Episode 9: Framing the Gambler

Push Kim. I hate to do this, but I just have to pick up right where we left off. In our last episode, we were talking about insider trading, how it's become the one crime the sports gambling industry really wants to police. But it's also the one thing that every other guy on an American college campus wants to do. As my producer LJ found out after just a few hours at the University of Kansas.

I ask you for aniela intel on the player pot.

Oh yeah, well he's driving there right now. He's on the bus, so I'm gonna text him Layer and I'd be like, what'sh I put money on.

Wandering around the integrity landscape these last six months, we found that some huge number of Americans who are too young to drink now gamble on sports. Yet no one ever gets in trouble for taking their bets. What people do get trouble for is trading on inside sports information. The analogy, which seems obvious to some people is the SEC ban on trading stocks when you have inside information. But even that is not an obvious type of crime.

You know, some kind of frauds clearly fall under thou shalt not steal some kinds of frauds clearly fall under thou shalt not bear false witness. But there really is no commandment that says thou shalt not trade securities while in possession of material non public information.

That's Dan Davies, once an economist at the Bank of England, an analyst for a bunch of investment banks. He now writes about financial fraud lying for money. His first book was called.

Most people would consider that's like just the epitome of doing good business. If you don't have more information, why are you making this transaction? And it wasn't a crime in most of the world for most of the history of stock markets. It became a crime in the USA in the nineteen thirty after the Wall Street crash.

It's kind of odd, right that the financial markets are the only place where you're vilified if you trade on some piece of information not available to the general public. Amazon can buy your property without telling you that they've already acquired the rest of your city. But if Jeff Bezos buys Amazon's stock because he knows Amazon has just secretly bought an entire city really cheaply, he might go to jail.

It's a decision that society has made to create this crime on the basis of a tradeoff, and that tradeoff is obviously that if you have inside to dealing rules you make it look like a fair game, You're going to attract more people into that game, and that in turn is going to attract more of the savings of the middle class in to finance the industrial developments of the capitalist will.

So maybe insider trading laws make sense in the stock market, though I got to say that their main effect is to trick a lot of people into thinking that the financial markets are more fairly police than they actually are. But that's my point, not Dan's. Here's why I called Dan up because his country is now trying to turn the informal rules against insider trading in sports gambling into actual laws, just like in the stock market.

It is being done, in my view, on the basis of a very very shaky legal footing. The Gambling Commission have taken it upon themselves to say that placing a bet with material non public information is in principle cheating, and that they will investigate it with their own criminal powers.

You're basically policing the market for who's benefit, Like who benefits from raising it to the level of a crime.

I think that is completely the right question to ask, because we know the trade off that we made with securities markets, which is that we decided that we would police their internal rules for them using the criminal law because we want to attract everyone into the capital markets.

And the answer to the question who benefits, it's the book maker. I assume the book.

Makers are the concentrated interest. They're the people who pay quite a lot of the bills, and so a lot of these sports seem to be quite happy to bend over backwards to keep things nice and safe for the bookmakers, to allow them effectively the kind of privileged position that stock market specialists used to have in the nineteen sixties and nineteen seventies.

Sports bookies hate insider trading for the same reason they hate smart sports gamblers. They're in the business of maximizing stupid sports bets and minimizing smart ones. They don't want to take bets from people who know more than they do. One way to avoid those bets is to criminalize the information. I'm Michael Lewis and this is against the rulers. It's still hard to tell how exactly sports gambling will play out in the United States. It's still so new here.

Black cop competitions, the relegation bottles, the dykes under the lights.

I absolutely love it.

You can see the effects of this gambling culture everywhere. Just google gambler's anonymous meetings in London. The gambling industry in Britain has acquired so much political clout that the British government still thinks mostly in terms of policing the gambler rather than policing the industry. But it's the Australians who are way ahead of everyone, even the British. Australia legalized sports gambling with few restrictions back in two thousand and one.

Australians lose more per capita than any other country in the world on gambling.

