Spencer's Super-Happy Fun-Time Right-Wing Word Pit

Trust me, this is a political rant... you just have to wait for it...

I work for a company that sells video games. No, not those kind, the kind you find in a bar or casino. Video poker, slots, bingo, mah jong etc. The product that I mainly deal with is a sweepstakes game. A sweepstakes game is a lot like a deck of cards. You know that in that deck of cards there are 4 kings, 4 queens, 4 aces, 2 jokers, etc.

If you take the deck of cards and shuffle it and begin pulling cards off of the top of the deck, you will notice that the order is random. If you continue pulling the cards one at a time off the top of the deck until they are all gone, you will have pulled all 54 cards and will have seen 4 kings, 4 queens, 4 aces, 2 jokers, etc. The possibilities are not infinite as with a game of pure chance (like a slot machine). We call these games "Finite" and we distribute them to sweepstakes locations.

Now lets take our example and add something to it. We have 54 cards in a deck of cards (including 2 jokers) and we add 6 blank cards to the deck. We now have 54 face cards and 6 blank cards. Shuffle the cards and we are ready to begin the game.

Our customer pays $1 to turn over a card. If he gets a face card, he wins his dollar back. If he turns a blank card, he loses his dollar. If the customer pays $60 and turns over all 60 cards, he will lose $6 and you will gain $6. What this means is that our game pays out at 90%.

This is essentially how our sweepstakes games operate except there are something like 36 million different outcomes on each game.

Here's where it gets interesting. Our games pay out at an average of around 90% so as I stated above, the gameroom is essentially keeping 10¢ on every dollar that comes in. The operators complain all the time that if only the payout percentage were lower that they would make more money. In other words, the operators want to keep 20¢ of every dollar. So they whine and complain that they are losing money because the percentage is too high.

The problem is - we are a competitive business. In some states like Florida we compete with other vendors. These vendors have their own games that payout their own percentages. What we have found is that if a game does not pay out high enough, the customer does not feel that he or she is winning and will go to another game or gameroom.

Because of this factor (competition) we have to maintain high payouts so that the customer will feel like playing our games is worth time and money. The real way to make money is through volume.

Volume works like this:
10% of 1000 = 100
20% of 200 = 20

Did you catch that? Higher percentage means nothing if the volume is not there. What I end up telling our site owners is that if they don't think that they are making any money then you need to increase your volume - promotions, clean your gameroom once in a while, put lights in your parking lot, feed your customers, etc.

Interestingly enough, this doesn't make a dent. The scenario goes like this...

A game paying 95% has yeilded a gross revenue of $20,000. The gameroom operator calls and tells me that this game is "killing" his gameroom. "If it only paid at 90%, I would have made $40,000!"

BZZZZZZZZZZZZZZT!!! Wrong. Why, because you cannot control how much money goes into the games - that's up to the customers (volume). If your game paid out less, there is a high possibility that it would not be as popular a game and would therefore have lower volume yielding lower profit.

In all cases, our higher payout games routinely outperform our lower payout games because the customer gets to keep more of his or her own money. It's that simple.

Now, that you have slogged through that, let's get to the taxes...

The politicians and the media keep saying that if we pass the extension of the Bush tax cuts we will lose $60 Billion or that $60 Billion will be added to the deficit.

How do they know that? It seems to me that they cannot control the in (workers' income) so how do they know exactly how much the out is going to be? They say, "If only we collected our taxes at a higher percentage, we would make $x!"

It is important to understand that this number ($60B) is only a projection based on what the analysts THINK will happen. This is the exact same argument made to Reagan's tax cuts in the 80's. When Reagan lowered taxes, tax income rose by 30%. Now it can be argued that the tax cut had little effect on these revenues, and certainly there were more factors to this than just the lower tax rate. The point is that uncertainty is the name of the game. Let the people keep more of their own money and maybe they wont send jobs to India anymore. You may actually see a shrink in that $60 Billion number.

Besides, since when does keeping my money "cost" the government? It's not theirs to begin with! If they think that they are going to be $60 billion short, then why don't they just spend that much less?