Gambling—Skill, Luck, or Something Else?

Gambling is an enterprise in which the entrepreneur, usually called the “player,” attempts to profit by winning games consisting either of foretelling the outcome of a specific event or of beating an opponent at a contest.These games can be broadly separated into two groups: low-skill and high-skill. By “skill” here, I distinctly mean the ability of the player to alter the outcome of the game in his favor through the use of advantageous strategies.

In the typical low-skill game, casino games for instance—craps, roulette, keno, what have you—there are no such strategies; the player may, through accurate play, only reduce the size of his expected loss over time. Indeed, in quite a number of casino games, various types of coin-operated machines for instance, the player may not even have the option of minimizing his loss through correct play, but must willy-nilly accept the pre-set negative outcome of the game.

Gambling in high-skill games, sometimes called proposition betting, involves the player accepting a partially predictable prospect of success or failure and will almost always contain a considerable mix of skill and nonskill factors relevant to the outcome. Examples of this form of gambling are commonplace. You might bet a friend that you will beat him at golf, tennis cards, or any of thousands of different activities each involving some degree, sometimes a staggering degree, of skill.

You might, alternatively, bet him that your favorite sports team will beat his favorite team in the upcoming
game.Have no doubt here; skill is and must be involved in this latter bet if the player intends to prosper over time.
In playing a golf or tennis match, the player’s skill is applied; his strokes immediately affect the outcome. In a sports wager, the player’s skill is implied.

The player himself does not affect the outcome of the game directly, short of perhaps introducing strychnine into the other team’s pre-game meal,but the player’s outcome, win or loss, is a function of his skill in rating the relative talents of the teams involved. In addition, to succeed, he must accurately evaluate other conditions that will or may affect the outcome before the game takes place.

If you are a purist, you may object to the characterization of a gambler as “making money with money” by contesting a golf or tennis match,or by playing a card game, or by wagering on a hockey match. Such an objection is specious. The only important question is, “What is at risk?” The banker, the bookmaker, the gambler, and the trader all put their capital directly at risk.

The physicist, the baker, the assembly-line worker, the teacher, the salesman, and the policeman put their time, talent, and effort right square on the line—but not their capital. To be such a purist here is equivalent to asserting that the only true way of making money with money is to play some form or another of flipping coins, wherein the only intermediary device used is actual currency or specie.

That’s much too formalistic a view.The Starting Line:To make money with money, whether by gambling or through any other enterprise,first involves a selection process of profit possibilities. For the gambler, the selection process amounts to “Which game(s) shall I play?” In low-skill games, this selection is basically emotional, that is, the gambler likes the game.

It’s entertainment for him and he enjoys it, notwithstanding that some large percentage of the time he is going to lose. Likely enough, he’s aware of this high probability of loss . . . and simply doesn’t care. In high-skill games, though, the selection process is much more empirical, as well as much more important to the player’s outcome. The high-skill gambler wants, in short, to maximize his confidence level methodically, either by selecting opponents he “should” beat or by choosing wagers that appear, empirically or intuitively, to be to his advantage.

He will ultimately end up measuring his success or failure with the yardstick of careful selection of his profit possibilities, of opponents, or propositions. This success or failure will be modified only by the intrusion of non-skill factors, of something very much like Shakespeare’s “outrageous fortune.” If the result for the gambler in low-skill games is more or less preordained, the result for the gambler in high-skill games is nothing if not highly variable.

Part of the reason for such variability is that, in a disproportionate number of games the gambler might play, he will not know his profit expectation beforehand. He may perceive he has an advantage in a given proposition or in playing against a given opponent, and, based on experience, he may very well be correct. The notion of perceived advantage in propositions, however, is in most cases a subjective view.