Thanks to modern jet travel, I am currently high above the American Great Plains, winging my way to Las Vegas tonight to speak at a convention this week. Las Vegas is one of those cities you either love or hate. For some, it boasts the sweet scent of winning, and for others it reeks of desperation born from loss. (It should be noted that most of the casinos try to mitigate the smell of desperation with their unrestrained use of industrial strength air fresheners)
Clearly, building a gambling mecca in the middle of the desert strains rational thought. But Vegas isn’t about rationality. In a very real sense, it’s just the opposite. For Vegas to survive it needs irrationality, and not just a little. Vegas has 150,481 hotel rooms. The city relies on irrationality to show up from all 50 states and every corner of the globe.
To be exact, Vegas is predicated on what neuroscientist Dan Ariely describes as ‘predictable irrationality’. The gambling dens of Vegas may have been constructed on a primordial seabed, but in a very real sense Vegas owes its creation—and continued survival—to five flaws in human cognition. Without these evolutionary glitches that show up in the form of decision bias, Vegas, like prehistoric sea creatures, would cease to exist.
When it comes to gambling, if all of our brains operated rationally, we would stop at our first loss. Or more accurately, we might never gamble in the first place.
Those readers with a healthy dose of dopamine are probably thinking, well you can’t win if you don’t play, which of course is true. The problem isn't so much the odds, it's our emotional brain working against us. The casinos exploit this simple truth at every turn. You can know this a priori by comparing the size of your home to the size of Caesar's Palace, the Palazzo, the Luxor and so on. One quick glance down The Strip tells you that like secrets, the money stays in Vegas. (That may be the one safe bet that Vegas affords you.)
So what are the five irrational biases in our brains that taint our decision process and guarantee that Penn and Teller will always have a warm stage to come home to?
The first is loss aversion. Our brains are hardwired not to lose. Our feeling of loss is far worse than our positive sense of gain. Or as the Heath brothers point out in their book Decision, if someone offered to flip a coin and pay you a hundred dollar bill for every time it came up heads, but you would have to pay them fifty dollars every time the coin came up tails, you would probably not take the bet. The opportunity would be overwhelmingly in your favor, but the potential price would feel too high. So to avoid loss at the casino tables, we continue to bet more money to ensure we’ll eventually win. And we all know how well that works out.
The Gambler's fallacy is another bias. We tend to believe that a string of losses will eventually produce a win. ("Well, my luck has got to change soon!") Sadly, in any exchange, the odds are not influenced by past outcomes. We get no credit for our past losses.
Sunk cost bias has nothing to do with shipwrecks. Sunk cost is the emotional tendency that once we make an investment of time and or money we are far more likely to stick with a losing strategy, even as we watch the dealer again and again move our poker chips into the house’s pile.
Vegas is quick to exploit the real-time bias sometimes also known as in-the-moment bias. With the casino’s lights flashing and bells ringing, we are more likely to get caught up in the moment and suspend our long-term judgment. The next thing you know, you’re putting this month's rent money on 7 to win.
'But wait,' you say, 'I actually win a fair amount of the time.' If you feel that way, you might be interested in the Von Restorff Effect. This occurs when we overemphasize certain things that stand out in our mind. This is also referred to as proportion bias. Studies show gamblers remember their wins and believe they happen with greater frequency than their losses, which they tend to downplay or even forget. This cognitive dissonance allows them the mental freedom of laying down yet another bet.
There is plenty to see when you come to Vegas. On any given day, the architecture is dwarfed by a relaxed evening of people watching. Vegas seems to bring out people's inner fashionista, where women’s high heels reach towering heights and men’s ill fitting toupees apparently necessitate the wearing of wrist watches the size of Coleman cook stoves.
For many, Las Vegas is the land of dreams; where no one ages, the sky is painted blue (at least in the Venetian Hotel) and fortune is awaiting you just around the corner (right next to a 24/7 all-you-can-eat- buffet.)
It’s a good thing that Vegas’s ancient sea creatures are but a relic from the distant past, because as a species, our tendency towards irrational behavior is plenty scary enough.
Which is why it's crucial that I packed my lucky polka dot Vegas T-shirt on this trip....