Everyone but industry wins in high-roller deals
The Tourism News Editorial; Tuesday 6th October 2015
MONA’s David Walsh, famed for making money from gambling but then using his powers for good to create arguably Australia’s best art facility, applied for a gambling licence then withdrew it. No big deal, right? Except that just the review of the licence cost the taxpayers of Tasmania $125,000, somehow pocketed by Sydney auditing firm Deloitte. One might think an auditing firm closer to Tasmania may have been capable of a fairly basic audit, and wonder why $125,000 should be spent on an application process that is just a matter of course.
Whilst $125k is pittance to Walsh – who, with a group of mates, reportably bet $17m across the Melbourne Cup carnival – it’s a lot to the people of Tasmania, a state known for its problems with employment across all sectors.
The Tourism News is questioning why Walsh would bother to put in a licence and withdraw it, knowing it was unlikely to be achieved – it was a waste of time, and time is money. Walsh does not appear to be the world’s most astute businessman though – in the Fox Sports article below, he is cited as saying:
“Just before the Melbourne Cup in 2009 I was accruing bills at the rate of about $5 million a month to build MONA… I couldn’t pay them… I discussed this with Zeljko, my gambling partner, and he said, ‘Well, we can’t make it any worse, so why don’t we go crazy on the Cup?’ . . . And we bet three or four times bigger than we usually do.”
But Walsh’s business and gambling experience is qualified by personal experience. He demonstrates a profound understanding of gambling and its effects on society up and down the line:
“…if the punter has a pathology, the revenue generated is a sickness tax. That could be called the “beggar pays” principle. And it isn’t very principled.”
This understanding is not in keeping with The Hobart Mercury’s report below that cites a sudden realisation of the impact of pokies as a reason for his application’s withdrawal.
Walsh has a gambler’s mind to be sure – but when he was a high-rolling gambler, it was just his money. Now, with a major attraction to his name, he’s deserved of major scrutiny – and a Deloitte fee to government of $125,000 for a simple audit is the kind of collateral cost that shouldn’t be incurred in the name of tourism.
Punt on MONA casino costly for Tasmanian taxpayers
From The Hobart Mercury, 1st October 2014
MONA owner David Walsh’s retreat from involvement in a controversial gambling deed was not enough to save Tasmanian taxpayers $125,000.
Treasury confirmed at least $125,000 had been spent on an independent report looking into his proposal for a high-roller boutique casino, a plan scrapped two weeks ago.
Mr Walsh withdrew his application for a casino licence, citing concerns about the impact of pokies in Tasmania.
Approval of the licence, before 2023, would have required permission from Federal Group, which holds the exclusive licence for pokies in the state.
But Mr Walsh said he did not want a licence for the casino, to be named Monaco, if it resulted in Federal gaining an extension on its monopoly for poker machines.
Despite stopping work on the report when Mr Walsh withdrew his proposal, Treasurer Peter Gutwein has told the Mercury Deloitte was still in line for at least $125,000.
“As a consequence of MONA withdrawing its proposal, the Government immediately requested that Deloitte stop work on its analysis,” Mr Gutwein said.
“The total cost of that analysis to date is approximately $125,000.”
He said while the analysis was incomplete, the Government intended to use those aspects of the report that would assist in informing its view on the options for the future of the deed.
“When the Government first received proposals from MONA and Federal regarding a casino at MONA, the Government publicly announced that we would seek comprehensive, independent analysis of the proposals,” he said.
Big-time gambler David Walsh details how betting syndicate won $17 million on 2009 Melbourne Cup
TTN Note: The below article is from Fox Sports, and is therefore skewed to favour gambling.
From Fox Sports, 25th July 2015
Zeljko Ranogajec, recognised as one of the world’s biggest punters, won a staggering $17 million with his mates across the Melbourne Cup carnival in 2009.
