The Madness of Crowds

The gaming industry is logging record revenues, but that does not mean it is perfect, by any means—oftentimes, those who venture to point out its shortcomings are doing so out of love, and a desire for things to improve for future generations. Such is the case with Richard Schuetz (l.), whose half-century of experience has touched nearly every aspect of the industry.

The Madness of Crowds

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”

—Charles MacKay, from Extraordinary Popular Delusions and the Madness of Crowds, 1841

The first article I published was in the early 1970s. I was in a master’s program in economics and showed it to Professor Bill Eadington at the University of Nevada, Reno. The article was about why the United States should legalize sports betting.

I had become interested in gambling during my university years, for while I attended college during the day, I needed money, so starting in 1971, I dealt cards at night at Bill Harrahs’ casino in downtown Reno.

Dr. Eadington read through my paper and said he wanted me to present it at a conference he was planning in Las Vegas. I did, and later, he published it in a book, which was an anthology of the papers presented at the conference.

The book looked great and had an air of importance about it. I was overwhelmed by having my name and article in it. I thought this was all very cool.

I didn’t publish much in gaming for some time after that. For a few years, I wrote a marketing column for a gaming magazine, and occasionally, I would pen this or that. I became occupied by life during this time, mainly working in and running casinos.

Skip ahead to 2011, and Governor Brown appointed me to the California Gambling Control Commission. I had left the casino business by this time, was consulting and teaching here and there, and found this appointment exciting because I had taken a great interest in gaming regulation while in a Ph.D. program in economics at the University of Utah many years earlier.

For my dissertation at Utah, I opted to spend over two years working on a story about the evolution of the Nevada gaming regulatory experience from 1945-66 (spoiler alert—do not try and write a dissertation on gambling at the University of Utah, especially when much of the data is transcripts of an FBI bugging operation to track the involvement of mob influence in Las Vegas).

Joining the Gambling Commission in California got me interested in writing again. I then developed a story about how Ed Olsen, Nevada Gaming Control Board (NGCB) chairman from 1960-66, used the power of his position to help racially integrate the Las Vegas Strip casinos, for until the early 1960s, Blacks were not allowed in these establishments. It was a story Ed told me as he was undergoing end-of-life challenges while living in a small cottage in Reno, and I spent much of a summer visiting with him there.

Once I finished the article about Ed, I sent it off to my long-time friend Roger Gros, and lo and behold, he published it. Since then, I have published over 150 articles, so if you are pissed at me for any of those—blame Roger.

Speaking of Roger, this article is also his fault. After the recent G2E, we were visiting, and he mentioned that several people had approached him at the show and asked why I was so down on gaming. Allow me to explain.

I am not down on gaming. I love gaming. It has given me a wonderful life.

There, glad we cleared that up.

I have done several profile articles on people like Scott Schettler, Ewa Bakun, Spanky, Jeff Benson, Brett Abarbanel, Ernie Banks, Frank Fahrenkopt, Carol O’Hare, David “The Hat” Purdum, and others. I am proud of that work.

I have often written on things such as manels (panels of all men), industry misogyny, the absence of women on boards, and the general bullshit that women are subjected to in this industry. A safe estimate of the women who have emailed, called, visited with me at a conference or otherwise contacted me and thanked me for these efforts is in the many hundreds. I consider each of those contacts as an award, so screw it if a bunch of you don’t like me getting real about the way that women are treated in this industry.

I have written critically about the American Gaming Association (AGA). I think they sometimes mouth nonsense, and I find some of their research efforts suspect. I was in the industry when the AGA was formed, and I understand that aside from Frank, these people tend to know little about the industry, come from other industries, and leave for other industries.

Their research appears to be junk science at times, and I spent over seven years in a master’s and Ph.D. program in economics and finance. If nothing else, that experience allowed me to sniff out some nonsense. I was also not impressed that I heard nothing back when I faxed them and also used their “contact us” digital connection to ask about one of their research efforts.

I also do not think they should be celebrating the industry’s great success in tackling gambling harm when more than a handful of states have no funding built into their legalization efforts.

I think the AGA’s belief that Merrick Garland is going to run off and shut down foreign sites is fundamentally flawed. I think they are trying to create a “poor me” narrative for the industry to argue to reduce taxes. (Spoiler alert—it’s not working).

I worked offshore and learned nobody would do anything about anything offshore without the State Department’s involvement. Where I worked, the country’s Opposition Leader owned a betting establishment that did not end at the water’s edge. The point is if you think the State Department is going to let Merrick Garland start running Eliot Ness-type raids in other countries and screwing up our foreign relations, you have no idea what you are talking about. It might be time to open your ears and shut your mouths.

The point is if you plan on doing anything involving an offshore country, always start with the State Department, and your first requested meeting when you go offshore is to meet the U.S. ambassador or consul general. These are very important and competent people. They will teach you things, and one of those things is reality.

