Physics, Psychology and the Casino Industry
by Steve Karoul

Physics, Psychology and the Casino Industry
By Steve Karoul

We are very fortunate to have a lot of very bright and creative people on our team here at Foxwoods. Ken Perrie, one of our Shift Managers, is one of them. He always challenges me with unusual questions which I enjoy. At a recent meeting, we had an interesting discussion about gamblers behavioral habits and the way certain players develop some very unusual gaming habits. This caused us both to wonder why?

The next day Ken came to my office with a big file of information about physics and psychology. My first reaction was that you don’t have to be crazy to work here but it helps. The first question that he asked me was if I was familiar with Newton’s Laws? Newton was one of the world’s greatest physicists. Newton developed a number of Laws such as the Law of Inertia which states that a body at rest and a body in motion continue to move at a constant velocity unless acted upon by an external force. Ken related this to a Roulette ball spinning or the tumble of the Dice. There are players out there utilizing these laws to their benefit on the game. He associated this with his theory on casino cheating.

The next question Ken asked was if I was familiar with Charles Darwin and his theory of Natural Selection. Darwin was a 19th century biologist from England. He developed a theory that would contradict the creation of man and imply that all species derived from common ancestors through a process called natural selection. Darwin found that organisms that die as a consequence of competition was totally random which resulted in a well known phrase called “survival of the fittest”. It is an interesting theory worth reading some day. Again, Ken related it to his own casino industry survival of the fittest theory. Look at all of the recent consolidations. How many casinos or casino brands have disappeared over the past few years? Just like the dinosaurs that disappeared millions of years ago. In addition, we have all seen our own casino dinosaurs retire only to be replaced by a new breed of professional managers more familiar with marketing, accounting and finance.

Ken’s next personality was Sigmund Freud. I started my university studies many years ago in Pre-Med to become a doctor. In fact, I wanted to become a psychiatrist so I read quite a bit of Freud in college. Freud had a lot of interesting theories about the conscious mind, the preconscious and the unconscious. According to Freud, the unconscious is the source of our motivations, whether they are simple desires for food or sex, neurotic compulsions or our motivations.

By now you are probably thinking that Steve Karoul is nuts. However, there is a lot to be learned from Freud and other great thinkers. Being a Vice President of Casino Marketing and being a psychiatrist actually have a lot of similarities and common ground. If you don’t think so, I suggest that you take a few minutes and go on-line and do a Google search of Sigmund Freud. You will find that Freudian psychological reality begins with a world full of objects. Among them is a very special object called the organism. A special part of the organism is the nervous system which has as one of its characteristics a sensitivity to the organism’s needs. If you keep reading about Freud you will eventually come to his theory on Life Instincts and Death Instincts as well as Libido or the motivation to have sex. Ah, now you can better understand. We all know that in the casino business that sex sells. Just take a look at the majority of casino advertising or marketing and you will usually see a sexy woman or man. Freud explains why. So, once again, psychiatry and casino marketing are quite similar. Freud, like many gamblers, once said “life is not easy” which translates to “gambling is not easy”. Yet life goes on and gambling goes on. Why? If you to read a little more about Freud, you will find the answers to many of these questions.

Freud was a genius with many different theories that can be related to gambling. Do a little additional reading and research and you will be surprised to learn more about motivation and how you can incorporate many of these ideas into modern casino marketing techniques. Another theorist named Carl Jung also has a number of interesting theories that many modern psychologists relate to. It helps to understand why people enjoy gambling and it also helps to understand how pleasure affects the body and the mind. All of this new knowledge can help you to develop more targeted casino marketing promotions thereby maximizing your marketing dollars.

I don’t want to sound too technical but I also want to stress that you don’t have to reinvent the wheel when designing a lot of your casino promotions. However, it is really helpful to have a basic understanding of human psychology if you want to maximize the profitability of your promotions. For example, are you familiar with another great psychologist named B.F. Skinner? Skinner’s theory involved “operant conditioning” and “reinforcing stimulus”. In operant conditioning, “the behavior is followed by a consequence, and the nature of the consequence modifies the organism’s tendency to repeat the behavior in the future”.

Imagine a rat in a cage. This special cage is called a “Skinner box” and it has a bar or pedal on one wall that, when pressed, causes a little mechanism to release a food pellet into the cage. Imagine the rat running around the cage, doing whatever it is that rats do, when he accidentally presses the bar and, bingo, a food pellet drops into the cage. The operant is the behavior just prior to the reinforcer, which is the food pellet. In no time at all, the rat is furiously peddling away at the bar, hoarding his pile of pellets in the corner of his cage. There are two Skinner theories that are relevant. The first is “Random Reinforcement”. Skinner found that by changing the interval between rewards that his test subjects (the rats) would keep hitting the pedal and not stop. Does this remind you of a slot machine? The second theory is a Fixed Ratio Schedule. This is nothing more than what we do with our player rewards programs or comp guidelines, i.e. play four hours with an average bet of $100 per hand and we will give you a free room.

Skinner’s research actually gets much more involved and much more interesting. Skinner discovered his “Schedules of Reinforcement” by experimenting with continuous reinforcement, fixed ratio schedules, fixed interval schedules and variable schedules which all offered different reward frequencies and patterns of behavior. According to Skinner, this is the psychological mechanism of gambling. You may not win very often, but you never know whether or when you will win again. It could be the very next time, and if you don’t roll the dice, or play that hand, or bet on that number or pull that slot handle this once, you’ll miss the opportunity for the big win. Can you begin to see some similarities?

Psychology is an interesting subject. There is a lot of good reading material available on “behavior modification”. Basically the therapy technique is based upon Skinner’s work. It is pretty straight-forward: Extinguish an undesirable behavior (by removing the reinforcer) and replace it with a desirable behavior by reinforcement. It has been used on all sorts of psychological problems such as problem gaming, addictions, neuroses and even schizophrenia. By better understanding behavior we can better identify problem gamblers and try to help them in the early stages of their problem.

A basic understanding of psychology is important today for the modern casino executive. Much of what we do either drives business to our casinos or helps us to increase market-share. Understanding what motivates people is a big help. In addition, psychology plays a big role in our daily interpersonal relation

Date Posted: 23-Apr-2006

[Steve Karoul is Vice President of Casino Marketing for Foxwoods Resort Casino located in Connecticut. Steve has almost 30 years of experience with top casinos both domestically and internationally. He is a contributing writer to several different major casino publications often injecting his own experiences. Steve can be reached at Tel. (1-860) 312-5070 or by E-mail: skaroul@mptn-nsn.gov]

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