The Gambler's Fallacy (The key to unbiased gambling)

[Aero Blue]

What is the Gambler's Fallacy?

Wikipedia has an awesome ELI 5:

"Gambler’s fallacy arises out of a belief in the law of small numbers, or the erroneous belief that small samples must be representative of the larger population. According to the fallacy, “streaks” must eventually even out in order to be representative." - Wikipedia Page


A simple example:

I see people fall victim to this train of thought so often, and a lot of the times it's the reason they fail at gambling. Here is a common example that I see around here a lot:

     - Most people can agree that if you flip a coin, it's 50/50 for heads or tails respectively.

     - Now, take this scenario: "You lose 20 coin flips in a row, what are your odds to win the next one?"

If you think that your odds are any different than 50/50 for the 21st coin flip, then you have fallen victim to this fallacy.

Individually it's very easy to understand the odds for one event, but once you introduce more data it gets a lot harder to tell.


Why does it matter?

Humans are naturally very bad at gambling, mainly because we suffer from many biases that feed off of each other.

Noticing these biases and false ways of thinking can help you make better decisions. You can play smarter and be more comfortable with events out of your control. It's also just good practice (cognitive thinking skills) which you can then use in any other aspect of your life.


Using this to your advantage

Now how exactly can you use this to your advantage? While understanding this won't make you the luckiest man alive, it can help you avoid making rash decisions based on flawed logic. Always try to constantly remind yourself that each "event" is independent of the next or previous, our brain always try to find patterns in things (regardless of whether one actually exists). Practicing this mode of thought can drastically improve your perspective and mood when gambling.


Further explanation

If you are still interested in learning more, Brian Keng has an awesome, in-depth explanation (including the mathematics and psychology behind it): http://bjlkeng.github.io/posts/gamblers-fallacy-and-the-law-of-small-numbers/

I find this stuff absolutely fascinating so please let me know if you would like more of these "informative" posts. I put a lot of time into writing this, so I hope it helps a few people out!

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[DarkDays]

What makes you say that humans are very bad at gambling?

Throughout our evolution, we as a species have had to make several extremely risky gambles that have paid off, I wouldn't say that we're bad at gambling.

We had to risk crossing the oceans to find new lands, we had to risk overthrowing and electing certain leaders and we've had to wage wars we might not have won.

We're definitely not bad at gambling.

[Oilacris]

We're definitely not bad at gambling.

He might not able to see it yet he do generalize in all sorts of things when it comes to gambling.Even on the simplest decision

in life do correspond some sort of gamble which we would really need up to make such selection into things.

[Aero Blue]

We're definitely not bad at gambling.

He might not able to see it yet he do generalize in all sorts of things when it comes to gambling.Even on the simplest decision

in life do correspond some sort of gamble which we would really need up to make such selection into things.

False, humans are awful at gambling: it’s a scientific fact whether you like it or not. It’s the reason casinos do so well and why the casino business is a billion dollar industry. Here is one of many huge articles containing numerous studies highlighting the psychology behind gambling.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3858640/

[YuginKadoya]

Humans are naturally very bad at gambling, mainly because we suffer from many biases that feed off of each other.

Noticing these biases and false ways of thinking can help you make better decisions. You can play smarter and be more comfortable with events out of your control. It's also just good practice (cognitive thinking skills) which you can then use in any other aspect of your life.

In my opinion Gambling really is the one that is Bad for humans, If gambling is not introduced in the first place then there is not a single soul that would learn about gambling, There are no humans that would definitely lose on it, be addicted to it and be depressed by it, But I guess there are players that are playing smarter but smarter in their decisions in minimizing their losses by getting an amount that they would naturally lose, Or it is OK with them, I think decision is the key here in when to stop in playing, And you can not control the outcome of the game the house always win and the outcome will be at random, I can say this because I experience it first hand.

