Everything Everywhere Daily: History, Science, Geography & More - How Casinos Work

Episode Date: October 29, 2021

Casinos are fascinating places. They can make tons of money, but they don’t really have a product. While it is often called entertainment, unlike other forms of entertainment, no one is entertaining you. In fact, the entire business is really nothing more than applied mathematics. With the proper application of mathematics and a liberal dose of high-tech security and proper management, a casino can become a cash machine. Learn more about your ad choices. Visit megaphone.fm/adchoices

Casinos are fascinating places. While they can make tons of money, they don't really have a product. And while it's often called entertainment, unlike other forms of entertainment, no one is actually entertaining you. In fact, the entire business is really nothing more than applied mathematics. With the proper application of mathematics and a liberal dose of high-tech security and proper management, a casino can become a cash machine. Learn more about how casinos work on this episode of Everything Everywhere Daily.

Do you ever climb into bed ready to sleep only to have your mind start racing the moment your head hits the pillow? Thoughts bouncing around, replaying the day, or jumping ahead to tomorrow? That is exactly why Catherine Nikolai created Nothing Much Happens. Each episode is a gentle, cozy bedtime story where, well, nothing much happens. No drama, no tension, nothing you need to follow closely. Just soft narration, calming repetition, and soothing sensory details designed to help your mind slow down and your body relax. It's not about entertainment, it's about rest. And millions of listeners around the world use it every night to quiet their thoughts and finally fall asleep.

If you've ever struggled to shut your brain off at night, this might be exactly what you've been missing. You can listen to Nothing Much Happens wherever you get your podcasts. Episodes are every Monday and Thursday. I have a confession to make. I enjoy visiting casinos. However, I also have another confession to make. I almost never gamble. When I tell people that I don't gamble, they often think it's for really.

religious reasons, or maybe I have a gambling addiction. However, neither of those is the case. The reality is a lot simpler. I have a degree in mathematics. I know mathematically that the odds are against me any time I put a bet down at a casino. I might win, but I probably won't, and the more I bet, the greater the odds of losing. So, that being said, I do enjoy casinos. What I find fascinating about them is how efficiently they are designed to use psychology and mathematics to extract the maximum amount of money from their customers. In that spirit, I want to go over just exactly how casinos work, how they manage to make money, and how they manipulate people to give it up. I'll note right up front that every casino is a little different. A mega casino in Macau will be different than a casino for

locals in Las Vegas, which will yet again be different from a casino on an American Indian reservation. Nonetheless, they all have enough in common that a general discussion can be had. So, let's start out with the core of any casino, the games. What if I gave you a you the opportunity to play hypothetical game where the rules are as follows. We'll flip a coin, and if the coin comes up heads, I'll give you a dollar. And if it comes up tails, you give me a $1.5. Would you play that game? Most people wouldn't play the game because it's obviously unfair. But if you boil it down to its essence, pretty much every casino game is the same thing. Every game in a casino has advantages, oftentimes just small advantages, which goes to the house.

Let's take the game which makes the most money for most casinos, slot machines. Modern slot machines are nothing more than a custom-built computer. All of them have what is called a built-in payout percentage. This is defined as the percentage of money which has returned to the player over time. In Las Vegas, slot machines at various casinos will have payout percentages from about 98% to 89%. This isn't a winning percentage, but it reflects on average how much of the house will return on each spinners. the wheel. As I noted, in most casinos, slots make up the majority of the revenue. The games are popular and simple. While there are a few things you can do to increase your payout, it usually

just involves betting the max number of coins. Slot machines will usually have bright colors and lights, and they make a lot of noise when you win. The reason why the machine will make a lot of noise is that the house wants you to think that the people around you are always winning. It can psychologically make players think that the odds are better than they really are. Table games are the other popular games at a casino. There's only really a handful of games that are regularly played. Blackjack, Kra, Baccarat, and Roulette. How the house gets its edge in each game is slightly different. In roulette, there are 36 numbers, but the payout for any one number is only 35 to 1. Likewise, tables will either have one, two, or occasionally three zeros on the wheel. The zero space is

neither red nor black, so if you make a color bet, the odds are always less than 50%. In Blackjack, the house odds come from the fact that the player plays first. The dealer has a predetermined algorithm for what they must do for the cards they are dealt. If you were to follow the exact same algorithm, if you go over 21 and the dealer goes over 21, the house will collect your bet before the dealer bus. Unlike other casino games, each hand of Blackjack isn't independent of the other. They're a finite number of cards,

and once a card comes up, it can't be played again until the deck is reshuffled. This fact is what makes Blackjack. potentially winnable if you count cards to determine what is left in the deck. You adjust your bets to make them higher when the odds are in your favor. However, casinos counter this by playing multiple decks of cards at the same time, and by just banning people who are making large swings in their bets. Baccar is a very popular game in Asia, and the game is very simple. There is a player and a banker, and you can bet on either one to win or tie.

