Viva Las Vegas

Speaker 2

and I'm Phil Magnuson. Well, I of love hate relationship with Vegas and I'm going there in a couple weeks so I've got a conference out there. I think it's an interesting town but it's also a bit overwhelming and you know it's a great place to visit I wouldn't want to live there.

Speaker 1

What kind of conference are you going to? ⁓

Speaker 2

That's an economics association and I periodically meet them in Vegas.

Speaker 1

I do find it funny where you have a locale like Vegas, which is so decadent, so debauched. And then it's like, okay, let's have all these business conferences here. It's like this this interesting dichotomy of like straight lace, getting work done, serious, you know, study, etc. And then you could just go out and lose your mind.

Speaker 2

So we work hard and we go play hard.

Speaker 1

How did Vegas start? Whose idea was it to go into the middle of a desert and put casinos there? How did this happen?

Speaker 2

casinos, but ⁓ the deep history, I think it was an old frontier desert land, Mormon settlement. It was kind of that wasteland in the middle of the country that nobody else wanted. And as the Mormon settlers moved ⁓ further out. out west, southwest out of Utah. They eventually stumble across there and they're like, all right, we'll do something here. We'll settle this land. But there's not really much you can do when ⁓ you're just surrounded by sand. I think that's, does Las Vegas mean? It's like the sand or the desert is essentially the translation. It was an underutilized area because there really wasn't much going on there, period. You can't farm in the sand. can't... really sell homesteads in the sand. It's ⁓ notorious for a climate that has 110 degree days in the summer and ⁓ is very brutal without air conditioning. In other words, the city could not survive without air conditioning. And yet it's really kind of in the 20th century that Vegas grows up as a city and it kind of becomes an outpost. know, Nevada is a frontier state. ⁓ It existed. You know, a couple steps ahead of the law, I guess, would be a good way to put it, as it's settled. You know, this is a running theme across the frontier, you're, it's the town that's, ⁓ you know, a few steps ahead of where the railroad is coming. That's where kind of the marginal characters of society start to gather. So that's always interesting, but there's a flip side to that, when you're also a few steps ahead. of the civilization, the law. It's also an area where people who are restricted back in the East can escape to. And one of the things you see about the settlement of the American West in general is, so like women's rights actually exist in a more robust way on many of the frontier Western states because, well, first off, there's not many people there and some state. and local governments say, you know, to attract female settlers to come out to the middle of the desert or out in the middle of nowhere, we're going to allow them to own property in their own name, which you couldn't do in the East at the time. So there are things like that going on. So it's both marginal characters that are ahead of the frontier, but also people that are trying to take advantage of an opportunity that they were restricted from doing by old laws, stuffy centralized control in

Speaker 1

When I think of pioneers of Las Vegas and this, know it's anachronistic, but I, in my mind, I just see a caravan of very obese human beings on jazzy scooters, just making their way slowly plotting through the desert. And they're drinking like just daiquiris in these gigantic like gallon size plastic receptacles. It's interesting when you talk about, you know, kind of being One step outside the law? that how you describe it? Lionel Shriver, the novelist, has a novel called The Mandibles. It's about the collapse of the dollar. Basically, it throws the whole country into turmoil. And the free state that they're trying to get to is Nevada. And it does make a lot of sense. Yeah.

Speaker 2

Yeah, see, know, it's an interesting geography. ⁓ It is probably some of the least desirable property in America, other than like the frozen tundra or something in Alaska at that point. There's not much there, it's just sand. And to attract people to utilize that property, you have to offer something different on the margin. And I think a couple things start to emerge in the 20th century. One is that ⁓ Nevada seems to be among the less regulated in a very moralistic era. This is the temperance movement of the 1910s, the anti-gambling movement that emerges with that. You start seeing crackdowns on what is seen as sin and debauchery in the West. But Nevada is one of the last states that goes along with those crackdowns. And then the enforcement's not always as stringent as ⁓ you might expect. in Chicago or New York City or some other ⁓ civilized place in the East. So the combination of those factors ⁓ draws people that are willing to kind of skirt around the edges of the law. You also have technological innovation is a major thing in the settling of Las Vegas. One big thing everyone points is the Hoover Dam. You know, they build this dam in the middle of the desert that is also a giant power plant and it creates a giant water reservoir, the one thing you need in the desert right behind it. So you've got power and water now in an area that previously didn't have either. That allows new areas of innovation, new things to do with that electricity and water. And well, what did they do? They connected the electricity up to giant neon signs and roller coasters and fountains that shoot. geysers hundreds of feet in the air and everything that you see. Touristic strap against them.

