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Friday, July 19, 2024

Dopa Bowl

Other than AI, gambling may be the fastest-growing $10-billion-plus industry in the U.S. A record 43 million Americans (1 in 6 people over the age of 18) bet on this year’s Super Bowl, wagering a total of $23 billion, a 35% jump from last year’s total. Next month, twice that many could bet on the NCAA men’s basketball tournament.

The media loves to catastrophize about AI, but, relative to the upside, the risks may be greater with gambling. There’s little chance gambling will make health care and education more accessible. And while the potential downsides of AI make for better clickbait, the risks of gambling are known and serious. However, the externalities feel less urgent. Why? Because the costs are (mostly) levied on young men and (mostly) tallied in isolation. Our nation has decided that problems facing almost every special interest group are, correctly, deemed issues that warrant study, empathy, and investment. But the issues affecting young men are viewed as a function of their lack of character that could be solved if they just “got their act together” or “were more in touch with their feelings.”

Leaving Las Vegas

In 2018 the Supreme Court struck down the federal ban on sports gambling, and 38 states have now legalized some form of it. It’s now an industry with annual revenue of $7.5 billion. Other online forms of gambling, operating in a legal gray area, are also growing quickly. But this hasn’t led to an upsurge in local business activity. Who has swallowed all this revenue? One guess: the tech industry. If you’ve watched any televised sports in the past few years, you’ve probably caught Kevin Hart, Jamie Foxx, and Charles Barkley hawking online gambling apps. They’re earning their money. DraftKings and BetMGM have seen their revenue increase 5x and 11x since 2020. FanDuel’s Irish parent, Flutter, listed on the NYSE last month, where it garnered a $37 billion valuation — more than Kia or Kroger.

Gambling has moved from something you do in isolation — at a geographically remote casino, using an illegal bookie, or socially in the context of a special event — to something available 24/7 on your phone. That has predictably accelerated the gambling business’s growth and brought billions into the sector. Just as banking’s move to smartphones morphed a tech-bro incel panic room into a bank run, our frictionless proximity to wagering is having effects we haven’t fully witnessed … yet.

The Las Vegas of … Las Vegas (Wall Street)

In truth, online gambling is larger than these figures suggest. Because there’s another industry we don’t list as “gambling” that we should. Online stock trading was a $10.7 billion industry in 2023. A meaningful portion of that is people managing long-term investments and providing growth capital for companies. However, the bulk of revenue generation comes from churn/trading. Customers use these apps to get in and out of stocks and buy elaborate, high-leverage derivative instruments. Online stock trading app Robinhood built its business on a stack of illegal and suspect business practices, paying fine after fine on the way to its IPO. Studies show that 97% of day traders lose money, but the house wins 100% of the time: Robinhood “crushed earnings and revenue estimates” for Q4, reporting $471 million in revenue on February 13, a 24% year-over-year increase. In the press release touting the results, the company said it was “building features for active traders.” There is upside here: Robinhood has introduced a new cohort to the markets, a good thing, and the best regulation is life lessons. But let’s call this what it is, a gambling app.

Wired for Risk

Gambling apps are not successful because they help their customers establish economic security. Bet long enough and you always lose — the house has a built-in edge, in both sports and day trading, because it skims off every wager, one way or another. Gambling is entertainment, but it’s a particular type of entertainment, having more in common with alcohol and recreational drugs than Netflix or Nascar. Its draw is dopamine, the reward hormone. Pro tip: If your daughter is dating a guy who, before prison, was a drug dealer and is now a day trader … encourage him to get back into drugs. But I digress.

The dopamine response isn’t as simple as a chemical making us feel good. It’s more powerful than that. When we win a bet, or our stock goes up, our brain marks the occasion by releasing dopamine, and we feel a rush of pleasure. The dopamine release is triggered not by the winning, but by the anticipation of winning — the wager itself. Losing is essential to the experience, in fact, because the uncertainty of the outcome makes the wager more exciting, leading to greater dopamine releases. If we won every time, we’d still play, because we want the money, but we wouldn’t enjoy it so much. It would be that increasingly perverse thing you do for guaranteed reward … work. Gambling is our brain tricking us into thinking losing money is pleasurable. There’s an episode of The Twilight Zone (aka the best Black Mirror episodes) about a criminal who is shot, dies, and ends up in heaven. In heaven, he can’t lose a bet. And that’s the rub, he’s not in heaven … but hell.

That dopamine reward cycle is also the same biologically addictive pattern experienced with drugs — not metaphorically the same, but literally. It’s the same chemicals, the same receptors. Indeed, understanding gambling addiction has improved our understanding of drug addiction. An addict is not addicted to cocaine or day trading itself, but to the chemical processes they trigger in their brain. There’s a silver lining to this similarity — research into treatment can be leveraged across categories, and breakthroughs in drug design hold hope. I’ve written before about Ozempic and the other GLP-1 drugs; part of what’s so exciting about them is that they appear to reduce not just obesity but also the cravings of addiction.

