The automotive industry came to Detroit by accident. The industry could have been located elsewhere. But Henry Ford set up shop in Detroit. There he applied ideas of mass assembly and economies of large scale to the construction and distribution of automobiles. Detroit was centrally located with railroad lines and Great Lakes transportation. It attracted the best labor from populations swelling with European immigrants. Ford’s successes attracted other industry innovators and leaders. With his leadership, Detroit came to hold undisputed leadership in the auto industry that lasted into the 1960’s.
Today when we think of quality, however, we do not think of the American automakers. We look to the Japanese, who have cornered a third of our domestic market. Although just twenty years ago Detroit was on a roll, that ended. Similarly, for sixty years, when people thought of casinos, they thought of Nevada. Now there is competition. Will Nevada share the same fate as Detroit?
In 1931 Nevada legalized casino gambling. In the 1940s gaming personalities such as Bugsy Siegel, Meyer Lansky, and Moe Dalitz played roles similar to those played by Henry Ford: They made their product accessible to ordinary people. In the world market, at the same time, the effects of war kept other countries from embracing mass-produced gambling. Now, however, there is casino gambling in many areas of the North American continent and in a preponderance of countries of the world.
Let us look at the factors that led to the downfall of Detroit and ask if they will have the same impact upon Nevada.
Groupthink. Detroit was “blindsided” as the forces of groupthink led automakers to believe that their success would last forever.
Is groupthink present in Nevada? Casino managers may feel they “know it all.” Yet in order to maintain a dominant market position, they must accept new ideas whatever their source. Yet this is not the case. Nevada’s larger and more fluid casino leadership group reaches out for new knowledge. Casino projects need new financing, and the financing necessarily comes from the outside. With the outside money comes new ideas.
Innovations in marketing. Henry Ford achieved profits by marketing a basic product to the masses. The notion of making a few models to realize economies of scale became part of management thinking. Year-to-year model changes were essentially cosmetic. When customers wanted real variety, Detroit did not give it. Japan did. The Japanese manufacturers demonstrated an ability to introduce new models by taking only three years to produce a new product. Detroit took five years.
In the gaming field, Nevada may view production as a mass operation allowing for cosmetic changes only. The new operators on the rivers and on the reservations, however, many of whom are Nevadans, are showing that they can put new approaches into place quickly, aimed at completely different markets.
Customer demand. Detroit would not listen to the customer. The “Big Three” – General Motors, Ford, and Chrysler – kept making big cars. They were the last to hear the cry for quality. “Recall” became the industry byword. Competitors came to understand that problems with cars were customer problems.
Customers coming to Las Vegas have many demands, and sometimes Nevada has been slow to listen.
Customers want more than just a gambling table. One group of foreign casino tourists asked for a tour of Death Valley. Management balked. They were a gambling house. They refused to help find a means to take the group to Death Valley, hoping, of course, that the group would decide to remain in Las Vegas. The group located a bus company that would transport them. They were given a very complete tour, and they returned to Las Vegas with one thought on their minds – sleep. If the casino had catered to these guests, they could have organized a more relaxing four-hour tour of Death Valley that included slot play beforehand and afterwards, a dinner show, linking gambling and tourism together.
Casino management must capitalize on the tourism value of Nevada by working closely with customers. Managers need to work a lot more on listening skills if they hope to avoid a Detroit-like fate in the future.
An easily replicated industry? The automobile industry symbolized America’s world economic dominance. Dominance continued as long as other nations lacked capital resources to duplicate factories. As soon as others found resources to invest in manufacturing, they replicated our auto industries. They realized that they could make cars as efficiently as we did and that they could meet the needs of American consumers as well. Although a car factory can be rather easily replicated, a gaming environment such as Nevada’s cannot. Its industry is built upon an infrastructure of variety, entertainment choice, inexpensive hotel accommodations, an ambience of good weather, and constant offerings of many special events. Multiplier factors. Automobile manufacturing is desirable because the factory jobs involved have a high multiplier effect. As many as six residents can be supported from the activity of one autoworker. As autoworkers are laid off, other jobs are also lost. The demise of the Detroit auto industry has been quickened by this negative multiplier. The multiplier effect in the casino industry is less pervasive. It is greatly influenced by the residence of its gamers. In Nevada, most are outsiders. In new gaming jurisdictions, most players are local residents. If these jurisdictions cannot offer gaming to patrons who come from outside the region, economic growth will be elusive. As future experiences are analyzed, there will be less pressure on other jurisdictions to seek to replicate the Nevada gaming scene. Expertise. Japanese car manufacturers demonstrated an ability to quickly learn the American market and to deliver products that met demands of Americans. They were good competitors. The same cannot be said for several non-Nevada gaming operators. Las Vegas has witnessed the experiences of four Japanese-owned casino operations. Only one was successful. Also, in foreign arenas, casino gaming is not conducted in a manner that will lure Nevada customers away. Nevada need not fear foreign operators, either within or outside the United States, The experts are in Nevada. Economic incentives. Labor costs and other provisions provided disincentives for automobile manufacturers to remain in Michigan. The Nevada casino scene is quite different. Gaming employees are not unionized, and wages are standardized at lower levels. Most other casino jurisdictions have higher wages, and dealers are organized. Taxation. Government taxation – both national and local – has driven the cost of automobile production to uncompetitive levels for Detroit automakers. The taxation situation has been a major incentive for auto plants to relocate. Gaming operations will not relocate outside Nevada for taxation reasons. Nevada casino taxation is the lowest of any jurisdiction – just over 6 percent. New Jersey has a gross tax approaching 12%, and most European casinos assess taxes of 50 percent or more on gambling wins. Conclusion
The factors that brought decay to the Detroit automobile industry appear not to be major concerns for the Nevada gambling industry.
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