The enormity of Ranogajec’s punting group, which bets $2 billion annually, has been detailed by one of its own with Tasmanian David Walsh lifting the lid on their success from three years ago.
Walsh, who funded and built the Museum of Old and New Art in Hobart with his winnings, said rising monthly costs to establish MONA led to the group upping the ante during the 2009 Melbourne Cup, won by Shocking.
“It’s a story I haven’t told before, but it kind of touches on the risk aspect,” he told the ABC’s Lateline.
“Just before the Melbourne Cup in 2009 I was accruing bills at the rate of about $5 million a month to build MONA and it got compressed up a bit, they were coming in faster than I expected, and I couldn’t pay them.
“And obviously I’ve never told the builders this because – but, think I discussed this with Zeljko, my gambling partner, and he said, ‘Well, we can’t make it any worse, so why don’t we go crazy on the Cup?’ . . . And we bet three or four times bigger than we usually do.
“We got lucky and we, over the Cup period, I think won about I think $16 or $17 million, which kept this place on the agenda.
“So, yes, I mean, gambling is my nature and – you look at this place (MONA) and it’s here at, you know, it seems inevitable, but, you know, lot of people have a lot of plans and you have to get lucky to be able to bring them to fruition.”
The multi-millionaire businessman is concerned he will no longer be able to fund the Hobart tourist destination after the Australian Tax Office ruled the gambling syndicate is a business.
Walsh and his mates, including Ranogajec, are liable for $900 million in unpaid tax according to the ATO.
Walsh himself has been hit with a bill for $37 million and is fighting the case in the Federal Court next month.
Former ATO auditor Chris Seage told Lateline; “If your operation has got $2.4 billion annual turnover, employs 300 people around Australia and started three service companies up to provide the punters club members with information like analysis and form, then I think you’re looking at more than a hobby.”
The ATO claims the professional nature of the group’s activities means the usual rule that gambling winnings are tax-exempt do not apply.
Ranogajec, seen as the king-pin of the group of mathematical geniuses, is reported to have won a record $7.5 million Keno jackpot at North Ryde RSL in 1994.
Skin in the Game
By David Walsh for The Monthly, February 2015
Nick Feik, the editor of the Monthly, asked me to write an essay for his esteemed rag. Now I’m a bit pissed off at theMonthly, so initially I didn’t really want to do it. I’m a bit pissed off because Richard Flanagan did a piece on Mona (my museum, and the only reason anyone asks me to write anything) and me for the New Yorker. It ended up in the Monthly as well, and I didn’t want it to, for at least two reasons: I felt that I had already committed to another writer for aMonthly piece, and I didn’t like Richard’s piece at all. They contacted me before running it, and I told them I didn’t want it printed, but it went to press anyway. Our respective interests were not aligned. I thought, “I’ll never write for those bastards.” At the time they had no interest in me writing for them, and a huge commitment to Richard Flanagan. Now Nick asks me to write, and I’m too flattered to say no.
Anyway, the two potential subjects he offered were “luck in the Lucky Country” and “gambling and compulsion”. By touching on these subjects only peripherally, and forcing the process into the essay (“David, can I take that paragraph about the Monthlyand me out of your essay?” “Fuck off, Nick.” You’re welcome! – Ed.), I can exact a small vengeance, while simultaneously showing what can happen when one acts without fear of consequences. Nick has skin in the game, but I can flense him. Of course, he might not print the essay, but survivorship bias, that elegant construct that ensures that we only factor in events that happen, protects me from the ravages of not being printed. Either no one knows Nick got his way or everyone knows I got mine.
Obama is a war criminal.
That’s not what this essay is about. In fact, it’s only peripherally relevant. But maybe now you’re thinking,Right on, maintain your rage, or maybe you’re refreshing your disgust with those bloody bleeding-heart liberals.
I have spent some time wondering why beliefs come in clusters. Why do many believe that a society should not have the right to take a life but simultaneously hold that a pregnant woman should? (A view that I’m mostly aligned with, but typically avoid scrutinising.) And, in my home state of Tasmania, why does an individual’s asserted right to be protected from meddling intervention by government go hand in hand with subsidies for the forestry industry?
