False value is a cancer
False value distorts what we value individually, creating not only businesses but industries that don’t need to exist. Once created, these industries are hard to eradicate.
This is the second post in a series on false value. You can read the first post here.
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I had a Gameboy with a clear body tinted purplish-blue. I liked to play Donkey Kong Country. You needed to furiously press buttons in the right order to keep your character dancing in time. Think of it like an early predecessor to Guitar Hero.
At first, I didn’t get many points. By the time I stopped playing, I could achieve a perfect score on several rounds. I appreciated that with enough patience and practice, I could improve and move through the levels or up the leaderboard.
I exchanged my time for the satisfaction of playing, improving, and ultimately winning. Perhaps not the greatest depth of value (hence I stopped playing), but value existed.
Other exchanges offer no value, yet we make the exchange anyway. The thing is, when we make this exchange, we believe we’re getting value. Valuing things that aren't valuable is an inaccurate assessment resulting from our human imperfections. In the value economy, this is known as false value.
In my last post, I explored the sources of false value and the reality that these empty calories can result in a neutral experience or a detrimental one.
This post explores the effects of false value at an individual, business, and economic level.
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The problem with false value
False value functions like value, and that's what makes it so dangerous.
Individuals value different things at different levels. What we value and how much we value it can also change over time or vary by circumstance.
When we value something that isn’t valuable, that false value gets added to our value schema. It influences the other things we value and how much we value them.1
As we don’t have unlimited resources — particularly when it comes to time — we have to choose between things we value. The weight we place on false value can result in our choosing to scroll through social media instead of talking to our partner at dinner or ordering another drink instead of buying groceries to feed the kids. And that says nothing of enduring neutral exchanges that simply don’t move us forward.
While this can have many harmful effects at the individual level, false value doesn’t stop there. Businesses in the value economy exist to deliver meaningful value to the people they serve. If our value schema is distorted, even the most well-intentioned businesses can struggle to identify the value the people they serve actually need, resulting in these businesses helping people achieve an empty outcome.
Worse, the actions of businesses based on false value — whether they’re well-intentioned or actively the source of false value — reverberate across the economy, creating phantom value industries around the initial false value. And the longer false value metastasizes, the more difficult it becomes to eradicate.
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How this plays out (pun intended) with slot machines
The first modern slot machine was created in 1894.2 Almost instantly, people voiced their moral objections. The makers of slot machines found loopholes — like creating slot machines with pictures of fruit that dispensed gum instead of coins and calling them gum machines — to continue to sell their product.
Organized crime ultimately controlled most of the slot machine market, which resulted in increased legislation restricting the sale, transportation, and location of slot machines. It wasn’t until after World War II that the government developed a keen interest in slot machines as a way to increase tax revenue. Prying them from the hands of the underworld subsequently piqued corporate interest for the same reason: money — lots of it.
And that brings us to the present day, where gambling is not only a socially accepted form of entertainment (wave at the buses of blue hairs visiting Atlantic City to play the slots) but its negative effects have been medicalized, which shifted responsibility and normalized those effects.
What do players think they get in exchange for their time and money?
When someone goes to a slot machine, inserts money, and sits there for hours, what value do they think they’re getting? Initially, they make the exchange for a chance to win a big jackpot.3 Over time, they make the exchange for the experience of playing; the point of the activity is the activity itself.
Before you say, “Well, that doesn’t sound so bad,” let’s examine that experience.
According to Michael E. Crawford, who did a tremendously thorough exploration of the makings of machine gambling addiction in his piece Misanthropic uses of the nudge,4 extreme slot machine players stand at a machine for eight to twelve hours at a time, leading some to develop blood clots and other health issues. They wear dark clothing so that it won’t show when they urinate on themselves. They ignore fire alarms, rising flood waters, and the heart attacks of their fellow gamblers; they can’t bear to leave the machine. Some simply watch the machine go through rounds on autoplay, numb to the rest of the world until they run out of cash.