That's Charlie Lewis, journalists for the Australian news site Krichie. Charlie was amazed to learn that twenty seven million Australians were losing twenty four billion dollars a year gambling per capita. That would be the equivalent of Americans blowing more than

There was a bipartisan process that unanimously concluded that there ought to be a blanket ban on online gambling advertising in Australia. The government had kind of sat on those recommendations for over a year until recently announcing that they were going to do a much more water down version of what that report was recommending.

Pole still showed that seventy percent of Australians won a total ban on sports gambling ads. The major political parties say they agree, but there's been no ban. The sports gambling ads are still everywhere.

Good I just chap fifty bucks on rice for don't give me lucky.

Ni puller out one thing I love about you alses you're all different.

And on the punt as mad as cuts.

Mad Is cutsnakes. You gotta love it. Anyway, Charlie set out to understand why the ad ban was going nowhere. What he found was a situation even worse than in Great Britain. The sports gambling companies hadn't simply bought the political process that bought the bulk of the Australian media too with ad money.

The real unity is from the Australian mainstream media because they rely on that money much more than they ever used to. So they are of one voice opposing reform, which is kind of interesting because that's also who pays for journalism in this country.

It wasn't that the Australian media completely ignored the problems that sports gambling caused, but Charlie found that a lot of the Australian media had settled on a narrative that was extremely convenient for the gambling industry. Yes, they report on the bankruptcies, the ruined lives, the suicides, but their reporting also implied that the industry bore is zero blame for any of it because some people simply didn't know

And now that was not an easy sell.

That's Frank himself now the co chair of the Commission on Presidential Debates. But back in the nineteen nineties, the Vegas casino owners hired him to be president and CEO of the New American Gaming Association.

The guys who were running the gaming industry of the various companies didn't believe there was any problems with you know, we responsible gaming. And when the first meetings, when I went, I brought with me the picture of all the leaders of the tobacco industry standing before Congress, raising their right hand, saying that tobacco wasn't addictive.

Yes or no? Do you believe nicotine is not addictive? I believe nicotine is not addictive.

Yet I believe that nicotine is not predictive. I believe that nicotine is not addicted.

And I said to them, you know, I want you to picture this in your mind. If we don't do something affirmatively which is in the public interest, the dealing with we we know is a problem. No one had any idea how deep the problem was.

The gambling industry wouldn't do what the tobacco industry did and lie and tell people that its products never caused harm. Instead, it would shift the focus away from the industry and on to its customers. It would fund lots of research about gambling addiction without ever having to do anything that reduced the money they made from the attics.

The gambling industry is only really doing what every big harmful industry does, which is fund research to try and get their message out there.

That's the Australian journalist Charlie lewis again.

Certainly not to back of companies. And I don't think even fossil fuel companies were ever as successful as the gambling industry has been in making that process kind of invisible, making it something that people don't really know is happening.

We are all now just living in frank feign costs frame, a frame that keeps people's attention on the person and off the situation, on individual weakness, and off an environment designed a profit from that weakness. In Australia, the regulatory environment has fallen entirely under the control of the gambling industry. But this is in a show about Australia. It's a show about America and how this latest predatory industry is

The drug is released in nineteen ninety six, and initially there's this incredible reinforcement for them where they're getting these letters from people, these amazing letters who say, you know, I can pick up my grandkid for the first time in years, I can go back to work. You've given me my life back.

That's Patrick raden Keief, author of Empire of Pain, the story of the Sackler family in Purdue Pharma, which back in nineteen ninety six came to market with a new painkiller called oxy contin.

And the drug becomes a huge blockbuster. There's a big moment where it edges out Viagra as the number one drug of the day.

So it's released in ninety six, when it is the first signs like if you were sitting there and you were concerned, when would you have first noted this some problems here?

Really early, it's like almost within a year, really really early. When they released oxy conton they sent out into the field all across the country the biggest sales force that had ever been put to work marketing.

A single drug.

The interesting thing about doing that is those are your canaries in the coal mine. You have this early warning system, which is these people who are actually out there in the communities. And so when you start getting doctors who say, well, Jesus is interesting, I had a patient come back and say the pain is coming back within eight hours. They've started taking three pills every twenty four hours, not two pills. You know, you get pharmacists saying people are starting to

Now, obviously opioids aren't the same as sports gambling companies. Sports gambling companies make you poor instead of making you dead. Then again, if you're poor, you're more likely to die. What opio It's taught us, or should have taught us, was that when lots of money is being made, massive public health problems confesster out in the open for years.