Your opinion is co-opted by having skin in the game. It’s difficult not to align your beliefs with your self-interest. Too much carrot. And it’s even more difficult when there isn’t enough stick. If there are no consequences for immoral behaviour, then it will soon start to look a lot like the right thing to do.
So if you’re a leader whose country is under some perceived threat from within (Islam? Parliamentary democracy?), meddling with law might seem a good way to suppress the threat. But there are, potentially, consequences. Your self-interest and that of your constituents aren’t necessarily aligned. There might be protests, and there might be polls, and there might be elections …
But what if the threat is from without? Well, you can declare war, of course. That might mitigate the threat, even if it’s massively overblown. But a massively overblown threat can “rally the troops”. Everyone starts pulling as a team, all your countrymen have common purpose. So here you, dear leader, can line up everyone behind you; your self-interest (being re-elected, establishing a family dynasty, creating a legacy) is held in common with that of the people.
Until soldiers start coming home in body bags.
When that happens, you have skin in the game. The mothers and sisters, and the viewers of the news, might not agree with you any more. How can you kill the enemy without taking a hit in the polls? Well, if you are the US president, and your name is Barack Obama and you have the industrial might of the greatest country on earth behind you, the answer is simple. Use drones. No one dies (except those people whose names look a bit like yours but who are nothing like you). Perfect. You managed to act without skin in the game. But the human race is wising up. (Just here the iPad auto-corrected me to “winding up”. I hope that was an accident, rather than artificial intelligence peeping through.) Now we have the International Court of Justice. The thing is, Barack isn’t such a bad guy. It’s just way too hard to notice that you’ve slipped off the straight and narrow when it’s so easy to get things done. And you can always internalise an argument that goes something like, “Everybody would do this if they had the power.” But it’s no less a war crime if “everybody would do it”. So here’s my message to Barack Obama.
See you in The Hague, mate.
The other day, the other Melbourne Cup day, two horses died. That made me think about the morality of horseracing and the morality of gambling and, perhaps unsurprisingly, the morality of gambling on horseracing. It’s hard not to think about it. At the moment, that’s the only thing people want to ask me. Tonight I’m having a public conversation with Phillip Adams. The first question will be, “How do you justify making your living in such an unethical way?” Or it should be, if Phillip has any balls. So I have to think about it. And so I might as well write down my thoughts and charge the Monthly for them. After all, Nick wanted luck in the Lucky Country. And he wanted gambling. Tick and tick.
I’ve already established, at least to my satisfaction, that having no skin in the game leads you to break the rules. Conversely, an opinion you hold based on skin in the game isn’t likely to have any merit. Prisoners on death row don’t constitute a major demographic in support of capital punishment. And blokes who make their living gambling on horseracing aren’t likely to support a ban on gambling. Or horseracing. So my opinion isn’t worth the electrons it is written on. With that proviso, read on.
My opinion? Horseracing is OK. (Just.) Gambling is OK. (Just.)
There is plenty of gambling on things other than horseracing. For example, gambling on poker machines is legal, but, in my opinion, it shouldn’t be. (No vested interest here. I don’t own any pokies.) Pokies are squalid, antisocial, grandma-raping machines, and they allow (force) the punter to control how often they gamble. When rats are able to control how often they stimulate a pleasure centre of their brain, they give up eating and they give up shagging. They just push the button. If they are given regular stimulation but have no control over when, they behave just like rats – happy rats. Humans aren’t rats, and pokies aren’t pleasure, but I think you can see the point I’m making.
And there is horseracing without gambling. Dubai has horseracing but no punting. So the morality of gambling has to be considered separately from the morality of horseracing.
Gambling first, and briefly.
