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The inside story of the gaming company that hit the jackpot playing by its own rules
Robert L. Shook, a New York Times bestselling author, delves into the business behind one of the world's foremost gaming and entertainment companies, Harrah's. Since Bill Harrah took over a small card game business in 1937, Harrah's has become a top casino, dominating Nevada and beyond. The first gaming company listed on the New York Stock Exchange, Harrah's is a $4 billion-dollar business ...
The inside story of the gaming company that hit the jackpot playing by its own rules
Robert L. Shook, a New York Times bestselling author, delves into the business behind one of the world's foremost gaming and entertainment companies, Harrah's. Since Bill Harrah took over a small card game business in 1937, Harrah's has become a top casino, dominating Nevada and beyond. The first gaming company listed on the New York Stock Exchange, Harrah's is a $4 billion-dollar business driven by smart marketing and smarter leadership. This book is the first to examine Harrah's and its leader, a man who dominated an industry and amassed a staggering fortune while refusing to deal with mobsters and corrupt politicians. Though Bill Harrah died in 1978 and the company has since been sold, Harrah's has retained its sense of history and remained an industry leader. Following the company's growth, Shook uncovers rich business lessons about marketing and customer loyalty, increasing market share in fiercely competitive industries, and maintaining a sense of integrity in a cutthroat business world. This is a compelling and intriguing story of a company that gambled and won, and it offers business readers an opportunity to benefit from the hard-won lessons of a paragon of the entertainment industry.
Robert L. Shook (Columbus, OH) is a seasoned business journalist and the ghostwriter behind several New York Times bestsellers. He is the founder and former CEO of Shook Associates and the American Executive Life Insurance Company. He is the author or coauthor of thirty-five books, including The IBM Way, Mary Kay on People Management, and Mary Kay's You Can Have It All.
It's been more than two decades since Bill Harrah passed away in 1978, leaving the unique and remarkably successful company that bore his name. He started his career in the mid-1930s and is recognized as one of the early pioneers in the chronicles of American gaming. In an industry with a shady past, the Harrah name is synonymous with integrity.
Since he opened his first casino in Reno, Nevada, millions of people have passed through the doors of the 26 casinos operated by Harrah's Entertainment, Inc. Relatively few people, however, know much about its founder. As years pass, the number of employees, business associates, and customers who personally knew Bill Harrah becomes fewer. Yet, many of his innovations have become standard operating procedure in gaming casinos across America.
Like pioneers in any field, above all else, Bill Harrah was a risk-taker. As one of the early casino owners, he blazed trails where no one had previously ventured. He is truly one of the great icons in the history of gaming in America.
The history of gambling traces back to primitive man and biblical times. In this country, its roots go back to 1612 when the first lottery in America raised 29,000 pounds for the Virginia Company. George Washington, who deplored the gambling rampant at Valley Forge, nonetheless supporteda lottery to help build the city that bears his name. Lotteries helped build General Washington's army and were also responsible for funding several early buildings on the campuses of Harvard, Princeton, and Dartmouth. America's modern gaming era began in the 1940s, a time when Nevada was the only state in the Union where casino gambling was permitted by law. The majority of Americans viewed gambling as sinful. For years, clergymen and politicians preached the evils of gambling to their parishioners and constituents.
The history of gambling in Las Vegas familiar to most Americans revolves around the notorious gangster Bugsy Siegel, who hit town in 1943. The film industry has perpetuated the image of Las Vegas as an underworld haven; blockbuster movies such as The Godfather, Bugsy, and Casino exhibit this slanted view of its early days.
In the 1940s, Vegas was a small jerkwater town in the desert. However, Vegas held two distinct attractions for Siegel and his Mafia associates: first, legal gambling, and second, a desirable proximity to metropolitan Los Angeles, three hours away by car. Meanwhile, Reno, Nevada, 450 miles to the north, was proudly hailing itself as "the Biggest Little City in the World," and it, too, was in its neophyte stage as a gambling refuge. While Reno had its share of disreputable operators, it also had a handful of commendable small-time casino owners. Although Reno's remoteness was considered a disadvantage at the time, it turned out to be a blessing in disguise, because underworld henchmen stayed put in Vegas. Mafia leaders had no motivation to set up shop in Reno when they were making so much money in Vegas. As the city of Las Vegas quickly became the gambling mecca of the world, Bill Harrah vowed he would never own a casino there. He did not shy away from competition; he simply had no desire to compete head-on against the underworld that had a tight grip on gambling in Las Vegas. Harrah wanted no part of the strong-arm tactics employed by mobster-type casino owners and their business associates.
