What do you think are the actual chances of winning a lottery, at a portal like Bet365 or some other? We all dream of becoming rich one day and it’s the precise reason why a large number of people purchase lottery tickets, despite the odds of jackpot being depressingly low! However, how low do you think these odds are exactly, and how can you make some money keeping that in mind?
If you study the human brain carefully you’ll learn that it can sometimes be brilliantly rational, however on other occasions disappoint you immensely with its irrational decisions. This is what the psychologists refer to as cognitive bias. Once you become aware of cognitive biases, you can significantly improve your decision making and register plenty of profits in the gambling and sports betting industry, or at the bare minimum avoid the chances of ending up with a burnt out wallet at some online casino!
What’s meant by optimism bias?
Optimism bias is the name given to the human tendency of thinking that we are at far lesser risk of experiencing some negative event when compared to others. Whenever we move as a part of some group, the optimism bias in our mind makes us get into a ‘not me’ mode, making the odds of getting hit by some unfortunate event seem quite unlikely to us.
Interestingly, this optimism bias also works equally well the other way round, when it’s about positive events. So, whenever we talk about pleasurable events, our brain naturally tends to exaggerate or enhance the chances of them being quite probable, the exact reason why a good number of lottery players continue buying tickets, one week after the other.
Some of the conventional examples of optimism biases include the belief among traders that they are far less prone to losses as compared to other traders in the market or among smokers who think that they are far less likely to suffer from lung cancer compared to other smokers.
What if I won a lottery?!...
Various behavioural studies have revealed that human brain isn’t very good at comprehending and dealing with events having very small odds. For instance, we feel that slipping and getting hurt badly while taking a shower is very unlikely to happen. However, we have no clue if someone asks us how unlikely is that to happen?! Is it less unlikely or more unlikely than dying in some terrorist attack? What are its chances compared to dying as a result of accidental alcohol poisoning?
Let’s better demonstrate the decision-making irrationality, specifically in relation to events having low probability. The Nobel Prize winner Daniel Kahneman carried out an experiment related to the purchase of insurance. He conducted this experiment on a group of Americans who were given the option of selecting between insuring themselves against the death in some terrorist attack during a trip to Europe, and opting for group insurance covering death due to any reason, during the same trip. Despite the fact that death due to any reason also includes death as a result of terrorist attack, people falling in the first group were ready to pay more for their insurance than the latter.
Talking about the possibility of winning a jackpot or 6/49 lottery at let’s say Bet365 or some other online casino, your chances are as small as 1 in 14 million! John Haigh carried out a comparison between the chances of winning the jackpot and the chances of dying in his book titled “Taking Chances.”
He observed that anyone in his middle age and enjoying good health had 1 in 1000 chance of dying within one year. It implies that the possible chances of you dying within the next hour are around 1 in 9 million. Now coming to the chances of winning the jackpot, if the winning jackpot numbers are drawn precisely at 8:05 PM and you had purchased one lottery ticket prior to 7:20 PM, it’s highly likely that you will pass away before the lottery draw is made, leave alone the chances of winning a share from the jackpot!
Putting it differently, if you spend € 1000 on purchase of 6/49 lottery tickets every weekend, with each ticket costing you € 1, and you continue doing this for 270 years, it is only then you will stand a real chance of winning at least one jackpot.
Then why do you think people continue buying lottery tickets day after day, even when they are faced with such type of odds? An easy answer to this question is that our brain blocks out the more probable and less savoury outcomes! And following is how it does it exactly.
Done in by randomness
As our brain isn’t very well-equipped when it comes to evaluation of small probabilities, it instead relies on its ability to picture a certain outcome, also referred to as availability bias.
Talking about in the context of lotteries at any offline or online casino, the winners are normally pretty highly publicized and our brain has a fairly long lasting impression of such winners. Hence, you may find yourself wondering for instance that if so-and-so person can do it, then why can’t you?! Interpreting the possibility in this way makes the idea of winning the lottery far more appealing, even when the actual fact is not so promising.
Post the World Trade Centre terrorist attack in the year 2001, it became very easy for people to recall or visualize the image of so many people getting killed by a terrorist attack. Doesn’t matter if the chances of slipping and dying in a shower (1 in 810,000) are 31 times higher compared to the chances of dying in a terrorist attack (1 in 25 million), people continue to be more obsessed and panicky about terrorist attacks than taking a shower!
The importance of mathematical fitness
Do you sometimes wonder why lotteries have always been a successful business, despite the fact that playing lottery at some online casino is purely gambling and has negative expected value? There is one more important bias apart from the basic reason that hope dies hard, which reinforces such behavior - In case of activities related to pure chance psychological rewards, for instance, the ‘near miss’ kinds of situations where the failures were actually quite close to being successful, they’re viewed as signs which increased the winning chances, whereas in real life such information doesn’t provide any insight into the likelihood of success in the future.
