First things first, I’m not a gambler. I don’t have any moral objections to it, but I have some logical problems with it. Casino games, all of them, are set up so that the casino, the House, always makes money. On the slot machines about 93% of all the money fed into the machine is returned to the winning players. In blackjack you have about a 49% chance of winning if you play optimally. Those sound pretty good but in fact they mean the house gets 7% on average of all the money you feed into the machine and in blackjack you lose 2% of the money you bet, on average. If you play a lot and don’t cheat you’ll most likely lose money, just like most lottery players. Of course since the odds are far better than a lottery you’ll win fairly often. And like the lottery some people will be lifetime winners. But in the long run the House wins a lot of money and the players lose a lot of money, otherwise the casinos would go out of business.
I’ve had trouble keeping in touch with my old college buddies because we all ended up in different states. One guy though, Jeff, has off and on been my fishing partner over the years and he’s wanted us to get together with our spouses, who have never met each other. He gambles at the casinos a lot, and I mean a whole lot. He’s an engineer too and understands the odds and the smart bets much more than I do. Because he plays a lot he gets free rooms whenever he wants and he suggested we all meet in a Gulf Coast casino town. My wife and I were a little skeptical about how much fun we’d have as non-players, but the relationship is important so it would be worth it. Plus the seafood is outstanding all along the coast and we’d at least have that to savor!
We met and the hotel was very nice, the rooms run about $500 a night on weekends, if you have to pay for them, but for us and for him and his wife they were provided free of charge. The food was awesome, just incredible, so that was fun. The first night I ran through the free ten dollars I was given by joining the casino’s membership program and five of my own dollars at slots. That took about five minutes and after that we just watched Jeff play blackjack. I know the blackjack rules and most of the rules of thumb on how to play smart but I didn’t play the first night. The second day we hung around the pool and the beach and ate more incredible food. After that I told him I’d commit $200 to play blackjack. So he and I sat at table with four other guys and played for a couple of hours. The minimum bet was $15 a hand but the maximum was much higher, I think it was $2,500 on a single hand of cards. I always bet $15 but some of the other guys bet as much as a thousand dollars on one hand!
I expected to lose because of the 49% thing. But surprisingly I was up two hundred dollars after awhile and ended up winning $232 for the night. Not a huge amount at all, but better than losing. It pretty well covered our share of the food for the two days but not our gasoline for the six hour drive there and back. And it was fun. I am no more likely to go to a casino and do this again than before but I do see the way it captivates people. Every time I won a hand that $15 dollars in chips the dealer stacked in front of me released a shot of dopamine into my system and I felt a tiny little rush. If I blackjacked (was dealt an Ace and a face card or a ten) I won three dollars for every two in my bet, or $22.50, I’d get an even bigger rush of excitement. As my stack of chips grew I pulled my original $200 off to the side to insure I wouldn’t lose that and just played with my winnings. When my winnings topped $200 I pulled those off to the side so I would insure I won at least that much. You can take an engineer to a casino but he’s still an engineer, after all.
As this mini-vacation and reconnection with my old buddy and his new (to us) wife went on there were some odd things going on in the stock market that had far more impact on my net worth than my gambling. The day we arrived our net worth was at an all time high, the next day it dropped by $15,000. During that time I had lost a total of $5 at the casino and felt worse about losing the five dollars than I did about my portfolio losing fifteen thousand! What was that all about? And the next day it came back to exactly where it was before it fell, so on paper I made $15,000 back. But that day in the casino I won a little over two hundred dollars and I was ecstatic about it!
Something was clearly different about the way I “lost” and “won” in the stock and bond markets and the way it worked in the casino. The five dollars I lost and the two hundred and thirty-two dollars I won at the casino are tiny amounts compared to the fifteen thousand bucks down and up that my portfolio experienced at the hands of the stock market. Yet the pain and joy of the relatively tiny casino game outcomes felt much more significant than the five figures I lost and then won back on Wall Street.