As an aside, I did find it recently ironic that the chair of the NGCB sent Merrick Garland a letter asking him to crack down on the foreign sites, and one of Merrick Garland’s subordinates from central California busted MGM, located just eight miles from the NGCB offices, for allowing an illegal bookie to work out of the MGM Grand. The MGM folks had also apparently assisted this California-based bookie by not adhering to many of the Bank Secrecy Act obligations that should have been addressed. Issues like know your customer and anti-money laundering (AML) processes.

It speaks volumes when the feds from California, in a settlement agreed to by MGM, mandated that MGM needed to spend a lot more money on compliance and AML training. My God, how embarrassing is that? If some federal agents from central California came to my casino in Vegas and had to teach me to run my casino correctly, I would walk out of the building in complete shame.

Let’s not forget the smoking issue. Watching the absence of gaming executives in this debate is fascinating. At panels and hearings, they will not show up. This seems to be the moral quality of many executives, for they seem afraid to address this issue face-to-face with their employees and guests. They would rather pay someone to run down and handle this messy work.

These executives should know that there is a high level of comorbidity between problem gambling and smoking, so they fight to keep smoking to create a welcoming environment within the casino for the problem gambler.

These executives should also know that science teaches us that smoking sections do not provide adequate protection for the health damage from second-hand smoke, nor do filters. Finally, I would suggest that many of these executives clearly understand that the segments of the workforce most subjected to second-hand smoke damage are most likely to be women and people of color, whereas the male and pale executives work in smoke-free environments. The gaming industry has a knack for treating women and people of color as less important. Their attitude is, “Let them eat smoke.”

There are other groups I like to write about. I often find fault with regulators. I will keep this short, for it could become a book. I have written three articles about why it is stupid for a key licensee to be required by the regulators to declare if he has had a vasectomy or been circumcised and if a woman has had a breast augmentation, reduction or a cesarean section. Moreover, this information is to be stored in government files.

The application instructions are clear, for the applicant is instructed to list all scars, and failure to do so can result in an application not being processed or approved. Have any regulators tried to remedy this nonsense? Not that I am aware of. And who in the agency is auditing this? That would be a weird job. “Okay, dude, show me your junk” would be a strange command from a regulatory investigator/auditor.

I suspect that addressing these topics would take too much time, preventing regulatory leadership from actively campaigning for one of the many Regulators of the Year awards, generally sponsored either by the people who appear before them or who they oversee.

And don’t get me started on the politicians.

No, I am not down on gaming. I am down on many people who seem primarily involved in what appears to be a massive cash and ego grab and who have little idea what they are doing. And they have surrounded themselves with a bunch of yes-people parrots to talk about how wonderful it all is. And I am down on this because I believe this will not lead to a well-thought-out sustainable system.

From being regulated as an operator, up to and including CEO of a Las Vegas casino company, to having filed gaming applications in over 120 jurisdictions, to having been a regulatory leader in two different jurisdictions, and consultant to the introduction of gaming in numerous others, I have found that there are some simple guidelines for the gaming participants to follow: 1) Always try to operate with a high degree of character, honesty and integrity, and 2) Always work to understand that what you are doing is a suitable means of operation.

I believe that if these standards become the industry’s guidelines, there will be an industry that future generations can be proud of. I also believe this is a long way off.

Gaming was legalized in Nevada in 1931. It was first “regulated” in 1945 to collect a tax, and the NGCBwas formed in 1958 (with less than 11 pages of double-spaced regulations).

It was not until May of 1978 that a casino was to open outside of the state of Nevada.

Now, legislators are pushing for gaming openings as soon as three weeks after the enabling legislation is passed. The regulatory staff are assembled without a day of prior gaming or gaming regulatory experience. The operators throw up systems seemingly overnight, allowing for numerous regulatory violations because they have not dialed in the systems to the particular nuances of the reg package of the jurisdiction they are in, and problem gambling is either an afterthought or is neglected completely.

I have also been around for a long time. Long enough to notice that a gaming regulatory agency in Nevada seemed oblivious to the apparent behavior of an industry leader that a few reporters from the Wall Street Journal were able to publish extensively upon. In fact, these reporters seemed to expedite this person’s exit from the industry. The Nevada regulators showed up long after he was gone from the industry to fine him; a classic example of the regulators showing up after the battle to shoot the wounded. Then, there was another gaming leader who threatened to sue the survivors of the largest mass shooting in U.S. history. These are classy people.

Why do I bring this up, you might ask? If we do not learn from our past mistakes, we will not have a very good future, and we cannot learn by neglecting reality and creating myths.

As an aside, I am not done with my complaints yet, so get used to it.

And yes, I love this industry and want future generations to be able to proudly serve in it.

Articles by Author: Richard Schuetz

Richard Schuetz started dealing blackjack for Bill Harrah 47 years ago, and has traveled the world as a casino executive, educator and regulator. He is sincerely appreciative of the help he received from his friends and colleagues throughout the gaming world in developing this article, understanding that any and all errors are his own.