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What value do they actually get in exchange, if any?
I found this somewhat difficult to determine. I initially thought the value was in the social aspect of a trip to the casino. Unfortunately, as we’ve established, slot machine players tend to become entranced by their machines, making them oblivious to the rest of the world.
Then I considered the thrill of winning big. The ever-present chance at a jackpot incites the imagination. The fantasy of winning could keep someone trying their luck for a while. But this is a poor trade since the exchange of time and money doesn't guarantee a jackpot. It doesn’t guarantee winning anything at all.
That leaves the experience. I can understand seeking an experience where you lose all sense of time because you’re so engrossed in what you’re doing. I get that way when I’m designing something. I used to get that way playing Donkey Kong.
While the first experience has value, the second experience, well, not so much. Playing Donkey Kong required some modicum of skill, which meant I had to practice to gain mastery over the game, and that’s why I enjoyed playing. But let’s be real: it wasn’t that hard, nor was being good at it all that valuable. Slot machines require no skill; you cannot master them no matter how long you play.
I have a tough time concluding that slot machine gambling offers anything other than false value. The players exchange their money for an empty and eventually harmful experience that damages their physical, mental, and financial health.
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What’s the source of this false value?
The false value of slot machine gambling has two primary sources: social influence and biological manipulation.
Biological manipulation
Slot machine companies have invested significant time and capital into understanding human behavior in order to manipulate it. From crafting the physical space to designing the finest parts of the game, the point is to get players to “play to extinction”5 — or until they have no money left.
Here are some of the methods they’re using:
Slot machine companies design the machines to give players the feeling that they’re on the verge of winning. Players feel like they are developing a skill and keep trying to achieve mastery.
Slot machine companies design the machines to provide smaller wins at an optimal frequency to cause the player to keep playing.6
Slot machine companies increase the speed of play to make the experience more absorbing.
Casinos use facial recognition software to cause a player’s favorite machine to call them by name if cameras detect the player is leaving the building.
Casinos upgraded to cashless gambling, which lessens the friction of inserting money.
The combination of our normal biology and the behavioral design tactics in use causes the addiction the industry needs.
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Social influence
Slot machines were once socially unacceptable. We’ve not only increased acceptance of slot machine gambling, we’ve medicalized the effects. I want to believe that when the DSM included “pathological gambling” as a psychiatric disorder, they did so to help people addicted to gambling. Unfortunately, it’s been equally if not more successful in shifting blame from the machines and the corporations that design them to the individuals that play.
In addition to giving companies a free pass to make any gambling problems your personal failing rather than a foreseeable result of their deliberate manipulation, it also allows those who manage to avoid forming an addiction a level of social, if not moral, superiority. Because gambling addiction is now recognized as a disease, the usual social mechanisms that would cause us to make different choices don’t exist. We can’t condemn the behavior because that would make us unkind to someone who’s sick.
Now it's neither the slot machine company's fault because plenty of people gamble without getting addicted, nor the addict's fault because gambling addiction is a disease. The false value takes permanent root in the void of unfortunate realities that take a very real toll on a lot of people’s lives. There, away from the sunlight, it can metastasize.
And metastasize it has. When state governments needed money, they turned to slot machines. You can now find them in casinos, bars, gas stations, and even restaurants. These small businesses now rely on the revenue as much as their larger casino counterparts7 — and the government relies upon revenue from all of them. That says nothing of the larger casino tourist industry, with artists who play the venues and residents who rely on the jobs to feed their families. Then there are companies like Global Cash Access that facilitate cashless gambling and allow limitless transfers from the gambler to the casino at the site of play.
We’re no longer just talking about a slot machine maker wanting to sell their product. There’s an entire industry responding to the false value and dependent on the revenue that comes from getting players to play the slots until they have no money left to lose.
