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The absence of feedback always leads to losses

Australians love a wager. That might sound like a statement of the obvious – after all, we’ve all heard the old saw about two flies crawling up a wall. But it obscures the fact that Australians really like a wager. According to market research, the annual spend per adult per year on gambling is around $1,200. That’s way higher than any other nation on the planet. 

The fact that is getting lawmakers, regulators and welfare groups hot under the collar is that this number is on an upward trajectory. The advent of online casinos made gambling more accessible, and attempts to block them by the regulator are an exercise in futility.

hen there are the specific circumstances of recent months. With lockdowns caused by Covid-19, the popularity of real money gambling that allow players to win and lose money anywhere has only intensified.

Playing in the dark

The more people gamble the more they lose. It’s a simple, mathematical fact, but one that gamblers everywhere, not just in Australia, find it very difficult to grasp. That’s partly because humans are notoriously bad at assessing risk in terms of probability.

Let’s look at a simple example – the question of our own mortality. Consider the following four ways a young, fit and healthy person might suddenly die:

  • Plane crash
  • Contracting Covid-19
  • Abducted and murdered by a psychopath
  • Car crash

The car crash option is exponentially more likely than the other three, and is by far the most common cause of people dying young. Yet the average person is far more fearful about the other three. 

When it comes to gambling, we have a similarly poor grasp of the probabilities. Partly, that’s down to a natural tendency to remember one big win better than 10 small losses. But it is also due to us failing to face the commercial reality of what a casino is and what it does.

RTP and the house edge

A casino is a business, just like a shop or a hairdressing salon or a restaurant. Any business has one primary objective – it needs to make money. In the case of a casino, that means taking enough money in wagers to cover operating expenses such as wages and overheads, plus winnings that it pays out to customers. Then it must have enough left over as a net profit to satisfy the board members and shareholders.

When you look at it that way, it is obvious that a casino has to take more money in bets than it pays out in winnings. Yes, there will be some gamers on any given night who make a profit and others who make a loss, but the latter will outweigh the former, or the casino will soon go bankrupt.

Likewise, and even more crucially, a player might be a winner on some nights and a loser on others, but over time, once again, the latter will outweigh the former. 

We can even calculate how much a player will lose. Every game pays out rewards that are stacked to incorporate a house edge. The easiest way to understand this is to envisage a game that involves the toss of a coin. It’s an even-money bet, but a casino might offer a 95 cent payout on a dollar bet for either heads or tails. This equates to a five percent house edge, sometimes expressed as a Return to Player (RTP) of 95 percent.

Every game has its own house edge / RTP. For European roulette, the house edge is 2.7 percent. Slots vary from around 95 percent RTP to 99 percent. It is all programmed into the machines and the figures are available online if you just search for them.

Let’s assume you wager $20 on roulette every night. One night you might walk away with a few dollars profit, another day with a loss. But the more nights you play, the closer you will come to an overall loss of 2.7 percent. It is a mathematical certainty and there is no way around it. 

Casting some light on gambling 

Most gamblers understand this. They treat casino gaming as a leisure pursuit that has a cost attached and see any occasional win as an unlooked-for bonus. However, those are not the people about whom bodies like the Department of Social Services are concerned. 

Problem gamblers are those who either expect or need to beat the odds. And for them, shining a light on the mathematical realities could be hugely valuable. That’s why they have conducted lab trials on apps that show a gambler how much he is really winning or losing over time, using basic charts. 

The next step is to trial the technology in the real world. It won’t create an overnight change and solve all ills, but anything that leaves gamblers better informed about what they are doing can only be a good thing.