Over the last fifteen months my net worth has increased by well over a million dollars due to the recovery from the March 2020 crash. Yet I lost seven hundred thousand in that crash in thirty days. I’m only partially exposed to the stock market so neither of those amounts really threatened my net worth, but still, those are mind boggling numbers to me, years of what we spend in living our lives. Yet I would rank both of those as having stressed or thrilled me just about the same amount as my teensy little slot machine loss and my slightly larger blackjack win this week. Which is to say I didn’t get particularly excited about any of them. That’s both a good thing and a bad one. The good thing is that I’m never likely to panic over stock crashes because I’ve lived through so many of them. The bad thing is that I enjoyed winning at blackjack and can maybe barely begin to understand how gambling addiction ruins so many lives. Its a drug, and the thrill of that natural opioid (dopamine) hitting your blood stream when you win is overwhelmingly more of a rush than the mild depression that comes from losing.
We know financial behavior is largely emotional and that most of us have made emotionally driven money mistakes many times in the past. We are human animals and it is what we do. I tend to think as a logical professional engineer that I’m above that. I overestimate my ability to be rule based in my behavior instead of emotion based, and you probably do to. I’d have never realized how good it felt to win at gambling versus how neutral I felt watching hundreds of thousands of dollars go in and out of my portfolio if the two things had not happened simultaneously. To me it is a cautionary tale, day trading on Robinhood, the lottery, blackjack and slot machines will eventually take your money. Investing in low fee funds or dividend stocks and diversifying your portfolio will eventually make you wealthy. But your emotions will lean toward the gamble and the chance of the big win, even if your logical mind tells you its a sucker bet. My advice, gamble if you want, with strict limits you can afford, for fun. But invest in the most boring way you can devise, for wealth.
What about you? Do you casino? How do you limit your losses, or do you?
Do you have experience with someone who has a gambling addiction? I do, not Jeff, he’s fine, but one of my former employees. It was pretty tragic how it controlled his life.
Do you think day trading is like blackjack or is it just as legit as index fund investing?
My wife and I like to gamble sometimes. We pass through Vegas a couple times a year on road trips. It’s more about the food, pools, people watching, etc. but gambling is part of it too.
Like you, I am way more sensitive to the volatility in our tiny gambling dollars vs the volatility in our massive stock market dollars.
It is odd but apparently I’m not alone in feeling gambling wins and losses more acutely than market wins and losses. I think part of it is knowing you will always win in the market in the long run, but there is no assurance that long term you’ll win back your losses from wagering.
I have similar feelings. At casinos, I actively seek $5 BJ tables and refuse to play $15 tables. But when I gamble on individual stocks (which in total will only be up to 10% of my portfolio) only a bet of $5k or more gets me excited. It’s because the expected values of these bets are different so my bet amount reflects this. In BJ when I expect to lose, I make it up in entertainment value but the $5 tables give me the same high as the more expensive ones.
I would have played a less expensive table but $15 was the lowest they had, they had $25 tables too and I stayed away from those. I think you are being smart.
hi steve. i’m not a casino guy but did go to vegas a couple of times for reasons like yours. once was for a wedding and the other for an event with my buddies. the 1st time i walked away about a grand to the good and the 2nd i lost a few hundred i think. that said i will gamble on some horse racing after living in a town that has the best horse racing in the country (saratoga). it’s fun when you learn to read a racing form and really handicap a race. even with all that i’m down to about 4-5 horse gambling days a year lately. the belmont stakes was on tv yesterday and i just watched it with interest and didn’t make a wager, for instance. while i have cashed 4-5 tickets in the thousands over the years i have no illusion of beating the house. it is entertainment and fun to be right and if i win i’ll buy something for the house. once i replaced our old stove and fridge and once bought a new sofa before i gave the money back.
that’s funny what you mention about the markets. my stock portfolio can be a little volatile and i remember one day it being down 70k mid-day and finishing up ONLY down 20k. the funny psychology of days like that is feeling like you were ahead. well done on your disciplline to take money off the table and walk away with some meal money.
