Investing and Gambling, What’s the Difference?

Jun 30, 2010 - by admin

Gamblers are risk takers. Investors try to avoid risk. This simple fact alone might make it appear that the worlds of gambling and investing are miles apart. A closer look at the two, however, reveals more connections that one might think.

Outcome unknown

Gambling is, by definition, a wager on an unknown outcome. If it takes place in land based casinos or in online gambling sites, whether the game is poker, blackjack, slots, or any other casino classic, gamblers never know how the game will end. Sometimes it is possible to make an “educated guess” about the outcome of, for example, a poker standoff; but other times, like in the case of online slots, everything comes down to pure luck.

In the financial realm, things are really not so different. Most investors don’t throw caution to the wind and put their money just anyplace. Instead, they research and project, trying to guess the future. There is the key word – guess. In the world of investing, like the world of gambling, money is being put towards an unknown outcome. The return might be great, or the move might bankrupt you – it is the goal of both the gambler and the investor to choose the right path.

Fun or profit?

One perceived difference between gambling and investing is that gambling is done for fun, while investing is a legitimate business. One look at the world of professional poker, however, is enough to crush this myth. There are people all around the world who make a living playing in online poker sites, or by putting money down on blackjack and building up wealth over time. Even slots players can hit big wins, like the record-breaking €6.3 million jackpot that was won in May of 2009 on the Mega Moolah progressive jackpot slot.

Investors might want to turn their nose up at “professional gamblers”, but in truth, both gamblers and investors work just as hard for their returns. From the point of view of the gamblers, their trade combines fun and profit, and poker pros might often wonder – “is investing this much fun?”

All about speed

Investing is a slow and laborious process. It can take years for a big investment to start paying off. Being a successful investor requires a great deal of knowledge, plenty of time, and most of all, quite a lot of patience.

A common stereotype of gambling, on the other hand, is that it is a quick and dirty way to get rich. This is both true and false. In the case of big jackpot wins like the €6.3 million Mega Moolah jackpot, lucky gamblers win a lot of money in a very short amount of time. After all, it just took one click of a mouse that player to go from zero to millionaire. But how many times did the player click before the big win happened?

Other games like blackjack or poker require just as much time as a long-term financial investment. Individual games might last just a few minutes or hours, but wealth is built up over long stretches of time. Just as investors must scrutinize each transaction from all possible angles before putting their hand in their pocket, poker pros must spend long hours playing, practicing, and perfecting their game before they can expect to win the big prizes.

Good versus Evil

One last alleged difference between gambling and investing that is worth mentioning is this: while investors are seen as hard-working and respectable businessmen, pro gamblers are often looked down upon as reckless thrill seekers. This social stigma against gamblers and gambling is completely unfounded. A poorly-planned, rushed investment has just as much potential to drive a person into severe debt as a misplaced bet, and investing can be just as addictive as gambling.

Moreover, while profits from the winning end of bad investments often end up in the pockets of individuals, gambling revenue is often filtered back into society. Governments around the world use gambling tax revenues to fund social campaigns and to create services for the good of everyone.

Conclusion

In the end, it is clear that the differences between investing and gambling are not so great. Investors gamble on their choices, and gamblers invest in their skills. Neither activity should be taken lightly – both require practice, knowledge, and patience if a person wants to excel and come out ahead.

Perhaps the real difference between gambling and investing is the people. Just as investing is not to everyone’s taste, gambling doesn’t give everyone the same thrills. Both are risky endeavors, and both can lead to either extreme wealth or severe debt. Whether you choose gambling or investing, let us leave you with one piece of advice: research, practice and play the odds, don’t trust your gut instincts!

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