Gambling, investing, and such

[Perd Hapley]

A few questions about what does or does not constitute gambling. I don't think the moral judgments about gambling matter here, since we're just looking at the definition.

Is there a difference between gambling and investing? To me, the major difference is that investing in a company actually means buying a share of the business, and is necessary to getting a new business of the ground. But you can have a boxing match or a ball game without betting on it, and the gambler doesn't share in the revenues from tickets, etc. Nor does he share the possibility of owning an ongoing money-making concern, or create jobs.

In, say, an office football pool, you "invest" in order to win the pot. However, no wealth is created; just transferred.

Does casino gambling gets a little closer to investment, or is it just another transfer of wealth?

Wrong time of year for this one, but the soldiers who cast lots for Christ's garments are often said to have been "gambling at the foot of the cross." I'm not so sure that's gambling, though. No one stood to lose anything. They were just choosing one member of the group at random to get a windfall. Is that gambling?

[RevDisk]

Gambling is zero sum. Investment creates or potentially creates new wealth. Speculation is the gambling form of investment.

[Phantom Warrior]

Casino gambling seems like the furthest from investment you get since you are guaranteed to lose in the long run.

[lee n. field]

In gambling you're counting on fate and chance.

[Headless Thompson Gunner]

Investments are based on sound, fundamental reasons to expect a return.  There's some risk and chance in investing, but the risks are small relative to the fundamentals, and are justified by the likely return.  

Gambling is based on chance.  You have no way of knowing if your gamble will pay off, and no fundamental reason to expect that it will.

An office pool is gambling.  Usually.

Casinos are gambling for the players.  There are fundamental reasons why the house will come out ahead in the end, so a casino is an investment for the owners.

Casting lots?  Neither.  That's just an unusual way to determine who gets the goodies.

[charby]

^What he said.

[vaskidmark]

Investments are based on sound, fundamental reasons to expect a return.  There's some risk and chance in investing, but the risks are small relative to the fundamentals, and are justified by the likely return.  

Gambling is based on chance.  You have no way of knowing if your gamble will pay off, and no fundamental reason to expect that it will.

An office pool is gambling.  Usually.

Casinos are gambling for the players.  There are fundamental reasons why the house will come out ahead in the end, so a casino is an investment for the owners.

Casting lots?  Neither.  That's just an unusual way to determine who gets the goodies.

Seems to me investing goes a bit farther.  Beyond the expectation of a return there is, or so it seems to me, an expectation that something will be produced and someone will be paid for producing that thing, and others will be paid for providing the ancillary goods and services needed to both produce and distribute the thing produced, all before the return is determined and paid.  That's really simplistic but I think you get the idea that there is a tangible "something - a widget, a computer program, a system of getting the masses to pay for being entertained - that is an inherent part of "investing".

The best gamble seems to be life insurance.  Even though eventually it will pay off to everryone who kept their premiums current, the odds of not needing to pay off long enough to use other peoples' money to make money (invest) are computed such that the house generally wins.

stay safe.

[T.O.M.]

Having just returned from Vegas, I'll says this... Casino gambling is putting up money on pure chance when the overall odds are against you.  Sure, an individual deal at the blackjack table may result in odds favoring you, but overall, the odds favor the house.  Sports book may be a little better, but still the house holds the odds against you.  With investments, you research the company, and it's you and the company against the market. 

[griz]

I pretty much agree with what HTG said, but I'll add a couple things.

For a few, poker in a casino is closer to investing than gambling.  A skilled player "invests" in a good hand, knowing he is likely to profit from it but also knowing the outcome isn't certain.  If he beats the amount the house charges to play (much like a commission to trade stocks) he can win long term. Admittedly he isn't creating wealth, since his profits come from the losses of less skilled players.

Is life insurance gambling that you will die?  It's certainly not in the same investment category as lottery tickets, but you only "profit" if you die early.

[vaskidmark]

....

Is life insurance gambling that you will die?  It's certainly not in the same investment category as lottery tickets, but you only "profit" if you die early.

Not only gambling that you will die sooner rather than later, but gambling that most other insureds will die later rather than sooner.

I would love to have been there when the first guy suggested that life insurance be started: Let's take a small amount of money each from a whole bunch of people on the promise to pay each of them a whole lot more than they individually give us, and see if we can make money in the stock market faster than those suckers die off.

And yet it is one of the soundest investments going these days - both for the insured (who is guaranteed to get paid) and for those who buy stock in the game of waiting to see if that crazy idea really will work.

stay safe.

[Headless Thompson Gunner]

Insurance is a product you purchase, not an investment you make.  You're buying a reduction in risk, not the possibility of positive returns.  

Insurance isn't supposed to offer a positive return even when you do collect.  It's just supposed to make a catastrophic event a lot less terrible.

Life insurance for instance: sure, you'll collect one day.  But you're still dead, so it ain't like you're getting ahead from it.  The benifit is that your family will only be down a man, instead or being down a man and destitute.

[T.O.M.]

I view life insurance as a parting gift to my family.  It's enough to pay final expenses, and to allow they some comfort without my salary for a few years.  right now, I'm carrying enough to give them the equivalent of 4 years of my gross salary.  If they are smart with it, they should have a nice chunk of change to work with.

When my mother died, her life insurance paid for the funeral services, and a nice $20,000 each for my brother and I.  We paid some bills, bought some new kitchen and laundry appliances, and banked a lot.  My brother took a 2 week trip with his family to Disney World, while unemployed, then spent $5,000 to have a deck built on his house which was then foreclosed on a year later.

Maybe that's another element we aren't adding to this discussion...the intelligence of the person with money in hand.  A smart gambler can turn a profit on his wagering, as can a smart investor.  A fool in either arena will end up broke.

[vaskidmark]

Purchasing life insurance is just that - buying a product.  Investing in a life insurance company, OTOH, is, to coin a phrase, a pretty sure bet.  More people paying more in premiums, plus more investors buying stock than the amount of settlements and the amount of dividends being paid out.

But I still would have liked to be there listening to the pitch to the first investor.

stay safe.

[Brad Johnson]

Maybe that's another element we aren't adding to this discussion...the intelligence of the person with money in hand.  A smart gambler can turn a profit on his wagering, as can a smart investor.  A fool in either arena will end up broke.

Amen, brother.

Brad

[Scout26]

The difference between gambling and investing is that one of the horses has to win.