illustrate these definitions, you and I can play coin toss. Each time you pick the toss correctly, I will give you a dollar; and you will give me a dollar each time you are wrong. As long as we don’t have a way to influence whether it’s heads of tails, the game will be honest. But in this case, the game will also be fair since while there may be some lucky streaks going both ways, the laws of probability say that in the long run, neither of us will win any significant money from one other.

But let’s change the rules a bit. If you pick the coin flip correctly, I will give you 75 cents; but if you are wrong, you still pay me a dollar. I think you can understand that after a while I am going to make money out of this arrangement at your expense.

Hey, wait a minute, that’s not fair! Now you are starting to understand. In the first example we were just playing for fun; in the second example I am running the game with the intent of making money off of you — just like the people who operate the casinos and lotteries. The difference between me paying you 75 cents or a dollar for winning determines my house advantage (or house edge).

All games of chance have some house edge. Without it the people running the game cannot make a profit. But the larger this house edge gets, it more it becomes a sucker’s game where the player is quickly drained of his or her money with little real chance to win.

Check out the following simplified chart on various games of chance from this site. Just remember, the smaller the House Edge, the more fair the game is; the larger it is, the more of a sucker’s game it is.

House Edge (with proper play)

Craps, 1x Odds
Video Poker
Slot Machines, flat top
Slot Machines, progressive
State Lottery, typical

As you can see, the two most popularly played games, slot machines and the lottery are among the most unfavorable for gamblers!

Slot machines have different house edges depending how they are set up but the overall average is believed to be about 10% which means that slot machines are considerably more unfavorable for the player than table games like blackjack and craps. In fact, most gambling guides like this one will “…recommend that you don't play slots very much, if at all.”

But casinos LOVE slot machines! No human dealers are required. So hundreds (or in the larger casinos thousands) of these money collectors can do their thing tirelessly 24/7. But there is an even better reason for loving those slots and it has to do with that house edge. The more wagers that are placed, the more likely the house edge will result in the player running out of money. Unlike table games which take more time to place bets, players can feed slot machines machine gun style if they like.

Even more troubling is how governments love slot machines. Some places like Pennsylvania, have reluctantly agreed to allow casino gambling but ONLY slots since table games are more like real gambling and are presumably more immoral.

For years, governments had made gambling illegal in most places mostly based on morality arguments. So the average guy on the street who wanted to gamble found a bookie for placing his bets. Most popular was playing ‘the numbers’ where you picked a three digit number and got paid around 600 to 1 for a hit, usually determined from one of the closing bell stock index numbers that day. But in addition to being illegal and presumably immoral, this was an even bigger rip-off than casino games and often took advantage of poorer people who had no other forms of gambling available to them.

So our governments came to the rescue and gave us The Biggest Sucker's Game of Them All the state lotteries! Instead of the immoral scourge of illegal numbers games that paid 600 to 1 for a hit, you could now play The Daily Number (or a something with a similar name) and only get paid 500 to 1 which is apparently OK since after all, it benefits senior citizens or maybe the state’s general tax fund. Since then, state lotteries have added a mind-boggling choice of seductively packaged games to choose from. And to make it more convenient, some lottery games are even offered in vending machines! But the one thing these state lottery games all have in common are the very unfavorable odds for the player.

When I have walked into convenience stores, I have often seen people in line waiting to place a wager on a state lottery game. If it’s a relatively affluent neighborhood, it doesn’t bother me too much. But I have also seen lines of people in poorer neighborhoods who judging from the old ragged clothes they were wearing are wagering sometimes substantial amounts of money that could be better spent on necessities. But sadly, many of them are chasing that elusive dream of hitting the big payoff and a better life.

Especially when thinking of these poorer people we need to be reminded that gambling is a zero-sum game. To me, the moral issue of gambling is not black and white but rather shades of gray. All games that exist to make money must have at least some house edge that makes the game unfair to a certain degree for those who play them. But the higher the house edge is for the casinos or the lottery, the more of a sucker’s game it is for the players and thus more immoral. So while a lottery game with lousy odds may be doing a good thing with the money it brings in, it is balanced by the fact that the people who are playing it are getting screwed.

So what can we do? Especially in localities where slot machines are the only casino game option, the government regulating agency should ensure that these machines are set to provide a lower house edge, similar to what is offered at most table games. As a result casinos will still do just fine, thank you, and players will have more fun for a longer time and with more of an opportunity to quit while they are ahead or not too far behind.

And there is no good reason for state lotteries to be run with the terrible odds for the people who play them. If these lotteries need to rip-off the players in order to make enough money for their intended purpose, we need to rethink whether at least some of those proceeds should again be raised out in the open through taxes.

Let’s face it, gambling is here to stay. But whether our governments are directly running the games as in the lotteries or regulating others like in casinos or other games of chance, we have to speak out and demand that they Just Say No to Sucker’s Games!

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