As the treasurer lauds supply-side economics, a once-controversial recovery theory is gaining traction.This is the essence of modern monetary theory – that government budgeting is nothing like household or business budgeting, for the simple reason that government can create money.
Poker machines on trial
In Melbourne’s Federal Court this week, a “David and Goliath” trial began. The suit was brought by Shonica Guy, a former gambling addict, against industry giants Aristocrat Leisure and Crown Melbourne Limited. Guy’s lawyers alleged that the poker machine Dolphin Treasure, which was manufactured by Aristocrat and sold to Crown, is designed to unlawfully entrap its users.
It is a fascinating, potentially industry-altering trial in that it will consider what is normally fastidiously protected intellectual property – the design of a poker machine. Never before has this been so considered by an Australian court. “There are two aspects of consumer law in this lawsuit,” Tony Mohr, a spokesman for the Association for Gambling Reform, tells me. “Misleading and deceptive conduct, and unconscionable conduct.”
The suit concerns three specific alleged characteristics of the machine. The first is that the final “reel” of the game is weighted differently – that the odds of securing a winning combination of symbols is much greater than the previous four, inducing a misleading sense of optimism. The second is that sound effects suggesting success are misleadingly deployed when a player is losing. The last is that the “return to player” – its payout to users – is inadequately explained. Regulations stipulating the design of poker machines mandate a “return” to the player, which varies between 85 and 90 per cent depending on the jurisdiction. Assuming an 85 per cent return-to-player ratio, this means a player will, on average, lose 15 per cent of their wager per game. This loss is accumulative. “If a user inserts $10 and wagers $1 each spin,” explains a recent report from the Australian Gambling Research Centre, “even if the game performs exactly as predicted (and this is extremely unlikely), the user would exhaust their funds in a little more than five minutes (at the rate of one wager every five seconds).”
Lawyers for the plaintiff argue that Dolphin Treasure’s users do not grasp this, believing that the return-to-player ratio applies to their total bets. “Consumer law is, in some ways, a version of the pub test,” Mohr tells me. “You ask someone what a 90 per cent return to player means, and the answer will be that for every $100 you put in, you’ll on average get $90 back. And this is very far from the truth.”
Lawyers for Aristocrat and Crown argue that the machine conformed to regulation, and that – via an information page accessible on the game – the return-to-player function was adequately explained.
In January 1960, four years after New South Wales joined Nevada as one of the world’s few jurisdictions to legalise pokies, an episode of The Twilight Zone aired in the United States. In “The Fever”, Mr and Mrs Gibbs win a paid trip to Las Vegas. Mr Gibbs abhors gambling and is reluctant to go, but accedes to his wife’s enthusiasm for a holiday. Given a buck by a drunk on the casino floor, Gibbs deposits it into a slot machine – hours later, still furiously depositing his money to win back his losses, he has become terrifyingly, irrevocably hooked. Believing the machine has become sentient, and is now literally pursuing him, Gibbs leaps fatally from his hotel’s window to escape it. The Twilight Zone’s customary end-of-episode narration intoned: “Franklin Gibbs, visitor to Las Vegas … lost his money, his reason, and finally his life to an inanimate, metal machine, variously described as a ‘one-armed bandit’, a ‘slot machine’, or, in Mr Franklin Gibbs’ words, a ‘monster with a will all of its own’.”
The question of will is central to the pokies debate – and is arguably implied, if abstractly, in the trial in the Federal Court. In 1938, the psychologist B. F. Skinner published one of his most famous books, The Behavior of Organisms, in which he argued that behaviour that is reinforced is strengthened, and that which is not will be weakened, if not extinguished. Skinner would become the chief explicator of “operant conditioning”, which The New York Times explained in its 1990 obituary of the psychologist as a theory that “holds that any behavior, from a rat’s pressing a bar to a human’s composing a symphony, is selected and reinforced by certain positive consequences in the environment”.
Opponents of pokies, tacitly or otherwise, accept Skinner’s premise that, like animals, we can be easily primed for destructive behaviour and that a poker machine is artfully designed for the operant conditioning of its user. Even allowing for variations of personality – compulsivity is not evenly distributed among the population – the argument may strike you as either depressingly patronising or merely realistic.
The industry’s position is clear. Its peak body in Australia, the Gaming Technologies Association, has published a player information booklet with the stated aim of helping “gaming machine players increase their understanding of the machines”. The document opens: “People who play gaming machines to increase their income are either misinformed about the nature of the machines, or just plain foolish. Gaming machines are not designed to enable people to supplement their incomes. Gaming machines are designed as recreational amusement devices on which people can spend money. Players are not forced to play machines, nor are machines designed to be addictive. They are designed to be entertaining and attractive.”
