The Magic Economics of Gambling
 Published on: 30 October 2018
 Build your website for 10% off at http://Squarespace.com/Wendover
Subscribe to Half as Interesting (The other channel from Wendover Productions): https://www.youtube.com/halfasinteresting
Get the Wendover Productions tshirt: https://standard.tv/collections/wendoverproductions/products/wendoverproductionsshirt
Check out my personal channel: https://www.youtube.com/channel/UCDA1X6RrhzZQOHOGvC3KsWg
Support Wendover Productions on Patreon: https://www.patreon.com/wendoverproductions
Youtube: http://www.YouTube.com/WendoverProductions
Twitter: http://www.Twitter.com/WendoverPro
Email: sam@wendover.productions
Reddit: http://Reddit.com/r/WendoverProductions
References:
[1] https://www.statista.com/statistics/253416/globalgamblingmarketgrosswin/
[2] http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_MET_2017.pdf
[3] https://twitter.com/wendoverpro/status/1054533498722111488
[4] https://www.nber.org/papers/w18237.pdf
[5] https://twitter.com/wendoverpro/status/1054533837328281600
[6] https://twitter.com/wendoverpro/status/1054534236642795522
[7] http://www.its.caltech.edu/~snowberg/papers/SnowbergWolfers%20Risk%20Love%20or%20Decision%20WeightsNBER.pdf
[8] http://www.footballdata.co.uk/blog/favourite_longshot_bias_tennis.php
[9] https://economix.blogs.nytimes.com/2010/06/02/thebpspillandthefavoritelongshotbias/
[10] https://acelscdncom.ezproxy1.library.usyd.edu.au/S0167268114002194/1s2.0S0167268114002194main.pdf?_tid=6aac86b27e4a46d0bf4d5ab70e8db750&acdnat=1540355242_b9bcf6d0549207112968a3467b39a9a0
[11] https://www.hbs.edu/faculty/Publication%20Files/08061_17c22e32fe064b4a8b5ee09227fc8104.pdf
[12] https://www.commissions.leg.state.mn.us/ladder/120511prizelinkedsavingsFAQs.pdf
Animation by Josh Sherrington
Sound by Graham Haerther (http://www.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 http://epidemicsound.com
Select footage courtesy the AP Archive  Runtime : 11:24
 gambling magic economics econ money lottery casino roulette odds loss aversion utility function interesting explained explainer video essay wendover productions half as interesting animated educational
COMMENTS: 40

RobosergTV 3 weeks ago
"perfectly intelligent people will take that deal", excuse me what? Intelligent people don't play gambling, only ignorant and uneducated do.

Jackson Ayres 3 weeks ago
It's worth noting that if you start with 100$ and play indefinitely, you won't actually leave with 100$. You will leave with 0$ because in an infinite sequence of plays, a sequence of losses will result in you losing all of your money eventually. If the house isn't assumed to have an infinite amount of money, then a string of successes that results in the house losing all of its money can also occur, but this is much less likely. This will cause to to stop being able to play. (You can still bet 0$, so the sequence is still infinite, you just will never earn money either.)In essence, the statistics of gambling only works out so cleanly when both parties have infinite funds to pull from, which is (almost) never the case. The statistics, however, are still accurate for predicting the outcomes of individual or small sets of plays, but when attempting to analyze and predict the behavior of the system on a large scale, you need to take into account the probability of exhausting your funds.In the same vein, when choosing between a sure $5 and a 80% chance for 6.25, they're only worth the same when you have an infinite number of attempts. With only one, there's a 20% chance of having nothing if you take the latter option  which means that in many cases, it won't be the one you want, since it's often better to have less with surety than a possible nothing.

Papa Tango 1 months ago
6:08 I would choose 100% chance of $5. Theoretical probability will not be accurate because every spin is independent.

Papa Tango 1 months ago
5:38 I would choose 100% chance of $5. Theoretical probability will not be accurate here because every spin is independent

Papa Tango 1 months ago
2:53 I would choose 80% chance of $6.25 because every time you play, it resets or in other words every time you play is an independent event. Calculating theoretical probability after 5 spins would result in $25 either way. In reality it is likely that the 80% option would end up with more money due to all spins being independent from each other.

Dwight House 1 months ago
"80% chance of $6.25" is not equivalent to "100% chance of $5" in the real world because a given individual cannot take an infinite amount of gambles. Almost all scenarios where people are weighing options, they have a limited number of times they can perform a given choice. Additionally, the individual is far less concerned with the overall societal balance than their own balance in a given gamble. People, on average, will try to achieve the best odds for themselves and their family at the time over anyone else.

Cneq 1 months ago
To be fair either I'm really lucky or what but I've won a lot at .4% chances, 1.2%, 2.2% and even all the way down to .3%. Of course it eventually was all lost but the reason it was lost because I decided to usually go bigger at more equal odds. If you're going to gamble go for low, win, cash out instantly, no other way or you're going to hurt.

Ps B 1 months ago
With casinos, you forget to mention the economic value of the fun of gambling or the experience of it.

RandomGuineaPig Aviation 1 months ago
perfectly intelligent people go to the roulette table every day Yea I don't know 'bout that...

Kim Jong Un Lol 1 months ago
Whish my dad watched this so I don’t need to work hard on getting something

boeuf3000 2 months ago
The insurance company analogy works, but insurance companies can make excuses up to not compensate customers.

Connecticut Ball 3 months ago
I picked 80% chance of $6.25For the rest, I picked the 100% chance of $5.00

SuperMickyG 3 months ago
You've got the payouts on the horses wrong. The 200/1 shot pays 200 dollarydoos for every dollarydoo staked, not 300 dollarydoos. The odds of the 2/1 horse would also not be better than 2/1. You are referring to FavouriteLongshot bias here, which does exist, but not to the extent that it provides a negative margin for the house.

Henryk Gödel 4 months ago
Most people are paying for the entertainment of the experience that experience being the chance to win money.

Avindu Bandara 5 months ago
Guys check this out... You will surely be amazedhttps://payhip.com/b/EDPj

Zhi Han Lee 6 months ago
7:30 Think the issue about plane crashes might also depend on what you use as the denominator for calculating its probability. If it's all the flights in the world then the probability is probably low, since the stakes are high (there's quite a lot of delay in evacuation after an emergency occurs in aviation, compared to other transport modes, due to things like the need to dump fuel and find a diversion airport, and during that delay the aircraft might no longer still be in 1 piece e.g. SR111), leading to a highlyregulated industry. However if the denominator is only the planes that have been in an accident than I imagine the probability is higher. I don't recall seeing as frequently, among other transport modes, accidents with a ~100% fatality rate e.g. JA123, AF4590, QZ8501, MS604, JT610

The Stigmeister 6 months ago
2 to 1 odds does not pay out $3 for $1 bet:https://youtu.be/7cjIWMUgPtY?t=397It would double the bet, so it would pay $2Reference: https://en.wikipedia.org/wiki/Odds

Prateek 7 months ago
This video is filled with inaccuracies. Behavioral economics is difficult to grasp intuitively, but you made some pretty incorrect analogies there

J L 8 months 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.

Clout Academy 8 months 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 8 months 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.
Insurance isn't about gambling. It is about minimizing individual risk by spreading that risk over a large pool of people so each individual will lose a small predefined amount (their premium).