Betting Psychology

betting psychologyDespite all the knowledge that we possess as humans we are still animals and that means we are all influenced by inherent biases and other tendencies that can lead people to fall into the same traps time and time again.

When gambling we are either betting on random chance or luck, as with most casino games, or we are betting that we can predict something to be true, as with most sports bets.  We know that the house always wins on average but those that bet rationally and can control their biases and natural tendencies can do better in the long run.

Of course, sportsbooks and casinos know very well how to exploit the psychology around gambling to take advantage of customers.  Therefore, it is critical to understand what the psychological factors are present when betting and how to stop yourself falling into the same old traps.

Here we break down various psychological tendencies to hopefully help you to make your decisions around gambling more rationally.  There is a bit of science thrown in to explain why biases work the way they do but don’t worry, these articles are designed to be understood by the typical punter too.

Gambler's Fallacy

Gamblers Fallacy

Of all the biases you will read about on this page this is the one that most people will recognise.  Just because you know about something though doesn't mean you don't end up falling for it.  Gamblers fallacy, known in psychology circles as cognitive bias, is a trick of the mind that makes you think that an outcome is more or less likely to happen based on previous events.  In random situations this is not the case.

Also referred to as the Monte Carlo fallacy, named after the casino where it was first observed, it reflects the human propensity to find patterns in what should be considered independent results.  The idea that on a roulette wheel if black has come up ten times then surely the next spin must be red, in reality the odds are exactly the same each spin.

Availability Heuristic / Availability Bias

heuristic word highlighted

Availability heuristic or availability bias is the tendency we all have to assign more importance to events that affect us more, are easier to remember or make a big impression on us.  The idea that you may drop someone at a train station and say ‘have a safe journey’, when in reality they should say that to you as the risks of death and injury on the roads is far higher than on trains.

This can be summed up as something that causes us to misjudge the real probabilities of events occurring, which can have a very obvious impact on gambling.  Here we explore how availability heuristic applies to betting and how you can avoid it.

The Green Lumber Fallacy

man cutting wood with chainsaw

The Green Lumber Problem was described by Nassim Nicholas Taleb in his book Antifragile: Things That Gain From Disorder.  It is based around the idea that one of the most successful men in trading wood, Joe Siegel, made a lot of money selling green lumber, believing for his entire career that it was painted green, when in fact it was only green because it was fresh wood.

The basic principle is that you don't need to understand the intricacies of how something works in order to exploit it.  What many people regard as 'knowledge' is in fact unimportant.  This obviously applies to betting, where people may believe because they 'know' a sport they will be more successful betting on it.  In fact, the most crucial thing is understanding the market itself.

Hindsight Bias

hindsight road sign

Hindsight is a wonderful thing, or so the saying goes, but in reality hindsight can be a dangerous thing as it can make us believe, falsely, that we knew something was going to happen all along.  Of course in betting that can lead to bad future decisions and subsequently loses.

You don't need to be a psychologist to know about hindsight but despite the fact we all understand what it is doesn't necessarily stop us falling into the trap.  Hindsight bias is actually more powerful when a negative result happens than a positive result.  Find out more.

Confirmation Bias

confirmation bias venn diagram

Of all the inherent human biases we talk about on this page confirmation bias will be the one people are most familiar with it.  Still, just because people know what it is doesn't stop them being influenced by it, like most biases it affects us mostly on a subconscious level and so we need to actually think about it to stop us being led by it.

Confirmation bias is the idea that we let our opinions, prior beliefs or previous happenings affect our future decisions.  This has a very obvious influence on betting and gambling.

Hot Hand Fallacy

hands in the sun hot hands

We've all been in the position where we think we are 'on a run' and that we can't seem to get anything wrong, every prediction coming true in turn.  In sports and betting this is referred to as a 'hot hand' and it can lead to the mistaken belief that we have more control over future events than we actually do.

While it may be true that people can be 'in the zone' it doesn't mean they can overcome random chance and just because you've won ten bets in a row it will have no impact on the outcome of your 11th bet.  This is kind of the opposite to the gambler's fallacy, there if black came up ten times in a row on the roulette wheel you would mistakenly think betting red is the better option.  With the hot hand fallacy because you won ten bets in a row on black you would believe it will more likely be black again the next time.

Sunk Cost Fallacy

sunk cost fallacy

A sunk cost is basically money or time or effort we have already expended doing something.  The issue comes in how people view a sunk cost.  Many people allow costs they have already experienced to influence their future decision making, which has an obvious implication for gambling.