Hey Freddy, I have a lot of friends who like the horse track. We’ve got one not too far away in Hot Springs Arkansas but I’ve never been. Oddly my wife, who was born and raised very near the track also hasn’t even been.
In Vegas or anywhere drinks are free to gamblers, I like to post up at a cheap table and have a few beers. This way, if I lose $50, I can rationalize it as simply spending an expensive $17 per beer (which I do at the ballpark!). It is funny that any VTSAX losses (the largest portion of my net worth) doesn’t bother me a bit, but if I lose a couple hundred bucks chasing Dogecoin spikes I am distraught. Money psychology is very interesting!
I did like the free drinks! But it was pretty crowded and the service was fairly slow. But free is always good, especially the free rooms!
One casino I frequent (not anymore, I haven’t gambled in years now, sadly) harasses me when I go.. When I play blackjack, I don’t wanna talk to anyone but they send multiple pit bosses to watch me play in person. I hate it.
I’ve won $20k from gambling in six months one year. It took me one month to give all that back and then like $4k more.
It’s a good thing I only use fun money for gambling. Casinos also really hate it if you’re winning a lot and they’re a relatively small casino. The big ones didn’t even care when I won $11k in one night from them.
I fully understand that I am at a 2% disadvantage. It’s a good thing I know how to control myself when it comes to gambling.
I agree fun money, entertainment money is the right way to gamble if you want to do it. I’ve seen first hand what an addiction looks like in a friend, and it is pretty awful.
Is there a backstory without revealing their identity?
One of the guys who worked for me, brilliant guy. Best troubleshooter I ever saw. Brave and honest. But his life was a mess. He made six figures but gambled it all away. He was smart, but addiction doesn’t care about IQ.
I love how you summed it up in the last two sentences. Nothing wrong with gambling if there are strict limits, but usually getting wealthy is pretty boring. I see all the crypto and day trading stuff the same way. And I feel like an old lady raining on people’s parade when I just roll my eyes at all of it. But all the get-rich-quick, FOMO, and associating dopamine hits with money just stands to hurt so many people. For whatever reason, the masses don’t share your skepticism and self-discipline, and they end up broke and featured in sob-story news articles. I wish we did a better job as a society of encouraging people to get their dopamine rushes from hiking tall mountains, running marathons, or any number of other activities that are more of a win-win. But nice job striking a healthy balance, having a great time with friends, having some fun, and staying aware of all the crazy stuff your brain was doing the whole time. Fascinating stuff.
Hey, you can’t be an old lady, you are still just a kid! I’m with you, except I never got that fabled “runner’s high” from any of my many marathons. Unless you count the relief I felt when I staggered across the finish line. I think for people subject to getting hooked on gambling its like substance abuse, you keep having to increase the amount to get the same kick. It is sad and scary.
I was curious to know what your gambling friend’s net worth is? Or… what do you think it is? I’ve known a few “Vegas” gamblers, and their decision making is poor. I mean… by default… if you believe you’re going to come out ahead over your lifetime gambling in Vegas, you are a fool (excluding some card-counters and poker players).
I’m not sure what Jeff’s net worth is. He is a chemical engineer like me so he’s making six figures I’m sure. He’s 66 and they both drive expensive German luxury cars in addition to having a new and very nice F150 pickup truck with lots of fancy gadgets in it. But he’s been through a nasty divorce and had some tax issues so I’m guessing he doesn’t have a big nest egg. He is talking about retiring soon, but like most people he doesn’t talk much about his financial standing. He swears he is way up lifetime gambling.
