The Magic Economics of Gambling

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  • Published: 30 October 2018
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    References:
    [1] statista.com/statistics/253416/global-gambling-market-gross-win/
    [2] annualreports.com/HostedData/AnnualReports/PDF/NYSE_MET_2017.pdf
    [3] twitter.com/wendoverpro/status/1054533498722111488
    [4] nber.org/papers/w18237.pdf
    [5] twitter.com/wendoverpro/status/1054533837328281600
    [6] twitter.com/wendoverpro/status/1054534236642795522
    [7] its.caltech.edu/~snowberg/papers/Snowberg-Wolfers%20Risk%20Love%20or%20Decision%20Weights-NBER.pdf
    [8] football-data.co.uk/blog/favourite_longshot_bias_tennis.php
    [9] economix.blogs.nytimes.com/2010/06/02/the-bp-spill-and-the-favorite-longshot-bias/
    [10] ac-els-cdn-com.ezproxy1.library.usyd.edu.au/S0167268114002194/1-s2.0-S0167268114002194-main.pdf?_tid=6aac86b2-7e4a-46d0-bf4d-5ab70e8db750&acdnat=1540355242_b9bcf6d0549207112968a3467b39a9a0
    [11] hbs.edu/faculty/Publication%20Files/08-061_17c22e32-fe06-4b4a-8b5e-e09227fc8104.pdf
    [12] commissions.leg.state.mn.us/ladder/120511prizelinkedsavingsFAQs.pdf

    Animation by Josh Sherrington
    Sound by Graham Haerther (Haerther.net)
    Thumbnail by Simon Buckmaster

    Special thanks to Patreon supporters
    Alec Watson, Andrew J Thom, Braam Snyman, Bryan Yip, Chris Allen, Chris Barker, Connor J Smith, Daddy Donald, Etienne Dechamps, Eyal Matsliah, Hank Green, Harry Hendel, James Hughes, James McIntosh, John & Becki, Johnston, Keith Bopp, Kelly J Knight, Ken Lee, KyQuan, Phong, manoj kasyap govindaraju, Plinio Correa, Qui Le, Robin Pulkkinen, Sheldon Zhao, Simen Nerleir, Tim Robinson

    Music by epidemicsound.com

    Select footage courtesy the AP Archive

Comments • 2 433

  • Krik
    Krik  6 days back

    Best gambling qoutes on Instagram @gambling_circle

    • Prateek
      Prateek  6 days back

      This video is filled with inaccuracies. Behavioral economics is difficult to grasp intuitively, but you made some pretty incorrect analogies there

      • Lewis Gray
        Lewis Gray  1 months back

        200/1 odds returns 201 for each dollar not 300. 6:43

        • Saadman Yasar
          Saadman Yasar  1 months back

          The House Always Wins

          • ХОРОШО
            ХОРОШО  1 months back

            Casinos not just sell loses, it sells entertainment.

            • J L
              J L  1 months back

              I didn't hear mention of entertainment being a motivation for patrons. I know I will lose money gambling but the thrill of winning has a value to consumers.

              • cormac23432342
                cormac23432342  2 months back

                1$ at 200/1 does not return 300$. It returns 201$

                • Paul Page
                  Paul Page  2 months back

                  Casino gambling and lotto are rigged games that always favors the house.

                  • Tradin War Stories
                    Tradin War Stories  2 months back

                    This is a stupid explanation of gambling hes leaving out so many factors juat by saying essentially you lose 94 cents for every dollar you play. Btw playing black or red is a suckers play on roulette. You play 3 numbers every spin they pay out like 38x

                    • Pat
                      Pat  2 months back

                      if you go see a movie you will loose the 10$ but get 2 hrs of entertainment. if you gamble 10$ you could win more, break even or loose all the 10$ all the while you are entertained and prob get a free drink.

                      • Pat
                        Pat  2 months back

                        just go and look at the quarterly Nevada gaming commission revenue per casino and games.

                        • Cody'sLab
                          Cody'sLab  2 months back

                          The only reason I have car insurance is I am legally required to have it for liability.

