Date: Tue, 22 Mar 94 18:28:27 PST
From: RISKS Forum <risks@csl.sri.com>
Subject: RISKS DIGEST 15.68

RISKS-LIST: RISKS-FORUM Digest  Tuesday 22 March 1994  Volume 15 : Issue 68

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Date: Sat, 19 Mar 1994 09:04:47 -0800
From: Phil Agre <pagre@ucsd.edu>
Subject: Gambling

For those with an interest in risks, the technology supplement to Forbes
magazine, Forbes ASAP, is a regular smorgasbord.  The 10/25/93 issue, for
example, includes an article about Bally's casinos' use of customer databases
to optimize their investments in "comping", the practice of offering free
drinks, hotel rooms, plane tickets, and what-not to high rollers.  Given
enough information about an individual's bets (regardless of whether they
win), a straightforward economic calculation can decide which level of
comping is optimal.  (The full reference is: David H. Freedman, Odds man in
[Bally's Atlantic City casino], Forbes ASAP, 25 October 1993, pages 33-35.)

The problem is getting the information into the computer.  The Bally's casino
accomplishes this in two ways.  At roulette tables and the like, they simply
have someone watch the game and enter bets into a portable computer.  (This
computer can also determine how much credit to extend to a given customer.)
At the slot machines, they give each player a card with a magnetic strip that
goes into the machine for as long as the player is playing.  (They also offer
a strap to keep the card attached to your wrist, so you don't walk away from
the machine without it.)

The risks, of course, are obvious.  Rational gamblers can take advantage
of competition between casinos, choosing the best comping deal.  But many
people are addicted to gambling, and these innovations also make it easy for
an addict on a binge to gamble away the maximum possible sum.  Furthermore,
as the article points out, "the riot of blinking lights, the clacking of
spinning wheels, the absence of outside views or public phones -- all of this
encourages the otherwise solidly grounded visitor to lose track of time and
space, not to mention financial common sense".  Profit margins are high, and
investors are pleased.

The analogy to data-intensive marketing of cigarettes (see Risks 15.62) is
strong.  What's next?  How about a frequent drinker's club for premium brands
of liquor?  Or individualized advice for children, based on detailed family
demographics, about how to shame their parents into buying them expensive
toys?  It wouldn't be that hard.  You could actually get a toy to do the
explaining.  Each product from a given toy company would contain a single chip
with a small microprocessor, a simple RF receiver, some memory, and a speech
synthesis device.  When the toy goes through the checkout, an RF device built
into the cash register downloads the toy with a demographic profile of the
family derived from credit files pulled up through the purchase transaction.
Then, as the child plays with the toy, the toy explains to the child the
virtues of various other toys from the same company, along with suggestions
for persuasion tactics that consumer research has shown to work well on
parents in that particular market segment.  If the toys can send as well as
receive wireless data transmissions then newer toys can reprogram the older
ones.  Better yet, the child's videogame system, which will surely get its
software over phone lines in the near future, could also download all of the
child's other toys with new sales pitches, based on records of whether the
previous pitches worked, as well as the latest market research and television
and movie product tie-ins.

Phil Agre, UCSD

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End of RISKS-FORUM Digest 15.68
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