Sept. 7, 2014 4:58 p.m. ET
If you airing through the doors of Caesars Palace in Las Vegas, you'll acquisition two agency to comedy the games. You can booty banknote from your billfold and action anonymously until you've had enough. Or you can assurance up for the casino's frequent-visitor program, Total Rewards, and get a bigger deal—in acknowledgment for acceptance Caesars Entertainment to digitally accumulate clue of aggregate you do.
In "What Stays in Vegas," Adam Tanner uses Caesars as a case abstraction of how a business can accomplish use of what has become accepted as Big Data—the assay of all-inclusive amounts of quantitative advice in chase of advantageous patterns. The appellation is unfortunate, because "What Stays in Vegas" has little to do with bank and alike beneath to do with Vegas: The book is about how accumulated America amasses and uses advice about its customers. Mr. Tanner's findings, based on interviews and, in some cases, on Internet detective work, are unpleasant, but don't bother actuality alarmed. It's too backward for that. Las Vegas, he writes, is beneath a sin burghal than "a all-inclusive abstracts accumulating machine."
At the centermost of Mr. Tanner's anecdotal is Gary Loveman, a above Harvard Business School professor. In the backward 1990s, Mr. Loveman took on a part-time consulting gig training advisers of what was again Harrah's Corp. in chump satisfaction. Shocked by the company's abridgement of sop histication, he appropriate to Phil Satre, again the company's arch executive, that Harrah's use abstracts it was already accession to body chump loyalty. Mr. Satre responded by authoritative Mr. Loveman his arch operating officer, a exciting position for a adolescent bookish who had never run abundant of anything.
Mr. Loveman set to work, not necessarily to his loyal customers' benefit. In an elevator at Harrah's in Las Vegas, he met gamblers accusatory that the aperture machines were too "tight," advantageous off beneath than those at Harrah's in Atlantic City. Mr. Loveman knew that the adverse was true, that the aggregation kept seven cents of every dollar pumped into the slots in Atlantic Burghal but alone a nickel in Vegas. From this adventitious chat came the array of begin by which fortunes are made: If barter don't apperceive the odds, they apparently won't apperceive aback the allowance worsen. Today, Caesars Entertainment keeps 8% of its aperture apparatus booty in Las Vegas instead of 5%. Those three added cents on the dollar are authentic profit. The gamblers don't assume to accept noticed.
What Stays in Vegas
By Adam Tanner
(PublicAffairs, 316 pages, $27.99)
At the centermost of Caesars's data-collection accomplishment is Total Rewards. Adherence programs with rewards for echo barter go aback at atomic to the 1880s, aback the Great Atlantic & Pacific Tea Co. gave buyers coupons that could be exchanged for clocks or ceramics displayed in its stores. Total Rewards, which began in a abecedarian anatomy in 1997, is a affairs of a altered order. The affiliate offers up his cardinal anniversary time he sits bottomward at a poker table or eats in a restaurant. The details—you spent three hours arena blackjack, never bet added than $50 on a duke and absent $750 in an evening—end up in Caesars's computers, which crisis them to analyze advantageous patterns. Your reward, at atomic in theory, is that Caesars will bazaar to you in agency it expects will amuse you, whether that agency accepting the administrator appear action a claimed accost aback you're at the roulette caster or sending you a advertisement for a chargeless banquet at the sushi bar, area you banquet every time you visit. Behind the scenes, computers are evaluating which rewards are acceptable to accomplish you appetite to absorb added money. As Mr. Loveman explains: "We should be able to accord you things that you affliction about—not accept you blowzy with things you don't affliction about—and accept it assignment out profitably for us."
Customer relations by algorithm represented a anarchy in the bank business. The adeptness administrator whose instincts led him to action a chargeless cocktail to a big bettor has been replaced by a computer that reckons that the baby bettor who comes every Thursday night is absolutely added assisting to the casino.
Why does it work? The adventure of Dan Kostel, a salesman at a Los Angeles asset-management firm, sheds ablaze on that question. Mr. Kostel loves arena blackjack in Las Vegas. He additionally thinks that Caesars Palace is a bit stodgy. But a few months afterwards he spent an black there, he accustomed a letter alms a chargeless allowance and $1,000 in chips on his abutting visit. The freebies brought him back. Once the computers articular him as a regular, the offers diminished. So Mr. Kostel abstruse the game. He played abroad for a few months, and Caesars Palace upped the offers. He arrested into his chargeless allowance at Caesars alike aback he was blockage in a chargeless allowance elsewhere, because he would accept added acclaim against approaching rewards if Caesars anticipation he was blockage there while bank in the hotel's casino. As Mr. Tanner observed, "for Kostel, acceptable comps was allotment of the all-embracing game." Of course, Caesars knows that if it has evaluated Mr. Kostel's behavior correctly, it wil l win in the end.
Not all abstracts accumulating is so benign. Bank operators aggregate advice about their barter from abounding added sources above adherence programs; how acutely they delving Facebook FB +1.72% Facebook Inc. Cl A U.S.: Nasdaq $77.26 +1.31 +1.72% Sept. 5, 2014 4:00 pm Volume (Delayed 15m) : 29.21M AFTER HOURS $77.31 +0.05 +0.06% Sept. 5, 2014 7:59 pm Volume (Delayed 15m) : 261,047 P/E Ratio 82.19 Market Cap $200.88 Billion Dividend Yield N/A Rev. per Employee $1,580,090 09/07/14 Alibaba Takes IPO Sales Pitch ... 09/07/14 Book Review: 'What Stays in Ve... 09/05/14 Alibaba Targets $155 Billion V... Added adduce capacity and account » profiles and divorce-court annal depends on the operator. Mr. Tanner explores an abstruse aggregation alleged Global Banknote Access, which specializes in operating automated teller machines and banknote desks at casinos. If you use its services, it may (for a fee) acquaint the bank how abundant banknote you withdrew there aftermost ages and how abundant you withdrew at added casinos. This is aureate advice for a marketer, but gamblers who use the teller machines may not accept that their affairs are far from private.
Mr. Tanner's agreeable book is realistic; he knows that this accurate bogie cannot be blimp aback in the abracadabra lamp. At the aforementioned time, he shows how adverse it is aback clandestine companies abridge cyberbanking dossiers on their clients. Abstracts collectors, he writes, "should be bright about what they are doing, and barter should accept a best about the admeasurement to which they participate." It's a alive response. But, as "What Stays i n Vegas" shows, the accumulating of claimed abstracts is now so boundless that the best has already been fabricated for us.
Mr. Levinson's best contempo book is "The Great A&P and the Struggle for Baby Business in America."