Episode 619: The Free Throw Experiment : Planet Money Casinos are worried that young people aren't interested in playing slots or other games of luck. They're turning to games that require skill, like basketball.
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Episode 619: The Free Throw Experiment

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Episode 619: The Free Throw Experiment

Episode 619: The Free Throw Experiment

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DAVID KESTENBAUM, HOST:

We all have something we're good at, something we think we're better at than most people. Maybe it's singing, crossword puzzles, ships in a bottle. Or maybe it is throwing a nine and a half inch ball through and 18 inch ring ten feet off the ground from 15 feet away - a free throw.

KAMAL HUNT: I'm pretty sure I'm going to win. My chances are very, very high.

KADISHA HUNT: My chances are looking good just to whip his ass, OK.

KESTENBAUM: That's Kadisha Hunt and her brother Kamal. This is not some neighborhood shootout. We are not in a high school gym. In fact, if you're a high school student, you really should not be here. We are at a casino.

UNIDENTIFIED ANNOUNCER: Good morning, ladies and gentlemen, and welcome to the Borgata for Atlantic City's first ever skill-based free throw basketball tournament.

KESTENBAUM: Atlantic City's first skill-based free throw basketball tournament. If those words sound like they were written by a lawyer, they may have been. This is new territory for casinos. If you think about it, most games at casinos are games of chance. In roulette, you have no control over where the ball goes. Slot machines are basically random number generators. Poker, OK, poker - if you're good at poker you can win, but that is the exception.

Casinos have built these giant towers on this proposition that people want to compete against lady luck, but that isn't the draw it once was. So Borgata Casino was trying something new - a game based on skill. If you could put the ball through the hoop, you could win thousands of dollars.

(SOUNDBITE OF SONG, "ROLLIN AT FIVE")

KESTENBAUM: Hello, and welcome to PLANET MONEY. I'm David Kestenbaum. Today, I'm joined by a special guest host, my friend and writer and occasional casino patron, Keith Romer. Keith, who told me about his contest.

KEITH ROMER, HOST:

I was excited about going to a casino and getting to call it journalism.

KESTENBAUM: It is journalism. Today on the show - skill-based gambling. It's a whole new way for casinos to make money, and maybe you if you're good.

(SOUNDBITE OF SPONSORSHIP)

UNIDENTIFIED WOMAN #1: Support for PLANET MONEY and this message comes from Dropbox, trusted by people and over four million businesses worldwide to keep their files safe, synced and easy to share with anyone. Dropbox for Business helps team members work together no matter where they are or what to tools they use. Get your whole team on Dropbox for Business today to keep your information easy to manage and secure. Try it free at dropbox.com/business.

KESTENBAUM: When you offer a game where still matters, you tend to attract people who are good at that thing.

ROMER: When we were at the casino, someone said, you guys should go talk to that guy over there, Ed Palubinskas. The one with the big ring.

KESTENBAUM: What's that ring you're wearing?

ED PALUBINSKAS: That's LA Lakers. I was a shooting coach for the Lakers.

KESTENBAUM: Any player in particular?

PALUBINSKAS: A guy by the name of Shaq. I work with him.

KESTENBAUM: (Laughter). A guy by the name of Shaq.

PALUBINSKAS: Yeah, when we - I improved him from 39 - 38 to 69.

KESTENBAUM: Percent free throw shooter?

PALUBINSKAS: Yeah, in the year. So - biggest improvement in history.

ROMER: Ed's in his mid 60s. He's balding, he's wearing wire rim glasses, and he's a total ringer.

KESTENBAUM: What percentage free throw shooter are you?

PALUBINSKAS: Ninety-nine point three.

KESTENBAUM: Ninety-nine point three percent. A little perspective on that number. Ninety-nine point three percent means that out of 1,000 free throws, Ed would miss only seven. He once set a record for most free throws made in an hour - 1,206.

UNIDENTIFIED WOMAN #2: You have 60 seconds to shoot 15 baskets. You're going to get a ten-second countdown before your minute begins.

ROMER: What about do overs?

UNIDENTIFIED WOMAN #2: No do overs.

ROMER: Ed steps up to the line. The clock starts. He grabs a ball - swish. Over and over and over - swish, swish, swish. It's beautiful.

KESTENBAUM: In. In. In.

ROMER: This is the greatest free-throw shooting I've ever witnessed in my entire life.

KESTENBAUM: In. Oh.

He missed one. I couldn't believe it.

PALUBINSKAS: Damn. Fraction higher. Fraction higher.

KESTENBAUM: One potential danger if you're a casino offering a skill-based game like a free throw contest is that only one person shows up only, only Ed comes because who would want to go up against Ed?

