Gambling: The Pipe Dream Payoff

"One more roll, and I'll get it all back."

Everyone gets mildly addicted to something. For some people it is gambling. Square foot for neon square foot, the casino is the highest density den of absorption—and vice—known to man. But a casino is just the racy poster girl for a multibillion-dollar industry that flourishes from the office betting pool to the PowerBall jackpot—anywhere we defy logic and statistics in pursuit of an easy payoff. Gambling plays on at least two human universals: the urge to get something for nothing and the difficulty of giving up that dream, no matter how high the stakes or the odds against it.

Winning vs. Recouping Losses

For most of human prehistory, living through the night was not a given. For this reason, goes the evolutionary hypothesis, our ancestors learned to take what we'd now consider murderous chances in pursuit of food and mates. Those who continuously gambled and won became our forebearers, passing on a taste for the "off chance." The possibility that a big score could be just around the corner, but you never know where or when you'll hit on it, parallels modern gambling: One more rock overturned and you find dinner.

When you start losing, the darker side of that equation asserts itself: "One more roll and I'll recoup my money" becomes a formula for huge losses. No one is exempt. Remember the Barings Bank fiasco, in which the Rolls Royce of British banking was felled by a lone trader who kept making bad bets on derivatives, desperate to dig himself out of a hole? His gut overrode his training. We're all vulnerable to this risk instinct, the feeling that "I can and must recoup my losses."

When Risk Pays

For our ancestors, it was actually risky to avoid risk altogether. Sometimes the next big score really is just around the corner. If you find an edible critter behind one in 50 rocks, your foraging pays off, especially when the terrain is safe.

In this case, one in 50 is excellent odds because you're in a low-risk, potentially high-yield situation. It's sort of like online dating: Meeting 10 people for coffee is not a huge imposition, especially since you could be finding your future partner.

Playing the slots is designed to feel similarly risk-free, but in reality it's high-risk, low-yield, at least in the long run. You're practically guaranteed a net loss and have only the slimmest shot at the jackpot. Another disadvantage: Gambling doesn't teach you anything new, whereas the risks our ancestors took for survival had a steep learning curve—after overturning four dozen rocks, you've identified some helpful patterns.

An F in Finance and Statistics

Money is a relatively new concept for the human species. We learn about it the way we learn to read or play the piano—with effort. For most of us, money makes scant intuitive sense. We understand trade, but fiat value eludes us. A diamond is vastly more valuable than a cup of water, until you're dehydrated. So which has more "value?" We learn to contextualize money because it's not natural to think in mathematical abstractions.

As bad as we are with money, we're worse when it comes to statistics. High risk is linked to high yield in our minds, because risks like staging a coup or making a power play are often worthwhile. But what about wagering double-or-nothing? Gambling upends the natural correlation between high risk and high yield. Losses quickly add up, but the gains don't increase accordingly, though we're likely to think they do. That's because we're notoriously bad oddsmakers.

Even mild proficiency in statistics requires study. Flying is safer than automobile travel; more than twice as many people lose their lives in car accidents each year than have died in the entire history of air travel. But the shock from a single plane crash evokes awe, whereas the tallies of auto fatalities put us to sleep. Same with gambling: Two percent interest earned on our checking account does not hold a candle to the lights, bells and riches of a casino jackpot. We're drawn to the more astonishing event, regardless of its probability.

Stakes at an All-Time High

Today, you can pad from your bed to your computer in your furry slippers and start clicking away your funds at 4 a.m. Online gambling is the ultimate example of the high-yield, low-risk paradox. A virtual casino is practically barrier-free, so it seems risk-free. In fact, it is low-yield and high-risk. Further, it contains even more unknowns (the state of security, unfair practices by the house, collusion among players) than casino gambling. As the advent of the Internet makes clear, gambling itself is evolving too quickly for us to catch up.

Wagering Wisely

• Beware of the tendency to tell yourself that you must recoup your losses. This drags you further into the hole and perpetuates the obsessive aspect of gambling.
• Argue with the instinct that you can beat the system by reminding yourself of the statistical realities.
• Place restrictions on your wagering before you get sucked in. The rush you get from
  gambling is fun and often legal, but beware of your judgment while in the zone. Leave your credit card in a safe place and
  do not let it into the casino.
• Your risk instinct generally operates below the level of
  conscious awareness. Make
  your self-talk about the fun of gambling conscious—so that
  you control the gambling, rather than the other way around.
• If these suggestions don't help, place it all on 21 Red (I have a hunch). No, make that 21 Black.