[DoublerHunter]

I do not agree that humans are bad in gambling but I strongly believed that it is a willingness to lose. There's a bunch of explanation that all gamblers types and I had seen hundreds of discussions and I also experienced how gambling it works but I did not feel that all gambling industries are evil or self-destructive. It is in your self how you control it and the responsible budget, the activity can be fun and rewarding. At least 4 times a week that would be better.

[angel55]

We're definitely not bad at gambling.

He might not able to see it yet he do generalize in all sorts of things when it comes to gambling.Even on the simplest decision

in life do correspond some sort of gamble which we would really need up to make such selection into things.

False, humans are awful at gambling: it’s a scientific fact whether you like it or not. It’s the reason casinos do so well and why the casino business is a billion dollar industry. Here is one of many huge articles containing numerous studies highlighting the psychology behind gambling.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3858640/

There are different types of gambling.  Gambling on something like slots or roulette takes zero skill and is purely luck.  The odds are obviously against you are the game wouldn't be there in the first place, over the longrun you will end up with a negative balance if you play enough games.

[Aero Blue]

I do not agree that humans are bad in gambling but I strongly believed that it is a willingness to lose. There's a bunch of explanation that all gamblers types and I had seen hundreds of discussions and I also experienced how gambling it works but I did not feel that all gambling industries are evil or self-destructive. It is in your self how you control it and the responsible budget, the activity can be fun and rewarding. At least 4 times a week that would be better.

Yea I definitely agree with you, probably using the word "bad" wasn't the best to describe my point. I don't think that gambling is evil, however it can become self-destructive very easily through addiction. It's like alcohol though, everything in moderation. And I completely agree with your last point: gambling is purely a form of entertainment.

[Patatas]

A very interesting read indeed. Love the breakdown on github as well. The Gambler's Fallacy is well known and there are books, movies, shows based on it.

What makes you say that humans are very bad at gambling?

How many humans do you personally know who are good at gambling? Like do the math and you wouldn't be surprised what is the ratio of good gamblers compared to bad gamblers.

[Aero Blue]

A very interesting read indeed. Love the breakdown on github as well. The Gambler's Fallacy is well known and there are books, movies, shows based on it.

What makes you say that humans are very bad at gambling?

How many humans do you personally know who are good at gambling? Like do the math and you wouldn't be surprised what is the ratio of good gamblers compared to bad gamblers.

Thank you! I find this stuff fascinating, originally got into it after getting into an argument with a friend over win streaks in a video game. I still do this all the time, but at least I am aware I am doing it so I can alter my thinking.

As for the "humans are bad at gambling" thing:

It was a bit of an over-generalization, what I really meant was that humans suffer from many biases, making success extremely hard. But to be clear: "There is no good gambling", I think it's more along the lines of "smart" gambling. Meaning that you can't change the odds, but you can be aware of them and limit yourself accordingly.

My point being that "smart" gambling has nothing to do with winning or losing, but more with how you think about it.

[adzino]

Yeah, nice explanation on gamblers fallacy. But I would still just like to add few more minor details. Gambler Fallacy is a form of "hope" for most gamblers. When playing heads or tails, if a user bets on heads but keeps on flipping tails, then he has a high hope (Gamblers Fallacy) of flipping a tail on next bet even though the odds of flipping a tail is still the same.
I would just like to disagree with the point were you said "Humans are the worst gamblers". In reality, we are actually one of the best gamblers.

[FFrankie]

Assuming that the games are probably fair, the streaks but law of probability eventually  have to even out. You are just as likely to lose 10 in a row than to win 10 in a row assuming that odds are 50-50. I dont understand how that is a fallacy can anyone help me understand why it is wrong to think?

[Aero Blue]

Assuming that the games are probably fair, the streaks but law of probability eventually  have to even out. You are just as likely to lose 10 in a row than to win 10 in a row assuming that odds are 50-50. I dont understand how that is a fallacy can anyone help me understand why it is wrong to think?