So it's not that people didn't notice in a public way that there were problems with OxyContin, that it was killing people, that people were addicted to it, and indeed that the company had done a lot of bad things. And there's this fascinating moment where there's a congressional hearing, and Arlen Specter, the late Republican senator from Sylvania in this hearing, has this moment in two thousand and seven.

I say fines with some frequency and think that they are expensive licenses for criminal misconduct. I don't know whether that applies in this case, but a jail sentence is a deterred and a fine is not not a corporate fine in the context of the kind of profits which you're involved here.

And he says, are we not, on some level just issuing them an expensive license to keep doing business? And it's this kind of incredibly poignant moment to look back.

At the evil now seems so obvious. The Sackler family made billions peddling a drug they knew was addictive, But the fact that it now seems so obvious should make everyone a little uneasy, Like what is going on right now that one day in the distant future will seem so obviously evil.

You're actually working in a very familiar kind of a Marria moral vernacular, right, which is guns don't kill people. People kill people, right, Like we have a deeply ingrained libertarian sense that you can create something that will wreak havoc and put it out in the world and get very rich doing it. And as long as there's some person downstream of you making some bad decision, you're kind of off the hook.

Morally and legally. We lead the world in many things, and one of those things is in our tendency to see the person, rather than his situation, as the ultimate cause of some problem, even when the situation has been designed to lead the person to his ruin, maybe especially when an industry has designed the situation. So long as that industry remains faceless.

Telling the story of how the wrong happened and how it should be righted is a lot harder if there's no characters in the story.

Yeah, no, it's an accident with driverless cars, exactly, exactly, stay faceless, Blame the customer, buy media, and politicians. All of that needs to be part of the sports gambling industry's strategy if they want to stay out of trouble. After that, there's only one more thing they need to do, create doubt. Lots of smart people recently have been noticing the same addictive forces at work in American life. We've

So I started just pulling on that thread and discovered this whole universe of scientific work that nobody had really written about.

That's Naomia Reski's Harvard professor in the history of science. Way back in two thousand and one, she was looking into the question of how much difference it made who paid for science, and she was looking specifically at oceanography, a field that launched in a big way after World War Two with money from the US Navy. These early oceanographers discovered, among other things, that oceans were warming, that the climate was changing.

So I wrote what became my most famous paper, the Paper on the Scientific Consensus on Climate Change, saying, hey, guys, there really is a consensus on this issue, and there has been for a while now. And I started getting hate mail and threatening phone calls.

Naomi soon found herself under systematic attack from a machine she didn't know existed, a machine built to deny climate change and paid for by the fossil fuel industry, a very American machine that happens to employ scientists. She decided to study the machine and others like it. I want to know the playbook, so I'm asking her to play

Great?

Well, first of all, I charge a lot of money for this. I just want to be clear up, friends, this is not a pro bono operation. But what we need to do is situate you as an honest business you're good guys. Just giving people an opportunity to do something that they enjoy. This is a form of entertainment. It's fun, it's enjoyable. People love professional sports, and people enjoy gambling on professional sports. Now, we recognize that for some people it can be a problem, but that's relatively minor.

Now vast majority might be too strong. I mean, the respected medical journal The Lancet just published a bunch of scary scientific findings. For example, one in six adolescents who gamble on sports develop a problem. That sort of science could screw up your business if you're running a sports gambling app. That's why you need Naomi.

You're going to cast doubt on that science. You're going to say it's unsettled, we don't know, the methodology is suspect. You're going to come up with a whole set of strategies and I'm going to help you with that. You will find credible researchers at credible universities, including my own Harvard, places like Harvard, Stanford, University of Chicago, and you will find scientists who are willing to do research that cast

And you think this will be effective, not think.

I know it will be effective because we've done it before. I can show you many books, many articles, many examples. I can show you examples of court cases that we have won because we cast out on the science.

