What is gambling and why do people gamble? Asking such a question will often yield only partially accurate responses. To illustrate this ask the average person to imagine what a gambler looks like. The images that come to mind will be that of a card shark, a poker player, a “bookie” etc. The image that does not come to mind would be a clean cut man in a suit and tie walking to his office on Wall Street. This would seem like a thoroughly obtuse characterization, but it isn’t. There are many investors who are gamblers to their very core and possess serious gambling addiction problems. A gambler is not defined by how he looks; he is defined by actions. These actions exist outside any preconceived framework.
By definition, gambling is any risky activity that comes with the promise of reward along side the potential for loss. In investing circles gambling, occurs when people who should know better throw caution to the wind in order to take significant risks that could have otherwise been avoided. To dismiss calling such high risk investors gamblers is to ignore their true nature.
Is Greed what drives Gamblers?
This is why the actions of such “gamblers” are so shocking when revealed such as the case in the 1980’s the names Ivan Boesky and Michael Milken achieved infamy. Both men committed illegal acts in the securities profession which ultimately sent them to prison. For many years afterwards, the acts of these two men would tarnish the success of Wall Street professionals and created the impression of all business people are “greedy”.
A lingering question remains: why would such successful men that were already wealthy take such significant risks? Were they really so greedy? It was not so much that they were greedy as much as they were taking huge gambles and attempted to alter the odds of success in their favor. Obviously, this was a prescription for disaster and disaster is often the result with high risk investment gambling. Such obtuse behavior often makes people wonder why such risks are taken. Is their love for money really that overwhelming? In all honesty, the answer is no.
The Gambler’s Psychology
Clearly, the goal of a gambler really is not just to acquire financial enrichment. After all, the ability to amass money can be made much easier than investing in the huge risks associated with “gambling oriented” investments. Yes, high risk investments such as exploratory oil, IPO’s and other ventures have the potential to pay a great deal of money. Then again, so does roulette. Of course, the odds of winning in roulette are 72 to 1 and this would hardly be considered and easy venture. Yet, roulette has its fans as does similar high risk investing that possess odds of success worse than roulette. Why take huge risks on options, futures and similar investments? The answer is while money is the item risked, money is only the conduit to what the investment gambler really is after.
Many intelligent investors understand risks and understand the value of money over will find them caught up in such a high risk, low payoff ventures when they could earn 10% returns on their income in safer, low risk investments. (This is to say nothing of the predilection of many to overextend by outlaying far more than they can risk losing.)
So what is it that is motivating smart investors to jump on the gambling train? Well, to answer such a question one must cease looking at the financial logic of sound investments and realize that these investors are attracted to gambling from an emotional, illogical feeling. To a significant degree, investors become attracted to gambling due to the various emotional buttons that gambling pushes. Ultimately, gambling is not about winning money as much as it is about arriving at an elusive state of mind. This notion is at the heart of the psychology of the gambler.
The true motivation of a gambler is not to acquire money. Rather, it is psychological stimulation and action that stimulates the gambler. Win, lose or draw is not relevant. What is important is that the gambler is in the proverbial mix. Gamblers love being at ground zero of the action and taking part in the thrill. The money that is transacted – win, lose or draw – is irrelevant in so much as the thrill is the most important.
Obviously, losing money is no fun and it undermines the thrill. After all, there is little thrill one can derive from being a “loser”. Plus, reality eventually will set in when massive losses pile up and the desire to “get even” and win money back becomes part of the mix as well. (A failed concept as the continuation of risky activity will probably lead to more losses) Ultimately, however, it is staying in the action that takes precedence over acquiring money although obtaining money remains part of the goal since it defines being a winner. On a conscious level, the gambler is completely unaware of the desire to be part of the action is the true motivation. This creates the confusion and lack of true focus on the part of the gambler that results in chaos and dysfunction is often the result.
Gambler’s Withdrawal and Addiction
But all this is secondary to the thrills high risk investment gambling provides. In order to maintain the “up” of the thrill people continue to gamble. When they are not gambling they are without a sense of exhilaration they can not live without. As such, they become addicted to the activity. Logic, common sense and reasoning are replaced by their thrill seeking and this is the root of the psychological addiction that dominates their actions. Then, these addicts ignore all the negative effects. In a way, there are not in control of their gambling; their gambling is in control of them.
The individual make up of the investment gambler has much to do with getting caught up in this type of behavior. Certain personalities are more prone to addictive behavior than others. For some, the ability to sit back and collect a decent return on an investment just isn’t enough. It doesn’t yield huge profits and it is not a quick process. But, with risky investment ventures there will be those who enjoy the “gamble” associated with such investments. In time, however, the negative effects of such behavior will catch up with the individual. This can come in the form of losing all one’s assets and ending up in bankruptcy court. At this point, it will become necessary to curb the behavior as a change must be mandated.
When it comes to curing a gambling addiction this is not something anyone can do alone. If one has a gambling problem (traditional or investment related gambling) then the need for professional help is required. Therapy and proper treatment along with a personal desire to change are what is needed to free oneself of gambling related issues. While getting into serious investment gambling trouble is easy, getting out of it is much more difficult. That is why this behavior should always be avoided at all costs. When it comes to investing, play it safe and play it intelligently and avoid risks. This will eventually provide a piece of mind that is far greater a thrill than risky gambling behavior could ever deliver.