You’ve been a good person all your life, you’ve eaten your veggies, always tipped more than 15% and hardly ever cheated on your taxes. So when you die, you fully expect to go to heaven. Instead, much to your surprise, you discover you’ve been reborn as a casino operator. Yeah, life’s tough, but what can you do? Make the best of it and figure out how to maximize your profits.
At first blush — you’re new to this racket, right? — you’re worried that some of your suckers, aka customers, are winning big, really big. How can you stay in business if folks keep walking out richer than when they walked in? That’s easy. You encourage them. You give your winners vouchers for free rooms, free meals, free everything. Because, once you’ve got the hang of it, you cotton on to the basic casino truism: winners are good for your business. They are, in fact, what keep you in business. You don’t worry about paying out winnings — $1,000 is chump-change for you — what you care about is that folks keep coming back. You’re in this for the long haul, and the law of averages is on your side. Over time, every $100 that goes into slots or onto the roulette table puts about $5 in your pocket. The only way you’re going to lose is if people stop betting. Contrary to the old music hall ditty, there never was, nor will there be, a Man Who Broke the Bank at Monte Carlo.
Of course, if you listen to the rubes as they leave your establishment, you’ll hear some of them complain: the wheel’s rigged, the deck’s fixed, the slots are manipulated, the jackpot winners are in the pay of the house. Which, of course, is nonsense. You don’t need to resort to any underhanded skullduggery. All you need do is keep the doors open and your profit is assured.
- Winners support the casino business in multiple ways:
- Seeing someone else win, a loser is motivated to keep trying
- Free advertising! Winners are your unpaid shills when they tell their friends about their big wins
- Winners come back, hoping to repeat their previous success
- Gamblers have a selective memory, remembering their wins more than their losses
- Winners are more likely to wager money they’ve previously won
Casinos are obvious beneficiaries of our species’ selective memory and other cognitive flaws, but it works just the same with big-time lotteries. Except, instead of leaving you with about $95 for every $100 “invested,” it’s more like $50. Without the free drinks and the company of other players. (You can read my lottery rant here.)
By the way, as a casino operator, you’ll be well placed to observe the gambler’s fallacy in action. You watch your guests playing roulette, for instance, when a long string of “reds” comes up. What do they do? Play black, of course! The longer the red string, the more money they’ll put on black. Because—law of averages—the more reds in a row, the more likely black is coming, to compensate, right? Wrong. Red or black, it’s all the same to the ball which, contrary to the strategy assumed by many gamblers, has no memory. Unlike, for instance, single deck Texas hold’em, in which a good player knows the odds of what the other players are holding. The roulette ball has an essentially limitless run, analogous to playing poker with an infinite number of decks.
You can also watch another foible of human nature, i.e. our irrational tendency to take bad risks at the wrong time. If a guest is winning, chances are she will bet more than if she were losing. Wrong strategy! A rational “Mr. Data” would place smaller bets when winning. It’s as if a winner considers her winnings as “free money,” Monopoly money that can be happily squandered. (I made my player female here, although males, especially young ones, are more likely to risk heavily. Want to get young men hooked on smoking? Tell them how dangerous it is, so they can prove to their impressionable peers how strong and brave they are.)
Sorry, I’m keeping you from managing your casino. Just stay away from the tables yourself — you wouldn’t want to be a victim of your own success.