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This is Pragmatic follow-up part A for episode 26, Gambling Machines. I'm John Chidjie.

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So I have some follow up from a few people about this particular episode.

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So I'll start with Jordan Cooper who does the Blenderhead podcast as well as Tech Douchebags,

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the latter of which is now on 5x5.

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And he's had involvement with poker in the past and in quite some depth.

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And I also got some more feedback from Nicholas Radcliffe also along the same lines, which

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which is to talk about zero-sum gambling, as in gambling between a group of friends

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or whatever whereby there's a fixed amount of money on the stakes and so on, and there's

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only so much to go around. Whereas gambling where there's a rake or a house, as Nicholas

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puts it anyhow, is a very different thing. Now I specifically avoided talking about that

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regarding and I stuck with slot machines, and I suppose the reason that I did this is

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is that you're playing, well first of all, you're playing a machine, you're not playing another person,

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which is with slot machines, and I wanted to separate those two.

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Second of all, they're the single biggest source

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of government gambling revenue in my country,

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and as we'll see in a little bit, in other countries as well, it's quite significant.

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So they're also very widespread,

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and hence there's a lot of people that have access to them.

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So if you count the number of people that have actually played a poker machine

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versus the number of people who have played poker, the game, the card game,

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then I think you'd find more people have played pokies than have played poker

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certainly with money

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so I can sort of, I may consider other topics like poker in the future

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since when I was a child I used to play that poker quite a lot

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but you know we played with matchsticks but you know never with real money

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but we'll see how we go, so anyway

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also had some feedback from Frank from Italy about some of their machines

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so their payout rates

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were at only 74% and that was only recently tweaked,

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I think it was in 2011 when that was increased 74%,

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but that's still much less than our payout rate in Australia.

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So as of mid last year, that would actually apply

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to what they call comma 6A slot machines,

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also known as new slot three, also known as AWPs.

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So in that particular class, a poker machine in Italy

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has a maximum bet of one euro

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and it has a 100 euro maximum payout.

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But they're slightly different

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from video lottery machines that they call

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their other poker machines. And these ones can be installed in gaming halls,

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betting shops, bingo halls. So the AWPs, however, can be installed in bars

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and restaurants and hotels. So they're very, very widespread.

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In fact, they're probably more widespread

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than here in Australia. And if they're not, it'd be pretty close.

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The numbers are quite staggering.

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So those particular machines in Italy alone raised 32 billion euros in 2010.

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That's just insane to me. That's a lot of money.

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So I suppose the point is that that's just Italy.

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I talked about Australia, a little bit about the US, but mostly about Australia.

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So there's some figures from Italy.

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So it is a worldwide problem and it's getting worse.

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It's not just Australia. It's happening everywhere.

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And it's a bit of a worrying trend.

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So anyhow, I also got some wonderful feedback

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from another listener called Andrew Rose,

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and he addressed the issue

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'cause of his background with insurance

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regarding a comment I made early in the episode

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about my grandmother seeing insurance as a form of gambling.

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So I really think the way that Andrew wrote this

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is just, it's worth reading verbatim,

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so I'm gonna do that. Although one can view insurance as a simple financial gamble between the insured and the

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insurance company, and in which the house always wins, there is a key difference that

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exists in that insurance contracts are used to make uncertain cash flows more predictable

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for the consumer. To be explicit, one should view insurance as a volatility hedge.

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Let us take the example of burglary insurance. The purchaser of burglary insurance pays a

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premium to the insurance company. These cash flows are predictable to the consumer as their

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timing and magnitude are known in advance. This certainty replaces the alternative situation

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where the individual is exposed to potential cash flows which are unknown in both timing

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and in magnitude. In the example, I would have no idea when my house may be burgled

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nor any idea what will be stolen, if anything. So, although the insurance company charges

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a premium such that on average policyholders will make an overall loss over time, they

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are also providing some amount of predictability and certainty as recompense for this."

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So I mean beautifully put thank you Andrew and I could not have put it better which is

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exactly why I read it word for word.

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So yeah bottom line is some people will simplistically see insurance as a form of gambling, the reality

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is it's not. Although one of the things that I do find frustrating about insurance has

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to do with all of the different clauses that insurance companies can use and will regularly

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use in order to wriggle their way out of actually paying out. So when you do have a claim, there's

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all sorts of ways that they can get out of it. And for smaller claims, they typically

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don't bother, but for the bigger claims, it can get quite nasty. So in any case, the episode

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wasn't about insurance, but I sort of mentioned that as an aside during the episode. I thought

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it was worth revisiting and thank you very much to Andrew for responding.

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So there's one more thing I just want to throw in there as well and that is that there, just

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just quickly on the poker thing is that there's an excellent film called Rounders by John

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Dahl and it is a really good movie.

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It's got Matt Damon in it for just to quote one of the big names in there and anyhow,

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It's just about poker and I'll wrap up on this is that his character during the game

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was describing poker to someone and says, "What is it?

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You think the five guys who reach the World Series Poker Final every year are just the

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luckiest guys in the world? No, it's about skill and it's not about luck.

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Whereas gambling machines, it's all about the statistics and the statistics are that

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you will never win, not in the long term."

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And that's it. [BLANK_AUDIO]