(04/13/06)
When I was in about the 8th grade, I saw an episode of The Simpsons where the Flanders' house is destroyed, and the Simpsons discover that the Flanders did not have house insurance, "because Ned considers it a form of gambling." While this is a hilarious joke, it did make me wonder where people who are morally opposed to gambling draw the line.
Granted, drawing a line of demarkation between plain old gambling and calculated risk in everyday life is neither easy nor a productive use of one's time, but I have never been one to use my own time in a productive manner (Exhibit A and Exhibit B)
Which of the following activities are gambling, and which are not?
- Two people flip a coin and make bets on the outcome
- A man plays roulette in Vegas
- A man plays blackjack in Vegas according to basic strategy mainly for fun
- A card counter plays blackjack with a slightly positive statistical expectation due to his more advanced strategy
- A group of friends gets together at an apartment every Saturday to play poker at stakes that everyone can easily afford
- A man makes a living betting on sporting events full time
- A man makes a living playing poker online full time
- A man makes a living because he wrote a software bot that plays poker online while he sits in the living room and watches movies
- A welfare-dependent single mother buys lottery tickets every week
- A man makes a living trading stocks with his own money
- A man makes a living trading stocks with someone else's money (i.e. a fund manager or something)
- A man makes a living because someone else trades stocks with his money
- A man buys house insurance
- A man invests in money market funds
- A man saves solely in guaranteed CDs and T bonds
- A venture capitalist invests a few hundred thousand in what he believes may very well be the next revolutionary product
- A television producer greenlights the production of a new television show based on a web comic with a small cult following
I could obviously go on forever, but I wanted to focus mainly on the guy who daytrades stocks and the guy who bets on sporting events. Are the two activities all that different? There is a great deal of uncertainty and chance involved in both games, and a great deal of skill involved in minimizing uncertainty and its effects. The stock trader speculates on how much he believes other people will pay for a certain stock, not how well that company does - he shorts and covers in addition to his buying and selling. After all, buying and selling futures of any kind is essentially the same thing - whether it is tied to the profits of a corporation, the going price of a physical good, or the win-loss record of a baseball team.
Let me know if I'm way off base. Comment away.