Strong but Weak

Treatments hold promise, but addiction remains a scourge. Young men are especially susceptible to gambling addiction. Games of chance hold more initial appeal for them, because men are wired to be more risk-seeking than women and less averse to potential losses. (Note: There are upsides to this — men are more likely to take heroic risks in battle or start a company.) However, once they play, young men are less able to resist the addictive cycle, because their prefrontal cortex develops more slowly. Think of the prefrontal cortex as the adult in the room, someone with common sense who can see beyond the next dopamine hit. When boys reach adolescence, they experience greater muscle growth than girls do, but behind the eyes, girls are making more important gains: Their prefrontal cortexes mature sooner, giving them greater ability to overcome the reward circuits with rational thought. Every study I’ve read on adolescent development can best be summarized as: While boys are physically stronger, girls are emotionally and mentally stronger.

Sports betting and stock trading are tailor-made to exploit these systems, and they’re particularly attractive to young men, as they don’t present as games of pure chance but tests of skill. In a cover story on sports betting, Newsweek recently explained, “Many sports bettors tend to see their wagers as safer and more informed than other kinds of gambling, researchers say; they think they know the game, the players and the teams, and are being guided by their own expertise and skill rather than luck. This may give them an illusion of control over the outcome.” There’s a similar dynamic with day trading. And gambling addiction is worse than substance addiction in some ways. It’s easier to hide, so friends and family may not realize a person has a serious problem until they are deep in debt and emotionally damaged. Problem gambling is associated with greater suicide risk than substance addiction.

Making this addictive product more widely available has had the predictable result of increasing the number of addicts. It’s a difficult problem to track (see above: easy to hide), but at least 6 million to 8 million U.S. adults are estimated to have a mild to severe gambling problem, costing the economy $7 billion, and many experts believe those are undercounts. Whatever the number is, it is going to go up, fast. Calls to gambling addiction hotlines are doubling every year in states that have legalized sports betting. In Michigan calls doubled in the first two months of legal wagers.

While all gambling addictions may not end in bankruptcy, they can have dangerous long-term effects on the health of an individual. Pathological gamblers are more likely to develop stress-related conditions like hypertension, sleep deprivation, and cardiovascular disease. These people are likely to lose focus on their jobs and relationships, all while feeling an immense sense of guilt and shame.


Legalizing sports betting has unleashed problem gambling, but I don’t believe pushing it back into the shadows is the answer. We aren’t going to outlaw day trading, and the responses to the risks involve their own risks. Many addictive substances are illegal, and they still ruin lives. Plus, many more people enjoy gambling as entertainment than suffer from it. Finally, I believe people have the right to consume ice cream and alcohol, sequester from society, day trade, and kill themselves slowly. However, we also have the obligation to educate our youth about the risks. Virginia is leading the way here, with a new law requiring schools to cover gambling and its addictive potential. Education can change behavior: We’ve halved drunk driving deaths since the 1980s, in part thanks to safer cars and tighter enforcement, but also because we’ve increased the understanding of the risks. We can pay for these and other programs by taxing the gambling companies in a way that reflects the externalities they create.

There are also clear benefits from legalization. It starves organized crime of a valuable revenue stream: By one estimate, illegal gambling is down 60% since 2018. And it creates revenue for investing in addiction services: $3 billion in gambling taxes since 2018. Regulated gambling ads include prominent messages about “responsible gambling” and, more important, links and phone numbers for gambling hotlines. More people are accessing these resources, which is evidence of an increasing problem, but also proof that these mandated messages are routing people toward help.

But something more insidious is going on here. Specifically, tech, media, and an infirm Congress have granted permits rendering it open season on young people, and especially on young men. Our elected officials are in a crossover episode of The Golden Girls and The Walking Dead. And there’s a survivor’s bias — few of our legislators have engaged in self-harm due to Instagram, and none has taken their life as they felt useless. As a result, we have the best-funded pension plan and free health care for seniors but a disastrous lack of empathy, focus, and resources for issues facing our youth and in particular young men.


Minority rule by seniors is speedballed by a hard truth. Men, historically, are disposable. If a village of 50 men and 50 women were to lose 25 of the women to combat deaths or suicide, the village would not survive. If half the men died, the village would persevere. For all the progress we’ve made on women’s rights, and it was overdue, we haven’t come to grips with just how poorly young men are doing today. Last year, 96% of the 1,150 people shot by police were men. Men represent 93% of people who are incarcerated and 77% of those who kill themselves.

Now, scan your emotions after reading the last sentence. It would be understandable to reflexively think that these statistics are a function of men being more violent and antisocial. And that explains some of it. Some. We just don’t bring the same empathy to young men. Why? See above: disposable.

Life is so rich,


P.S. In my new book, The Algebra of Wealth, I talk about the importance of character and discipline. You can preorder it here.

P.P.S. Join Section for a free event on What I Wish I’d Known in the First 10 Years of My Career, featuring execs from Meta and Western Union.

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