                          • kevin wilson
                            kevin wilson  2 months back

                            Sports betting no different

                            • Milquetoast Eugenicist
                              Milquetoast Eugenicist  2 months back

                              Double Zero American Roulette is for Mushes.

                              Now let me go put a c-note on 11.

                              • Magnusmaster
                                Magnusmaster  2 months back

                                Now explain how people buy loot boxes in videogames when it's cheaper to buy a game without loot boxes and it's way more fun.

                                • Mitchell Lerich
                                  Mitchell Lerich  2 months back

                                  The reason people buy into low probability big wins is because most people that gamble can't afford too. Gambling feeds off the poor.

                                  • Keanu-sama
                                    Keanu-sama  2 months back

                                    Except intrest is basically nothing

                                    • Aston Dence
                                      Aston Dence  2 months back

                                      Wendover? more like Bendover

                                      • Shivansh Shukla
                                        Shivansh Shukla  2 months back

                                        Doesn't the background music around 11:00 sounds like Arriving Somewhere But Not Here - Steven Wilson?

                                        • s.f.w.l
                                          s.f.w.l  2 months back

                                          You want a big gamble with low risk? Buy bitcoin and don't touch them for 5 years, than sell them for a big profit!

                                          • JoeAceJR
                                            JoeAceJR  2 months back

                                            Insurance should be optional.

                                            • Jon C
                                              Jon C  2 months back

                                              The guaranteed $ can keep playing and winning infinite money, the non-guaranteed win, can lose and it's game over...

                                              • David Lloyd-Jones
                                                David Lloyd-Jones  2 months back

                                                A 1:15 the video claims a fair 50-50 would let you leave with the money you came in with after infinite time.
                                                Wrong!
                                                With a finite stake playing on a fiar 50-50 proposition you will with certainty go broke. In finite time. You may be rich from time to time, but you will at some point hit zero -- at which point you're out of the game. The end.
                                                So much for Wendover's knowledge of "magic economics."

                                                • Alexandre Zajic
                                                  Alexandre Zajic  3 months back

                                                  Insurance doesn't exist only because people have loss aversion. It's actually logical, if you grant that there's decreasing marginal utility of money. Spending that extra 3 cents on the dollar to make sure that an accident doesn't leave you in abject poverty is a huge win, because the marginal utility of the universe where your $100,000 accident coverage pays out and you avoid abject poverty is worth a lot more than the universe where you risked abject poverty for the long-run benefit of +$3,000. In other words, though it's negative EV in terms of money, it's positive EV in terms of utility.


                                                  It's important that loss aversion and the decreasing marginal utility of money are kept as separate ideas. If people had a ton of money like banks themselves, then insurance would be illogical, as you say, and would only exist because of loss aversion. But it exists for a very logical reason, not just couched in human psychological biases.

                                                  • Santiago Ruvira
                                                    Santiago Ruvira  3 months back

                                                    Insurance works because people are risk-averse. To say that they economically shouldn't work is really ignorant

                                                    • 本刀にهُنْطُ نِクスノギ کُسُنُگِ

                                                      gambling should be banned 100% and the government should shut down all the casinos

                                                      why?

                                                      1. it exploits the poor for money
                                                      2. the profits from casinos do not generate any material wealth

                                                      • xMacieX
                                                        xMacieX  3 months back

                                                        The 80% option doesn't only come with a "chance of loss", depending on the number of tries you are able to take for example 1 try you have 20% to loose everything and end up with 0$ instead. Even if you are unlcuky because of the nature of the probability there is a certain random factor involved and if you are unlucky this certainly happens because you can't ramp up the sample size to infinty when applying this to reality. So optiopns considering probability are not "woth the exact same". Only if you are able to run enough cycles you are able to achieve these results due to the law of large numbers. Since this doesn't usually apply for many ppl it is totally reasonable to pick the 100% chance chance choice over the other.

                                                        • iceshadows911
                                                          iceshadows911  3 months back

                                                          I think your study lead you to make a bad premise where the gambled $6.25 is equal to $5. Winning a prize happens only once, and cannot be averaged out over time and therefore it's obvious these two choices aren't equal. One is either $6.25 or $0 and the other is always $5.

