Monday, December 14, 2009

Personal Finance Part 15 – The Evils of Gambling

After reading some news and forum letters in the Straits Times recently about gambling, and also after the tragic case of a man who killed his two children then committed suicide (presumably because of gambling debts), I felt compelled to write something about this topic as I feel very strongly about it. What’s more, the Integrated Resorts (IR) are about to open soon in Singapore, the first being in FY 2010 and the other in FY 2011; and this will surely add to the burgeoning problems with gambling which are already being experienced by our society. Let me delve into the details of this vice, how it can destroy people and families, and perhaps discuss what we and the Government can do to reign in this social evil.

Gambling itself is not perceived to be a vice in Singapore due to the nature of the Chinese race, where the game of mahjong has been commonplace in most households. This is treated as a game in which social ties are built and relatives and friends get to mingle and share stories, even as money is being exchanged and small fortunes are won and lost. Eventually, one “graduates” from mere mahjong to other more insidious forms of gambling such as 4-D, Toto, soccer betting and horse racing. One might argue though, that a little punting now and then should be considered harmless and can be perceived as a form of leisure, especially for retired folk who have nothing much to do with their time. It is also seen as a lottery game where a little is staked in order to win a large windfall payout. Hence, the attraction in gambling is that you can bet a small amount and the reward is large by comparison, never mind the odds. People get a quick thrill and adrenaline high when the results are announced; thus this produces endorphins which stimulate repeat behaviour. This is when someone is considered “hooked” to gambling and betting.

Many people can be classified in terms of how often they gamble, and the amounts they stake per bet. These factors are used to determine if a person is a “light”, moderate or habitual (problem) gambler. Statistics show that only about 5% of people eventually turn out to be compulsive gamblers, but the light and moderate gamblers also end up losing substantial amounts of hard-earned money over time. This is due to the previously discussed “Gambler’s Fallacy” article which I wrote, and the fact that gamblers can never seem to remember the pain of losses (I call it “selective amnesia”), but only retain the sweet memories of huge windfalls. It is the problem gamblers which form the bulk of social problems, as they are unproductive at work (as they keep wondering which numbers to buy for 4-D or Toto), not close to their family (they are shunned because of their habits) and possibly also suicidal (chased and hounded by loan sharks for excessive borrowing for gambling). Sadly, every now and then a case pops up in the newspapers about someone killing himself or getting in trouble with the law (stealing or robbery) because of their uncontrolled gambling addiction. These people do not see themselves as having a problem and frequently refuse to seek help, thus compounding the problem.

One forum letter recently criticized the Government because of the prevalence of betting outlets (there is one located conveniently in almost every HDB housing estate and heartland area); and also the “expansion” in the array of products one can bet on. It used to be just Big Sweep, 4-D and Toto; but now includes F1 racing as well as soccer betting. The Government’s stance is that it is much better to legalize these forms of gambling, rather than leave it to illegal bookies to collect bets and for unlicensed gambling dens to proliferate. While this argument does hold some merit, I question the rationale for the inclusion of so many betting avenues and the fact that such outlets are viewed as being “socially acceptable” to the general public. Generally, you won’t begrudge your friends, relatives or colleagues if they take a punt, and so there is a general reluctance to discourage someone from gambling as it is viewed as something harmless and within control. With the impending opening of the IR casinos, can families still view gambling as a suitable social activity and outlet for relaxation? If you want social life go to a club, do jogging, go swimming or meet for coffee. If you want to relax then go for a spa or massage session or just read a book and sip a milk shake. Gambling is an excuse for brain stimulation which ultimately ends in debilitating losses as the odds of winning the jackpot are so minute that almost 99% of the people will experience negative ROI. This is conveniently ignored by the adrenaline rush which accompanies each bet, as well as the aforementioned fallacy.

So what can we do as individuals to curb this unhealthy habit and ensure our money is put to better use? One method is to use education – ensure that schools teach students about the dangers of compulsive gambling, and to help them to realize that gambling is betting on an uncertain outcome, and that the odds of winning are very low. Simple examples can be used to illustrate this concept, and to help the youth understand that gambling can lead to social ills if uncontrolled. Parents and family members also play a role in this – if any of them are compulsive gamblers it becomes harder to discipline the child and prevent him/her from going astray. A supportive spouse or children can also help an errant person to mend his ways once he sees the destructive nature of his habits.

On the Government’s part, they had set up the National Council on Problem Gambling (http://www.ncpg.org.sg/) which they hope provides an outlet for families to seek help. Individuals and their families can also ban themselves from the IR if they feel they are problem gamblers. They should also set up more voluntary welfare organizations (VWO) to handle family problems stemming from gambling, and also offer more financial help to these families who have been ravaged by gambling debts, instead of letting them turn to illegal loan sharks. Hopefully, these measures will be sufficient to combat the rising incidence of problem and compulsive gambling within our society; and over time help to nip the problem in the bud.