A Nation of Risk-Takers
Taking risks is the American way. We survived as a nation because our founding fathers were risk-takers. Before the colonization of America, lotteries were conducted in England to determine who would go to the New World. The first to arrive in this country came to America in 1606 and founded the Jamestown colony. By 1609, our nation's first colony had a population of nearly 500 citizens. During the winter of 1610, the colonists were ravished by sickness, starvation, and hostile Indians until the colony's population was reduced to 60. Despite the dangers and hardships, brave men and women colonized our shores and survived. Early settlers encountered enormous risks when they crossed the ocean to a faraway land and ventured into the wilderness. Our forefathers probably embraced gambling because life itself-getting out of the mills and mines, getting through Comanche territory in one piece-was a gamble. Later, during the nineteenth century, Americans pioneered a vast virgin land, building farms and ranches often many miles from their nearest neighbor. Isolated, the settlers became fiercely independent, a characteristic that today epitomizes the American spirit. From its birth, America opened its doors to the world's unwanted. Brave newcomers left their homes and arrived penniless on our shores. They too were risk-takers. This is our American heritage.
In a speech delivered to the Commonwealth Club in San Francisco on November 3, 1989, Philip G. Satre, president and CEO of Harrah's, told his audience:
Americans have a philosophical drive, an instinct for achievement that includes taking risks. Americans have an inbred tendency, if you will, to gamble. It's been true in our frontier past. I think it is true in our entrepreneurial present. And I think it will be equally instinctive in our high-tech space age future. As long as people strive for the charms of wealth, and try to avoid the pitfalls of poverty, the gamble to win will be a part of our makeup, part of our nature, and part of our future. As luck will have it, gambling will be with us for a long time-you can bet on it.
Business annals are full of resourceful entrepreneurs with humble beginnings who amassed huge fortunes. Irenee du Pont, for example, came to America in 1800 when he was 30 years old. As a boy, he had learned the craft of powder making while apprenticed to famed French chemist Antoine Lavoisier. Not long after his arrival in this country, du Pont bought some gunpowder for a day's hunting. He was shocked by its poor quality. This was his impetus to begin DuPont, today one of the world's largest chemical companies.
The Coca-Cola Company was founded by John S. Pemberton, who was a struggling pharmacist before he concocted his famous formula in 1886. Initially, his caramel-colored syrup was invented to relieve indigestion and exhaustion. He added caffeine because he believed it would serve as a headache remedy. Only after Pemberton failed to market his new product as a medicine did he sell it to Atlanta's largest pharmacy, Jacobs'. Later, when it was mixed with a glass of soda, it became the soft drink that billions of people have since enjoyed. Yet, Coca-Cola was not what could be considered an overnight success. Its first year's sales totaled only $50!
Henry J. Heinz, founder of H.J. Heinz, was another entrepreneur who had a humble start. In 1869, he and his neighbor, L. Clarence Noble, started the famous ketchup company in Sharpsburg, Pennsylvania. They hired two women and a boy, and operated out of Heinz's home. From their kitchen, they peddled their product to grocers, managers of hotel kitchens, and housewives.
In 1920, Walt Disney, an 18-year-old cartoonist, was turned down for a job by the Kansas City Star, so he hired on as a graphic artist for a local advertising firm. He started as a $40-a-week illustrator with the Kansas City Film Ad Company, a firm that made 60-second animated cartoon advertisements shown in local movie theaters. In 1923, he left Kansas City for a place where he had heard young filmmakers could find financial backing for their projects: Hollywood. With $40 in his pocket and an unfinished print of Alice's Adventures under his arm, Disney boarded a train heading west. Thus began the fabulous career of Walt Disney, one of the legends of the movie industry. Like DuPont, Coca-Cola, and Heinz, the name Disney is known around the world.
Many of America's greatest corporations sprang from humble beginnings. American Express started out as the Pony Express in the 1840s. General Electric dates back to 1878 when Thomas Edison was researching the incandescent lamp. When IBM first began in 1914, it was as a manufacturer of butcher scales.
During the last half of the twentieth century, thousands of companies with modest beginnings became household names in America. In 1954, Roy Kroc was a $12,000-a-year milkshake mixer salesman for Multimixer. Then he came across the McDonald brothers, who operated a drive-in hamburger restaurant in San Bernardino, California. When Kroc saw the crowds of people lined up to buy the one-tenth of a pound hamburgers for 15 cents each, he envisioned opening McDonald's restaurants across the country, each amply supplied with Multimixers. The inventive salesman then convinced Dick and Mac McDonald to give him the exclusive rights to franchise their operation all over the United States. Thus, at the age of 52, when many businesspeople begin thinking about the day they may retire, Kroc embarked on a new career.
Shortly after World War II, Sam Walton, founder of Wal-Mart, got his start with a $25,000 loan from his father-in-law to start his own business. Walton opened a Ben Franklin Store in Newport, Arkansas, and by 1950, had developed it into the most successful location in his region. That year, however, he lost his lease. Forced to sell out, he moved to Bentonville, where he purchased another Ben Franklin store, opening it as Walton's Five & Dime. Throughout the 1950s, Sam Walton continued to add "Walton's Ben Franklin Stores" to his little chain within a chain. This was the beginning of what was to become the world's largest company with revenues in 2001 of $219 billion.