Those people that chase loses or place bets to try to win back money they have already lost are falling into the sunk cost fallacy.  On this page we explain what sunken costs are, how they relate to gambling and, importantly, how to avoid them influencing your future decisions.

The Ostrich Effect

ostrich cartoon head in sand

This is one of the more obvious human biases to explain.  There is a commonly held belief that Ostriches bury their heads in the sand, this is actually not true, but the myth persists.  It doesn't really matter if it is true or not the point is the image is designed to represent what happens when people ignore information and 'bury their heads in the sand'.

The implications for betting and gambling are also fairly obvious but despite that fact many people will suffer from the Ostrich Effect time and time again. Read more about about it and critically how to avoid it.

Outcome Bias

outcome and related words in a speech bubble

Simply put outcome bias is the process by where we allow the result of something to impact our evaluation on how good our original decision was.  The fact is people can make good decisions but will sometimes still get a bad outcome, that doesn't mean the process by which you made the original decision was flawed, however.

In gambling people will often see a losing bet as a bad decision but bets can lose for all sorts of reasons and it doesn't mean you were wrong to make that decision.  It doesn't necessarily mean you shouldn't bet that way again.  Discover more about outcome biases and how to avoid them negatively affecting your gambling.

Action Bias

post it notes try something and fail or try nothing and succeed

Action bias is the human tendency to feel that doing something is better than doing nothing.  It is the thing that motivates people to swap queues in the airport check-in line or change lanes in a traffic jam.  People generally feel they should at least try to do something than do nothing at all.  For example, goalkeepers will generally always dive when a penalty is taken, yet statistically they would be better doing nothing and standing still in the middle of the goal.

The issue comes when we make quick decisions that we do not prepare for.  This has a fairly obvious implication for betting.  The idea that if you see a horse in a race and maybe you like the name then you feel you should take action and bet on it, because if it wins you will feel like you failed.  In reality a bet like that would be a bad decision as we have little knowledge of the horse or its chances of actually winning.

Overconfidence Effect

overconfidence

Overconfidence is simultaneously the most dangerous cognitive bias and the most common at the same time.  If you think about almost every financial crash we have had it has its roots in overconfident traders.  Gambling is very similar and many people who have experienced loses will put at least some of this down to overconfidence.

While it is important not to question yourself too much either, being overconfident can be just as damaging.  Evidence shows that people who believe they are certain about something are wrong as much as 40% of the time.  It is often easy for us to spot overconfidence in the aftermath of an event but how can be avoid it in the first place, especially when betting?

Optimism / Desirability Bias

over-estimate

Optimism or desirability bias is one of the more obvious ones to explain and it also affects virtually everyone at some point.  It is basically the process of backing a specific outcome not because we think it will happen from an objective stand point but rather because we want it to happen.

An underdog playing in a football match, for example, is highly likely to lose but fans of the underdog team (or fans that want the bigger team to lose) will often bet on the more unlikely outcome.  In a casino you may place a bet on a specific number on a roulette table because it means something to you and this makes you more optimistic of an outcome than the real probabilities suggest.

While the bias is obvious it is very hard to ignore, all of us want certain things to happen and this is part of the motivation of betting.  It is important to recognise optimism bias, though, as it can lead to compulsive gambling and long term loses if you cannot identify and control it.

Conservatism Bias

conservatism defined dictionary

Some people are very open to new ideas, change and new information, others are more predisposed to rely on existing or historical information and give less weight to new information.  There are pros and cons to both of these approaches but conservatism bias is the process by which we tend to ignore new evidence and this can have an impact on betting and gambling over time.

Conservativism is by definition to keep something safe and stable, effectively reducing risk by taking a path that is well travelled and you know well.  This can be a good strategy in many instances but can result in people ignoring critical new details that could significantly change the outcome.  Conservatism in betting can actually result in you taking more risks than you would if you properly weighted new evidence.

The Disposition Effect

positive and negative thinking emojis

Humans have evolved to be loss averse, to feel the pain of a loss more than an equivalent gain.  This makes a lot of sense as loses can be costly, especially if your life is threatened.  As humans have organised into civilised societies this bias has however remained and still persists in decision making around finance and gambling today.

The disposition effect is in essence the process of giving up to early on a winning position too early (e.g selling a rising stock or cashing in a winning bet) while also clinging on to losing positions (such as falling stock or a losing bet).  While this is a natural tendency if you can recognise it and avoid it when unnecessary it can be beneficial.

