by Some people rise from poverty to affluence through gambling or playing the lottery. So why do people tell you not to gamble, even though you hear many gambling success stories? And does the house always win? Here’s exactly why you’ll lose money gambling.
Contents
Casino Games
Heard of the mantra “The House Always Wins”?
It is a cute, succinct mantra but it is not 100% accurate.
If you go onto any casino website, you’ll see a list of winners.
Sheldon and Angela won a $98,432 Quick Hit Platinum.
Norman won a $14,000 Willy Wonky Progressive.
Yix won a $15,045 Double Jackpot 777.
Source: Graton
There are some winners, so technically the house doesn’t always win.
However, for every winner, there are many, many losers. The House may lose on occasion, but over the long run it wins and it wins big.
It is not luck or coincidence that allows casinos bring in billions of dollars of revenue every year.
The House doesn’t always win, but it does as a whole, and over time.
So a more accurate mantra would go like this:
“The House always wins in the long run”.
You Are Designed to Lose
How does the House always win in the long run, you might ask?
It’s quite simple. Every single casino game is designed to give the House an edge, with the exception of single deck Blackjack (even odds).
Roulette provides the House a 5.3% advantage. That means that for every 100 rolls, the house will beat you 5.3% more than you beat them. For every dollar you bet, your expected return is -5.3%.
Craps provides the House a 1.4% advantage. This translates to a -1.4% return on your investment.
Slots provides the House a 5% – 10% advantage. You can expect a 5-10% loss on your investment.
In other words, you’ll lose money gambling when playing casino games.
My Personal Experience
One weekend during my senior year of college, my friend and I visited Morongo Casino in California to hit up the blackjack tables. Each hand had a $10 minimum. After a few hands, I was down about $50. But my luck quickly turned around. I was winning hand after hand. I was doubling down. After several winning streaks, I left the casino ahead $300. It was an incredible feeling. $300 is a lot of money for a broke college kid! My friend on the other hand lost about $200. How did I outperform him? Was it luck? Did I make better decisions? I’ll never know. But that night, I beat the house and it felt amazing!
About a month later, we decided to visit the casino once more. I thought if I came up $300 last time, there should be no reason for me not to do it again. I figured, I’m just as smart as I was last time, if not smarter! After the first few hands, I lost money quickly. First down $100, then a recovery to down $50, and after a few quick losing streaks I had lost then entire $300 I brought with me, as well as $40 in my emergency stash. I lost it all. The House always wins, in the long run.
That night taught me a valuable lesson. I’ve all but steered clear of casino gambling, with the occasional wager of $5 or $10 here and there just for kicks, but never in the hundreds. I hastily realized that no matter how smart you think you are, or how lucky you think you are, the House ALWAYS wins in the long run.
Sports Betting
Even when it comes to Sports Betting, the House always wins in the long run.
Just think about it, why would so many casinos host sports betting only to lose money?
Check out the NFL odds for a few games on 12/13/20.
Let’s examine the first game, KC Chiefs vs. MIA Dolphins. The point spread is 7. You can bet on the Chiefs to win by at least 7 points. You’ll notice the number -114 in the point spread column. That means that if you make this bet, you’ll have to pay $114 for a chance to win $100.
You can also bet on the Chiefs NOT to win by at least 7 points. If you do, you’ll have to pay $107 for a chance to win $100.
The House will adjust the point spread to get the same amount of money in wagers on both sides. That means for every $1 on one side, there will be close to $1 on the other side.
Let’s say there are two bettors. One bets 114 on the Chiefs, and the other bets 107 on the dolphins. The house collects $221 in total. It doesn’t matter who win or loses, the House will always pay out $100, plus the original $100 wager, but keep the $21 as commission. So regardless of the outcome it will almost always make money.
Lottery
Think you have a good shot at winning the lottery? Think again!
Your odds of winning the lottery are extremely small. Your odds of getting struck by lightning or being attacked by a shark are MUCH greater!
Much like casino games and sports betting, the expected value on each lottery ticket is negative.
