Casinos and Stock Marktes

My earlier post reminded me of visiting Las Vegas in 2002. I was on a visit to US for some work. There were 2 weekends in between so I emailed an old contact who lives in Vegas. This guy is a very interesting person he owns a company that does some BPO works out of India in Kerala. I think he is a pioneer of BPO in state of Kerala, God’s own country. He is also a pioneer in Medical transcription, and his company developed software that can be used from home to deliver files securely so there is no need to add a lot of infrastructure to add people, it is also a boon for people who want to work part time and from home. But that is not the reason I am writing about him, for the sake of privacy we will keep him and his company unnamed. The reason I am writing about him is that he also makes some software for the Casinos. The aim of the software is to ensure that the house always wins in the long run.

Coming back to my email, my friend (It is an honor to call him a friend although he could have been my boss, but that is another story) emailed me a return ticket from John Wayne airport to the Las Vegas airport. A couple of call followed and on Saturday morning I took my flight to the Sin city. I consoled myself that I am going to meet a friend and not gamble so this is not a typical trip to Vegas where people go to gamble. He received me at the airport and took me to his office as he had some work to do. In the evening he decided to give me a round of the Strip as the main street in Las Vegas is called. We went to a few casinos each one of them is as big as a small city, with hundreds or may be even thousands of people inside each one of them. He showed me some of the games that people were playing there. He shared one of the oldest tricks in the gambling business that the house allows some sucker win every now and then. I was surprised at learning this. I asked him why the house would do that, to this he gave a very simple answer that it is like advertising expense for the casino. The sucker who will win will be telling a million other people about his win this will lead to people thronging to casino like bees to honey. This will also dispel the myth that nobody wins in Vegas except for the house. Now since the winner is a friendly neighborhood Joe like you and me people are going to believe that they have got a chance against the house. So for every say 1000 or maybe 10000 losers there will be a single winner who will be taking may be 1/10000000 of the money that the casino makes every year. But since each one of us expects to be that single winner the casinos are always fill with people more than eager to lose their hard earned money smiling. I really liked what my friend told me and bet 1.25 USD loose change that I had on a slot machine and promptly lost the same, apparently I was not to be that one in a thousand winners.

Some thing similar most of us expect from stock market and hope that the stock that we have picked on the hot tip from our highly reliable sources will turn out to be winner not realizing that the tip is being planted to suckers like us so that the smart brokers and their cartel who have picked up the stock when it was at 1/10th the price can off load the same to people like us who are hoping to beat the system. I think the moral of story is that one should not go for get rich quick kind of situation and stick to a long term investment plan. Remember : Slow and steady wins the race