In A Bone of Fact, my autobiography, I contend that it is OK for me to win if it is OK for me to gamble. I won’t rehash that argument here, because poor Nick is going to have to pay me by the word. But, at a superficial level, it would seem to be absurd to contend that it’s not morally OK for winners to bet but it is OK for losers to bet. Casinos might disagree. And in the unlikely event that my mad plan to put a small casino at Mona gets up, I might be confronted by this dilemma. Should I, like an annoyed card counter at the Hobart casino years ago, erect a sign that says, “Losers only welcome”?
Morality is a morass mixing the personal (sans self-interest) and the societal. Everybody has had a crack at defining it, but here I plumb with Jeremy Bentham, who summarised his moral principle as “It is the greatest happiness of the greatest number that is the measure of right and wrong”. I align myself with him because, applying this principle and the ideas that emerge from it, he was able to conclude that slavery was wrong, child labour was wrong, and animal cruelty was wrong – and he supported separation of church and state, freedom of expression, the rights of women, and the rights of homosexuals. A principle that allows you to leapfrog two hundred years of missteps must have something going for it.
So does gambling support the “greatest happiness of the greatest number”? Certainly not, at least not directly. Of those who gamble, only those who win in the long run and those who lose within their entertainment budget are directly benefiting. Those two groups are in a minority. That’s why I tend to like the Vegas/Macau model, where those who want to gamble choose to: Save up. Travel. Bet. Indulge. Repeat.
But the majority of gambling is local. So the onus is on the gamblers to stay within their entertainment budgets. Many, perhaps most, don’t. Thus society benefits only from tax revenues. That raises issues. Those who are contributing do not derive a benefit proportional to their contribution, and they may have no choice about their contribution, since their gambling may be expressing a pathology. And if the punter has a pathology, the revenue generated is a sickness tax. That could be called the “beggar pays” principle. And it isn’t very principled.
The beneficiaries of the revenue, the governments, have no skin in the game. These days, when the scope of the damage that gambling causes is discussed, authorities can just say, “At least this way the gambling is policed. If we close it down it will move to the outlaw West of the internet.” The lesser of two evils. A principle that assumes that the consequences of an action are known for certain.
So, depending on who is doing the gambling (and also the type of gamble), gambling can be morally repugnant or just OK. Libertarians might argue that no one needs to be protected from themselves. But safety nets protect populations as well as individuals, because they induce speculative behaviour by mitigating the consequences of risk. (Trapeze artists will attempt more when there is a net.) An individual taking a risk benefits society. Next time you enjoy a local beer (and you really should be enjoying local beers), think about all the breweries that didn’t quite make the grade, outcompeted by the lovely foaming brew you are quaffing. Those beers you can’t drink, because they now don’t exist, are crucial to the quality of those you can. More failures generate more successes. But the failures need protecting from the risk they took.
Gambling isn’t a single thing. It can be an expression of a skill set, one or more of a range of pathologies, a social entertainment, or a rational economic behaviour (even for losers). The latter happens in one of two circumstances: when one thinks a lot of money is worth proportionally more than a little bit (for example, that a million dollars is worth a lot more than a million times a dollar – a ubiquitous belief that might justify a Tatts ticket but doesn’t justify turning over money multiple times) and a situation where money has more than economic value. One will gamble if one’s life depends on it – a cancer operation must be paid for. The state might not do it. And actually, that last thing can be used as a diagnostic for an appropriately formulated society. If the safety net isn’t formulated in such a way as to protect one from needing to bet your life, then the system needs to be changed, and the self-interested rich, and the libertarians, can go fuck themselves. In fact, in a well-formulated society, fucking themselves might be their only option.
