Everything is gambling now

0:00Sean Harding is a 45 year old finance manager from Denver. So Sean found himself on this app and he wasn't spending too much in the very beginning, maybe a hundred or a few dollars a day. And then within 40 days he was spending over $1,000-$5,000 a day. Just wiping whenever you could really get a free moment when he was doing laundry, sitting on the toilet. And it was only when his wife confronted him about this odd behavior, about some missing pages on this credit report that he really looked at what he had spent. And that number was crazy. It was $1.3 million in four months. He had borrowed money from a friend. He had taken out personal loans. And finally, when all that was depleted, he had used his employer's credit card. The app is what not on today's explain from box.

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2:00That's fetchpet.com-slash-save. There's an investigate reporter at the Wall Street Journal and she recently investigated what not. What not is a live shopping app? So imagine the home shopping network had a baby with TikTok and eBay and it was on your phone and it was running 24 hours a day. This box is a loaded shop. Let's get another giveaway going. Congrats to that giveaway winner. Give me a water. We're going to throw this away in the bed. Give me a hand. This is once again into solid 10-curry gold with boys and night. Live right now going in eight. Gorgeous oversized sweater. It has little, I guess you can say, Patrick. So you open up that. There's countless numbers of categories. You can get coins. You can get cards. You can get horseback, plants, goo, lobsters.

3:04There's any, I mean the categories are expanding all the time and there are sellers live auctioning off these goods in real time. Here we go. New delete. Three. You know what? Size large bodysuit with padding and sportswear protection. Four seconds large. Three, two, one. Soul can grab this. And there's a countdown clock that can go anywhere from three seconds to 60 seconds and it's counting down and the auctioneer is or the sellers hyping up the chat as they call it. Broncos prices chat, bonkers prices. What an insane seal. Another sugar squish dragon go. And that chat is commenting like, wow, look at this, what a deal. And in the meantime, there's some music. Sometimes it's nice, melon music. Other times it's metal or EDM. Unless you want all the peeks it's used. I know you could probably sell them. Depending on the personality of the seller, there can be a various degree of moods in there. But the end result is that the last person to swipe at the bottom of the screen, which

4:06is how you bid, gets the item. And once you have swiped and you're the final person to do that, there's no real confirmation screen. We're just on to the next product and you only really find out what you got when it shows up your door. It started as a marketplace for Funko Pop figurines, which are these like square headed niche figurines in the collectible world. But it quickly expanded. I would say the biggest categories are sports cards and trading cards like Pokemon. That's a big, big one. And then the other one is women's fashion and beauty products. I spoke to multiple people who found themselves just spiraling into really, I mean, a whole of addiction and what they like into gambling because of especially that break format. KKE, you're going to play the game, yeah? So tonight tonight you're done buying singles and you're going to play the game a little bit, Jake.

5:06Why don't you make a little bit of money? The format typically applies to trading cards. That can be sports cards, Pokemon. It can also happen with like rare coins. But the idea is that there is a sealed pack of cards and that sealed pack is pretty expensive to buy out, right? So say it's like $10,000. The seller will have that and before the show starts they'll say, okay, guys, there are 10 slots that apply to this pack. So I need 10 people to buy in at a price of $1,000. This is a steal, right? Like you're getting a piece of the pie of a $10,000 pie for only a thousand bucks. The reason that they're willing to do that is that within that pack there might be cards that are worth $2,000, $3,000, $10,000. So you recoup quite quickly if you only pay $1,000 for that. The other side, the flip side that often does happen is that the cards are worth nothing

6:07close to what you bought in for. So people will get a card that's worth $50, $100. And at the end of it, all you have to show is kind of these small value cards and those who have described kind of a cycle of problematic behaviors say that when you lose, when you don't make up the value that you paid, you just buy right into the next one until you get out of the hole. So that's this feeling of the high, the almost thrilled adrenaline rush, the, oh my God, look what I just did when you get a card that's way over what you thought. And there's this despondency, this despair, the shame, and that feeling of, okay, I need to make my money back on that flip side. This app sounds fun in that, you know, oh, when I was a kid, I was always after this one Pokemon card and now I can find it and even purchase it on this kind of like live auction