ROMER: A lot of people. By the middle of the morning, there were hundreds of people in that line.

KESTENBAUM: Everyone paying 20 bucks or 40 bucks - 'cause you could go twice if you wanted. The rules allowed that. There were all kinds of people. Remember that guy who was really tall. I had to extend my arms straight up with the microphone to actually interview him?

ROMER: There were people like Ed, who had people perfect form. There was that one guy who shot everything Granny style - underhand.

KESTENBAUM: There was one guy who just had this ugly shot. He was just throwing them off the backboard. The tournament was set up in this - I think it was a ballroom off the main casino floor. And it was hopping. Like, people were waiting their turn to shoot; they were excited. The music was pumping. It was really thrilling.

ROMER: Outside that room, it was totally different. There were rows and rows and rows of slot machines, mostly without anyone using them.

KESTENBAUM: There were a few older people.

ROMER: Just pressing a button over and over and over. The two worlds couldn't have been any more different.

KESTENBAUM: One of the guys who'd come for the basketball contest told me slot machines - slot machines, he said, are for zombies. The zombie sentiment is actually a thing these days. And casinos are worried about it. We're going to leave the whole basketball experiment for a minute because it is worth talking about slot machines. Slot machines are where people think the real money is in this whole skill-based thing.

ROMER: Slot machines are the classic casino game. They're a huge source of revenue for casinos, but young people just aren't playing them.

ERIC MEYERHOFER: They have no interest in slot machines whatsoever. They find them kind of boring.

KESTENBAUM: This is Eric Meyerhofer. He used to work in the slot machine business. There is data on this, he says. Young people do go to casinos. They go a lot, more than any other age group. But if you look at the people who play slot machines, only two percent of the people playing are under the age of 35.

ROMER: Young people go to casinos to have drinks with their friends, go out to dinner, maybe go dancing. They couldn't care less about slots. And Eric thinks they're genuinely less interested in games that just depend on luck.

KESTENBAUM: Do you really think games of chance are getting less popular? I mean, they found dice in ancient Greek ruins. You really think that's...

MEYERHOFER: That's what the stats are showing. In fact, it isn't just in casino gaming. It turns out the lotteries, the state lotteries are having the same problem.

KESTENBAUM: And why now, finally in 2014 - or is it '15?

MEYERHOFER: I believe...

KESTENBAUM: What year is it? (Laughter).

MEYERHOFER: Yeah, 2015.

KESTENBAUM: Why now?

MEYERHOFER: Look, I think the answer is probably sitting on the desk right in front of you or in your pocket.

KESTENBAUM: As it happened, mine was on the table. My iPhone, or as I like to call it, my Angry Birds machine - actually Tower Defense games are my weakness.

ROMER: For me, it's online Scrabble.

KESTENBAUM: People spend an extraordinary amount of time playing various games on their phone. The most popular ones are games of skill. They're games you can practice at, and games you can get better at.

ROMER: In comparison, slot machines can seem really, really mindless.

KESTENBAUM: Just like lame video games. Eric, whose background is in engineering, is now CEO of a company called Gamblit, which is trying to develop replacements for slot machines.

ROMER: They're video games, but with one important difference - you can win or lose money.

KESTENBAUM: Remember the old arcade game or Asteroids? Gamblit has Cashteroids - I know. Could you make a sound from it please?

MEYERHOFER: (Laughter). How do I make a phaser powering up sound? (Laughter). (Makes sound).

ROMER: Cashteroids is still under development. But this other one he told us about, Police Pooches Versus Zombie Cats, that one's ready.

(SOUNDBITE OF GAME, "POLICE POOCHES VERSUS ZOMBIE CATS")

ROMER: It's basically Angry Birds but with police dogs.

KESTENBAUM: You launch dogs from a catapult. You're trying to hit these cats that are holed up in some kind of fortification.

KESTENBAUM: The better you are at the whole zombie cat thing, the better chance you have at winning money. Eric says, for a $20 wager, if you hit the jackpot, you could get 2,000 bucks.

(SOUNDBITE OF GAME, "POLICE POOCHES VERSUS ZOMBIE CATS")

KESTENBAUM: They're going to people who look at this and say, hey, you've married one super addictive thing with another super addictive thing and made it even easy easier for people to lose money at casinos. Does that cross your mind?

MEYERHOFER: Well, it does except people typically have a budget. So you'll play those games because they don't cost a lot. If they were costing you too much, you'd find a way to limit yourself.

KESTENBAUM: I mean, casinos - people sometimes walk out losing a lot of money.

MEYERHOFER: They do, but it's like...

ROMER: Eric imagines the casinos will make about the same with his machines that they make now off slot machines - a couple hundred bucks per machine per day.