Got a bit off track there. Anyway, since the range of gambling is too wide to assign each case a moral category but there are clearly some immoral categories, then the best options are to make gambling illegal altogether or to categorise the style of gambling in terms of the social damage it does and outlaw the biggest offenders. The biggest offenders are pokies, because, as I said, the punter controls the frequency of the gamble. At the other end of the scale are casinos that don’t service locals and thus only tax the entertainment budget of visitors. In the middle (and ignoring the animal rights issue for a moment) is horseracing. Going to the races focuses the mind on a limited number of spaced events; off-track betting means more events and a greater disconnect between gambling and racing itself as a source of pleasure.
The bottom line: since I can’t demonstrate that my punting is anything more than ethically equivocal, I’d better do something worthwhile with the cash (or stop gambling).
The morality of horseracing.
Wim Delvoye is one of my favourite artists. He is represented at Mona by a Gothic cement truck (by the time you read this, on the back of a Gothic semitrailer), a small Gothic chapel, and Cloaca, the alimentary canal analogue that, when given food, does nothing much except make shit. We also have a tattooed pig’s hide. Wim’s pigs were tattooed while they were alive. Exploitative? Cruel? Sensationalist? Well, some argue that art doesn’t have to abide by the same strictures as society. It plays the social value get-out-of-jail-free card. That was played by, and on behalf of, Bill Henson, when he photographed adolescents naked. I’m not saying he deserved censure (naked kids probably doesn’t equal sexualisation), but he has to play by the rules, like everyone else. After all, the guy who starved dogs because he opposed mistreating animals certainly had a point, and in my opinion he was making art, but his ends-justifies-means argument doesn’t cut it with me.
Wim tattooed pigs under a general anaesthetic. These pigs, bred to be slaughtered at ten months, were then allowed to live out their unhealthy, truncated natural lives. Farmed pigs are unhealthy because of selective breeding to gain weight, and for docility, and are cardiomyopathic and myopic. But of course, we need them for food. Or do we? Muslims and Jews don’t eat pork, and they seem to be doing OK. And vegetarians don’t eat pork. Nor do vegans. We aren’t killing pigs because we need to, we are killing pigs because we like to.
Wim exploited (tortured?) pigs for entertainment. In return they received an extra ten years’ care. Since entertainment is universal, just as eating is, and I would argue that the consequences for Wim’s pigs were far less severe (tattooed pig versus dead pig), it seems reasonable to assert that tattooing pigs is OK. This has a big dollop of moral relativism in it, so those who gather their beliefs from a central authority, like a church, or a good book, are going to remain unconvinced. Their certainty shifts over time. (Many Catholics were excommunicated or killed for believing that the son wasn’t as old as the father – a heresy called Arianism.) And it varies over large areas, but locally commitment to the same beliefs seems paramount.
Why do people get so committed to a belief system?
Most of the things we believe, whether secular or religious, societal or personal, make sense and are universal. Most of us oppose murder and theft. In general, most of us uphold the principle of reciprocity (the do-as-you-would-be-done-by ideal). Where it gets tricky is when we believe crazy things (virgin births, rising from the dead, access to 72 virgins per martyr, junk lending never leading to a run on banks). We believe crazy things because once upon a time it was essential to know whether a stranger was with us or against us. If they were against us but we thought they were for us, the dagger in the back was just around the corner. Code words and secret signs don’t work. Once they’re discovered they can be mimicked. An uncounterfeitable system is required. If you meet someone who agrees that your messiah’s mother died a virgin, you can be sure they are on your side. Those who don’t won’t feign belief, because it’s just too ridiculous. (This can backfire – plenty of Jews have died not fighting on the Sabbath.) You can reliably identify someone as being your enemy if they won’t testify to your beliefs. And the more ridiculous the beliefs, the better. So if we allow a bit of cultural relativism to sneak in, at least that will protect us against those with vested interests, because in-group/out-group identification is biologically based, and evolution isn’t a cultural phenomenon. Horseracing might be ridiculous, but the horseracing fraternity won’t know that, and won’t even be able to contemplate that, because their beliefs protect, but concurrently conceal, their interest.
