“A nickel ain’t worth a dime anymore”
—Yogi Berra
If there is a topic in gaming that does not get enough attention, it is the topic of regulatory capture. I would think this neglect is very much in line with the gaming industry’s desires.
I have an extensive collection of capture quotes, and for this discussion, I will use one by the University of Chicago’s esteemed economist, the late George Stigler. Stigler stated, “… as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.”
Stigler, a winner of the Nobel Memorial Prize in Economic Science, became identified for his work on capture, and within the discipline of economics, there is a surprising degree of consensus in this regard—a bit unusual since it is generally argued that a person could line up ten economists end-to-end and they would never reach a conclusion.
If one wanted a textbook study of the conditions conducive to facilitating capture, the Nevada Gaming Control Board’s reality since A.G. Burnett left the chair position in 2017 provides a wonderful example.
A.G. stepped down from the board in December 2017, and Becky Harris became the chair in January of the following year. Ms. Harris lasted a few days short of a year, courtesy of the then new Governor, Steve Sisolak, who apparently placed political party affiliation ahead of maintaining continuity of leadership and experience on the Board. This was followed by Sandra Morgan who held the position for 20 months, Brin Gibson for 24 months, Brittney Watkins for a bit more than a month, and now Kirk Hendrick is in the chair slot.
Having worked in key positions for two different regulatory entities, I would argue the first year of a chairperson’s tenure is mainly spent figuring out the agency, the people, and the many nuances of the job. The first year is clearly transitional and this transition has a price in efficiency and competence. It would not be a struggle to find an organizational theorist who would suggest Nevada’s level and rate of turnover are clear symptoms of a poorly operating entity.
A portion of the turnover described above was self-inflicted by small-minded politicians in the state such as Adam Laxalt and Steve Sisolak. A bigger problem, however, is that the salary scale for these people seems designed to ensure that competent people will be hard to recruit and maintain.
Let me repeat: The salary scale offered to the state of Nevada’s Gaming Control Board chairperson and board members makes it hard to recruit and retain quality leadership.
There is a suggestion that if one puts all of his eggs in one basket, that individual must watch that basket. This is quite relevant to Nevada for this state has managed to stuff the entirety of its economic eggs into one gaming basket. One would think the state would work to hire the best to oversee this basket, yet there are over 150 employees at the University of Nevada, Las Vegas, who make more than the chair of the Nevada Gaming Control Board.
I am not suggesting the UNLV folks are not worth what they get (okay, the football program has demonstrated an incredibly bad ROI) but understand that the gaming board members oversee the economic engine of the entire state.
If one of the big gaming companies in Nevada were to suggest it was looking for a CEO and was offering $200,000 tops, the company would be laughed out of town, and the shareholders would think the company’s board is a bunch of idiots. Yet, that is what the state says it is worth to oversee the activities of ALL of the gaming companies in Nevada.
Admittedly, Nevada has a bit of a reputation for its cheapness, as its stingy attitude towards problem gambling suggests. The state’s education system also manages to rate last or close to it in the U.S. every year and while there are a number of reasons for this, being cheap isn’t helping.
One of the driving forces that influence the situation where Nevada tries to run its gaming regulation on the cheap is there are a lot more lobbyists giving the politicians money to protect the profits of the gaming companies than there are lobbyists giving the politicians money to enhance the quality of regulation. And unfortunately, to steal the line of P.J. O’Rourke, our politicians have become a parliament of whores.
This group of politicians does not understand that quality regulation does not come cheap and that sustainable industries demand quality regulation. Unfortunately, it appears the industry allows these salaries to stay low because they believe it keeps the regulators in line in the sense that the Board members do not want to bite the hand that may soon be feeding them, and relatively low salaries are the lubricant to a quick trip through the revolving door from agency to industry.
Aside from an embarrassing rate of turnover in the GCB, it also needs to be appreciated that the complexity of gaming operations and transactions has escalated tremendously over the years and the asymmetry demonstrated by having a group of folks wearing Sears Best suits trying to equitably interact with a group of folks in Brioni is a fool’s errand.
Markets work, and if the state of Nevada wants to hire and maintain good regulators, it should pay them well. First of all, it is difficult to attract top-notch talent at the present salary level, and if they do accept it, it is with a short-term mindset to polish up the resume so they can make real money when they move on. This is not good for the state of Nevada.
There was a time in my life when the Nevada Gaming Control Board was known as the gold standard. That is becoming a distant memory and it is not because of anything the board did. It is because a bunch of short-sighted politicians and industry folks decided to get stupid.
I would hope that Nevada would begin to work to fix it for there is no upside to allowing the gold standard to become a punch line.