Speaker 1

Yeah, when I think about... the early days of ⁓ Las Vegas, it's a lot more glamorous in my mind, even though the jazzy scooters, it's more jazz than jazzy scooter. And obviously people will think about the mafia associating Las Vegas with the mafia with movies like, I don't know if it's The Godfather or The Godfather 2, where the Corleones make a move and kind of take over Vegas. As somebody who ⁓ has lived his whole life within the law, I haven't stepped out of bounds ⁓ or at I don't want to incriminate myself. I used to really, really enjoy Las Vegas. And if there's any, you know, single guys out there, what I would recommend is if you have a great first date, I would say go wild and ask her to go with you to Vegas for your second date. I had a wonderful... That's the final test. Yeah. When I was single, had a great time, a second date. And there were other dates after that with the same gal, but it was a lot of fun. was... It was, it was an opportunity. It was sort of like an adult, an adult playground where you could drink, you could eat well. If you wanted to go to shows, you can go to shows. If you were into gambling, you can go into gambling. It was, ⁓ it was a fun wild time. That's how I remember those days, which is, mean, we're probably talking like 14 years ago, 13, 14 years ago. Since then, I feel like it seems like Vegas has been, ⁓ has changed a little bit.

Speaker 2

commercialized quite a bit. Again, this is a pattern we see. It's why Vegas first pops up. It wasn't like the mob had a giant mobster meeting and decided, hey, we're going to move here. This is our new city. Rather, it was a lot of mob families that got chased out of other cities as the gambling crackdown occurred or as prohibition occurred in the early 20th century. What did they do? They moved to places where that enforcement is a little less stringent or maybe doesn't exist quite yet. So there's a convergence there for that reason. ⁓ You do have kind of the seedy reputation and element, especially in the mid-20th century, but they also realize that in order to have a functional economic model built around drinking and boozing it up and partying and gambling and all these types of things, you actually have to get people there. So they start adding accoutrements to it. ⁓ Entertainment. It's like, hey, let's build a giant concert venue attached to this hotel. So it's not just the sad people sitting in front of the slot machines all day. There are other clientele that maybe want to come in and yeah, they'll play the games and they'll drink at the bar, but they'll also go buy a concert ticket to see Elvis. you get an entertainment economy that emerges kind of organically around all of these things converging. And then over time, that entertainment economy moves from not simply catering only to adults to now you want to bring the family in. And you have what's been referred to as the Disneyification of Vegas, which is now you have all ⁓ these giant themed resort hotels that have theme park rides on them and roller coasters and ⁓ parachute drops and fun stuff that you would normally associate, it looks a lot more like Orlando than it does the Las Vegas of the 1960s and 70s.

Speaker 1

It's wild when you're in Vegas, especially if you're at a conference, in that you don't have to leave the hotel. There is something that's kind of like post-apocalyptic about it, where it's like there's no reason to leave the hotel. And then if you go step outside, it feels like a neutron bomb has gone off. And it's just so hot. And when I'm thinking about mobsters and men in wool suits and all that, I'm like, could you have had Vegas without air conditioning?

Speaker 2

That's the wild thing. think the air conditioning has certainly... correlated with its birth as a town and its explosion as a town. You you mentioned these hotels where you don't have to go outside and they're not just a hotel, it's a hotel connected to another hotel, connected to another hotel by a fake manufactured river and mall in between them where they even have clouds painted on the ceiling. So it looks like you're walking outside, but you're doing so in all the comfort of air conditioner. The temperature outside is 110 degrees, but it's 68 in the fake mall with the fake river and the ⁓ storefronts and shops all along it designed to, you know, make you comfortable and entice you to come in there and business. So it's a great business model in many respects.

Speaker 1

And I love that there's no no apologies whatsoever for the verisimilitude. Yeah. As you were speaking, I was thinking of the Paris Hotel where there there is there is an Eiffel Tower. So if anybody out there has been dying to get to Paris, France, you don't have to do that. You could go to Vegas. You could see that that hotel. There is a ⁓ there's a Panda Express there. You could practice your French with the cashier behind the Panda Express.

Speaker 2

get bored of France you can go to Venice which is just down the street.