16 comments:

slowlybutsurely said...

sad to say with the 2 IRs coming up soon next year, we will see an increase in the number of bankruptcy in the country. More social problem will happen with the ever increase complexity in the society. Let's hope the government will continue to curb this foreseeable issue.

Createwealth8888 said...

Spa and massage? hopefully don't end up with special services?

Akatsuki said...

Well, i don;t see the two IRs as a problem. I think because of it, more people are aware then ever before the dangers of gambling. Actually.. i personally can;t wait for it to open, hopefully my value investing principles will kick in once i start throwing those dices. =D

Musicwhiz said...

Hi slowlybutsurely,

I agree with your views. The Government is trying but I feel it may not be enough. Anyway, let's see how things go once the IRs open.

Cheers,
Musicwhiz

Musicwhiz said...

Hi Createwealth8888,

I hope so too, but knowing human beings, as long as there is demand, supply will somehow squeeze through.

Regards,
Musicwhiz

Musicwhiz said...

Hi Akatsuki,

That's what I'd hope too, but Singaporeans have been aware of the dangers of gambling ever since we had horse racing and illegal betting, so it's nothing new to our society.

This merely gives people one more avenue to lay their bets. Sad but true - I don't think we can stop it, all we can do is minimize the impact somehow.

Musicwhiz

Keat said...

Legalized gambling in its pure economic form is a redistribution of wealth.
If executed legally and honestly in the utopian situation, is one of the most effective way to level the playing field for the rich (those who can afford to bet) and poor (those who do not even have enough to eat).
Just another thought... ...

Musicwhiz said...

Hi Keat,

Noted your comment, but unfortunately for all of us we don't live in a utopian society. In fact, the real world is more like a dystopia. (Haha mind my cynicism) :P

Cheers,
Musicwhiz

PanzerGrenadier said...

Hi MW

Gambling happens in our neighbourhood Singapore Pools outlets, Slot machines in clubs, the stock market(!) and with the impending opening of the the 2 Integrated Resorts (Casinos), the relatively easy availability would make the problem bigger at least initially.

It's interesting to note that some of the corporate frauds e.g. APB's Finance Manager who defrauded banks into lending him under the guise of APM monies to feed his gambling lifestyle were due to gambling.

Was it not even the Law Minister who mentioned that things would get worse initially before it got better, i.e. would be more criminal activities when the IR opened even with increased policing of the two IRs?

Ricky said...

Would be nice if the schools could include a module on finance, starting from secondary level. I heard unis have these, but it is too late?

slowlybutsurely said...

the way how human being are wired in terms of thinking are tied down to loss aversion - we tend to gamble more when we loss... that is why gaming industry are always playing against normal people psychology, and they never loss...

Musicwhiz said...

Hi Panzer,

Yes this is indeed a pervasive problem. I really hope it doesn't get too bad, especially for the heartlanders. The common man on the street already has to struggle against rising costs - this will be another obstacle to overcome (mental, in this case).

Regards,
Musicwhiz

Musicwhiz said...

Hi Ricky,

It is my belief that all schools should teach a module on personal finance starting from probably Primary 3-4. This will inculcate good habits from a young age and prevent teens and young adults from becoming reckless spendthrifts.

Cheers,
Musicwhiz

Musicwhiz said...

Hi slowlybutsurely,

For casinos, the odds are tilted slightly against the player so that over time, on average, one will lose. This is called the "house advantage", and it's pretty pervasive. Unless you are a math (statistics) geek, you probably won't get put off by these numbers and will continue to punt "for luck".

That's why I believe mathematicians make lousy gamblers. LOL !

Musicwhiz

Willie said...

Hi Musicwhiz,
Everything has a double edge swords. It's really depend on how the person uses it.Hence,the two edges of the swords are "gambling" and "speculation".I always find speculating in financial derivatives exactly the same as doing it in casino.One may argue, in casino there is a house edge. But in financial world, where the volatility and risk are always inherent in it. We as a retail investor/speculation are always a losing edge should u trade against the big boys. I always heard gambling is a taboo words but to me, it is about taking calculated risks whether is in fiance world or casino world.I guess, the bottom line is, how u this sword to your advantage.

Musicwhiz said...

Hi Willie,

I agree leverage is a double edged sword. The point is that one must know how to use it properly. Your description also says it all and I concur. One major problem is that leverage exposes you to risks which a non-leveraged person may not have; and so this aspect of it is what bothers me.

Of course, if one can safely mitigate the risk of blowing up on leverage, then by all means go ahead and use it to grow wealth faster!

Cheers!
Musicwhiz