7:08gamified atmosphere app that I have on my telephone while I'm on the toilet or whatever. But then you talk about a story like Sean's and it's like so dark. $1.3 million in four months on this app. This app destroyed his life. Baseball trading cards destroyed his life. You spoke to the founder of what not. What does he say when you tell him a story like Sean's? LaFontaine said that addiction does not register as a problem to them in their internal data, which they look at often. When we presented a story like Sean's, they repeated that addiction does not register as a problem. When you breach the topic of gambling or people accusing this app of having gambling features, that's where what not definitely buttons up there under pretty intense screw needs surrounding that allegation. They categorically reject that and they say they can't comment on pending litigation. They do say that they created an app that had the best user experience possible and that

8:13they're new and they're learning and they're scaling and they're assessing the marketplace in real time. Are they implementing any guardrails to maybe prevent someone like Sean from ruining his life and his family's life? So while they say that addiction doesn't register as a significant problem, they also have introduced optional spending limits and watch time caps. They said that's not because of addiction concerns, but because some users said that they spent more than intended. That was the distinction that they made. They said there's other safeguards coming, such as velocity of spend alerts for sending sudden spending spikes. Some have pin locking for categories, so you have to type in a pin to go to a certain category. Some of these are self-policed, so a watch time cap, you could presumably change yourself even though you're the one that implemented it. They're also saying that they're going to develop some type of birthday reconformation

9:16option, so that way they could catch underage users, which is coincidentally how I came to know about what not was one of my colleagues' daughters had spent over $5,000 in one night on Pokemon cards. Wow. He only realized that when he looked at this credit card and was like, what is this? He went to go sell those cards at a Pokemon like at a card shop after the fact to try to recoup, and he could only get back like $300. Oh my goodness. Yeah. Is this just a what-not thing? Are there other ways kids and adults can be gambling their lives away on these live auction type of platforms? So live shopping has been one of the most predominant ways that Chinese shoppers shop for a long time, and it's really kind of the way it has crested over there a long time before it has here. It really started to take off and gain traction in America in the kind of post-bandemic world,

10:18and while what-not is definitely leading the charge, TikTok has their own thing called TikTok Shop that has a similar kind of setup, Ebay's trying out stuff like this, and then for the card collecting hobby, specifically, Fanatics Live is a major source to go to get your cards and experience breaks and all that. And do all of these different platforms be it on TikTok or Ebay, this live auction's style, have the sort of gamified countdown clock to make it more intense, more exciting, and perhaps more addictive? What-not's really found a way to create a really engaging and easy to interact with atmosphere. They've also successfully merged like the Parasocial media aspect, so there's relationships between the seller and the buyer. So if you keep going back to the same seller, they'll remember your name, the people in the chat will remember. So there's some folks who were like, I found friends in here, and Sean said the night

11:20that he used his company credit card, he was reached out to by a seller and they really came in. You've got to join this. This breaks awesome. I have a great slot for you. I'll give it to you at a discount. And he's like, I don't have any money. And that's when he realized that he had a little money. It just happened to belong to his employer. So that kind of shows that there's this social atmosphere. I mean, yeah, Wanda is definitely leading the charge, but other companies are seeing how successful this is. And I think it's only time before they kind of merge all these aspects together in an attempt to take their market share from them. What-not's not for the kids, but the games are next on today's explained. So both of the charity comes from China. Is your summer fun catching up with you? A weekend trip here, a dinner there, spritzes on the patio that each cost double digits

12:25you flush. Don't get me wrong. It was all worth it, but you might be feeling the financial squeeze going into fall. And that is where China comes in. China wants to change the way people bank. They're not like your old traditional banks, your dad's bank, who charges fees and gate keeps perks and rewards. China, on the other hand, offers the most rewarding fee-free banking, all with no overdraft fees, no monthly fees, no minimum balance fees. You can join the millions who are already banking fee-free with America's number one choice. For bankinged to chime.com, slash explained. That is chime.com slash explained. You can sign up now for chime. It only takes a few minutes. Chime is a fintech, not a bank. Banking services and chime card provided by Chime's bank partners, qualifying direct deposits required. Terms and limits apply. Go to chime.com slash disclosures for details.

