Washington Monthly: BAD BET: The Inside Story of America's Gambling Industry. - Review

BAD BET: The Inside Story of America's Gambling Industry by Timothy L. O'Brien Times Business/Random House, $25

For the past 25 years, gambling has grown like kudzu across America. State legislatures started tapping the easy cash flows from lotteries in the late 1960s. Atlantic City broke the Vegas casino monopoly in 1976. And the '90s have seen the endless march of Indian tribal casinos, video poker kiosks, and riverboats. Americans now bet more than $650 billion a year. The industry's take from this amounts to $250 for every American, or $750 a head for the third of us who participate every year.

Gambling's presence in American life is nothing new. In 1850, for instance, New York City boasted a gambling hall for every 85 residents. Nor is it particularly novel that state legislatures have grown addicted to lottery finance. In 1832, the revenues from lotteries run by eight eastern states dwarfed the federal budget by a factor of four.

What marks gambling's break with the past is professional mass marketing. As Timothy L. O'Brien writes in Bad Bet, "this once largely informal activity is being institutionalized and marketed with the same vigor and innocence as breakfast cereal" Only thirty years ago, gambling bosses truly were men like Bugsy Siegel, building tacky if not vigorously American Las Vegas knock-offs of the ritzy European clubs. They ran their clubs like the amateurs (and often crooks) that they were, typically not even bothering to do basic bookkeeping--a helpful habit if you're evading the IRS and bilking witless outside investors like Howard Hughes.

That all changed in the mid-1970s. A new set of entrepreneurs took over a couple of Vegas casinos and revolutionized their industry. Their formula was simple: take the dazzle of a Caesar's, but go for volume. And run the place like a business.

The pathbreakers were Bill Bennett and Bill Pennington, who took over the formerly Mob-owned casino Circus Circus in 1974. Their target was a customer new to Las Vegas--one who shopped at Sears. The pair pulled the burlesque shows and paved over 51 acres for RV parking. Older games intimidated novices, so out went the baccarat tables, and in went rows and rows of slot machines. What is now familiar was then unprecedented; and Circus Circus had struck a gusher. Southern California emptied itself heading for Circus Circus, with the kids in tow to see the carnival acts Circus Circus sponsored.

The magic lay not in going low-market, but in spotting a group of potential customers, defining what they wanted, and selling it. The modern doyen of casinos, Steve Wynn, built his empire with the same marketing savvy. In the '70s, he made the Golden Nugget the place to be for elegant gamblers. Then, in the '80s, he built the first major casino to go up in 15 years, the Mirage, and did it with all the marketing precision of Toyota or Procter & Gamble. With the Mirage, Wynn aimed to attract the vacationer for whom gambling alone would not be enough. So Wynn added what a crypto-gambler would want: restaurants, a shopping arcade, and a spa--and a dolphin tank, a shark tank, and a 40-foot volcano. And this autumn, Wynn has done it again, capturing headlines worldwide for his $2 billion Bellagio. Wynn's new target is the super-rich. For the allure at Bellagio is for the set just in from Rome--a Prada store, an opera house, and a top-notch $300 million collection of masterpieces, including Van Gogh, Cezanne, and Picasso.

Other marketing geniuses have followed. As the stigma of owning a casino dissipated, ITT and Hilton both bought in. Even Holiday Inn bought the casino firm Harrah's, and then built a nationwide casino chain with the same middle-market values of their hotels--good service, clean rooms, and moderate prices. The result of all this marketing and investment? A 40-fold growth in American betting since 1976.

So the story of modern gambling is of a supply-driven revolution. The ultimate impetus behind it, however, has not been entrepreneurs. It has been state aid. The nationwide spread of gambling required first that state legislators outside Nevada decriminalize casinos and gambling machines. Gambling money has bought much of that help--growing seven times from 1992 to 1998, to $85 million spent in the 1998 election alone. (That's on the same order of magnitude as what President Clinton spent in the 1996 election.) Even much of the putatively strait-laced Republican right has filed up for cash--including Senate Majoritt Leader Trent Lott, who takes a plane ride with Steve Wynn occasionally, and his money by the thousands.

Now every state but Hawaii and Utah has legalized gambling in some form. This November, pro-gambling candidates and referenda won further advances nationwide. In South Carolina, video poker money hired every free bus and truck in the state just before the election to hound their opponent Governor David Beasley out of office. They succeeded, as did their friends in Alabama's gubernatorial race. And in California, voters approved Prop 5 and authorized unlimited expansion of "gaming" for Indian tribes.

But the states have not only deregulated the marketplace. They have become mass marketers par excellence. Thirty-seven states now hold lotteries. They advertise them with glee and in ways that would make a tobacco merchant blush. Banning other competition, state lotteries are far more profitable than casinos. While a casino may keep a 10 percent cut on the average bet, a lottery will retain a third to a half. This adds up to a lot of money: the average resident of Massachusetts--not average gambler--spent $505 on the lottery in 1996. Unsurprisingly, state legislators love the painless finance. Where else will they find a pseudo-tax where citizens stand in time to pay for an average of 3 percent of a state's budget?

The players don't complain, only gambling's foes. Gambling awakens misgivings in such strange bedfellows as Ralph Nader, William Satire, and Gary Bauer. For like drinking and doing drugs, gambling is a vice that most gamblers do for fun and in controlled amounts, but some do because they can't help themselves. The humanitarian cannot help loathing an industry that makes it so easy, so accessible, for compulsive gamblers--somewhere between 1 percent and 3 percent of all of us--to bankrupt themselves. For the social democrat, the lottery offends as a method of funding the public fisc. The poor pay far more than their share, certainly relative to their income, maybe absolutely. Lotteries' sleazy advertising upsets even the libertarian. Even if the state shouldn't forbid a free people from gambling, the state shouldn't mislead and goad its citizens into tossing their money away on lousy odds. And the state should not promote and profit from a business that snaps the link between hard work and reward, nor make sport of people who believe in that link, as lottery ads often do.

Mr. O'Brien's book is chock-full of tidbits about gambling, such as a shorthand guide to cheating at cards on antebellum riverboats. Yet while Mr. O'Brien reveals his anti-gambling animus through numerous scattered asides, he never lives up to the promise of his title: a sustained, articulated critique that might persuade anyone who doesn't agree with him from the start. The organization of the book, too, is jarring, flitting from topic to topic on a given page. For the patient reader, the book could serve as a trove of lore about modern American gambling. As a contribution to the nation's debate over gambling, however, it leaves the reader wanting more.

Mark Wiedman is a management consultant in New York City.