100 years from now they will look back and see how gambling (er …“Gaming”) became mainstream when politicians instituted lotteries ..“To help fund the schools” Then it morphed into “Riverboat casinos” …to “Help fund the schools” .Now the NFL and all sports leagues are immersed in gambling. A couple decades ago a study was done in Ohio regarding people’s plans on how they could fund retirement from work. 20% of Ohioans planned on winning the lottery. Billboards proclaim …“You can day - trade and get rich” This “day - trading” is people buying stocks on margin with no real knowledge of the value of those stocks. In other words they are gambling.
I don’t think it’s so much the economy, as the regulatory environment. It used to be that gambling was very tightly regulated, and only allowed in very controlled circumstances. But then a bunch of companies found some extremely thin loopholes, sometimes amounting basically just to “This isn’t gambling because we say it’s not so there”, and the regulatory agencies, for the most part, just winked at them and let them get away with it. So now we’re starting to see a whole bunch of reminders of why gambling used to be so regulated in the first place.
I first played Magic the Gathering back in 1994 and stopped playing around 1996. I was a very casual player (was competitive play even a thing back then?) with a modest collection I ended up giving to a friend’s kid around 1997. After I stopped playing, Magic and other collectible card games continued to become more popular and are an anchor product for most local game stores.
I’ve had conversations with parents who were concerned about what they see as predatory sales practices manifesting in the randomness of cards, rules changes encouraging customers to buy new cards, and of course having to buy enough cards to create a deck that can win at tournaments (pay-to-win). The first time I had such a conversation with a parent was 15-20 years ago, so at least for card games, it’s not just our current economy.
You also have younger adults who grew up in an era where video games have gambling mechanics. Loot boxes were pretty controversial, but I think most PC and console games no longer have them, but mobile games still have similar mechanics. Both collectible card games and video games might not be gambling in the classic sense, but they have mechanics very similar to gambling.
Poker is probably the closest analogy. The odds are known for every possible winning hand and yet if the cards are dealt properly randomly the actual hand is not predictable. And you are playing a competitor, unlike in craps or roulette, whose behavior can and should change your behavior. Whether it’s a sport is for a whole 'nother thread.
Others have made this argument and it’s true as far as it goes. Investors would have been far more cautious without limited liability companies and corporations would be far more constrained in development, r&d, expansion, and all the other factors behind growth and value. But this ignores all the negative externalities that result. Pollution, environmental damage, political pressure and bribery, shortages of water, gas, and electricity, land grabs, worker treatment, movement of jobs outside the country, lack of giveback to surrounding cities while getting special treatment from them. People today are angry not just at wealth inequalities but these other issues that help destroy the quality of their lives all in the name of growing the stock price. Data centers foremost. As I always do, I blame Milton Friedman.
We can do that today. Lotteries are intrinsic to American history. Thomas Jefferson said lotteries “are indispensable to the existence of man, and every one has a natural right to pursue such one of them as he thinks most likely to furnish him subsistence.” Lotteries funded much of early America, Boston’s now-famed Faneuil Hall, e.g. Moralistic forces kept shutting them down, so no continual history exists, but this article summarizes a surprisingly long and deep history before 1964.
The way I see it, if I buy shares of a fishing company stock, there is usually some correlation between the stock going up and either the company is catching more fish or maybe the price of fish has gone up for market reasons. I can point to where I am now wealthier because this asset I own a part of us create more of some product or that product has become more valuable.
People who get rich off crypto or prediction markets, what actual products or services were created? None. No more fish were caught or cars produced or whatever. That’s the definition of a speculative market. Where the only thing driving up the price is people’s perception that it’s something they want, until it isn’t.
That’s what pushes people towards gambling in the modern economy. Most jobs, you can’t generate enough value or advance high enough to where you’re income will increase dramatically. So then the alternative is to try to place bets on something that you think will increase in value dramatically. Like a business or the lottery or the next wave of speculative bullshit.
Things like mutual funds and all the various derivatives are at a remove from just buying the stock of a company that actually does something that adds value. I’m not sure if that sort of financial trading is akin to a sort of rent seeking, or if it’s just more of the same kind of thing, just at a remove.
Crypto is 100% something that has value because there’s a sort of collective agreement that it has value. That’s why when I think about it, I kick myself for not doing bitcoin mining early on in like 2009-2010 when I first heard about it, because it seemed like illusory BS and at that time, there weren’t even ways to convert it into real money.
Mutual funds are simply bundles of stocks, mitigating the risk of buying shares in a single company. Derivatives are more complex financial instruments for hedging risk. The way I see it, equities serve a valid purpose in wealth creation in that they allow ordinary people to partake in the financial success of large companies in exchange for providing those companies with cash they need to grow.
Bitcoin and crypto currencies is another matter because they are actually illusory BS and the only thing driving the price is completely driven by a collective agreement that it’s worth something / FOMO. Until it’s not.
And I think it’s that concept that has been driving the “gambling” mentality since at least the dot-com boom. That by picking the right stock or tech or techno-fad, you can essentially hit the lottery in the form of 1000s%-fold returns.
Because no one wants to be the person kicking themselves for not having bought into some trend ten years from now while all their friends are driving Bugattis.
For all practical purposes, you can substitute gold in that sentence and nothing would change.
I would say that buying stocks is not inherently gambling, but that it is often treated as such.
