A few years ago, I did some work for casinos in Las Vegas and elsewhere.
Casinos are interesting businesses. Essentially, they provide a strange value proposition – give them your money and they’ll give you some of it back. Occasionally, they’ll give you more, but usually they’ll hand back a fraction of what you gave them. And that’s it. No other service is provided, no goods change hands.
Casinos depend, in many ways, on people making irrational choices. Everyone walks into a casino thinking that they’re going to win money, even though they also know the games have been set up to prevent this from happening. Everyone knows the house has the edge, so the house depends on making everyone forget that for a short time while they gamble their money.
What this means, practically, is that casinos have mastered the art of subtle manipulation – of enticing the players to enter, to play a few minutes longer, to gamble a few more dollars. The casino depends on the first law of manipulation – a small shift multiplied by a large number of people translates to a large stake.
So how do they do it?
Most of the legends told about casinos and how they manipulate patrons are ancient. The old story about there being no clocks in casinos, for example, is true, but with cell phones in every pocket, who cares? The casinos, though, have become adept at using much more modern techniques to manipulate patrons, and they don’t need to resort to pumping oxygen in the air, either.
Consider slot machines, for example. They are the bread and butter of the casinos, making up 70% of the average casino’s revenues, and taking up roughly the same floor area. From primitive mechanical machines, they are now jewels of manipulative engineering. Consider some of the great innovations of the modern slot machine:
– It converts cash to credits. On a modern machine, you never gamble cash – you gamble credits. This was a great innovation when it surfaced. Why? Because, psychologically, people find it easier to gamble (and lose) a “credit” than a dollar bill, and as a result patrons tend to gamble significantly more when they are dealing with credits than with cold, hard cash.
– Modern machines are programmed by computers to pay out a certain percentage of their receipts. If a machine is set to pay out 80% of its receipts, for example, it will pay out 80 dollars for every $100 it receives. By law, in Vegas, the minimum payout is 75%, but entire consultancies have been built on tweaking the exact payouts of machines. The trick, of course, is to return enough to a player so that they keep playing, but not enough that the machine does not provide enough of a return to the casino. So the casinos have used tactics such as programming some machines to pay out a carefully calculated mini-jackpot every – a jackpot that makes people very happy, but not large enough for them to cash out. They also tweak some machines daily or weekly to be ‘looser’, surrounding those machines with slightly ‘greedier’ machines – people tend to be encouraged by winning machines, and keep on playing their own, believing that their machine ‘is due’ anytime soon.
– On a similar point, nowhere on a modern slot machine can you see your odds of a payout. This is odd. Roulette, for example, has very simple odds – so does craps and many other games. But a slot machine will advertise maximum jackpots, or trumpet how many combinations will give a win, but nowhere will the actual odds of a payout be shown. And each machine has a multitude of settings that ensure that even the software that runs a machine at hand cannot be used to calculate the actual payout statistics of a machine.
– Slots machines are approachable. Look at one: Seriously, how cute is that??Everything about a slot machine is carefully considered to entice someone to use it. Think about it for a second – why would anyone play slots, with a house edge of 10% or more, when other games, like craps, blackjack or baccarat offer odds that are almost 10X better?
The answer is that most casual gamblers are simply afraid of approaching a baccarat table, or even to join a blackjack game. A slot machine, on the other hand, is easy to approach and laughably understand to understand. Look at the big red lever on the side – can you get simpler? For that matter, can you resist pulling it? Look at the bold colors, the bright lights, the large lettering: everything in a slot machine is designed to encourage someone to use it, and to provide a safe haven to players that are intimidated by a blackjack or craps table.
– Players who play slots fall broadly into three categories – the addicts, the casual players, and the impulse players. Addicts are players who spend hours on the same machine, playing several days in a row or very frequently. Essentially, these are players who have hit machines that are perfectly tuned to their inner comfort zone: the machine pays out often enough to provide a thrill, yet is stingy enough that the player always re-ups and never walks away, thinking that the ‘big one’ is just around the corner. Once a player with lots of time and money finds a machine that matches his particular psyche, he can easily become an addict.
