What Happens in Vegas: Notes on the Psychology of Gambling

If the house always wins, why do the players continue to play?

Posted Jul 03, 2020

Pixabay
Source: Pixabay

To a psychologist, the casino offers several fascinations. Casinos are intentional environments, designed for a purpose. The purpose is to take your money and make you feel good about it. This is no easy task. To succeed, the casino environment must exploit human psychology. And it does.

First, by shunning clocks and windows, the casino disrupts your sense of time. We use time cues to organize our days and evaluate our behavior. In their absence, we are trapped in an endless present. If time doesn’t pass, then it’s never time to go home. The varied sounds and colorful sights excite our nervous system and keep us awake. The cheap alcohol reduces our inhibitions, including the inhibition we have about spending money.

In most entertainment venues, you give your money away in return for some entertaining product or service—a book, a show, a drink, a meal, etc. In a casino, giving away your money is the entertainment. What it buys you is an internal, psychological event—a fantasy. You think you’re getting a chance to win big. Considering the odds, however, you’re actually paying for a chance to lose. Human beings are not very good at understanding and weighing odds. Once the odds are above zero, however slightly, they resonate in our minds as meaningful. The gambler’s enthusiasm about the tiny odds of a win is akin to the anxious person’s dread regarding the tiny odds of a calamity.

The prototypical casino game—the ‘one armed bandit’ slot machine—is an emblematic example of human factors engineering. A foundational law in learning theory—the law of effect—in essence contends that a behavior that is rewarded will be repeated. In other words, we all follow the reward. Yet how we follow the reward will depend on how the reward is presented. The slot machine rewards you on what psychologists call a ‘variable ratio’ schedule, which means that you get rewarded after an unpredictable number of responses (in this case, lever pulls or button presses). Unlike a ‘fixed ratio’ schedule, which rewards you every set number of responses, the variable ratio schedule is uniquely resistant to extinction, which means that a behavior rewarded in this way is difficult to stop.

It makes sense if you think about it: Under this schedule, you know that the reward is linked to pulling the lever (rather than, say, merely time at the machine), yet you’re unsure how many pulls will be needed to get the reward (as opposed to a fixed schedule, in which that number is set, and known). Thus, you can tell yourself after every pull that the next pull will bring the reward. This notion—that the big one is just around the corner—keeps you going indefinitely. It is known as the gambler’s fallacy.

The fact that the reward is theoretically just one more try away, coupled with a prominent structural feature of the slot machine—how two out of the three pictures often come up identical—facilitates the ‘near miss effect,’ which makes the player feel as if they are “almost winning” rather than losing, thus further compelling continued play.

Moreover, our brain is not equipped to accept randomness. When presented with random chance, we’re compelled to engaged all manner of storytelling to impose some order on it—lucky numbers, superstitions, rituals, charms and the like. The brain is a meaning-making and problem-solving machine. When faced with randomness, it’s compelled to stick around and discover the order underneath.

Further, humans are short-term thinkers and notoriously loss-averse. One way to ward off the psychological experience of losing in the short term is to keep on playing. Playing, then, manifests as a solution to the problem of losing while being, in fact, the root of it. 

Another appeal of the casino is its frankness. A casino is about money. It is designed to indulge our greed in the raw. This is satisfying for us because normally, in the course of civilized life, we are not allowed to express or act on raw desire. We must consume the things we covet in processed, modified, or neutered form, under the cover of some respectable alibi. In polite company, even if you’re hungry, you have to mind your manners; if all you want is sex, you still have to feign an interest in the conversation; if you’re after money, you have to wrap it in some sales story about values or service.

Freud had long ago noted that in constructing the group project of civilization, we give up some measure of raw, selfish, sensual gratification. A part of us is frustrated by the need to always modulate our passions; dress them up in socially accepted narratives; force them into considerate channels of expression; wait patiently and ask nicely. At the casino, there’s no pretense and no hiding what you’re after. The casino is for greed what the strip club is for sex, and what the buffet is for gluttony—a chance for raw, selfish, sensual gratification. It’s no accident that Vegas is known for all three.

While casino players dream of big money, casino operators are making it. At the casino, the house always wins. It does so by ensuring that enough players will lose so as to allow the house to pay the few big winners and keep the rest as profit. We accept this model for the purpose of our entertainment, but what if we applied it to more consequential areas of life?

Thought experiment: What if we decided to use the casino model for the purpose of funding our retirement? Instead of saving for retirement, we’d all play the casino regularly throughout our lives, with the idea that one big win would finance our golden years. You can see the problem. The casino model is not a good approach to financial planning because if we adopt it, most people will be left with nothing. Thus, we understand that when it comes to important life functions, the casino model is lacking.

Yet this is true only if you take the perspective of the players. Things look quite different from the perspective of ‘the house’—the people who own and run the game: So long as enough people continue to play, and lose, for the hyped but scant hope of ‘making it,’ the house will continue to win.

If you’re ‘the house,’ all you have to do is sell the people on the story that everyone can win big, but only if they play, and play hard. Then, you parade a constant trickle of big winners by and celebrate them, telling the mesmerized losers that in order to win they need to redouble their effort, commitment, and loyalty to the game. Then you sit back and collect the fruits of their labor.

Does this story sound familiar? If it doesn’t, it should, since we’re increasingly living it.

Consider the foundational American narrative of ‘rags to riches’. Fantasies of upward mobility undergird the American ethos, and success stories are celebrated incessantly. Our screens are teeming with successful beat-the-odds celebrities, come-from-behind businessmen, and up-by-the-bootstraps entertainers, creating the illusion that such stories are common, an effect related to the ‘the availability heuristic.’ Yet the rates of social mobility in the U.S. have been declining steadily for years. The U.S. is not even in the top 20 of socially mobile countries. Most young Americans will neither outearn nor outlearn their parents. Contrary to the myth, the American poor tend to stay poor, and the rich stay rich, or, more recently, become vastly richer.

In effect, our current economic system increasingly sells the fantasy of upward mobility via the mythologizing celebration of billionaires, success stories, and ‘sharks,’ keeping many Americans believing.

What happens in Vegas is happening everywhere.

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