A while back, I read a story about how a lot of people would walk across the street from, for example, one store that sells packs of gum for $1 to another store that sells the same packs of gum at half the price. But far fewer people would walk across a mall from one store that sold $500 suits to another that sold the same suits for $490. I think the same principles are at play to some extent with the gambling. Maybe the dopamine hit from a higher percentage discount equals the same hit from a gambling win. Also, I wonder if, for similar reasons, even a lot of index find investors bolt from their investments—in part or in full—if the fund drops by some “high” percentage over the course of a short period of time (a day/few days/few weeks). And unless they’re fanatics or at least regularly track their funds (which I suspect is a small percentage of people), absent crazy bad things happening related to the investments of those funds and that command the headlines of local, national, and international press, they probably aren’t paying any attention to them.
I think you are likely right. I didn’t start tracking my net worth or accounts until I started thinking about retirement. I have no idea when I accumulated my first million. But now with Personal Capital app on my phone I check it every day. That’s kind of fun in the market environment we’ve had since the March crash in 2020, but if we ever hit a large and lengthy bear market it won’t be fun to do that anymore.
I really don’t like casinos, and tend to avoid at all costs. I think it’s the fact that there are so many people inside them losing money they can’t afford to lose. I struggle to even commit $100 to gambling when I’m there, because I know the odds aren’t good and I feel little-to-no optimism that I’ll win. I guess that’s a good mentality. Regarding massive swings in the market, I subconsciously know that ‘the market always comes back,’ therefore the paper losses on any given day aren’t locked in (by selling), and I know it’ll just take some time for it to correct. At the casino, on the other hand, once it’s gone, I’d be throwing good money after bad in order to try and gain back my losses. Maybe that’s why it feels different?
Adam, upon reflection I think you nailed it. A paper loss in my Personal Capital app isn’t real, because I’m not selling anything, and my long history has conditioned me to see market dips as normal and as having no lasting impact. But taking money out of my wallet is quite real and there is no likelihood, in fact it is a statistical improbability that I’ll ever win it back at a casino.
People try to equate the stock market to gambling but they are not the same.
DP, you are absolutely right, as Adam pointed out below too. The stock market is a positive growth creature. No matter what happens today if you keep investing you will always grow your wealth in the long run. Casino gambling is the opposite, if you play long enough you will lose your money in most cases. The stock market multiplies money, the casino shrinks it.
Sounds like you and your wife had fun at the casino with your friends, which makes it well worth the tiny cost!
As for the $15k swing in your net worth, it sounds like you’ve simply adopted a proper long-term view of investing 🙂
Thanks, I chalk it up to having lived so many decades. After never selling during/after a crash several times it seems normal. But for younger folks that’s very hard to do, because you just don’t have the history to lean on. Nothing teaches like personal experience. Thanks for commenting Froogal!
I definitely enjoy gambling and going to Las Vegas. I’m heading back there in 2 weeks actually. We usually go twice a year and it’s been over 1.5 years since we’ve gone, due to covid, so we’re quite anxious to go. Gambling is entertainment and we treat it as such. We’ve got a budget and stick to it. We get free drinks and free food for a couple of days, so any loses can be viewed as paying for those.
I think day trading is more like playing slots than blackjack. It’s pretty much completely random.
That’s a great perspective. Most of my friends who gamble more than I do have that same take. Its fun entertainment, and they do not expect to win all the time because, well, somebody has to pay for it. Day trading, yeah, that is like slot machines except you can lose more money even faster!
Fantastic perspective Steve, thank you for sharing. I’ve seen a few friends fall down the gambling addiction rabbit hole. I don’t blame them too much, because I know if I exposed myself to gambling as much as they did, my emotions would take over. The key is to set limits on yourself. Great article.
Tyler, so much of life hinges on knowing yourself and not walking into situations you are not equipped to control. Smart people, like you, are destined to succeed because you put yourself in a position to win in life and avoid situations you might not be able to control. It is easy to blame people who are addicted gambling. But having seen it in a friend I know he’d give anything to make that go away. He just can’t, or couldn’t, I have not seen him in years. I hope he found a way out.