Speaker 1

Right there. Yeah. And the weather never changes. The clouds are always painted as God intended. Yeah. There is something really fun about people just sort of unapologetically saying, this is how I want to live my life or this is how I want to celebrate my life. And for those of you who don't know, and I had no idea that the Statue of Liberty was so close to the Eiffel Tower. It's like you could, it's unreal that they were able to bring that all together.

Speaker 2

Embrace the Kitsch. Direct replica. I think it was a years ago, the post office or someone got in trouble because they made what they thought was a Statue of Liberty stamp, but it was actually a stock photo of the Vegas Statue of Liberty. No way. Because it looks so similar.

Speaker 1

⁓ that's hilarious. You know, now that I'm thinking about it, there was a little bit of a of a push to buff out the original Statue of Liberty to get it to its copper base, right, which would be a terrible waste of money. ⁓ To do that in New York is it's just going to oxidize, it's going to go back to being green. But it might be the kind of project that you could actually get away with in Las Vegas.

Speaker 2

Yeah. There's no humidity. That's the other thing. You never want to go outside because it's not only 110 degrees. It's ⁓ like the atmosphere around you soaks all water away from anything. ⁓ They've even counteracted it. Some of the better parts of Vegas, they have these water sprayer humidity things that spray out over the street.

Speaker 1

Yeah. The technology ⁓ is getting pretty amazing. I love air conditioning. Whoever invented it, thank you so much for that. Probably the biggest, most innovative thing that's happened in recent memory in Las Vegas is the Sphere. Yeah. And I've never seen a concert in the Sphere before, but I have been at a hotel with a perfect view of the Sphere and it is un... real. Because for those of you don't know, it's this giant sphere. And they project video and these moving images and stuff like that. The one morning I woke up a little too early and I looked outside and I felt like I was on a alien planet because the sphere was made to look like it was either Mars or the sun itself.

Speaker 2

Right. Right. You can sit in your hotel room and watch this thing. It's like a giant ball that's also a TV screen. And there are shows that are projected to the whole city can see it. There are changes themes throughout the day. I think one of the more creepy ones, because I had the same thing at a hotel room that overlooked where the sphere was. And you open the shade in the morning. ⁓ hello. What is this? And it's a giant eyeball that's blinking at you.

Speaker 1

Yeah.

Speaker 2

So a little strange, a little creepy, but then a few minutes later it's a completely different show and it's just ostentatious but fun and fueled by this electricity from the Hoover Dam.

Speaker 1

and I think the Raiders are now the football team ⁓ in Las Vegas. So you see a lot of this buildup in Vegas, that's exciting, but it seems like they have been experiencing a downturn when it comes to tourism, and I wonder what's behind that.

Speaker 2

And I think there's a couple things. The one that I follow the most closely is it's a very unionized town. And unions have kind of like a quasi-monopoly over certain types of hotel contracts and guest services. And part of that is, if you want to go to a conference at such and such hotel, it uses the same audio visual ⁓ company that every other hotel uses and they can basically set their own prices and... to get a PowerPoint projector set up for your room, ⁓ like a 20-year-old projector, and they charge you $10,000 or something to run it for the conference in that room for the weekend. Why couldn't I go to Walmart and buy my own projector for 50 bucks? And there's no, our contract doesn't allow that. I think there's been a stiltification of some aspects of the Vegas economy by the fact that it's a very, ⁓ you know, entertainment union driven town ⁓ that has reduced some of the competition that might otherwise naturally emerge in another tourist destination. And they're reaping some of the repercussions of that because it just drives up cost.

Speaker 1

And it looks like they're going to have four major sports teams.

Speaker 2

Well, they raided Oakland and I know this because the Independent Institute where I work. We were based in Oakland, California. First we lost, they raided the Raiders and a few years later, ⁓ the Oakland A's, the Athletics, although I think they're temporarily located in Sacramento right now waiting for the stadium to be built in Las Vegas to move there. Then on top of that, they've got NHL hockey team that was their expansion that they moved there.

Speaker 1

Wow. I imagine the athletes themselves must like the move because there's no state income tax as far as...

Speaker 2

Yeah, Nevada is still a relatively cheap place to live. that's some of the successes of it ⁓ as a state, historically. It hasn't had the biggest government. It's not like neighboring California. ⁓ It's a mostly... ⁓ desert state, mountains and deserts. And you can see this other parts of Nevada, like the Lake Tahoe area, the line between Nevada and California is very clear. And you can see what's on one side of the line, what's on the other side of the line, and it completely affects the business climate.