Business Insider calculated the expected value of the Mega Millions lottery and determined an expected value of -$0.71 for a lump sum payout and a -$0.89 after-tax annuity payout. Ouch!
Source: Business Insider
But You’re Smarter Than Most People?
If most people lose money gambling, but you’re smarter than most people, then maybe you stand a chance?
Probably not.
Research conducted a phone survey and found that 65% of Americans surveyed think they are smarter than average. Source: Real Clear Science
We tend to overestimate our abilities. Another study found that 88% of the Americans surveyed thought they were better than average drivers! Source: Smith Law Co
We all know that if skill was distributed fairly evenly, where the average is smack in the middle, then roughly 50% would perform better than average and 50% would perform worse than average.
So where does this overconfidence come from?
Illusory superiority is a condition of cognitive bias wherein a person overestimates their own qualities and abilities, in relation to the same qualities and abilities of other people. Source: Wikipedia
No matter how good of a gambler you think you are, or how smart you think you are, just remember that it is confirmed FACT that the house has a built in advantage in BY DESIGN. The House is designed to win. Every gambler is designed to lose.
More Ways to Lose
Comps
Casinos provide comps (complementary items) to some players to encourage them to gamble.
The most basic comp includes free drinks. Nearly anyone who sits down to play at a casino can get free drinks.
Higher rollers, those who wager much more money on their bets, may receive even better comps including free rooms, parking, meals, and shows. Some extremely high rollers can even get free airfare, limo rides, cash back, even private jet service! Source: Wikipedia
Wouldn’t Casinos be bleeding money by handing out all of this stuff for free?
Not necessarily. It is all part of a casino’s strategy to extract more money out of you, or get their money back.
For example, if you lost $30,000, the casino will lure you back with free perks to get you to come back in hopes you’ll lose another $30,000!
If you won $30,000, the casino will lure you back with free perks to get to come back and return the $30,000. The casinos know that with their house advantage, they will get their money back over the long run.
Lowered Inhibition from Alcohol
As mentioned earlier, drinks are the most basic comp available to almost any player.
Drinks are the lowest cost way for the casino to do two things: Keep you comfortable, and lower your inhibitions.
Whatever you’re thirsty for, the casino’s got it. They can bring you water to keep you hydrated and comfortable. They can bring you Jack Daniel’s on the rocks to keep the excitement alive and the energy flowing.
Have you ever tried gambling after a few drinks? It’s not a coincidence that you start losing money quicker when you’re drunk! Why? Because alcohol lowers your inhibitions. You spend your money more freely. You make decisions based on chance and feeling lucky. You deviate from the appropriate game strategy. You’re more inclined to open your wallet because, hey, you’re having a good time! #YOLO! All of these lead to you making poorer decisions and losing more money. This gives the House an even bigger advantage.
The gamification of gambling
Casinos want you to think that gambling isn’t risky, but rather a fun game!
Gambling is risky. But gaming is fun. After all, who doesn’t enjoy games? Computer games, board games, and football games are all associated with fun, not risk.
That’s why casinos reframe the language to call it gaming rather than gambling.
Don’t be fooled. Gambling is exactly that, gambling with your money. Every bet you make is a gamble, and one with a negative expected return.
If you’re not careful, you may be attracted to the bright lights, the colors, the sounds, the fun themes, all to entice you to play more. Just know that the more you play, the more you’re likely to lose.
Putting it All Together
The casino industry makes billions of dollars every year and it’s no coincidence.
Anyone can get lucky over a few hands or a few games, but over the long run, the House has an advantage on Casino games, sports betting, and the lottery. The advantage covers not only their overhead, but also a profit.
Casinos entice gamblers to play more and thus lose more by offering comps, lowering their inhibitions with drinks, and making gambling seem less risky and more like a fun game.
If you want to gamble, then that is your own decision. Good luck… you’ll need it!
But also understand the risks. You WILL lose money gambling. Because the House ALWAYS wins in the long run. If you want to instead grow your money, you’ll have a greater chance by continuing to invest in the stock market through dollar cost averaging.
2 thoughts on “Why You’ll Lose Money Gambling”