And what other industries should I look to as models from my own, Like if I want to see who's done this, well, who's like state of the art?

Well, the textbook case is tobacco. We've known that tobacco was harmful since the nineteen thirties. We've known since the nineteen fifties the tobacco caused cancer, emphysema, bronchitis, heart disease. But tobacco is still legal everywhere in the world. Millions of people still smoke, and even in the United States, where significant controls were placed on tobacco. From the nineteen nineties onwards, we delayed. We effectively delayed tobacco regulation for the better part of half a century.

And So if I don't take your advice, if I like, just let the science pile up. The gambling addiction is growing because of legalized force betting. What's going to happen to me? If I try to just stay out of this, well.

Your business will be destroyed because the scientific evidence will make it clear that this is massively damaging. There will be public outcry. There will be parents, mothers, the spouses of people who have been bankrupted by your industry. There will be teenagers who committed suicide after being incrupted or having their lives destroyed by gambling addiction. You will be

Sorry, don't have any choice. That's the big point here, the inevitability of what the sports gambling industry must do if it wants to survive in its current most profitable form. The first thing it must do is figure out the best scientists to buy Our Devil's advocate isn't worried about that.

We can identify three different types of scientists who you might be able to find help you.

Type number one is the shill the hacks who show up every time some predatory new industry needs help, but they aren't all that useful because of their past association with Big Tobacco or Purdue Farmer or whoever.

That is, if we can find someone who's a bit of a true believer, and we do that in two ways. A person could be a true scientific believer, and that happens when for some reason someone doesn't accept the science, and it might be a legitimate reason. We can find those people and they may be willing to accept funding from us for their research because this is the research they want to do independently, so we can make common calls with those people.

Yes, we can get the science we pay for. We can buy the science we need, but in the end we might not need to pay that much because this is America, baby Land of the Free, which means, among other things, being free from science.

The other people we can make common calls with our ideological fellow travelers, people who believe in the free market system on principle, who don't believe in government regulation. I can assure you there are lots of them, people who are opposed to govern regulation on principle, and they will support us, and they will do this work because they don't want to see your industry regulated. And those are

If muddying the waters is actually going to cause so much damage, to actual damage in the society, how do these people who are going to help us sort of defend themselves from I mean, why are their institutions even put up with them? I would have thought they would be discredited just by joining forces with us.

Well, universities are very weak, and the remarkable thing about universities is how easy it is to buy them.

Is it sufficient just to muddy the waters in scientific research? That's all we need to do?

Yes, that's the beauty of what we do. You don't need to prove that what you do is safe or good, or right or moral. All you have to do is prove that we don't know. Because if people think the science is unsettled, then they will think it's premature for the government to get involved.

So the lesson to draw from that is, don't waiver, don't show any weakness. As long as I don't flinch, I'm more likely to be the tobacco industry than I am the ozone whole industry. Correct, Right, So sports, if I'm my sports gambling company, just has to be just consistent in the messaging that we don't know.

Correct, do not flinch, Do not.

Flinch, and I don't think they'll flinch. Too many interests are aligned. The sports leagues all see gambling as their future. The tax revenue for states isn't big yet, but it's new revenue, and new revenue is hard to find. I think this is what's coming. Lots more people getting into trouble, lots more ruin and anger and pity. Because your society will not defend you against this particular threat, not for

So I'm not family dinner in Paris at the Olympics, and I made a bet i'n't an event. I didn't tell my dad about it, and the dopamine is filling my brain right now, I can smell the money.

Against the Rules is written and hosted by me Michael Lewis and produced by Lydia gene Kott, Catherine Gerardeau, and Ariela Markowitz. Our editor is Julia Barton. Our engineer is Jake Krski. Our music was composed by Matthias Bossi and John Evans of stell Wagon Cinfinett. Our fact checker is Lauren Vespoli. Against the Rules is a production of Pushkin Industries.

Okay, I'm a little scared now. This could be taken out of context and people will think I've gone over the dark side.

Oh no, that was just the best.

Okay, I'll share another secret. You know, people always say, like, if you could be reincarnated as anything in the world, I would like to come back as a stand up comic because I don't think anybody gives people more pleasure.