The Australian Gambling Research Centre, established in 2012 by the Gillard government, released a paper in July this year called “How electronic gaming machines work: Structural characteristics”. It was written by Dr Charles Livingstone, a senior lecturer in public health at Monash University, and a man who will be called as an expert witness in the current trial. Regarding the structure of pokies, Livingstone wrote: “The goal of game designers is to maximise revenue per available customer and ‘time on device’. For the most part, designers utilise structural characteristics to do so. Structural characteristics define the capacity of [poker machines] to induce substantial expenditure in users. They may also have an addictive or habituating effect on users.”
The paper argued that Skinner’s “operant conditioning” was fundamental to a machine’s design. “It has been repeatedly demonstrated that animals (including humans) develop habitual behaviour when exposed to an unpredictable pattern of rewards in response to specific activities ... Operant conditioning is a key element of [poker machine] design and is incorporated in [poker machine] games via their ‘game maths’ – the interplay of random outcomes and the reward schedule of the game.”
There’s a difference in language between the pokie makers and its critics. Public health experts prefer “machines” and “users”. The industry almost uniformly uses “games” and “players” – flattering words, invoking innocence and thoughtful engagement. But Aristocrat Leisure’s founder, Len Ainsworth, often uses more honest language, phrases that haven’t been market-tested. In a 2000 episode of Four Corners on gambling, Ainsworth was asked what he thought had contributed to his company’s success. His response has become notorious: “Building better mouse traps.”
Approaching his 100th birthday, Ainsworth does not seem given to pained reflection. In 2013, and still far from retirement, he was interviewed again by the ABC. Asked for his thoughts on online gambling, he said: “It really means the way it functions that any kid can sit at home with a computer, and I don’t think they make too many inquiries as to who or what you are, as long as you’re prepared to gamble. Another viewpoint, of course, is that they’re probably training these people to gamble and they’ll end up in a casino or a club or a hotel playing our machines, wherever it might be. So perhaps it’s a positive.”
Ainsworth founded Aristocrat Leisure in NSW in 1953, just three years before poker machines were legally recognised by the state. This encouraged intense investment in, and subsequent innovation of, gaming machines. Because of the early legal recognition for this exotic form of gambling, Australia became and still is pre-eminent in machine design. “It’s a fascinating, if galling history,” Tony Mohr says. “Australian companies, especially Aristocrat, have become world pioneers in gambling machines.”
Innovation and state acceptance mean Australia has almost 200,000 pokies – the highest per capita in the world, excluding casino-dominated economies such as Macau. According to the Queensland Treasury, they account for $14 billion in gamblers’ losses. Unsurprisingly, Len Ainsworth became a billionaire, but a terminal cancer prognosis in 1994 – when he was 71 – forced his divestiture from the company. As part of his severance, he demanded a prestige car every three years until he died.
He’s still receiving them. The prognosis was wrong, and Ainsworth established a rival company that bore his name. It has yielded almost another billion dollars. While not a household name, Ainsworth is an industry legend and he remains at the helm of his company. It’s a successful firm, although not as dominant as his original – Aristocrat is now the second-largest manufacturer of pokies in the world. Despite the lawsuit, its share price for the past five years describes a mountaineer’s ascent.
Tony Mohr believes that, regardless of the Federal Court case’s outcome, there is growing opposition to the machines. “The trial is part of a bigger, longer problem for the industry,” he says. “In Australia tobacco is the best parallel. It’s sold for big profits, designed to addict and bad for your health. Smoking was once so common today’s world-leading laws were unthinkable. It’s not going to be easy, but pokies will be the next tobacco. The campaign won’t wither away and die on an adverse outcome in the trial. We’re building a constituency of people who are passionate about this. There aren’t many, but there are some MPs who have spoken out about this – and in these cases it’s likely that they’ve witnessed the suffering. Nick Xenophon is a case in point. We’re doing work now with AFL clubs, many of whom profit from pokies. We’re working with AFL fans and clubs because everyone wants footy to be family friendly and pokies and gambling are the opposite of that. That’s why North Melbourne got rid of their pokies and why Geelong are now doing the same.”
The trial is expected to run for three weeks. There are a few possible outcomes, and as many minds working on them as there are on the many millions of probabilities on a one-dollar bet.
This article was first published in the print edition of The Saturday Paper on Sep 16, 2017 as "Poker faces".
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