Casino gambling is big business in the US with revenue from gaming reaching $40.28 billion in 2017, surpassing $40 billion for the first time. However, according to Gallup in the same year, only 52% of Americans invested in the stock market, despite recent stock market gains. Although gambling and investment are distinct activities, both involve risk-taking. How is casino gambling linked to investment risk taking?
Casino gambling versus investment
Casino gambling is defined as playing games of chance for stakes of money or anything of value. There are over 500 commercial casinos in the US offering games such as blackjack, poker, or roulette. Investment is putting money into a wide range of opportunities such as the stock market, futures, commodities or investing in a business that offers profitable returns. The definitions of these two activities are very similar, in fact, some say that investment is simply another type of gambling and both involve risk-taking with studies showing the conceptual link between gambling and activity in the financial markets.
The perception of risk in casino gambling
Casino gambling and financial investment both involve risk. However, the risk is perceived differently with gambling in casinos generally considered to be a bad thing for the gambler themselves. It is a well-known fact that in casino gambling the casino has a mathematical advantage as, in essence, casinos are businesses aiming to make a profit out of its customers. In fact, the house edge has been calculated to be as much as 15% for slot machines. However, the different elements of casino gambling including risk, anticipation and the rush of adrenalin at a near miss or a win are addictive to gamblers, despite the odds being stacked against them.
Risk taking in investments
Investment is a key part of the US economy but in contrast to casino gambling, investing in the stock market is perceived to be a more positive activity. Investing in the stock markets or in a business results in owning something which will bring dividends if profitable and, if the price of the stock goes up, can be sold at a profit. However, it should be noted that not all investment activity is the same with some activities, such as higher-risk stocks or speculation more akin to gambling than other lower risk investments which yield a lower return over a longer period of time. In a key difference to gambling, risk in investment can be researched and managed to give the best chances of a positive outcome with investors deciding whether to go for high-risk investments, which come complete with the same feeling and adrenaline rush as a roulette wheel, or lower risk investments with a more guaranteed, if lower, return.
Many parallels can be drawn between risk taking in casino gambling and investments. Although distinct activities, both involve risk-taking and are conceptually linked. Some types of higher risk investments and speculation are more closely linked to casino gambling than others.