No Dice – Why the House Always Wins

I used to do bits and pieces of stand up comedy.  I was pretty good when given the right audience but decided not to pursue it as I didn’t have the ‘stuff’ required to deal with ‘regular kickings’ that every comedian has to deal with. One performance has always stuck with me though; I was at an open-mic night in Sydney and asked the room to put their hand up if they spent $50 or more on gambling and after some coaxing…

“1,2,3,4,5,6,7,8, 8 hands, 8 people spent more than $50 a month gambling.  “You are the people that make the Casinos the majority of their profit.” a small laugh followed, “No really, people spending $50-$150 a month make up about 80% of Australian profit” I give a double thumbs up “Fun Fact” that too received a chuckle. “Again, just out of curiosity how many of you would say that over all, you are either up money or have broken even?” Hands would be raised “1,2,3,4,5,6,7” I paused for dramatic effect “and 8” I paused again, this time with a faux perplexed look on my face, another small laugh broke out in the crowd. “See the people that laughed there, those are the people with a basic understanding of arithmetic” another slightly larger laugh would follow. I tried the joke a couple of times but it never quite landed. I like to tell myself that this was because my audience was not smart enough but it probably has more to do with the fact that I’m not nearly as funny as I like to think I am. 

On the positive side, I really like that story. 8 people who are all spending in excess of $600 a year, all of whom are almost guaranteed from a statistical stand point to be down money, believed that they had either broken even or were up money. Now I know what you are thinking

“But Buck, do you not think that it was likely that those 8 people may have felt pressured to put their hand up the second time? Maybe they were aware of their losses but were not comfortable admitting that to a room full of strangers, did you think of that Buck? Did you?”  

Yes, I did think of that, thank you very much. In a survey run by the UK Gambling Commission, they found that among people what had gambled in the last year, when asked why they had gambled, 59%  answered “to make money” and 83%  “for the chance of winning big money”. If we just ignore the fact that 83% maybe are aware of how astronomically small their chance of wining big money is. It’s the almost 60% of those that see their gambling as an investment that I am interested in. As an experiment, next time you are talking to a friend that regularly gambles, (doesn’t matter whether its lottery or slot machines), ask them if they think they are up or down money; they will invariably tell you that they are slightly up, have broken even or some of the more honest cases, slightly down. The UK’s Gambling industry is estimated to make around 2.5 Billion pounds in 2015, so something isn’t right here.


The Von Restorff effect

Now every gambler is different and what drives one might have no effect on another.  It’s complicated and I make no claims to having any expertise or hold any deep understanding on the matter (or any other matter for that matter), but one thing I imagine would play a part would be ‘The Von Restorff effect’. The effect takes its name from psychiatrist and pediatrician Hedwig von Restorff. The idea is quite simple, it states that we recall the peculiar quicker than we will recall the mundane. The famous example being that if given a shopping list with one item written in green pen, we are far more likely to remember that item, this could play a part. I once asked a friend about his gambling habits and before he could finish the sentence he was telling me the story of the night that he had won 300 euros betting on a Chinese ladies badminton match, something that is much easier remembered than all the single euros spent on lottery tickets and spare change lost in fruit machines. I suppose it makes sense, it was probably more important for our ancestors to remember the bush with the fruit that made them violently sick than the twenty that didn’t. 

The Von Restorff effect (also known as the isolation effect) and other types of cognitive biases were very useful to our ancient ancestors, though they seem to almost work against us in the 21st century. As our knowledge of how the brain works (and doesn’t work) has grown, the advertising and gambling industries have noticed and have had no problems exploiting this new information as best they can. Slot machines are designed to remove your money slowly, and modern machines no longer make any noise when you lose, just to make the experience even less pass-remarkable. Now, compare that to a win on the machine: bells, whistles, flashing lights and all topped off with the extremely satisfying noise of coins colliding with the metal collection plate (it’s always metal). Just add a hit of dopamine and you’ve got all the ingredients for a good time or a life crippling addiction.

Probability, big numbers and the concept of a random and chaotic universe are difficult

When you tell someone that their chance of picking the correct lottery numbers is 1 in 13,983,816, you will quite often hear the response “Well someone has to win”, the problem I think, is that when we hear the number 13,983,816, we don’t actually hear 13,983,816. What we hear is “Big Number”. There is no emotion attached to it, just this feeling-less sense of largeness, my gut says nothing to me about that number. Now compare that to the feeling I got the day I picked my first lottery numbers.  I had just turned 16, I stood by the lottery desk mulling over the ticket with a pen in my hand, picking out the special numbers. For some reason it was important that the numbers were special, (birthdays, numbers of siblings, that sort of idea), being careful not to pick numbers that were too close together and making sure that I didn’t have too many odds or evens. The ticket felt special, it felt like a winner. It wasn’t.

I will agree that lifeboats are good
I will agree that lifeboats are good

Number are pretty new, they likely didn’t come into real use until about 4,000 years ago with the first cities and even then only used by a small number of people.  Even the idea that the universe is random and with out cause or purpose is one that I think we all find counter-intuitive. Feelings on the other hand have been with us since before we were ‘us’.  Feelings have weight and without a basic grasp, critical thinking or an appreciation of our own flaws and biases, they are very difficult to argue with. As the cliché goes “We are the heroes in our own stories” and eventually the hero will win, we tell ourselves.  Those gut instincts have, after hundreds of millions of years of evolution got us here, but those same instincts are now being hijacked by advertisers and every other brand of charlatan and our only defense is to be aware of it. A defense that which can falter, even I still find myself occasionally (very occasionally) hand over a spare £ for a scratch card, cause you never know, it could be me.

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