13:32And for to explain, comes from Anthropic, the team behind Claude. Every big AI headline is a lot of important questions. Like what does this mean for my job? Should I even be using it? Anthropic is a public benefit corporation founded on asking those kinds of questions. More specifically, they say, how do we make sure AI goes well for people? So Anthropic sat down with some people. They did more than 120,000 interviews. They asked those people for their hopes and fears and they don't gloss over what they heard. Anthropic publishes that data even when it's uncomfortable. What came back, they say, wasn't just fear. It was curiosity with questions like, could this cure diseases or could my kids have a better future? Perhaps there is hope in asking hard questions. Ask yours at claw.ai slash today explained and keep thinking. Support for the show today comes from talk, Iatry. If you feel your anxiety, depression or ADHD is more than just a rough patch, you might

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15:36I'm Vernon Silver, a senior writer on Bloomberg's investigations team. Sweet. And tell us, Vernon, what is a Skinner Box? Skinner Box is a contraption developed by psychologists in the 1930s. Here are 20 boxes, each of which contains complete equipment for studying the behavior of a pigeon or any other small animal. Where they learned how they could get pigeons or rats to click furiously at a lever. Dr. Skinner, what are you doing with this pigeon? I'm getting ready to demonstrate a fundamental principle of behavior. The operator is quite simple, but the principle is far reaching. Not only in explaining the behavior of pigeons, but in analyzing human behavior. The animals knew that if they clicked on a signal that they might get one pellet and one pellet, then they changed it up.

16:37And if intermittent intervals, the machine dispensed a ton of food pellets or none or just one, the clicking by these animals would become much more furious and repetitive. In essence, if you have a game on your phone, chances are you have a form of a Skinner Box in your pocket right now. We started writing about games as Skinner Boxes when we were looking at sort of virtual casinos, social casinos. These are the games where you can play slots or card games. You put money in to buy more coins if you need them, but you never get your money out. It turns out that those same mechanics being used in those in the last few years in particular have been repurposed in games for children, designed for children, rated for children, as opposed to these 18 and over very obvious casino games. So we started looking at the whole universe of mobile games and how under the hood, they

17:37shared these design aspects that were very much just based on a random reward system that could train you to keep wanting more. And in the piece you write about a CEO some years ago who kind of said the quiet part out loud. It was almost exactly 10 years ago. And this finished game maker was speaking at a conference. Hello. I'm here to talk about monetization. It is about a summary of a huge bunch of behavioral psychology. He titled his talk Let's Go Whaling. Now in game talk a whale just like it is on a casino floor is a big spender. There are within gaming industry lingo, there are whales and dolphins in minos. And the big get is this very small percent, let's call it maybe 2% of the players who you want to keep coming back and spending more. Those are your VIPs.

18:38And the quiet part that he set out loud was here's how you manipulate people. Some of you will probably be slightly shocked by all the tricks I have listed here, but I will leave the morality of it out of the talk we can discuss it if we have time later. There is a roadmap to draw players into repeated play. He outlined a lot of these psychological techniques that are at the time were a little controversial and now they are just like their business model. The most important one is the core loop. This is the underlying mechanic of the game where the player repeats the cycle of action, reward, advancement to a goal. You want to get to the next level and you are just going round and round. The next is just as well be a slot machine because you are being rewarded usually in some random way as you work through this reward loop. What makes the game different is the next level, the meta.

19:40That is the virtual environment that you are playing in whether it is a battlefield or a fairy land. That is the story. That is where you start not realizing that you are just playing a darn core loop over and over again. Then the third and final piece that almost all these games have is the live operations or the live ops. That is where the game company engages directly with the players. They will run real time competitions, offer chances to buy the virtual and game currency. They are setting deadlines to complete tasks. These events are for a limited time only. You have to use them quickly before they disappear in a couple hours. One of the techniques he pointed out is the IKEA effect. This is the idea that if you do work to build something, whether it is a bookshelf or in the case of a game trying to build a very princess castle or complete a virtual sticker book, that the more work you do within the game, the more emotional attachment you get to the

20:42thing that you are going to build. So that, let's say, you are running out of time. You don't have enough credits to keep playing. You don't want to lose that precious thing that you have put so much labor into. You might pay through a micro transaction and in-game purchase in this game to keep playing a little bit more. That way you can get to the next level. That is the throttling, the playing with the timing and the dynamic of the game for them to maximize fun or profit or both. In any game, you have those layers. Tell us about a game that is very clearly using these tactics that we might be familiar with. The example that we've used as part of the transition from obvious casino games to games that are dressed up like kids games for fun is Monopoly Go. It's based, according to people who have analyzed it within the industry, on Coinmaster,