KESTENBAUM: Are any of these games out there in casinos?

MEYERHOFER: No.

KESTENBAUM: None?

MEYERHOFER: None.

KESTENBAUM: Eric told me a lot of states have laws or policies basically restricting casinos to games of chance. Poker is the obvious exception, but for historical reasons, the law largely treats it as just another game of chance. That is why the basketball contest was notable. It was a first, a big experiment.

(APPLAUSE)

UNIDENTIFIED ANNOUNCER: First place winner will receive at least 5,000 in cash

KESTENBAUM: A surprising number of people took part in this experiment. In fact, they kept coming. The prize pool started out as $5,000, but as more people arrived, threw their 20 bucks in, the pot grew.

ROMER: After a few hours, it was up to $10,000 for the winner. So obviously, we had to take our shot.

KESTENBAUM: Are you really stretching?

ROMER: My back is tight, David. You want to be in top physical form when you take part in skill-based competition. Physically, I need to be right.

KESTENBAUM: How does it feel in your head right now?

ROMER: I feel like we have wasted $40.

KESTENBAUM: Keith, you stepped up to the line. They reset the red countdown clock to 60 seconds. These two guys had gathered as your kind of personal cheering section. One guy told me his name was Filthy Rich from Atlantic City.

ROMER: Filthy Rich, let me hear you.

FILTHY RICH: Elbow in. Elbow in.

UNIDENTIFIED MAN: Good shot, good shot.

KESTENBAUM: I made you wear a GoPro camera on your head, which I think they thought was funny.

FILTHY RICH: GoPro. Let's go baby. Elbow in. Gooseneck, gooseneck, gooseneck. One more, one more, one more. This for the money. This for the money. Aww, man. You just went out like that with me?

ROMER: How did I do? Was that 17? Five. Didn't it seem like more than five?

That was rough. But you know what I had to look forward to, David? You had to go next.

KESTENBAUM: I got a pretty large cheer.

ROMER: Right, when you made your one basket.

KESTENBAUM: I was so worried I was going to get zero.

I didn't get zero.

ROMER: You seem absolutely thrilled by what just happened.

KESTENBAUM: I can't talk right now.

ROMER: So I've spent plenty of time in casinos, and they can be kind of depressing places. But this was totally fun.

KESTENBAUM: It was exciting even after we were knocked out.

ROMER: The field of hundreds and hundreds became 64, then 16, then eight, which is when Shaq's coach got knocked out.

KESTENBAUM: I couldn't believe it.

ROMER: I had to ask him what happened.

PALUBINSKAS: Well, one ball rolled in front of me, and I lost my concentration on one shot. You know, it's a quarter of an inch here, a quarter of an inch there. You can't make no excuses. Good job, man. Way to bang it.

KESTENBAUM: Finally, we were down to just two people, neither of them ringers. One guy was a first grade teacher. And the other finalist was the backboard guy.

ROMER: Right, this is the guy that we mentioned before, the guy who was just hurling every shot as hard as he could off the backboard. But it turned out to be a brilliant strategy. He'd essentially realized something that no one else had even thought of, which was that the glass on these backboards was totally dead. These weren't normal backboards. They had just been wheeled in for this competition.

KESTENBAUM: And when you have a dead backboard, you can just hurl a ball against it, and it drops into the basket. It was a brilliant strategy. I went up and talked to the guy just before the finals. His name is Wayne Nelson.

WAYNE NELSON: I used to have one of these backboards when I was younger. And it's a dead backboard, no bounce. Just trying something new, it works, you know.

KESTENBAUM: Just hurl it against the backboard and see.

NELSON: Hurl it against the backboard same spot, it goes in. (Laughter).

KESTENBAUM: You're beating some really impressive free-throw shooters with a really kind of brilliant strategy.

NELSON: Everybody is the same to me, to be honest with you. They are.

KESTENBAUM: There are all kinds of skill - being good at free throws and just being smart. The moment had come. It was going to be Wayne or the first grade teacher. The winner would get over $10,000. Wayne went first slamming every ball off the backboard.

Off the backboard, in. Off the backboard, in. Off the backboard, in.

ROMER: Wayne missed just two.

(APPLAUSE)

KESTENBAUM: Then it was the first grade teacher's turn. He hit shot after shot.

Twelve, swish.

Missed one so it came down to the very last ball.

Thirteen, fourteen, swish. I wonder what it's like to hold a basketball in your hands and know that if you hit the shot, you get 10,000 bucks. Anyway, he hit it.

UNIDENTIFIED ANNOUNCER: Got it. There it is, our grand prize winner of $10,222.

(APPLAUSE)

UNIDENTIFIED ANNOUNCER: Ladies and gentlemen, your grand prize winner.

