There are four ways to get fired from Caesars: (1) theft, (2) sexual harassment, (3) running an experiment without a control group, and (4) keeping a gambling addict away from the casino

December 11, 2012

(This article was originally published at Statistical Modeling, Causal Inference, and Social Science, and syndicated at StatsBlogs.)

Ever since I got this new sound system for my bike, I’ve been listening to a lot of podcasts. This American Life is really good. I know, I know, everybody knows that, but it’s true. The only segments I don’t like are the ones that are too “writerly,” when they read a short story aloud. They don’t work for me. Most of the time, though, the show is as great as everyone says it is.

Anyway, the other day I listened to program #466: Blackjack. It started with some items on card counting. That stuff is always fun. Then they get to the longer story, which is all about a moderately rich housewife from Iowa who, over a roughly ten-year period, lost her life savings, something like a million dollars, at Harrah’s casinos. Did you know they had casinos in Iowa and Indiana? I didn’t. Anyway, the lady was a gambling addict. That part’s pretty clear. You don’t lose your life savings at a casino by accident.

The scary part, though, was how the casino company craftily enabled her to lose more and more. They offered her freebies (of course), but also, after big losses they’d call her on the phone at home and sweet-talk her into coming in and losing more. Sarah Koenig reports:

These kinds of calls are standard, apparently. Angie Bachmann always gambled at Harrah’s Casinos. The company is now called Caesars Entertainment, since it bought out Caesars. It’s the largest gaming company in the world.

And Bachmann happened to start gambling at the same time that Harrah’s began to overhaul its marketing strategies. Harrah’s knew how to track each gambler’s habits through Total Rewards cards, that each gambler, including Bachmann, would use throughout the casino. And that told the company exactly how much money each player spent, on which games, and at what frequency. The company would then use that information to tell them exactly what kinds of perks and rewards would keep certain gamblers coming back and at exactly what juncture to offer those perks and rewards.

I was listening to this on my bike, and I thought: this sounds familiar. I remember Caesars being celebrated as an admirably modern, data-oriented business. When I got home I googled a bit and found this interview with the CEO of Caesars entertainment:

Gary Loveman, the CEO of Caesars Entertainment, says there are three ways to get fired from the hotel and casino company: theft, sexual harassment, and running an experiment without a control group.

Loveman continues:

We need to overcome hunch and intuition with empirical evidence. . . . We can start with a hunch or strong belief, but we act on it through experiment. We want evidence. We’ve gone from the introduction of experimentation as a technique to a culture of experimentation as a business discipline. We hire people predisposed to do this by temperament and by background. Organizationally, we’re committed—and I’m committed—to making sure we have the discipline to have the decisions we make informed by this evidence.

The interview is entirely positive and nowhere does it suggest that there might be social costs to making this business more efficient. In retrospect, though, perhaps this bit should have set off some warning bells:

They might test which is likelier to get customers to spend more: a free meal or a free night in a hotel.

“Get customers to spend more” = “Offer gambling addicts hundreds of thousands of dollars on credit to stay at the blackjack tables.”

Here’s a quantitative question, which I do not have the answer to: What percentage of casinos’ profits come from addicts who are in over their heads? (I’m not an expert on addiction, and here I’m not counting people who have a gambling habit that does not take over their lives.) I have no idea. But the data wonks at Caesars must have an idea.

To her credit, Koenig, the This American Life reporter, looks into the question of the casino’s policy on problem gamblers. She quotes an earlier interview with the Caesars CEO:

Gary Loveman: We do not wish to be in the business of serving addicted gamblers. . . . our objective is to try to identify addicted gamblers as best we can and encourage them to seek treatment and help. And to the degree they’re willing to identify themselves as addicted or troubled gamblers, not serve them in any fashion, not market to them, not lend them money . . .

The magic words are “to the degree they’re willing to identify themselves as addicted.” It’s not enough that people display a pattern of addiction, they have to self-identify. Koenig says:

I ran all this by Caesars Entertainment, the supposed difference between their policy on paper and what actually happens on the casino floor. In response, a spokesman wrote to me that diagnosing problem gambling is extremely difficult, even for trained clinicians.

Where does this all go?

I don’t want to get on some moral high horse here. Lots of people like to gamble, I enjoy the occasional poker game myself. Caesars might be doing some bad things—I think they are doing some bad things, it seems immoral to me to have an employee whose job it is to convince big money losers to come back to the casino to lose the rest of their life savings—but, hey, I’ve heard that Coca-Cola does some evil deeds too but I keep drinking the stuff.

The Caesars case (I keep wanting to write Caesar’s but apparently no, it’s Caesars, just like Starbucks) interested me because of the role of statistics. I’m used to thinking of probability and statistics as a positive social force (helping medical research or, in earlier days, helping the allies in World War 2), or mildly positive (for example, helping design measures to better evaluate employees), or maybe neutral (exotic financial instruments which serve no redeeming social value but presumably don’t do much harm) or moderately negative (“Moneyball”-style strategies such as going for slow sluggers who foul off endless pitches and walk a lot; it may win games but it makes for boring baseball). And then there are statisticians who do fishy analyses, for example trying to hide that some drug causes damage so it can stay on the market. But that’s a bit different because such a statistical analysis, no matter how crafty, is inherently a bad analysis, trying to obscure rather than learn.

The Caesars case seems different, in that there is a very direct tradeoff: the better the statistics and the better the science, the worse the human outcomes. These guys are directly optimizing their ability to ruin some people’s lives.

OK, maybe you could argue that it’s a good thing to take a million dollars from someone who doesn’t really need it (as seems to be the case for this Iowa woman; at least, it doesn’t sound like she is starving or homeless) and transferring it to middle-class casino employees. They could rename the casino Robin Hoods and see if anyone gets the point.

But I don’t see anyone making this point. Gary Loveman doesn’t say, Yeah, what of it? We’re fleecing the suckers, taking millions from rich addicts who don’t need the money anyway. Instead, he implausibly denies that they are systematically plucking people. What’s it like to be a statistician working in the keep-them-coming-back-for-more department of the Caesars marketing department, knowing that, the better you do your job, the worse you’re hurting people? Maybe someone holding such a position feels no worse than I do, every time I drink a Coke.

P.S. I’m annoyed that This American Life did a show called Red State Blue State and didn’t interview me! They also have this show with Malcolm “Igon value” Gladwell.

P.P.S. My sound system is an ipod plugged into the Goal Zero 90401 Rockout Speaker which goes for $25 on Amazon. It’s loud enough that I can hear music or podcasts in traffic.

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