Bill Gates was born in 1955, after Kroc and Walton had already started their companies. Still in high school, Gates began programming software with his friend Paul Allen. In December 1974, Allen, four years older than Gates, dropped out of the University of Washington to start a full-time career in computers. Shortly thereafter, Gates left Harvard to join his friend, and, in the summer of 1975, they founded Microsoft. Gates and Allen were not typical entrepreneurs. They had no business plan, no venture capital, and no bankers or Small Business Administration loans. Not yet 21, Gates couldn't even rent a car. But the young duo had everything necessary for entry into the computer industry at the time: a product, programming expertise, and most importantly, a vision of greater possibilities. With this unassuming start, in a relatively short time, Bill Gates became the richest man in the world, and Paul Allen is a close second.
These stories are a tribute to the free enterprise system. There are literally thousands of stories about self-made Americans who started on a shoestring and built empires. The story of Bill Harrah is one of them.
A Humble Beginning
Like so many of our nation's giant dynasty builders, Bill Harrah had a humble beginning. In 1929, at age 18, he went to work for his father, who owned and operated a bingo parlor, the Circle Game, in the sleepy town of Venice, just south of Los Angeles. This hole-in-the-wall operation was housed in a small storefront on a pier built on wood stilts that extended west, standing tall above the Pacific Ocean.
Ironically, it was by pure chance that Harrah's father had acquired the bingo parlor. Before the Great Depression, John Harrah had been a prominent attorney; he even served a term as mayor of Venice. He had amassed a small fortune as an owner of several real estate properties. However, during hard times, tenants couldn't pay their rent, so he was unable to meet his mortgage payments. Consequently, he lost nearly everything, but he did manage to keep a lease that he owned on a storefront on the Venice pier. To keep his head above water, he used this unoccupied space to open the Circle Game. It fit right in with the pier's other tenants; it had several concessions including a hot dog stand, a shooting galley, a pool hall, and a hit-the-milk- bottle game operation. The honky-tonk business was not comparable to a thriving law practice, but it did put food on the table. Like many others during the Great Depression, John Harrah did what he could to survive the hard times.
After completing his freshman year of higher education at California Christian College, Bill Harrah enrolled at UCLA with the ambition of becoming a mechanical engineer. At the end of his first term, he dropped out of college. With millions of unemployed Americans desperate for work, the young college dropout went to work for his father. It was only a temporary summer job, he figured, and both he and his father would find more suitable employment when the Depression ended.
Bingo winners at Circle Game received a carton of cigarettes, which at the time sold for $1.25. Most people played two sets of five cards, which cost 50 cents. Betting 50 cents to win $1.25 was a poor payout, but it didn't matter because the customers had a good time. It was an escape from their hard lives. The Circle Game was bingo with a twist; players sat in a circle on one of 33 stools. In the middle of the table, a roll-down hopper connected to a flashboard. Players bought cards from the dealer, then tried to roll a ball into the hopper in such a way that the flashboard would register a card of a suit and number that would match the cards the players had bought, filling in a four-card sequence. Once out of the hopper, where the ball rolled was random. Still, it was considered a game of skill.
Its being a game of skill was essential because bingo was illegal in the Los Angeles area; however, the law did permit games of skill. There was, of course, some debate on whether skill was actually involved in the Circle Game-and the interpretation varied, depending on the mood of the presiding district attorney.
On slow days when there were only a few customers, John Harrah put house players, otherwise called "shills," in the game to protect the house. Objecting to the use of shills, Bill told his father, "The customers aren't fools. They know when we use shills and it keeps them from playing. Besides, with the extra money we pay for shills, it's bad business."
"If we get rid of the shills and have only two players at a game that pay 25 cents each, we'll be 75 cents in the hole," his father claimed.
The father and son disagreed on many things. For instance, Bill wanted to replace the folding chairs with comfortable stools. He suggested putting drapes over the windows to keep out the glaring sun, and it was he who urged improving the decor. "You have to spend money to make money," he told his father.
An ongoing battle raged between the two Harrahs on how to treat employees. John Harrah would preach to his son, "The help are just like apples or somethin': you need a dozen, you go and buy a dozen."
Excerpted from Jackpot! by Robert L. Shook Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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PART I: THE ENTREPRENEURIAL SPIRIT (1937-1978).
A Risky Business.
The House That Harrah Built.
PART II: MERGERS, ACQUISITIONS, AND EXPANSION (1979-1994).
The Holiday Inns Influence.
PART III: HARVARD COMES TO VEGAS: HARRAH'S UNIQUE MARKETING STRATEGY (THROUGH THE PRESENT).
Formulating a Marketing Strategy.
Winning with People.
The IT Commitment.
All Customers Are Not Created Equal.
There's No Business Like the Gaming Business.
Posted January 9, 2003
This book is a riot! I could not put it down. One of the funniest books on gambling I have ever read.(and I've read 100 books on Vegas/Gambling.Go straight to page 43 first- "there is no underworld presence today in Las Vegas"- this author really knows how to write satire.The book is just filled with one funny story after another about how everything now in gambling is on the up & up.Robert Shook is more humerous than that Connecticut Senator whose trying to protect children from the entertainment industry.Another fun thing to do with his book- circle the word "lawyer" and then underline all the Federal & State laws that his book exposes.God Bless America! We should all feel blessed to have a comedy writer like Robert.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.