Be wary of words from the unwise!

October 23, 2001 3:35 AM


Worthwhile gambling references are heavily outweighed by garbage. I used to blame the victims. The folks naively seeking easy answers, loopholes in the laws of math, and secrets the casino bosses don’t want anyone to know. Those to whom concepts such as expectation, volatility, and utility will forever be mysteries. I figured opportunistic purveyors, many who knew they were serving up nonsense as well as some who actually believed their own blather, simply supplied what consumers demanded.

The current Nobel Prize in economics, while not contradicting this view, adds a dimension to it. Laureates George Akerlof of Berkeley, Michael Spence of Stanford, and Joseph Stiglitz of Columbia won for their work in “asymmetric information.” They explained certain failures of the “free market” to optimize commerce, owing to what various parties to a transaction do or do not know. That is, market dynamics should balance price and quality. But incomplete information sometimes interferes.

A classic example, from Professor Akerlof’s research, involves used car sales. In particular, new automobiles lose market value too quickly. Why? Some new cars are bound to be “lemons;” these are more apt to be sold prematurely and cheaply by their owners than the “creampuffs.” Buyers, including dealers, are generally aware of this but lack reliable means to tell the jewels from the jalopies. They therefore bid down all prices to reflect a disproportionate likelihood of getting someone else’s headache.

The free market fails and Gresham’s Law, “bad drives out good,” then takes effect. For two reasons. 1) Buyers would pay more if they knew they’d be purchasing higher quality, but they don’t have this information; owners who know they’ve got good cars tend to keep them because they can’t get their prices. 2) The more that creampuffs are held off the market, the greater the proportion of lemons being sold; this creates a downward spiral of low prices, making fewer good used cars available, raising the ratio of junk to gems, further depressing prices, discouraging more owners of better vehicles from selling them, and so on.

Similar circumstances exist in the realm of gambling references. Solid citizens realize there’s good and bad gambling advice afoot, but typically lack the backgrounds to differentiate one from the other. People would ostensibly be willing to pay a high price if they were confident of getting wise counsel. Gamblers who routinely risk hundreds or thousands of dollars per session surely should be happy to spend more than $29.95 to learn how to improve the chance they’d increase rather than lose their stakes. Yet, few do. Instead, players hammer down prices since they’re aware that what’s offered may well be worthless, if not damaging.

Experts who could develop good resources find it difficult to earn what their efforts are worth. The market doesn’t support high prices for limited sales to the gambling elite. Nor does it provide volume at the low end because the base of bettors most needing enlightenment don’t start with enough information to know where to look. Hence the Charybdis: low prices, deterring trustworthy gurus from generating high quality material, increasing the proportion of malarkey, further depressing prices, and so on. The Internet’s low cost of producing, promoting, and distributing poppycock exacerbates the situation.

In the used car trade, dealer reputations and warranties offer a degree of self-correction. But, in gambling, reputation has been more a matter of shameless self-promotion than reliability or endorsement by credible authorities. And, try to get a refund, let alone a reimbursement, out of the post office box from which you bought that “system guaranteed to beat the house.”

The result may be that the market for gambling guidance is inherently Greshamite and doomed to dominance by gobbledegook. You can still find quality, of course. Or, at least, you can up the odds by rejecting anything with claims or promises you may wish were valid but know must be unreasonable. Otherwise, consider the commentary of the perceptive poet, Sumner A Ingmark:

Absent means of judging quality, Spending money’s mere frivolity.