Nobody Harmed By Andrew Tottenham, Managing Director, Tottenham & Co November 21, 2018 at 2:00 am Recently I attended an event entitled “Nobody Harmed by Gambling”, organised by the bookmakers William Hill. The intent of the meeting was to start a conversation about how to reduce, to a bare minimum, the harm caused by abnormal gambling behaviour. Attendees were other gambling operators, academics, addiction specialists, gambling addicts, and treatment providers. The company’s CEO, Philip Bowcock, gave the opening speech and discussed how, if the industry is to be sustainable, it has to rethink its approach to problem gambling. No longer can it focus its efforts on excluding those that think they have a problem, or who the operator believes have a problem. Yes, a customer does have personal responsibility for their behavior – the industry has in the past relied heavily on this, but for someone with an addiction it is very difficult, if not impossible to exercise that responsibility. Regulators are pushing operators to take notice and accept some of the responsibility for the negative impacts that their products cause. William Hill believes that operators need to take the lead and also focus their energies on “at risk” customers. In the UK there are estimated to be 430,000 problem gamblers and a further 2 million at risk. Men are ten times more likely to have a gambling problem than women, and men between the ages of 16 and 24 are twice as likely to have a problem than those at other ages. Harm is caused not just to the problem gambler but also to those around them: partners, children, parents, friends, and employers. We do not know how to measure that harm, nor do we yet understand what we need to do to prevent it. There were a few presentations to get the discussions going. One covered the findings of research that looked at current social responsibility “best” practise exercised by operators. It was not pretty: examples included posters hidden behind slot machines; venue staff who could recite the licensing codes but didn’t know what it meant, nor what they were supposed to do when confronted with someone they thought was playing irresponsibly; and slot machines that defaulted to “max bet”. Online operators, that presentation said, do a great job of hiding their social responsibility messages behind three or more clicks on buttons with small fonts, hidden in the corners of the screen. Similarly, when a player wants to fund their account, the default amount is sometimes £99,000. Whilst this is clearly ridiculous, it has the effect of “anchoring” the amount in the players’ minds and can lead them to deposit more than they might otherwise want to. (Regarding anchoring, two behavioural scientists, Kahneman and Tversky, have shown through experiment that you can influence peoples’ perception of value simply by the size of a number you first expose them to. Participants exposed to a large number, initially, are likely to estimate something’s value higher than those exposed to a lower number.) Another presentation was given by a member of the Behavioural Insights Team, sometimes called the “nudge” team. This team has been working with the UK Government, using behavioural science, to improve responses from the public to government initiatives. One example was vastly increasing the number of people who filed their taxes on time, not by the usual threat of a steep penalty for late filing but through comparing them to their peers: “Did you know that 85% of people in your street file their taxes on time?” The point being, how can we use this sort of messaging to help gamblers manage their gambling? Personally, I don’t think we have enough knowledge to be able to know where or how to start. That’s not to say operators shouldn’t do something. Firstly, we need to understand risky behaviour: are there indicators from the way a player gambles that could show us that they are likely to become an at risk gambler or a problem gambler? We also need to know what is it that turns someone from a recreational gambler into an at-risk gambler and from there into a problem gambler. What in the data is going to tell us that? How well can we measure that? If we do not know how to measure it well, how are we going to know whether it is it the product, or some of the features within the product, that increases this risk? The other hurdle the industry must overcome is how management is incentivised. Currently bonuses of cash or stock options are based on financial targets, usually EBITDA and medium-term share price. The challenge is that many of the protective actions that should to be taken will negatively impact EBITDA and therefore share price in the short to medium term. Philip Bowcock believes the actions William Hill has already taken will reduce annual EBITDA by £40 million. In the long term this is potentially less than the fines that it could accrue, but it doesn’t exactly push management to make the right choices. Personal Key Objectives are a useful tool in this regard, but unless these are related to bonuses rather than done as part of a nebulous annual performance review, behavioural change by senior management is unlikely. Stock market funds are only interested in the increase in the value of the stock price or the size of the dividends. Understandably, fund managers have customers, and are looking to grow the value of their funds for those customers. I have no idea how you get fund managers to understand that growth in value in the gambling sector may be in short supply due to measures taken to reduce harm, but there are smarter people than me out there. Hopefully, they can find the answers.