Herd Mentality

herd mentality example

Herd mentality, pack / mob mentality or the bandwagon effect, are all different names for the process of following the crowd.  It is one of the more obvious biases we suffer from yet it is one of the hardest to avoid at the same time.

We've all done something in the past because other people are doing it, often against our better judgement.  Humans are after all social animals and we are hardwired to operate in groups.  The problem is that following the herd can often mean we ignore our own beliefs, knowledge or intuition and can result in poor decision making.

The effects of herd mentality in finance are well documented, resulting in numerous financial crashes from the dot-com bubble to bitcoin.  There are, however, a lot of parallels between finance and gambling and if you always follow the herd when you bet it can result in poor value and more loses in the longer term.

Ritualistic Behaviours And Superstitions

wishful thinking fingers crossed

It is doubtful anyone on this earth is not subject to some sort of superstitious or ritualistic behaviour.  These behaviours have evolved as a means for humans to try and make sense of a world we do not fully understand and certainly in the past many superstitions were given credence before modern science helped us discover how things actually work.

Superstitious behaviours can be endearing but they can also be damaging, especially when people have a genuine belief that going through a ritual will have a real world affect on an outcome.  This is, therefore, pertinent to betting and gambling where ritualistic practices can lead people to believe they can have an influence on an outcome.  This can also lead to gambling problems in the long run.

Positive Moods Can Increase Risk Taking

negative and positive thinking concept

Positive moods in general increase risk taking and negative moods tend to make people more conservative.  This has a clear effect on people when they gamble, with those in a positive mood more likely to gamble and therefore more likely to take a risk - although not necessarily more likely to place riskier bets.  Indeed, studies have shown that whole populations can be affected by positive mood influencers, such as good weather, with gambling increasing as a whole within a city when it is in a good mood.

It isn't quite as simple as that, though, as gambling in itself can be responsible for good and bad moods that can then create a feedback loop.  Of course, everyone is different and reacts to their moods in different ways but ultimately when betting if we can take our mindset out of the equation and focus on the objective aspects of gambling we can ensure more consistent success.

Commitment Effect

commitment word dictionary blurred

The commitment effect is something anyone can identify with whether they gamble or not, it is the simple process of sticking with something or even increasing our investment into something we have already committed to.  This is a common issue in relationships, finances and life decisions but has an obvious impact on betting too.

Studies have shown that people believe a selection is more likely to win after they have backed it than before, this is because they have made a commitment to the bet and that in itself can make people believe it is more likely to win.  Often even if evidence shows we may have made a poor decision we can ignore this because we have already committed to it.

Loss Aversion

loss aversion

For much of human history we were very worried about our survival, where our next meal may come from, who may attack us, etc.  Therefore, it is no surprise that humans, and animals in general, have a tendency to be loss averse, this is where the pain from a loss outweighs the pleasure we get from an equivalent gain.  In effect this is risk management, trying to ensure we win little and often but don't take risks that that could threaten our survival.

Human societies have moved on but that mindset still persists in many.  The result of this is many people are predisposed to win as opposed to win money.  This presents an obvious conundrum in betting and gambling and it means that a lot of punters and players who are loss averse can win often but ultimately still lose money.  Whether it is always backing the favourite or placing lots of small bets on a casino table, while this may mean we win a lot it doesn't necessarily mean we will walk away with more than we started with.

Uncertainty Can Be Its Own Reward

person standing conflicting arrows in front of them various directions uncertainty

We know from other articles in this section that humans are generally risk-averse and often the pain of a loss is more powerful than an equivalent gain.  On that basis then you would assume that people favour certainty over uncertainty and that is true in a lot of situations.  However, when some people gamble it is actually the uncertainty itself that can be its own reward, often more so than actually winning.

Uncertainty creates a buzz in some people, or more scientifically a release of dopamine, this gives a sense of enjoyment to a situation, raises the heart beat, etc.  This process for some is what they actually enjoy about gambling and they are less concerned (at least sub-consciously) with winning.  Uncertainty is, however, risk and taking unnecessary risks when betting rarely ends up well.  It can also lead to addiction.  The key is to find ways to enjoy betting but also while mitigating the uncertainty (risk).  Any professional gambler is not concerned about getting a buzz from uncertainty, to them getting as close to certain as possible is the game.