Congratulations, You’ve Lost! How Slot Machines Disguise Losses as Wins

Photo: firepile

Casinos are designed for a single purpose: to separate you from your money. And they’re good at it. Commercial casinos in the U.S.  made nearly $35 billion in revenue last year, up a percent from 2009.

While they represent just a fraction of that revenue, slot machines are the casino gateway drug for the least savvy gamblers. It’s why they’re by the door. More than any other casino game, slots condition people to keep playing through positive reinforcement (bells and whistles). And the odds have gotten worse as technology has improved.

Though today’s sophisticated multi-line machines have a higher “win-rate,” the amount won is negligible, and often less than what was originally gambled. A recent study by researchers at the University of Waterloo in Ontario, finds that these multi-line machines are more effective than their single-line predecessors at taking money from the gambler by disguising losses as wins.

Casino slots today are dominated by multi-line machines, which allow you to bet on a multitude of combinations: up, down, diagonal, rather than just hoping for the three 7′s to line up across the middle on an old-school single-line machine. While that may seem like an advantage, it’s harder for the average person to accurately calculate the odds of multi-line machines.

The table below shows how losses are disguised as wins based on the number of lines the user has bet on:

Though you may win more, the pay out is often lower than what you’ve already put into the machine to begin with. So you get the bells and whistles, but it’s really just a fancy loss.

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  1. Steve Rosen says:

    Last week, I sat through a presentation by the GM of Cleveland’s soon-to-open Horshoe Casino. He explained the average bet on a “penny” slot is actually seventy cents and that the “pull” rate is almost seven times a minute. Do the math, they have a great gig.

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  2. Malcolm says:

    I’m just now reading Freakonomics, and enjoying it. At last an economist who thinks differently. If you have time, I have a question – and btw, if it were up to me, there would be no Nobel Prize for economics, until – :
    Why do ALL economic plans depend on growth? Telling us: Ageing populations are bad. Shrinking markets are bad. People spending less is bad. Less credit is bad. Etc., etc.
    The hunger for growth got us into the mess we are in today. When will an economist come up with a sustainable plan based on enough? (After all, you suggested that economists modify human behavior)
    My say = there is only one problem. Too many people.

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  3. RogerP says:

    Hidden due to low comment rating. Click here to see.

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  4. Lassie says:

    I’ve been to the casino, put $40 on my card, and went to town on the machines. Twenty minutes later, I lost every penny. I might as well have just thrown my money out the window on the ride in, turned around in the parking lot, and gone back home. I don’t get it. I really don’t get it.

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    • divelly says:

      I bumped into an old friend I hadn’t seen in a few years at the local casino.
      I said ,”How’s it going?”
      He said,”Not so good.I lost my job and they repossesed my car so it’s hard to look for one.
      And my poor old mother can’t keep up wiyh her house paymewnts since dad died and the bank might foreclose.
      And my wife needs an operation and we don’t have insurance and can’t afford it.
      Do you suppose you could lend me a few dollars?”
      “We’re in a casino.How do I know you won’t go gamble it away?”I said
      He said,”Oh!I got my gambling money!”

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  5. Joe Allen says:

    What about ‘Near Misses’.
    In Nevada (at least) slots can weight the stops just before and after a jackpot 5x more heavily than if each were equally likely. This means you will infer from the close calls that you were much more likely to win than you really are.

    The Wizard of Odds is a great resource on slot machine statistics and methods:
    http://wizardofodds.com/askthewizard/slots2.html

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  6. Mike says:

    My parents used to love the casinos – and they thought it was awesome when they would put three quarters in, a couple of cherries would hit the line, the machine would light up and ring and they’d get two quarters back.

    To an economist, its an LDW. To my senior parents it was fun. I call that a quarter well spent.

    The lesson – never take an economist to do anything fun.

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  7. Statspotting says:

    The big miss in this article is that Casinos are mandated by law to return, as wins, more than 85 percent of what they take in.

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  8. Julietta Strauss says:

    @Joshua, what makes you think people can’t rent out their pool to a neighbors? why not?

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