If you’re actually buying stock because you see something you support and want to provide finances, I don’t consider that gambling. If you’re doing so but also hoping to make money, I still wouldn’t call it gambling except in the sense that starting your own business would be gambling.
But when it becomes a process where you are looking at statistics and trying to figure out what will give you the most money, and the actual company, product, etc doesn’t matter? That takes it into gambling territory, IMO.
That doesn’t mean it’s the same type of gambling as playing the lottery or betting on horses, but then neither of them is the same type of gambling as playing a game with friends where having money involved adds to the gameplay.
As for the OP: I agree with the idea that gambling has increased in part because of people feeling worse off financially and not believing they can get ahead within the system.
Sure, regulations have changed. But even that was part of this change in the economy. These gambling-based companies were taking advantage of the change.
A big thing with that type of gambling is that the house always wins.
I think the key is whether you view your shares as ownership stakes in a particular company that you understand and want to own part of, or whether you view them much more like poker chips of various denominations.
The first is more long-term investing, while the second is much more akin to gambling, IMO.
I would say it’s the opposite. If you are picking stocks based on emotion or desire to support a cause or hope or any reason other than dispassionate intent to make money based on statistical probability, that is gambling. You are hoping to “beat the odds” and enjoy a disproportionately high return.
It’s the same reason I consider crypto gambling. People are kicking themselves because they didn’t buy into Bitcoin 15 years ago but IMHO that’s like kicking yourself for betting on red instead of black. Bitcoin didn’t create some product that had some quantifiable value. There’s no way to perform a valuation on Bitcoin fundamentals to say it should be worth X instead of Y. If you got rich on Bitcoin it’s literally because you made a gamble that happened to pay off.
People who invest or underwrite loans or insurance policies are gambling. They are assessing risk based on available data. Companies like venture capital firms that make money by “betting” on companies taking off know that 9 out of 10 of their bets don’t pan out. But the ones that do offset the losses of the ones that don’t.
It’s also why counting cards becomes less about “gambling” and more about systemized risk assessment. Good card counters know when the odds are higher for busting or hitting a blackjack and will bet larger or smaller amounts accordingly so their wins offset their losses.
Let me put it this way (I’m probably butchering the math a bit).
- In roulette you have a 47.4% chance of doubling your money on a red/black bet
- In an S&P 500 you have a 75% chance of a positive return each year with an average 7-8% return (adjusted for inflation).
Which is the better option for maximizing your money?
In my scenario, no one is trying to “beat the odds.” That is you assigning that motive. The whole point is that making money is not their primary goal.
That’s where I’m drawing the line. If they are trying to make a return that beats the market, then, yeah, that’s gambling. But that’s also true of your 75% chance on S&P. You’re hoping you bet on enough different “games” that you wind up with a higher return.
The odds aren’t what make it gambling, in my view. It’s the motivation.
No, that’s just you making up definitions. Unless you are just doing it to have fun, the motivation is generally to make money.
For an activity to be considered gambling, it typically includes what experts call the “Three R’s”:
- Risk: Something valuable (like cash, property, or time) is put on the line and can be lost.
- Reward: There is a potential to win a prize, material goods, or a larger sum of money.
- Randomness (Uncertainty): The outcome relies heavily on chance, luck, or an unpredictable event rather than a guaranteed result.
It is the randomness and uncertainty that makes it gambling.
I say that the goal is to “beat the odds” because the odds in any casino are always in favor of the house.
If you buy stock because you “see something you support and want to provide finances” by don’t expect to see some sort of return on your investment, that would be something closer to a “charity” or “non-profit” I think.
But see how you can “win” with Polymarket:
*Polymarket built near-perfect copies of its website, then instructed creators to make simulated trades on those dummy sites and hide that they were being paid by Polymarket. To get the videos to go viral, Polymarket has recruited a social-media army to copy and re-post creators’ footage. Though the New York-based company has been banned from offering its primary crypto platform in the U.S. since 2022, the social-media creators are paid to specifically target U.S. users, who can still access the site with a virtual private network…
Polymarket hired and worked closely with a marketing contractor to promote the site. In a message reviewed by the Journal, that contractor told its social-media army to repost content made by 10 Polymarket creators in particular… These creators didn’t initially identify themselves as paid by Polymarket, although one offered a $20 bonus code in his social-media bio… The company instructed creators not to disclose they are paid, according to creators who have worked with the company. They said the pay often added up to $2,000 to $3,000 a month…*
Social media does also. This mechanic if now built into virtually everything that rewards consumer engagement. It’s based on the principle of intermittent reinforcement which demonstrates that variable or uncertain rewards make it more likely for a behavior to be repeated. People operating these sites - mobile platforms especially - have paid scientists exorbitant sums of money to research ways to get humans to act against their own best interests. There are entire grant-funded laboratories that are real casinos with scientists studying the impact of various tweaks on actual human behavior.
As I was explaining to my son the other day, he’d be less interested in YouTube if it always showed him what he wanted to see.
It’s certainly a factor that gambling is more accessible than ever before, but it’s also more addictive than it has ever been at any point in history because it has been engineered that way.
As far as stocks go, I’m a boring old mutual fund investor so anything else looks like gambling to me. I don’t attribute the crypto scam or futures betting to financial desperation so much as the natural result of a culture that seems to value money above everything else. A lot of the people doing that kind of thing are not hurting for money. They just want more. Always more.
I’d bet gambling was plenty big before that. Running numbers games was one of the big mob rackets. Plus, America was basically built on real estate speculation.