Speaker 1

Yeah, I wonder too, you know, over the past, you know, I would say 10 or so years of me going back and forth to Vegas, I've kind of noticed that seems like quality of service is kind of down. Yeah. Prices are up. At first it was like, Oh, maybe, maybe it's just me. Um, but then it started to kind of like make sense. Cause I feel like people are definitely making different choices now in their lives. I don't think as many people are gambling as they used to be, or if they are gambling, they might be doing more gambling like on their phone or on their computer, which you don't have to go to Vegas to do that.

Speaker 2

You don't have to sit in the bookie lounge in Vegas. Now you can dial into an internet site.

Speaker 1

So it's kind of like when I was going there in my heyday, the gamblers were subsidizing me. It was sort of like the hotels were going to make bank on the gamblers and because of that they were able to give me a way cheaper breakfast.

Speaker 2

Right, right. That was the old business model. As you try to keep, draw the gamblers in, park them in front of the slot machine or either the video poker, whatever it is, and they're sitting, they're feeding money into the machine all day. And if your business model is that, that's your main margin is ⁓ what they're losing at gambling. You want to keep them there. So you start serving them free drinks or you give them a coupon for the buffet, or you have a steeply discounted room to someone to stay at my hotel. Cause I know you're going to be parked down in the lobby gambling for the next three days. ⁓ more than offset the discount that I'm giving you for your hotel. Well, I think that model's changed a bit because the clientele, the customer base, the tourism base of Vegas has expanded. If you're a family with young kids and you're going to Vegas because it's now the Disney World of the West, well, you probably aren't going to be putting those kids in front of slot machines all day to turn out money.

Speaker 1

I'm just imagining how much money my kids would lose me.

Speaker 2

Yeah, and you get in trouble with the law if you did that. what does that mean? It means that ⁓ it's a different business model you got to pursue. Now it's much more like the actual Disney world where ⁓ you are paying for a room, a premium room at the hotel that has some special roller coaster or another amenity. You're paying for the fancy ice cream. You're paying for... ⁓ The buffet is no longer a coupon to keep you in the casino to go back to your slot machine. The buffet is like this ⁓ feast extravaganza where you pay $100 to go gorge yourself for the day. That's a completely different business model. responsive to catering to different clientels. I do worry, I think one of the caveats there is, you if you go too far in that other direction and then you ⁓ ossify it in union contracts and ⁓ non-competition clauses and hotel arrangements for ⁓ conferences and things like that, you actually end up just driving up the cost and ⁓ that's passed on to the consumer. in ways that suddenly they start coming to Vegas as much.

Speaker 1

I do wonder how Vegas is looking to adapt because obviously businesses are individualized, et cetera, but they all are kind of reliant on one another. And yeah, and I wonder what will ⁓ the standard operating procedure be for Vegas five years from now, 10 years from now?

Speaker 2

It seems like a diversified economy. You know, they still cater to the gambling addicts that sit there at the slot machine all day pulling the handle. But at the same time, they cater to children now that want to go and see ⁓ characters and stuff standing on the street, want to go to the family venue that has a theme park attached to it. So it's a little bit of everything that I think is going in there. a diversified economy is a way to cater to multiple groups. It also means that you bring in a large family and they all have different interests or a large conference and they all have different interests. Some want to be in Vegas so they do their conference work during the day and then they can go see a concert or a show at night. Others want to be in Vegas so they can do their conference of the day and go hang out at the bar at night or get a good meal or. ⁓ Go gamble. So a multitude of interests are different ways they're part of the business model to capture all the different tourist goals.

Speaker 1

Yeah, for the listeners of happy hour econ, if you guys are fans of Vegas, or if you're not so much fans of Vegas, let us know what you like and don't like about Vegas. And if you have ideas of where which way Vegas should go, because me, my, my, my thing is, like, I just want you guys to be cheaper. That's all I that's all I really need right now. I'm very fortunate that I don't have a, I don't have a gambling problem, a drinking problem. You know, not yet, who knows, the weekends coming, but it would be It'd be really interesting just to see like, you know, what are the possibilities for a city like Las Vegas that is just, you know, kind of hard stamped on the minds of everyone as, you know, gambling, fun with this, really rich, rich history. You know, what does the future, you know, hold for them? Yeah. Well, ladies and gentlemen, we want to thank you for gambling on this episode of Happy Hour Econ. We hope it paid out. But you know, like they say, the house always wins. And I think Phil and I have won big tonight. We'll see you next week for another episode of Happy Hour Econ.