No matter how rational we may think of ourselves to be, even the smartest people can be seen falling prey to one or other biases of this kind, and it’s next to impossible to understand which particular bias will be applicable in a specific situation. What makes matters even more complicated is that it’s possible for one individual to employ different biases in exactly same situation, on various occasions.
Although hoping to win a lottery at an online casino such as Bet365 is one of the many ways of investing your money and time, another important thing you can do is develop a strategy of positive expected value and then apply it consistently. Statistics reveal that you’d be better off using the latter.
Expected value or EV is one of the very important metrics you must pay heed to in any profit-making activity. It tells you how much you can expect to win, and is easily the most significant calculation when it comes to investing, betting and gambling activity. If you are already aware of how to go about calculating expected value, it’s the right time for you to devise your own preferred betting strategy. Let’s talk about the cognitive biases now.
The effect of cognitive bias or hindsight bias in sports betting
Cognitive bias in sports betting is something that you should be definitely aware of if you wish to score long term profits in this endeavour.
Research carried out in the field of neuro-economics (the science which tries to explain human behaviour and decision-making) has revealed that various moneymaking experiences are perceived by our brain just like it perceives chemically-induced highs. On the other hand, financial losses are perceived just like mortal dangers. Then what do you think can the sports bettors do to improve their chances of profitable survival in this industry, while continuously walking a tightrope between mortal disaster and euphoria?!
Anyone seeking long-term profitability in the field of sports betting cannot do without combining a tried and tested betting strategy with positive expectations and consistent execution. May sound quite straightforward to you, but ponder how often do we think ourselves into problems and you’ll know!
Cognitive biases – Are they a blessing or a curse?
Daniel Kahneman and Amos Tversky did something very important in the year 1972 which made the entire world aware of a certain Nobel Prize worthy discovery – they threw ample light on cognitive biases, the systematic patterns of deviation from rationality when making judgements.
It’s a well-known fact that psychologists have time and again documented many such misconceptions. It’s pretty natural for us to overestimate heights when we are looking down, for instance, any height that makes us particularly concerned about falling. Unfortunately, all such mental shortcuts (which are also referred to as heuristics) are not as life-saving as they are perceived to be, especially when it’s very important to be objective, for instance in case of betting.
From getting troubled by social influences and mental noises to succumbing to information-processing fallacies and emotional motivation, the task of decision-making in the sports betting industry is constantly impacted by cognitive biases. These biases are very simple for our brain to compute, but at the same time they are prone to some of the most systematic and severe errors as well.
Hindsight bias is one of our most favourite cognitive biases. It’s also commonly referred to as creeping determinism or knew-it-all-along attitude after the occurrence of some event. Thomas Gilovich, a renowned professor of psychology was the first person to delve into hindsight bias in various gambling situations.
He carried out an experiment which delved into why American sports bettors continue following losing betting strategies, and observed how sports bettors’ own interpretations of their failures and successes influences their future betting activities.
In his first experiment, Thomas found that after football matches that were decided by flukes, for instance bad calls made by referees, neither the losers nor the winners would change their bets. The losers would justify their losses by citing all such random flukes, while the winners easily discounted them as being irrelevant, as the end result was the most important to them. Thomas, thus came to the conclusion that sports bettors always tend to take success at face value, however are very careful about scrutinising failures.
In his second experiment, Thomas Gilovich tried determining the extent to which all such past flukes may impact the sports bettors’ future betting decisions, especially when they’re reminded about the critical role played by such flukes in their recent betting indulgences. He discovered that this restored the faith of losing sports bettors in their teams, but didn’t decrease the faith of winning bettors at all.
The last experiment carried out by Thomas revealed that the subsequent bets placed by losers (due to the fluke situation) as well as the winners (due to non-fluke or fluke situation) were significantly larger compared to their earlier ones.
Hence, it can be concluded that the tendency of accepting success at face value and translating losses into ‘near wins’ often leads to overconfidence in sports bettors, and significantly decreases their chances of registering future successes. Sports bettors, just like people facing other circumstances, were found unwilling to admit their wrongdoings.
So, is it possible to overcome hindsight bias? The answer to this question was given pretty efficiently by Jeff Ma, a MIT Blackjack team member, who had made loads of money beating casinos world-over during the 90s. In his opinion, you CANNOT overcome hindsight bias. It is natural for human beings to be subjected to cognitive biases, and there’s no way we can escape them.
However, it’s also important to trust the findings of a renowned German scientist named Georg Christoph Lichtenber, who stated that once we are aware of our weaknesses, they don’t cause us any major harm. It provides a good amount of hope in the light of cognitive biases.
So, the next time you see yourself thinking of a near win situation at a portal like Bet365, it may be simply because you’re looking at it under the impact of hindsight bias. Rather than cursing your luck, it would be better if you stop and ask yourself what’s more important to you? To be profitable in the long run or to be right? The results may amaze you!