21:46a game that was essentially a slot machine. And instead of the slot machine itself being evident, you're in a board game with a very familiar Monopoly properties and characters. And among other things, just like you do with these online auctions, you're trying to get packs of stickers and you open the pack and it's very exciting if you can get the stickers to complete your book. So in a lot of ways, it's a crossover between the mechanics of a slot machine plus the mechanics of some of these online live auctions. And of course, if adults want to spend their money playing Monopoly Go, that's well and good. But I think the reason you guys are writing this story is because the fear here is that these games are really appealing and addictive for kids, right? Yeah, what we found is over the past decade, games rated for kids have far outpaced in revenue growth, the ones rated for adults. Essentially, in the past 10 years, you have a tripling of the revenue in kid-rated games.

22:54When you look at the top 10 grossing games on the App Store right now, they're all kids games versus three years ago when you might have had a couple adult games. There's been a wholesale shift as the industry has more and more adopted some of these measures to make kids games the most profitable ones. And so you will also see with this rise in the popularity of kid-rated games, a rise in the litigation. And then the last couple of years, we've seen a wave of lawsuits. The judge is allowing a lawsuit to move forward against Epic Games, which says the video game Fortnite is specifically designed to get kids addicted to playing it. According to court documents, the child started playing when they were five or six years old, spending hundreds of dollars on in-game purchases, displaying addictive behavior, leading to anxiety, depression, and other symptoms.

23:55As you know about the social media lawsuits, there's a new set of lawsuits, which is the video game addiction lawsuits. There's a whole group of them in California. They're a bunch in the federal courts. Those have only just begun. So in these lawsuits, for example, you have kids who have missed school because they are concentrating only on these games. They have rage issues. They have withdrawal symptoms when they're told that they can't play their games anymore. There's one family that had to install cameras in their house, not just so that their kid couldn't get it the games, but because they were afraid of what he was going to do to a siblings because of the rage. There are dozens and dozens of these, and every day it seems more being filed. When we talk about the way we're making these games and the way we're allowing our kids to play these games and the way these games are generating billions and billions of dollars, it feels like we are not protecting the children here. Was that surprising to you in reporting this out? What was surprising to me is how much so many businesses in the tech sphere are

25:00depending on games and are depending on the kind of engineering that's behind the games. They've realized that this is a way to make money. Because of that, they've gone from games for adults to games for kids. Now these same mechanics are showing up nearly everywhere in bank apps, dating apps, health management, and even ed tech, the stuff that is in the schools. It's a market. We're all in it. Are we all just destined to be little rats looking for treats forever? We could be, but I'm an optimist. One of the things that we tried to do with our story that was completely ridiculous was to build a game and take all of the reporting that we had about, all the techniques are being used and make them completely transparent in a game that you could play at home. We call it Subway Rat and the idea of Subway Rat is that you're a rat in the New York

26:02City Subway and you're opening up a box and getting random slices of pizza and dragging it into a pizza box to try to complete a pizza before the train comes into the station. The idea being that if you're transparent, if you can show people what's being done and they're a little more aware of it, then they can maybe take a little more control. Because you don't know the problem or the way that you're being manipulated unless you know what the techniques are. Vernon wrote Design for Addiction for Bloomberg. They even designed a game for the article. It's called Subway Rat and you can play it at Bloomberg.com. Daniel Huett made our show today. I'm an alzadi-edited Gabriel Donatov was on Facts and Bridger Donegan and David Tattishore were on the mix. I'm Sean Ramis from Off to a bar in Western Massachusetts for the weekend. The rest of the team includes Heidi Mawagdi, Miles Bryan, Peter Balan on Rose and Patrick Boyd Kelly, Wesinger, Ariana Spurudustin, Dessoto, Denise Gera, Noel King. Come on. Abish, I

27:09are at C. Jolly Myers, Miranda Kennedy. We use music by break master cylinder. Today explain is distributed by WNIC. This shows a part of the Box Media Podcast Network. Find out more about that at podcast.voxmedia.com. Listen to the show ad free at box.com slash members. Support for the show comes from Delta Airlines. Every athlete at the top of her game knows that greatness isn't just a destination. It's a grueling life-long journey. It's built on early mornings, silent sacrifices, and an unwavering drive to outclimb the achievements of yesterday. That is the journey of a WNBA athlete. And Delta is there every step of the way. Delta is proud to host these competitors, providing charter flights for every WNBA team,

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