Winner Used to Take All
by Doug French
by Doug French
What happens on the Las Vegas Strip drives the rest of Las Vegas. Not a catchy ad line, just a fact. The hopes and dreams of hundreds, if not thousands of small and not-so-small businesses rest on whether the titans of the casino industry invest wisely, attracting millions of people to town so they may leave billions of dollars behind.
The Mob did it wonderfully. Benny Binion's "Good food, good whiskey, good gamble" formula worked like a charm. The Gaughan family, beginning with Jackie and then Michael, has made the business look simple for nearly six decades, and the second generation of the Fertitta family seems to have the magic touch.
But Wall Street Journal columnist Christina Binkley doesn't have any interest in these very successful, but less than flashy, casino operators. She only has eyes for three of the Strip's big hitters in her new book: Winner Takes All: Steve Wynn, Kirk Kerkorian, Gary Loveman, and the Race to Own Las Vegas.
If it weren't for the author's access to Wynn and the fact that he sold Mirage to Kerkorian, the book should really only feature the ex-econ professor Loveman and the octogenarian Kerkorian, who are locked in a two-company race to control Sin City.
Sure, Wynn may eventually build numerous resorts on what used to be the best golf course in town — the Desert Inn course. For now a $22 million Tom Fazio-designed course occupies the dirt until the time is right. But with Vegas in a funk and credit markets tight, driving and putting may be the highest and best use for that land for years to come.
Binkley's account certainly squares with the scuttlebutt heard around town about the mercurial Wynn. I once overheard an old-time Vegas casino owner say that Wynn was a nice guy, but a terrible businessman. I remember at the time thinking that was a crazy and harsh assessment, but reading a chronicling of Wynn's many mistakes in Winner Takes All, makes the point.
Wynn doesn't really pretend to be a businessman, he thinks of himself as an artist, a creator. In fact the only entrepreneur of the big three that Binkley writes her book around is Kerkorian. The shy, unassuming, 8th grade-educated majority owner of MGM Mirage never falls in love with any of his investments. He has bought, sold and re-purchased yachts, properties and companies. According to the author, Kerkorian leaves the day-to-day details to others, however the late Hal Rothman described the Armenian's management style as "hands-on" in his book Neon Metropolis.
Either way, Terry Lanni was hired to run the MGM after casino veteran Robert Maxey opened the property. Although Binkley describes Lanni as "conservative" he has constantly agitated for higher business taxes and told Kerkorian that it "would be very hard for me to work at a place in Las Vegas without the union." At the time, Maxey, who decertified the culinary union at the Four Queens in 1985, had the union on the ropes again. But Lanni folded when Kerkorian brought him aboard. Without Terry Lanni at MGM there might be no culinary union in today's consolidated Las Vegas.
Meanwhile, Loveman serves as the chief propeller head at a company run by propeller heads — Harrah's. Loveman was a MIT-trained economist destined for a sleepy collegial life in Boston teaching America's privileged at Harvard, but then Harrah's called. However, as Binkley explains, Loveman and his crew know more about retailing — from books and academic studies — than they do about gambling.
To Loveman, gambling is only a numbers game. He is one of the few CEOs who love to talk about algorithms and such, according to Harrah's consultant and Harvard organizational psychologist Tom DeLong. Loveman and his propeller heads track every move Harrah's players make; and offer food and room comps to entice their customers to increase the number of trips they take to their nearby Harrah's. Gamblers are "promiscuous," according to Loveman, who tells the author, "I'm in the business of fostering customer monogamy."
Appropriately, Binkley leads her last chapter with a quote from legendary casino gambler, entrepreneur and character Bob Stupak. The author had obviously asked Stupak if gamblers or tourists are suckers. "Honey," replied the Polish Maverick, "I have to answer that like this: You're talking to a sucker. Gambling is a vice. Drugs are a vice. Prostitution is a vice. You can't sell the poison unless you're willing to take it yourself."
Stupak, who created Vegas World, which is now called the Stratosphere, likely doesn't believe that the managements at Harrah's and MGM Mirage, none of which even live in Las Vegas (Loveman still commutes to Boston, Terry Lanni to southern California), can "sell the poison."
For sure less and less "poison" is sold as a percentage of revenues. Shopping, eating and entertainment now generate more than 60 percent of the revenues in Las Vegas, and that percentage grows each year, while gambling provides less. Also, gaming companies are now in the property development business. The combination of favorable odds and a hopelessly addicted clientele just isn't enough. Now what passes for casino operators are urban planners and condo salesmen like MGM's Jim Murren, who studied urban planning in college prior to working as an analyst at Deutsche Bank.
Gone are the old-time casino bosses who escaped from the law to Vegas after running clandestine games of chance in other locales. In cinematic terms, Las Vegas has turned from being Casino into a cross between A Beautiful Mind and Glengary Glen Ross.
Binkley believes that as Las Vegas becomes like the rest of the country, the rest of America is becoming at least a little like Las Vegas, with gambling popping up everywhere. In turn, while Sin City used to be resilient to downturns in the national economy, what is now Retail and Condo City is mired in the current economic malaise.
"There is no end of Las Vegas," Binkley concludes. Sure, but these ain't like the good old days.
March 24, 2008
Doug French [send him mail] is executive vice president of a Nevada bank and associate editor for Liberty Watch Magazine. He received the Murray N. Rothbard Award from the Center for Libertarian Studies.
Copyright © 2008 Doug French