The casual players want to go to Vegas to gamble, but are afraid to approach the more complex games. They want to have a good time with a minimum of fuss, and slots are perfectly suited for them to spend a few hours on. Here, design is key, and familiarity can be a key advantage – this is why so many slots are branded with more familiar media properties – Betty Boop, Who Wants to Be a Millionaire, Kiss, or any other name that a casual player would recognize. The more comforting and known the property, the better.
The final category is the impulse player. If you come to a casino with $10,000 to spend, you are likely to focus on roulette or some other high-stakes game. But when you leave for the night, with a last $20 bill in your pocket – how hard is it for the casino to convince you to drop it in a slot machine?
It turns out, not hard at all. This is why casinos spend a great deal of time planning the slots layout – which machines are located where? There are several factors that impact the layout: the casino generally tries to position the slots that are best at drawing casual players near the high-traffic areas: bathrooms, exits, bars, and entrances. Roulette players will find the roulette tables no matter where you put it – slot players need to stumble onto a machine rather than seek one out.
This is another reason why slot machines come in so many denominations. You can play slots with $100, $10, $1, or even $0.05. So the layout of slots in a casino is meant to attract the attention of players that may only have a few dollars in their pockets. Different patterns are used, but the basic idea is that slots of different denominations are laid out over the casino floor plan, covering all the high traffic areas and gradually drawing in players from low denominations ($0.25) to higher and higher denominations.
– Did you know that, in the US, casinos can refuse to pay out a slot jackpot if they claim the machine was malfunctioning? This is tricky. Basically, once a jackpot is won, the casino can examine the machine and, if they decide to, they can claim that the machine was malfunctioning for some reason, and refuse to pay out the jackpot. Nevada laws (which are largely quite casino-friendly for obvious reasons) allow the casinos to claim all sorts of malfunctions – from hardware to software to network errors – to refuse to pay a claim. Slot machines are quite complex now, so an engineering fault can be very hard to argue with (especially since a casino typically has a better legal team than a vacationing couple from Florida).
Casinos tend not to do this all the time simply because of the bad press, but it happens much more often than people realize. Casinos typically prefer to not pay out large jackpots, and so any jackpots that are above a certain level will attract a lot of scrutiny from the casino, and the machines will often be found to be “faulty” just after paying out a big jackpot.
This is a US thing, by the way – in other jurisdictions, if a casino puts a machine on the floor, it is deemed that the machine is in working condition and that a jackpot has to be paid out, even if the slot was actually broken.
This is also why, by the way, casinos ask a lot of innocent-sounding questions to jackpot winners – they are looking for a reason to disqualify them. Are you underage? Disqualified. Did you swear or use foul language? Are you drunk? You could be disqualified at many casinos. In fact, even saying the wrong words can disqualify you from claiming your winnings. Of course, the casino doesn’t monitor players for these behaviors – just winners. And each one of these disqualifications saves the casino millions, while they can claim, legitimately, that they are ‘just following the rules.
– Finally, as some have discovered, some machines stretch the very definition of gambling. In many slot machines, once you win a small pot, the machine offers you a chance to double your winnings: typically, it shows a number from 1 to 10 and offers to double your win if you can guess if the next random number will be higher or lower. Let’s say the machine shows a ‘2’ – you’re likely to bet “Higher”, since you think you have 9 chances out of 10 of winning (only a 1 can sink you).
Turns out, though, that for many machines, the outcome is pre-ordained. The machine’s programming has decided that you will lose, and will manipulate the last number to make you lose: if you chose Higher in the previous example, for example, the machine will produce a 1. If, for some reason, you chose Lower, a 7 would have been produced. You never had a chance to win, in other words, which is against the very definition of gambling. As a wise machine once said, “the only winning move is not to play.”
Casinos do a lot more than deal with slot machines, but since slot machines account for so much of their revenues, a lot more attention is spent on manipulating slot players than any other. It’s ironic that so much thinking and planning and engineering has gone into manipulating the poor slot players rather than the rich, high-stake rollers at the roulette or craps tables…