One of my favorite lines in one of my favorite books about gambling—Richard Armstrong’s God Doesn’t Shoot Craps—features a character explaining to another character the effectiveness of his system for beating the casino: “It’s a gambling system,” he says patiently. “Sometimes it wins and sometimes it loses.”
Your odds would be much the same without a system, but there’s something to be said for the comfort of a system. You’re not at the mercy of blind fate; you are following a game plan and reaping the rewards. And when it no longer rewards you, well, sometimes it wins and sometimes it loses.
You could say much the same about casino development. Companies conduct extensive market research and analytics before investing millions (or in some cases billions) in new projects. But there’s still much left to chance: rising or falling energy prices, the strength or weakness of the dollar, foreign government decrees. So at the end of the day, sometimes it wins and sometimes it loses.
I can’t chase Armstrong’s words from my mind while thinking about the latest news from the Strip. The Cosmopolitan sold for $1.7 billion. The Tropicana sold for $360 million. Hooters sold for $70 million. Genting just officially broke ground on the $4 billion Resorts World casino resort. The tag team of James Packer and Andrew Pascal appear close to doing the same on their own resort on the Frontier site.
Five years ago, these kind of transactions would’ve been wishful thinking. But think about it: Five different interests have decided, in recent months, to buy into Las Vegas (three decided to sell, but that’s a story for another time). When you combine that with the rising visitor numbers, room rates and overall spending, it looks like the sky is the limit.
But haven’t we been here before?
From 2005 through much of 2007, things looked similarly sunny. We’d just been through what we thought was a jarring recession (the post-9/11, post dot-com bubble slump), and all the indicators were looking up. The longer you sat on the sidelines waiting to get a piece of the expanding pie, the dumber you looked (and probably felt). It’s the equivalent of watching a blazing run on a craps table: People stand on the periphery, waiting for the opportune time to jump in, while everyone at the table continues to rake in money.
Finally, you reach in your pocket, put your money down … and the dice cool. Certainly, all of us who bought a house or casino in Las Vegas after 2004 and before 2008 can relate. But up until the moment that everyone craps out, the system looks foolproof.
The real tragedy is that a good system often does win, sometimes much more than it loses. Las Vegas is full of success stories, both at the tables and in boardrooms. So sitting the game out isn’t always the best option.
This isn’t just a Vegas thing, either. Since the Dutch tulip bubble of the early 17th century, the world has seen speculation rise, fall and rise again. It may be human nature to try to get in while the going is good. In a city of second chances like Las Vegas, it’s entirely understandable that people—at the craps tables and boardroom tables—will want to do just that.
How will we know when the time is no longer right? There will undoubtedly be a sixth (and a seventh) entity buying into Las Vegas in a big way soon. In the end, some groups will invest wisely, and some will invest rashly. And just like at the dice table, a seemingly random bounce can make geniuses or failures out of either group.
This current wave of investment is more than reassuring; it’s morale-saving. We should relish the return from recession. But we should never lose sight of the fact that, in the end, the broader economy is very much like a gambling system: sometimes it wins and sometimes it loses. As long as we’re aware that the losses will come, there’s nothing wrong with betting sensibly and hoping for a win.
David G. Schwartz is the director of UNLV’s Center for Gaming Research.