The Ultimate Stupidity Tax (Part I).

Would you just throw money away?

I’m sure everyone would reply with a hearty “NO!” to that question. Yet, each year, people throw away hundreds of millions of dollars gambling. Some folks wonder why I am so against gambling. Others, who know a little about how the brain works and who’ve done the simple math of probability, don’t need to ask why. Put starkly, gambling is a form of “stupidity tax”. It takes money away from people too lazy or dumb to do the math, and transfers it to folks who have.

Gamblers, of course, don’t like to talk about probability. They just like to remember the rare days they win and conveniently forget all the days that they lose. But there’s no escaping the math – if you gamble consistently, you’ll lose, all the time. And if you consciously know you’ll lose money at something and then do it anyway, well my friends, that’s the definition of throwing money away!

It’s been said that gambling is a tax on the poor. It is. And if a person is not poor when they start gambling, they soon will be. But gambling is also a tax on those that are poor at understanding – understanding basic psychology and basic math.

Let’s take psychology first.

Gambling caters to a unique set of weaknesses of the human mind that succumbs to glitzy advertising, false imagery and natural biases. And when you combine all these factors, it becomes a siren song that stacks the odds completely against the gambler. As I like to say, the casinos don’t beat you, they just give you every opportunity to beat yourself.

Take the glitzy advertising. Casinos do a great job of marketing. They make gambling appear as a regular activity of the rich and sophisticated – think tuxedos, roulette and shaken martinis. Casino Royale!

But that’s the movies, not reality.

As anyone who has been in a casino knows, most people gambling are middle class or lower and they are more likely to be dressed in shorts and a Hawaiian print shirt instead of a tux. And for as much glitz as casinos have on the outside, they are nearly windowless mazes of darkened rooms with flashing lights and noise on the inside, all designed to trigger base emotions in your brain and deceive you.

Have you ever noticed that there are no clocks in casinos? That’s so you can totally lose track of time and gamble away all your hard-earned money. The same goes for the lack of windows. If you can’t see out of a window, then you can’t see that you have wasted the entire day throwing your money away.

The casinos also exploit a very common bias in us, something I call “memory convenience”. This is the common tendency we all have to focus only on good, unusual, or easily remembered experiences, while forgetting the bad, common, or less available ones. In other words, we conveniently remember the good and conveniently forget the bad, even if the bad is far more frequent than the good.

For example, hearing that someone has won the lottery sticks in our mind much more than hearing that someone has lost that same lottery over and over again. This explains why people put more money into slot machines that are in large groups, where they can hear and see signs that others are winning, rather than into lone machines, where they have no recent memory of someone’s winning. And people consistently do this, despite the fact that the odds are just as bad for the group as for the lone machine.

Want more proof?

When your favorite sports team wins, you’re probably more likely to say “We won!” When your favorite sports team loses, you’re more likely to say “They lost!” See the bias? Your brain associates with winning and quickly disassociates with losing.

There’s also a pattern bias that casinos take advantage of. Our brains like patterns and systems for understanding things that are complicated and complex, like probabilities and odds. However, this normally good brain activity betrays us in a casino, because we start to look for patterns.

For example, slot machine jockeys will continue to put more and more money into a losing machine because at some point they become convinced the machine is “due” for a payoff. In reality, each spin of the slot machine, like the spin of a roulette wheel, is probabilistically independent from its preceding roll.

Gamblers seems to think that the machine has feelings and should make the average of past losses “come out right.” But in reality, the machine does not remember past losses and has no obligation to even-out the number of losses that have come before.

There is no system, period. If there was, don’t you think everyone would know about it by now?

When you walk into casinos you are walking into a war zone, where the battle is for your mind. In fact, casinos have done extensive research into every conceivable psychological technique they might apply to induce the gambler to stay longer and to bet more… until it’s all gone.

Take the gambling chips. Why do you think casinos use chips? They are a subtle manipulation to make gamblers feel like they’re not losing actual money, and to make them feel more like it’s just a game. It’s a lot easier to throw that chip down as a bet than it is to see your Andrew Jackson lying on the table, about to be scooped-up and placed into the casino’s coffers. Some dealers are even instructed to give change in the smallest denomination possible, as those have been shown to most likely encourage more betting!

Alright, I’ll put away the dentist drill away for now. If you’ve read this far, I think you get the point that the psychological odds are stacked against you in gambling. But what about those other odds, the mathematical odds of gambling?

That’s the subject of the second part of this post. Tune-in next week for the conclusion of this post as we explore the startling statistics behind gambling. It’s been said that gambling is the surest way to make nothing out of of something. After reading the second part of this post, you’ll never want to gamble again.

Be free. Nothing else is worth it.