If you bet on the player and they win, you double your bet. If you bet on the banker to win, it pays 95%. and a tie pays 8 to 1, even though the odds are 9 to 1. Craps is a much more complicated game, and the house edge just basically involves the difference between payout odds and the odds of winning. The house percentage in craps is usually listed as 1.41%. With the exception of slot machines, most games will usually not have any more than a 5% edge to the house. So why don't casinos make the odds even more in their favor? Because they want people to keep playing.

So long as the odds are in their favor, however slight, the longer someone plays, the greater the likelihood that they will not come out ahead or just lose everything. If the odds run any worse, people would just stop playing. This desire to keep people playing, and to play as much as possible, is what is behind the psychological manipulation at a casino. One thing you will not find in any casino are clocks. They don't want people to know what time it is, so they'll keep playing. Likewise, there are no windows, so you don't know what the time of it. day is. Almost every casino has really garish carpeting. This too is by design, as studies have found that it keeps people alert and playing. Trying to walk through a casino can be confusing, and that is

actually by design. If the casino has a hotel, you have to walk through the casino floor to get to your room. If you want to go to a restaurant or the bathroom, you'll also have to walk through the casino floor. You might have noticed that you never play with real money in a casino. Modern slot machines will often play with credits on a card, and table games you'll use. casino chips. There are several reasons for chips instead of cash. First, it psychologically makes people think that they aren't playing with real money, so they tend to gamble more. Second, it's easier for surveillance to detect differences in chips than it is pieces of paper. And finally, many people forget to cash in chips or take them home, and that's just pure profit for the casino.

Casinos are also on the cutting edge of data analysis. This is why most casinos have a loyalty program. This allows casinos to track the amount of money that their customers are betting. To their customers who bet the most, they will be extended what are called comps. Comps are just complementary things like free hotel rooms, meals, drinks, and sometimes free casino chips. The reason why they will extend these comps is to get people to come to the casino more often and to gamble more frequently. If you're a high enough roller, known as a whale, these perks can be quite large. This can include flying in clients on private jets. There is one notable story of a person who worked at the front desk of a hotel on the Vegas Strip.

Several celebrities came in looking for a room and the hotel was full. The only available room was in their most expensive suite. The person at the desk said they could have the room for $5,000 a night, which the celebrities agreed. The person at the front desk felt proud of themselves for selling the suite, but they were later reprimanded. A whale came into town and there was no place at the hotel for them to stay. The whale would have bet $5,000 a hand at the blackjack table, so the money made by selling the room was nothing in comparison to what they would have made and the gambling tables. As they were reminded, they were a casino hotel, not a hotel casino.

Another classic story shows the power of keeping people in the casino. Australian billionaire Kerry Packard was a notorious gambler. In September of 2001, he was in Las Vegas and was up several million dollars and was about to go home. When the terrorist attacks shut down all of the flights in the country, he was stuck in Las Vegas for several more days, where he gambled more and wound it up with a $6 million loss. Given the amount of money in a casino, and the fact that every game has such slim margins, there is an ever-present concern for theft and cheating. One of the first things you'll notice in any casino is the ever-present eye in the sky on the casino floor. If you're at a casino, look up the moment you walk in, and you'll see a small black dome on the ceiling. All of these are hiding cameras.

The cameras can detect player cheating, but they also keep an eye in the casino workers. Everyone has someone watching them. The dealers are watched by the supervisors who are responsible for the tables, who are themselves overseen by a pit boss who is in turn observed by the camera. One of the most important tasks is the handling of money. You can exchange cash for chips at a cashier window or at a table. Once your money is exchanged for chips at a table, it's put into a locked box where can't be accessed by the dealer.

If you want to get cash for your chips, it has to be done at the cashier's window, where all transactions are done in clear view of the cameras. All of the cash is processed and counted in a special secure room called the count room. Count rooms may be divided into soft count rooms for paper bills and hard count rooms for coins. The count room, like everywhere else in a casino, is monitored by cameras and often microphones as well. There they will count and bundle the money which is brought in, and there will await transportation by armored car to be deposited in a bank. I find casino management to be a really fascinating subject. The amount of attention that goes into the smallest things is astounding, and it is all for the purpose of separating you and your money. Despite all of the detail and attention that goes into running a casino, it is at its heart a very simple business.

You create games where the house has a statistical advantage, and then get people to play as often and as long. as long as possible to improve your odds of winning. It's both why I find casinos fascinating and why I never gamble. The associate producers of Everything Everywhere Daily are Peter Bennett and Thor Thompson. If you'd like to support the show, please join the list of patrons over at patreon.com. And also remember, if you leave a review or send me a question, you two can have it read on the show.