The Magic Economics of Gambling

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  • Published on Oct 30, 2018
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    References:
    [1] www.statista.com/statistics/253416/global-gambling-market-gross-win/
    [2] www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_MET_2017.pdf
    [3] wendoverpro/status/1054533498722111488
    [4] www.nber.org/papers/w18237.pdf
    [5] wendoverpro/status/1054533837328281600
    [6] wendoverpro/status/1054534236642795522
    [7] www.its.caltech.edu/~snowberg/papers/Snowberg-Wolfers%20Risk%20Love%20or%20Decision%20Weights-NBER.pdf
    [8] www.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] www.hbs.edu/faculty/Publication%20Files/08-061_17c22e32-fe06-4b4a-8b5e-e09227fc8104.pdf
    [12] www.commissions.leg.state.mn.us/ladder/120511prizelinkedsavingsFAQs.pdf
    Animation by Josh Sherrington
    Sound by Graham Haerther (www.Haerther.net)
    Thumbnail by Simon Buckmaster
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    Music by epidemicsound.com
    Select footage courtesy the AP Archive

Comments • 2 438

  • Lewis Gray
    Lewis Gray 8 days ago

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

  • Saadman Yasar
    Saadman Yasar 10 days ago

    The House Always Wins

  • ХОРОШО
    ХОРОШО 11 days ago +1

    Casinos not just sell loses, it sells entertainment.

  • J L
    J L 12 days ago

    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 23 days ago

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

  • Paul Page
    Paul Page 26 days ago

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

  • Tradin War Stories
    Tradin War Stories 29 days ago

    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 29 days ago

    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 29 days ago

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

  • Cody'sLab
    Cody'sLab Month ago +2

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

  • kevin wilson
    kevin wilson Month ago

    Sports betting no different

  • Milquetoast Eugenicist

    Double Zero American Roulette is for Mushes.
    Now let me go put a c-note on 11.

  • Magnusmaster
    Magnusmaster Month ago

    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 Month ago

    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 Month ago

    Except intrest is basically nothing

  • Aston Dence
    Aston Dence Month ago

    Wendover? more like Bendover

  • Shivansh Shukla
    Shivansh Shukla Month ago

    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 Month ago

    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 Month ago

    Insurance should be optional.

  • Jon C
    Jon C Month ago

    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 Month ago

    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 Month ago

    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 Month ago

    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 2 months ago

    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 2 months ago

    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 2 months ago

    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 2 months ago

    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?

  • 3 Subscribers Without Any Videos!!!!!

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

  • infinitecanadian
    infinitecanadian 2 months ago

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

  • Asbjørn Olsen
    Asbjørn Olsen 2 months ago +1

    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 2 months ago +5

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

  • Brandon Guerrero
    Brandon Guerrero 2 months ago

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

  • Redallstar1
    Redallstar1 2 months ago

    FOMO explained.

  • Vipul Petkar
    Vipul Petkar 2 months ago

    7:58

  • Vipul Petkar
    Vipul Petkar 2 months ago

    7:58

  • Jack L
    Jack L 2 months ago

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

  • NightCrawller
    NightCrawller 2 months ago

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

  • Markus Poremba
    Markus Poremba 2 months ago

    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

  • Libertad o muerte
    Libertad o muerte 2 months ago

    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 2 months ago

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

  • imperatoreTomas
    imperatoreTomas 2 months ago

    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 2 months ago

    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 2 months ago

    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 2 months ago

    Insurance works because it’s law

  • JayBaddAssCutler
    JayBaddAssCutler 2 months ago +1

    CHICAGO HEIGHTS?!?!?
    I went to school at Marian Catholic in the Heights

  • Lord Zizumias
    Lord Zizumias 2 months ago +4

    I mean I wouldn't have insurance if I wasn't forced to by law.

  • JoelJames2
    JoelJames2 2 months ago +3

    10:44 Why does that guy look like he is going to murder them?

    • Mahad Omar
      Mahad Omar 2 months ago

      Plot twist he acutally kills them

  • Nub Lord
    Nub Lord 2 months ago +4

    I personally would always take the $5 even if you have me a chance to win a thousand dollars. I just really hate probability

  • J W
    J W 2 months ago

    I will teach anyone the secrets of making money gambling if they deposit 4 dollars worth of bitcoins into my bitcoin walllet. Im dead serious. I will hold your hand the whole way. something unfortunate happened to me that depleted my bitcoin account. I just need one adventurous stranger to help me out.

  • thomasm1964
    thomasm1964 2 months ago +1

    I don't know how it works in the US but, here in Europe, vehicle insurance is not a voluntary option. If you want to drive a car on public roads, then you have to buy insurance. It's nothing to do with me making a intelligent choice about whether insurance is an economically viable gamble: it's the law!

  • Ricky
    Ricky 2 months ago +1

    I'm not sure what your saying about the 80% of 6.25 = 5.00. Are we talking about a series of one-off rolls of a ten-sided dice in which the outcome isn't effected by previous outcomes? Say you need numbers 1-8 to win 6.25 and numbers 9-10 yield you 0. And say you roll the dice 20 times in row and every roll you get between 1-8, the next roll is still in your favor as you would still have an 80% chance of rolling between 1-8 because it is not effected by previous outcomes.

  • BrokenSymetry
    BrokenSymetry 2 months ago +1

    The reason why car insurance works is because you don't want risk going completely broke due to potential car accident expenses every time you drive a car

  • Rhami Zeini
    Rhami Zeini 2 months ago +1

    Would you rather have 6.25 at an 80% chance? Or get $5 guaranteed and not get arrested and have your car impounded by the government

  • Marcus Killian
    Marcus Killian 2 months ago

    The true magic is to win constantly while gambling.

  • TheEpicFuzz
    TheEpicFuzz 2 months ago +3

    One big problem with this video
    You keep saying "if you took this deal infinite times", yet if this ever were to happen it wouldn't, it would be once, and that's how the general amount of people would think

  • Nadezhda Khlevnaya
    Nadezhda Khlevnaya 2 months ago

    I like this service, I often take a loan here
    primetimeadvance.com/?cguid=396039e8-9bcb-4d7f-b17c-a05513760d6d

  • jvgama
    jvgama 2 months ago

    I very much liked the video, but there is a small mistake in it.
    The two "behavioral" features mentioned are indeed necessary to explain lotteries. Conventional economics does not explain those.
    But rational agents may use insurances and the insurance business may be explained in a conventional economics framework. This is because a rational agent does not need to be risk neutral. In fact most agents are risk-averse and this is not a "behavioral" feature. A rational agent with consistent preferences may prefer $10 100% of the time to 30$ 50% of the time, there is no contradiction. That is why, regarding assets and investments, riskier assets are more profitable than safer assets. A "utility function" is compatible with those choices and they are "classic/conventional" economics.
    Lotteries are not explained in this way, because if agents were consistent and risk-loving (instead of risk-averse, like most people are) they would go to the stock market and "gamble" in the riskier assets - where you are payed (in expectation) to have a risky behavior - instead of going to the casino - where you pay (in expectation) to have a risky behavior.
    In a world of risk-averse agents insurances make sense, but in that same world - where you are payed if you are willing to have risky decisions - paying to do so does not make sense. And therefore, only agents who behave in an inconsistent/irrational manner make casinos and lotteries work. And one may explain that using "prospect theory" (loss aversion, etc.) like you did in this video.

  • Louis Tournay
    Louis Tournay 2 months ago

    Behavioral economics are a bitch

  • YEdwardP
    YEdwardP 2 months ago +2

    I remember a quote that went somewhat along the lines of "the lottery is a tax on the statistically illiterate."