                                                          • Jacob Larsen
                                                            Jacob Larsen  3 months back

                                                            If you can swing the advantage to you favor $100 bet with a 1% edge is worth $1 per bet and the longer you play the more you win it's that easy folks just gain the edge over the house and play a lot to win the same way the casino does

                                                            • marek m
                                                              marek m  3 months back

                                                              The horse racing gamble is wrong i think. With 2:1 odds you win $2 for every $1 you bet. So if you win, you get $2 plus your original $1 back...so $3. If you bet 200:1. If you win you get $200 plus your original $1... so $201, not $300. Come on guys, are you or are you not degenerate gamblers who should know this?

                                                              • Sound Money
                                                                Sound Money  3 months back

                                                                Fml hes right.. the moment i went from euro table to american i lost everything

                                                                • infinitecanadian
                                                                  infinitecanadian  3 months back

                                                                  Gambling is such a waste of time and money. I don't know why anyone would gamble.

                                                                  • Asbjørn Olsen
                                                                    Asbjørn Olsen  3 months back

                                                                    Well, there is also the entertainment factor - people think gambling is fun, and maybe they're okay with paying for that through gambling.

                                                                    • eSwatini
                                                                      eSwatini  3 months back

                                                                      Haven't watched the video but I'm going to assume that he puts planes into this somehow

                                                                      • Brandon Guerrero
                                                                        Brandon Guerrero  3 months back

                                                                        Sometimes gambling is pure magic especially when you win good money.

                                                                        • Redallstar1
                                                                          Redallstar1  3 months back

                                                                          FOMO explained.

                                                                          • Vipul Petkar
                                                                            Vipul Petkar  3 months back

                                                                            7:58

                                                                            • Vipul Petkar
                                                                              Vipul Petkar  3 months back

                                                                              7:58

                                                                              • Jack L
                                                                                Jack L  3 months back

                                                                                Those polls only show that most people don't understand basic statistics

                                                                                • NightCrawller
                                                                                  NightCrawller  3 months back

                                                                                  Did not understand the tennis example, if anyone can elaborate.

                                                                                  • Markus Poremba
                                                                                    Markus Poremba  3 months back

                                                                                    u miss one important fact: when i have the chance to win 100Dollars with an input of 5 then i hope that i get these 100 dollars faster than spending 100 Dollars

                                                                                    • Jose
                                                                                      Jose  3 months back

                                                                                      I have a gambling problem the sad part about it is that i have 120 iq and I already have watched this video thrice
                                                                                      Is really hard to fight this things

                                                                                      • PseudoTiger
                                                                                        PseudoTiger  3 months back

                                                                                        So if I win the lottery I should be afraid of dying of terrorism?

                                                                                        • imperatoreTomas
                                                                                          imperatoreTomas  3 months back

                                                                                          This totally fails to explain tail risk. Tail risk of death or baskrupcy is “more expensive” to buy because if it happens you’re out of business for good. Don’t believe me? Google why put options are “overpriced” and you will see it’s because this downward tailrisk is actually correctly priced and that there is a value to not dying no matter the “risk”

                                                                                          • Spastik
                                                                                            Spastik  3 months back

                                                                                            I gambled once in my life. My dad gave me $50 to gamble as a "lesson" to show its a waste of money. I was down to $10 and feeling bad about it and then I won $394. Im never gambling again.

                                                                                            • Adrian Rutkiewicz
                                                                                              Adrian Rutkiewicz  3 months back

                                                                                              100% for getting X is not 25% for getting X*4. Maybe it is mathematically, but not practically. The first option is surety, while the other is a chance of getting 4 times more 1/4 of the time, which in practical terms may mean never. Get a 100 sided die, throw it 100 times and look a the distribution. Chances are that there will be results that occur multiple times and such that do not occur at all. So yeah, 100% for getting X is the same as 100% for getting X*4 every fourth time.

                                                                                              • comic215
                                                                                                comic215  3 months back

                                                                                                Insurance works because it’s law

                                                                                                • JayBaddAssCutler
                                                                                                  JayBaddAssCutler  3 months back

                                                                                                  CHICAGO HEIGHTS?!?!?

                                                                                                  I went to school at Marian Catholic in the Heights