KESTENBAUM: The first grade teacher one. His name was Al Callejas. And not only did he win $10,000, right afterward, one of the casino executives, a guy named Joe Lupo, came up to him and said you got a place to stay tonight?

JOE LUPO: Want to stay in Atlantic City? Want to stay here at Borgata?

AL CALLEJAS: Yeah, we definitely would.

LUPO: Put you up in a nice suite, send you to dinner.

CALLEJAS: Oh, wow. Thanks a lot. I appreciate it. Are you sure? I don't need that. Thanks.

LUPO: Yeah, I want you to enjoy the property.

KESTENBAUM: OK. Skill-based games versus games of chance luck. Keith, you and I left feeling sort of different about this, right. I left feeling like this was pretty exciting, like, however you feel about gambling, this was way more exciting than watching someone play a slot machine where it was basically mathematical certainty that they were going to lose. I was excited about the idea of skill-based games.

ROMER: Well, I've spent a lot of time in casinos. And I would say, in a lot of ways, it didn't feel that different. That thing that happened there at the end where Al Callejas got the free room...

KESTENBAUM: Yeah.

ROMER: ...That is classic casino strategy. You've got a guy who won a lot of money at your casino, give him a room, give him free dinner, keep him around. Maybe he gambles, gives some of the money back.

KESTENBAUM: You also pointed out that the whole idea of sort of drawing attention to this guy and saying he won $10,000, like, that's a classic casino thing.

ROMER: I'm a gambler. And when I see a big deal made out of somebody winning $10,000, it seems like free money. It makes me want to gamble. It's a totally effective strategy.

KESTENBAUM: And, of course, it's easy to think, oh, that the casino's money he's winning, but really, that was our money, right. That's, like, my $20. That's your $20. He was walking away with our money. In that sense, it's not that different from slot machines, right. Everyone puts their money in. One person hits the jackpot, but it was everyone else's money.

ROMER: And if you think about what's going on inside people's heads when they're playing a game of skill versus a game of chance, I don't think it's that different. Like, let me ask you. When you stepped up to the free-throw line, out of the 15, how many did you think you were going to make?

KESTENBAUM: I thought I was going to get five. But I also thought I might hit more.

ROMER: And you made one. It was the same with all the people who were in the line that we talked to before they shot. We would ask them, how many do you think you're going to make? And they would all say they were going to make 15 out of 15. I'm going to make all of them.

KESTENBAUM: We were all overconfident. And in that sense, games of skill and games of chance are not that different. When you go up to a slot machine, you are thinking, I am going to be the lucky one. You are overconfident about how lucky you're going to be.

ROMER: And when you step up to the free-throw line, you think they're all going to go in.

KESTENBAUM: Overconfidence.

ROMER: That is how the casinos stay in business.

KESTENBAUM: I'm actually OK with that. Like, that was a fun day. For 20 bucks, it was totally worth it.

ROMER: Well, I stayed later than you, and I lost way more money than you did.

KESTENBAUM: Wayne Nelson, the backboard guy, did take him $6,000 for second place. We should mention, the Borgata casino that hosted this did not make any money off the event. This is more of a test of principle. But a casino executive told us he thought they would have some of those skill-based video game things on the floor in about a year.

ROMER: For the time being, Borgata is trying to think of some new games to keep the excitement going.

KESTENBAUM: Maybe ski ball.

ROMER: Right, or golf, putting, chipping - whatever you do in golf.

KESTENBAUM: (Laughter) This one guy we met there had a different proposal. He said, how about chess boxing. Apparently you play chess for three minutes. If there's no checkmate, then you box for three minutes. Five rounds of that.

ROMER: I'd watch it. I wouldn't do it, but I'd watch it.

(SOUNDBITE OF HOT CHOCOLATE SONG, "EVERY 1'S A WINNER")

KESTENBAUM: That GoPro video of Keith shooting his foul shots is online, npr.org/money. You can send us an email, planetmoney@npr.org. Our producer today is Nadia Wilson. Thank you, Nadia. Also, NPR here wants me to tell you to check out Morning Edition, one of those popular radio shows in existence. Turn on your radio in the morning. It's there. It's great. It's the news. You can find your local station's schedule at npr.org. I'm David Kestenbaum.

ROMER: And I'm Keith Romer.

KESTENBAUM: You can say thanks for listening.

ROMER: Oh, thanks for listening.

(SOUNDBITE OF SONG, "EVERY 1'S A WINNER")

HOT CHOCOLATE: (Singing) Everyone's a winner, baby, that's the truth. That's the truth. Making love to you is such a thrill. Everyone's a winner, baby, that's no lie. That's no lie. You never fail to satisfy. Satisfy.

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