2747: Losing More Than a Bet by Nick Maggiulli of Of Dollars and Data on Gambling & Personal Finance Habits

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[00:00:53] This is Optimal Finance Daily, Episode 2747. Losing More Than a Bet by Nick Majulie of

[00:01:18] ofdollarsanddata.com. And I'm your host and personal finance enthusiast, Diana Merriam.

[00:01:24] Welcome back to Optimal Finance Daily, where every day I read and offer commentary on some of the

[00:01:30] best personal finance blogs on the web in about 10 minutes or less. So with that, let's get right to

[00:01:36] our next article as we optimize your life. Losing More Than a Bet by Nick Majulie of

[00:01:46] ofdollarsanddata.com. I was supposed to publish a post today called The Most Addicting Game.

[00:01:54] It discussed my grandfather's troubles with gambling, some statistics on gaming addiction,

[00:02:00] and had a personal story, all the things that make a good blog post. But before I could hit publish,

[00:02:06] I got the call. It was my father, and it was 302 Pacific Standard Time. He informed me that

[00:02:13] my grandfather had passed away last night. There have been few moments in life where I've been

[00:02:18] struck by coincidences so eerie that they seem unbelievable. This morning, I had one of those

[00:02:24] moments. What is the chance that my grandfather would pass away on the very day that I decide to

[00:02:30] discuss my family's troubles with gambling? There was no family incident that inspired me to write

[00:02:36] about this. I actually wanted to write about gambling because of the man who won 1.2 million

[00:02:42] after betting on Tiger Woods to win the Masters, and then bet $100,000 on Tiger Woods to win the

[00:02:48] next three majors. But now I can't publish that post. I have to publish this one. There are a few

[00:02:55] things that I will always remember about my grandfather. I will always remember how happy

[00:03:00] he was to see his grandchildren and how much he enjoyed telling riddles. Every Christmas,

[00:03:05] I eagerly awaited his new riddles, and he always delivered. One riddle that I remember well was

[00:03:12] what goes up a chimney down, but not down a chimney up? An umbrella. But I will also remember

[00:03:21] that my grandfather loved gambling. He really did. My father and I once estimated that my

[00:03:27] grandfather gambled away over a million dollars in his lifetime. It's sad, but true. When I think

[00:03:33] about my grandfather's problem with gambling, I often wondered, what kept him going back for

[00:03:39] another hand, for another horse race? As the saying goes, money won is twice as sweet as

[00:03:45] money earned. My grandfather went back for the same thing they all go back for, the thrill of

[00:03:51] effortless money. It's the most addicting game in the world. In my effort to understand gambling,

[00:03:58] I've come to realize that some people just can't quit. And after thinking about this topic for a

[00:04:03] while, I now know why. They can't quit because it's easy for them to rationalize their decisions.

[00:04:10] For example, the man who won 1.2 million on Tiger Woods probably thought that his new

[00:04:16] $100,000 bet was just house money. Even if he loses it, he's still up over a million,

[00:04:23] and he's probably confident that he could win it all back. He did win that master's bet, remember?

[00:04:30] But what if he keeps losing? In that case, it's easy for him to justify taking even greater risks

[00:04:36] to regain his losses. The cycle continues. Another loss, another justification, another gamble.

[00:04:44] At every point in their downward spiral, a gambler can rationalize their behavior,

[00:04:49] even if it's clear that their decisions, taken together, were foolish. It's this process that

[00:04:55] makes gambling so destructive. In real time, it's hard to notice, but in the long run, you're

[00:05:02] left in ruin. It's the opposite of compounding. The North American Foundation for Gambling

[00:05:08] Addiction Help estimates that 2.6% of Americans, nearly 10 million people, had a problem with

[00:05:16] gambling addiction in 2016. This is roughly 10 times greater than the number of people that

[00:05:21] used heroin in the same year. And with U.S. gambling losses totaling over $100 billion,

[00:05:29] Americans lose five times more money gambling each year than what they spend on Amazon Prime

[00:05:35] and Netflix combined. This does not dismiss the role of personal responsibility, but it also

[00:05:41] doesn't imply that compulsive gamblers are just individuals with self-control issues.

[00:05:46] The reality is more complex. And with some research suggesting that gambling is partially

[00:05:52] linked to genetics, it makes it that much harder for pathological gamblers to address their bad

[00:05:58] behavior. As a result, they'll act in nonsensical ways and then rationalize it. Then again, don't we

[00:06:05] all? My Grandfather's Lesson I was originally going to end this post by talking about the

[00:06:12] seduction of investing. I was going to talk about how some people say they're investing when

[00:06:17] they're really just gambling, that is excessive trading, leverage, etc. Since investing involves

[00:06:23] stocks and not cards or horses, you can seduce yourself into thinking that you're somehow different

[00:06:29] than a gambler when you aren't. Just because you call it investing doesn't mean that you're an

[00:06:34] investor. But after losing my first grandparent, I have to end this differently. I'll conclude with

[00:06:40] a simple thank you to my grandfather for providing me with a lesson. Even if he didn't realize it,

[00:06:46] my entire relationship with money was transformed by watching how my grandfather used his.

[00:06:52] For this reason, I have never wagered a single dollar in a casino or horse track, and I never

[00:06:58] will. Sometimes the best lessons are the ones that are never spoken. So thank you, Thatha,

[00:07:04] the name I used to call my grandfather, for warning me about the dangers of gambling

[00:07:09] even as you fought the addiction throughout your life. I and the future Majulies will not forget you.

[00:07:16] Please take some time today to tell your loved ones that you care about them,

[00:07:19] because on some days we lose more than just a bet. You just listened to the post titled

[00:07:29] Losing More Than A Bet by Nick Majulie of of dollarsanddata.com, and I'll be right back with

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[00:09:23] shipping to your advantage. Learn how at usps.com slash advantage. USPS Ground Advantage. Simple,

[00:09:32] affordable, reliable. While it can be easy to dismiss gambling as financially irresponsible,

[00:09:40] none of us are immune to addictions or irrational behavior. For example, an aspect of this addiction

[00:09:46] is falling victim to the sunk cost fallacy. This is the false belief that since one has paid into

[00:09:53] something, in this case a high-stakes gambling game, that person should keep paying into it,

[00:09:59] no matter the result, in order to recuperate the cost of the initial investment. While a gambling

[00:10:05] addiction might seem like an extreme version of this, the sunk cost fallacy rears its ugly head

[00:10:11] in our lives all the time. Think about that dead-end relationship you stayed in for far too long,

[00:10:17] just because you already invested so many years with the person. Or even something as simple as

[00:10:22] finishing a book or movie that you started but you aren't enjoying. For most of us, the sunk cost

[00:10:28] fallacy isn't going to destroy our lives, but there are certainly opportunity costs at stake.

[00:10:34] The main reason why I raise this is because it can be easier to find compassion for others

[00:10:39] when there's some understanding or ability to relate on some level. And that's another edition

[00:10:45] of Optimal Finance Daily. Thank you for listening and I'll be back with you tomorrow for another post,

[00:10:51] so I'll see you there where your optimal life awaits.