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Legislation can’t kill the cancer
When we see the damage caused by false value, we seek to contain it. The task feels overwhelming, so we turn to the big bad boss: legislation. Surely, passing the right laws will fix the problem.
But we know that the government has an interest in keeping slot machines alive, so it shouldn’t be surprising that the legislation has only gotten us so far. For example, many casinos are required to give 75-90% of the money players spend back to the players. Instead of reducing the negative effects of gambling, this law simply increased the pressure on casinos to get players to spend all their money.
The fight to regulate skill games in Virginia provides another example. Slot machines by another name, these skill games are installed primarily in small business venues and provide critical revenue to business owners. In fact, it’s these small business owners fighting to keep the machines in the name of achieving the American dream.
The groups lobbying against these machines aren’t concerned citizens but casinos that see regulation as a route to eliminating their competition. Perhaps most appetizing to the government is the regulatory scheme of the skill game supporters that “would impose a 15% tax on gross revenues from the machines, could generate up to $200 million in new tax revenue per year divided between state and local governments. That estimate would put the industry’s total gross revenues somewhere around $1.3 billion per year.”
Legislation in general makes people feel better by stating that those under 21 can’t play, but it contains no enforcement structure. The tax revenue allows us to make money from bad behavior and put that money toward good things like parks,8 which ensures the bad behavior will continue or, well, no parks. It feels like we’re doing something. We’re not killing the cancer.
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We have to stop playing
By the end of the first decade of the 21st century, more than 830,000 electronic gaming machines were operating in the United States, and the capital generated from these devices rose from 40 percent of total casino revenues in 1970 to approximately 70 percent in 2010.9
Dismantling the industry formed in response to the false value of slot machine gambling presents as an insurmountable task in part because someone working in the industry who needs their paycheck will get hurt in the fallout. But we can’t live on empty calories any more than we can have businesses or governments surviving on false value.
The only option is not to play and to invest our resources into something valuable instead.
In my next post, I will suggest ways we can limit the creation and spread of false value — and in some cases, even starve it to death.
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What we value — false or otherwise — also influences how we understand the world.
I consulted the Encyclopedia Britannica as my primary source for the history of slot machines.
According to Michael B. Crawford: “The longer odds enjoyed by the house because of these manipulations means that it can afford to offer occasional multi-million dollar jackpots, which is key to attracting new gamblers — the ones who have not yet discovered the catatonic pleasures of the zone, and naively dip into machine gambling with the hope of winning.”
While I read several articles about slot machine gambling, I relied most heavily on Crawford’s piece to understand the biological manipulation at play as well as some of the behavior of extreme slot machine players because it was both well-researched and well articulated.
Natasha Dow Schüll, Addiction by Design: Machine Gambling in Las Vegas (Princeton, NJ: Princeton University Press, 2012), as referenced by Michael B. Crawford in Misanthropic uses of the nudge
According to Michael B. Crawford: “There must be smaller wins as well, at some optimal frequency; this is called the ‘reinforcement schedule’ in the sort of behavioral conditioning that relies on random reinforcement (as opposed to the ‘classical conditioning’ of Pavlov’s famous dog, where strict correlations are established between events). In experiments with rats, random reinforcement (in the form of a dose of cocaine) has been found to be the most powerful way to induce the animals to persist in some behavior (for example pressing a button with their snout) for which they are occasionally rewarded. They will persist so doggedly that they neglect to eat or drink, and so they die. Their instinct for self-preservation has been overridden by something more powerful.”
Slot machines are by far the largest profit generator for nearly every casino
In some cases, a portion of tax revenue gets set aside to treat gambling addiction. There’s no lack of awareness that by keeping the machines, more people will suffer the negative effects the games are designed to cause. And slot machines are the most addictive: 50.2% of all slot machine players have gambling problems.
Glimne, Dan. “Slot Machine | Gambling Device.” Encyclopedia Britannica, 20 July 1998, www.britannica.com/topic/slot-machine. Accessed 12 Mar. 2024.