It’s OK that Delvoye tattooed pigs. The pigs might have suffered a bit, but they are compensated by things like a longer life. Of course, we could have given them the longer life without any imposition on them, and that would have been better, but our universal moral imperatives (the ones that don’t lead us to do ridiculous things) enable us to justify appropriately proportioned negative consequences.
Fat men being railroaded.
I talked about this in my book, but I need to rehash it here. If a train is bearing down on, say, five people, but there is a side track with one person on it, the vast majority of people would redirect the train to the side track, thus killing one to save five. However, if they see the train bearing down on the hapless five and the only way to save those people is to push a very fat man off a bridge to derail the train, they will not. Or consider kamikaze warfare. During World War Two, on Okinawa, Japanese kamikaze attacks killed about five thousand Allies for the loss of about one thousand. Considering that “normal” military engagements have about a one to one kill ratio, the five to one ratio achieved could be considered a triumph (and the Japanese authorities, deluded by their own self-interest, did consider it to be a triumph). But the outcome was achieved with casualties as a consequence of the strategy, not as a side effect, and so kamikaze tactics are widely derided. Just for a moment, contemplate what you think of suicide bombing as a military tactic.
Direct action isn’t appropriate, indirect consequence is. That’s why bullfighting and cockfighting suffer almost universal opprobrium (except from those in the in-group, who believe the ridiculous to bind the group). It isn’t sufficient for an action with negative consequences merely to be entertaining; the negative aspects must be a side effect, not an inevitable consequence, of the entertainment.
Horseracing is about horses running, and racing. Some people, but nevertheless a small percentage of horseracing fans, watch races because they admire the beast. These beasts, like pigs, have been selectively bred and are significantly modified from their wild ancestors. Arguably, unlike the pigs, the consequences of selective breeding thoroughbreds are mixed. In any case, they haven’t suffered from the selective selection pressure as much as pigs have. Sometimes, in the pursuit of our entertainment, horses die (as do jockeys, but they, it is argued, understand the risks). This happens about once in 1400 runs. So the horse’s life expectancy is reduced from, say, about 25 years to about 24 years, nine months. A reasonable price to pay for our entertainment? I think so, but then I would. A couple of provisos. Some owners and breeders are quick to top their slow or injured charges. They are economic rationalist scum, and are in-group rationalising a moral outrage. Also, in South Australia and Victoria, there are still hurdle and steeplechasing races. A quick survey of fatality rates suggest that they are about 20 times more dangerous than flat racing. And the extra utility that is provided as a result? Not much. They might be a bit more exciting to bet on, but that is as a direct result (not an indirect consequence) of the chance of the horse falling. So I think hurdle and steeplechase racing should be banned. And this time, I am contradicting my own direct interest, so my opinion has some relevance.
Horseracing is OK, if a bit morally ambiguous. Damage is done, but at a low frequency, and it is a side effect, and not the goal, of the industry.
Slipping from morally ambiguous to morally dubious.
Imagine I had the power that public office allows one to exert. I would exert it. Obama’s drones make him an asymmetric warrior, a killer of individuals. And now seekers of public office have to contemplate the notion, in what used to be the best-case scenario, that if they end up the boss, they will be signing death warrants of individuals, and they will know that there will be collateral damage. Will the most moral among us, those that wouldn’t gamble even if they could win, seek elected positions knowing their morality could be gravely compromised? Such an appalling choice might not influence me, but I’m not of the best among us.
I’d end up in The Hague, in the cell next to Obama.
So now, is it best to hope that the moral crusaders among us don’t seek to run things? That’s a more foolish bet than any I’ve ever taken. But maybe those are the bets you take when you formulate your morality without skin in the game.
And here I am, writing on an average betting day, and by now, near the end of the betting for that day, we will have turned over more than $5 million across five continents. And I note again how difficult it would be for me to manifest rage against an industry that supports all that betting, and the winning that is its likely consequence. So I ask you, Nick, esteemed editor of an esteemed journal, why ask me for an opinion?