Foreword｜SuperAce88
Novice and seasoned gamblers alike sometimes have thoughts like:
“Since black has hit the last nine times, red should hit on the next spin.”
“My lottery ticket is still a single digit away from the last draw, so I must be close to hitting the jackpot.”
“Because the underdogs have been so good against the spread this season, I bet they’ll beat it again in this game.”
These are all examples of cognitive biases, or thought patterns, that lead us to (falsely) believe we know what’s going to happen next.
But as anyone who has gambled more than a few times can also tell you, our brains can make us believe some irrational things.
Gambler’s fallacy｜SuperAce88
Because something that happened recently happened more often (and vice versa), something that happened in the future is expected to happen less, which is known as the gambler’s fallacy, or “gambler’s hot hand”.
Like the first example above, roulette is a game where this bias runs rampant. One of the reasons is because the game is designed that way.
Online or land-based casinos, most roulette games have a panel that shows the results of the last 10-20 spins. It’s natural to try to look at this ball for clues as to where the next ball might land (for example, 75% of the last 20 spins have landed on an even number), but this is trap thinking.
Since each spin on the roulette wheel is an independent and random event, these numbers are basically worthless and are just a device to give players the illusion of control.
In a famous example of this fallacy, black appears 26 times in a row in the game of Monte Carlo roulette in the early 1900s.
With the streak considered unlikely, bettors began betting heavily on red, thinking it was “overdue” to hit. When it finally came on the 27th spin, the casino had made millions.
Other types of cognitive biases in gambling｜SuperAce88
Cognitive errors like this are common in most forms of gambling and can manifest in many other different ways.
Recency Bias: Particularly prominent in sports betting, gamblers tend to overestimate recent outcomes (e.g. team coverage) when assessing the likelihood of a particular outcome occurring. In fact, similar to roulette, the outcomes of sports games are mostly independent of each other.
While previous games may give us an idea of one team’s talent and winning potential compared to another, they have no real impact on the likelihood of a particular future outcome.
Outcome bias: Whether in gambling, sports, or even board games, most of us take big risks that pay off in the end, making us feel like the smartest people in the room. But when those risks flatten out, we blame ourselves because we feel we should have known better.
This is actually outcome bias, where even when our decision-making process is statistically sound (like basic blackjack strategy), we overestimate the outcome of something rather than the reasoning behind the decision.
Confirmation Bias: Another bias that is more prevalent in sports betting.
When looking at information about betting opportunities, undisciplined gamblers often look for information that only supports their initial gut decisions. This leads to ignoring contrary evidence that could be a red flag for a given decision.
So-called expert pick services are notorious for this, often citing random and unrelated trends that only support their picks.
These biases also exist in investing. Like gamblers, investors are highly loss averse because they will take more action to avoid losses than to achieve comparable gains.
Investors sell more often when they are winning than when they are losing money, just as it is difficult for a gambler to walk away when he is losing but not quite out of the game. Most people would rather play until they lose everything than walk away with 50% of their initial bankroll.
How to overcome prejudice｜SuperAce88
No matter how conscious or self-disciplined we are, cognitive biases cannot be fully overcome. However, it is manageable.
Recent research has shown that making biased decisions can be reduced during a dedicated session of debiasing a movie or computer game.
But for those who are not privileged to participate in academic research, there are many ways we can try to reduce the bias involved in our decision-making.
When it comes to casino games, taking the time to understand the true odds of the game and its different scenarios can help you become a more rational player.
For most games, very smart people have already done the dirty work of calculating these odds and developing a strategy that will always put the player in the best position to win in every possible situation. The basic blackjack strategy is a good example: following it can reduce the casino’s house edge to around 1%, which is the lowest of any casino game.
In sports betting and investing, overcoming bias means ignoring small sample sizes and giving equal value to information that supports and does not support your initial hunch.
One way to do this is to write a “blind resume” that only presents the cold, hard facts of your selection and doesn’t let distracting details like team/company names or overly recent results.
This information can also be weighed and put into an algorithm that automates the decision-making process so that the thinking brain is not involved.
Basically, once a gambler knows that their thinking cannot be trusted, they can begin to put it to good use when making decisions.
As Sun Tzu said in The Art of War: “Know your brain, and be not afraid of a hundred hands.” Or something like that.
