The Real Problem with Problem Gambling

The University of Nevada has hosted the International Conference on Gambling and Risk-Taking every few years for the past several decades. Increasingly prominent on the agenda is problem gambling, and I attend many of these talks, since there aren’t as many talks on the mathematics of gambling.

While some of the speakers discuss treatment programs, many of the talks, surprisingly, are about identifying and defining problem gambling. At the 2009 conference, a speaker who worked for Harrah’s stated that their biggest challenge in tackling problem gambling was that they didn’t have any method to identify a problem gambler. “Oh well, I guess there’s nothing we can do then!” [shrug of shoulders]That statement has to be the biggest lie in the history of casino gambling, beating out strong contenders like: “This is my last hand,” and “The key to winning is you’ve got to take care of your dealer.”

I’ll concede that Las Vegas is a special place, in the sense that it is a resort destination. There are quite a few tourists who come for the weekend, blow some money, have a good time, and go home with a story and a plan to repeat the experience in a few months. This is what we would like the casino industry to be, and what the industry execs, regulators, and lawmakers pretend it is.

As gambling has spread nationwide over the past two decades, most casinos are not resort destinations. Have you ever booked a weekend to travel to the Majestic Star, in Gary, Indiana (if you’re reading this blog, you probably have!)? Have you seen the long-running Cirque du Soleil show at the Casino Queen in East St. Louis? Have you eaten at the Michelin-starred steakhouse at Bear River in Northern California? Of course not! Who goes to those places? Locals.

And these locals are not the “savvy locals” mentioned in books. These are “degenerate locals.” Walk into a locals casino at 3 a.m. on a weeknight, and every person in there is a problem gambler. That’s how easy they are to identify. You need more convincing? Sit down and play with them for an hour. Any questions? I have pulled all-nighters at poker tables where guys were calling in sick at 8 a.m. Heck, that’s why they let you use your cell phone at the table!

At these casinos, all of the players and all of the staff know who the problem gamblers are, but it’s a “Don’t-ask-don’t-tell” regime. They pretend everyone’s having fun.

As for the Harrah’s claim that identifying problem gambling is so difficult, consider this: When Gary Loveman, a Harvard dude, took over Harrah’s, did he not make a massive attempt to optimize the whole Total Rewards system? The goal was to use sophisticated models to accurately estimate a customer’s annual value to the casino, even for new customers who did not have much play history. Harrah’s boasted about how well they could do this. Question: Has Harrah’s, or any other casino, ever used its massive database to run an econometric regression model with the goal of identifying the problem gamblers? Have they made any anonymized data available to researchers for that purpose

They will throw out numbers arguing that the percentage of problem gambling is quite low, but if you look at locals casinos nationwide, the percentage of revenue coming from problem gambling—using any reasonable definition of problem gambling—is way too high for the casinos to give it up.

Here’s a simple proof of that last claim. Have you ever noticed that casinos have credit-card-cash-advance machines? I’m not talking about ATMs, where you withdraw money from your own bank account. I’m talking about getting a cash advance on your Visa card—borrowing money to gamble. You’re going to get socked with interest up the wazoo, and the transaction fee is ridiculous! An advance of $500 will probably incur a transaction fee of $25 or $50.

Don’t we all agree that borrowing money at insane fees on a credit card is absolutely an example of problem gambling? There is no reason we should allow this practice, if in fact we care about problem gambling. State gaming regulators could easily disallow such cash-advance machines, just as the federal government has restricted banks on funding Internet casinos, or as many states have disallowed comping of alcohol, or as Las Vegas has regulated that strippers must keep one foot on the floor when providing lap dances.

If those cash-advance machines didn’t bring in money, the casinos wouldn’t have them. We know they’re lucrative, and deriving revenue solely from problem gamblers. So the existence of the machines proves that casinos and regulators don’t care about this problem. They’d rather get the money.

Their apathy is revealed in another way. Consider an AP, call him Neo. The casinos don’t want Neo to gamble. What happens when Neo is spotted gambling at Harrah’s? Security comes running. They back him off. They follow him out onto the street (or drag him in handcuffs to the back room). They figure out who his associates are. They send a flyer to all the properties in the area, or at least all their sister properties. Sometimes these flyers say “BOLO” on the top. They might even put Neo into a world-wide database, so that casinos everywhere can try to stop Neo from gambling.

Now consider Blue. Blue has put himself on the self-exclusion list because he is a problem gambler. At every casino cage there are brochures that mention how to do this, and what numbers to call to seek counseling. Now Blue is spotted at a casino. Does the casino send out a flyer throughout the region? Does the casino alert its neighbor “BOLO: Blue—not supposed to gamble! Backed off of all games. If he attempts to play, detain and contact security supervisor immediately.” Does Blue get put into the Griffin, Biometrica, SIN, OSN, or whatever other database is designed to thwart his play? Are local cops called in to intimidate Blue and violate his Constitutional rights?

The casino’s claim that it doesn’t have the ability to identify and thwart problem gamblers is completely bogus. Anyone on the self-exclusion list is a known undesirable. Could you thwart those gamblers? Maybe not, but you could try! Most APs cannot be stopped, either, but casinos spend millions of dollars trying. When it comes to the problem gamblers, where are the flyers, the pictures on the podium in the pit, the stares and whispering, the heat? Hmm, I see on this casino balance sheet that APs are under “Cost” while problem gamblers are under “Revenue.” Does that have something to do with it?

There are problems in the world that are solvable, but for apathy, and higher priorities. Even the dreaded Ebola has now been solved (cross your fingers that the new vaccine continues to work), partly because the latest outbreak bumped Ebola up the priority list. When you see cash-advance machines in casinos, and a complete lack of effort to shut down known problem gamblers, then you know that problem gambling will never be solved until we solve the real problem: Casinos are greedy and regulators don’t care.