The "streaks have to even out" that you call "law of probability" is actually known as the "law of small numbers" which is the whole fallacy that I am speaking of. I described the possible benefits in the "Using this to your advantage" section, however I think an example would probably help since I didn't explain it that well.

Another helpful phrase: "A part is not representative of the whole"


Here is an example of a common "situation" gamblers find themselves in (this is what I've experienced myself and see happen all the time):

     > Let's say that you flip a coin 10 times, betting tails each time and losing to heads.

     > While the odds don't change on the next coinflip, you still feel like it's more likely.

     > With this flawed thinking, let's say you bet 2x more than you normally would: because the odds are better right?

     > Then you hit another heads, and you're out of money.

This isn't really the best example, but often times we bet more based on this flawed thinking that the odds are better. However, it's important to realize that we are even subconsciously biased and we tend to follow patterns even though we don't realize it.


I was trying to find a website I remember visiting a while ago that was interactive and demonstrated some of these biases, but now I can't find it

Edit: found it

[jhongzjhong]

This is a very good idea and not bias on us gamblers, we become bad in gambling into other eyes because they know that gambling might get you addicted gamblers if you don't know how to handle with it perhaps better to quit in gambling. One of the best aspects of gambling addiction is to chase profit on gambling which is a very bad idea. Gamble that you can afford and enjoy every moment that you are in gambling site because it's a cool and wise move.

[Aero Blue]

This is a very good idea and not bias on us gamblers, we become bad in gambling into other eyes because they know that gambling might get you addicted gamblers if you don't know how to handle with it perhaps better to quit in gambling. One of the best aspects of gambling addiction is to chase profit on gambling which is a very bad idea. Gamble that you can afford and enjoy every moment that you are in gambling site because it's a cool and wise move.

Very true, I think another important thing to realize (especially for non-gamblers) is that it's never as easy as it sounds. People always tell you to "cash out" and then laugh when you lose, but then they do the exact same thing. The psychological tricks our minds play on us can cloud our judgement very easily.

But I completely agree with you about "don't gamble what you can't afford", I think most people on BT (that I've heard from so far) view gambling as more of a form of entertainment: which I believe is the correct and best way to look at it. And as the old adage goes: "never chase the dragon".

[Hypnosis00]

This is a very good idea and not bias on us gamblers, we become bad in gambling into other eyes because they know that gambling might get you addicted gamblers if you don't know how to handle with it perhaps better to quit in gambling. One of the best aspects of gambling addiction is to chase profit on gambling which is a very bad idea. Gamble that you can afford and enjoy every moment that you are in gambling site because it's a cool and wise move.

Very true, I think another important thing to realize (especially for non-gamblers) is that it's never as easy as it sounds. People always tell you to "cash out" and then laugh when you lose, but then they do the exact same thing. The psychological tricks our minds play on us can cloud our judgement very easily.

But I completely agree with you about "don't gamble what you can't afford", I think most people on BT (that I've heard from so far) view gambling as more of a form of entertainment: which I believe is the correct and best way to look at it. And as the old adage goes: "never chase the dragon".

Gambling will never be existed if owners never sees any potentiality that it will grow and even get profitable.
Now, if if we think that gambling isn't good supposedly the government never allow it to be presented in the community but they are, this simply means that gambling is legal. Those people get addicted in gambling is not because of this, but it is their choice to be like that.

[qwertyup23]

We're definitely not bad at gambling.

He might not able to see it yet he do generalize in all sorts of things when it comes to gambling.Even on the simplest decision

in life do correspond some sort of gamble which we would really need up to make such selection into things.

False, humans are awful at gambling: it’s a scientific fact whether you like it or not. It’s the reason casinos do so well and why the casino business is a billion dollar industry. Here is one of many huge articles containing numerous studies highlighting the psychology behind gambling.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3858640/

This is a good read and a nice article which composed of explaining the psychology behind gambling. But what makes gambling contagious and dangerous at the same time is the addiction and satisfaction that we garner especially when we experience a winning streak in the game. This creates an biased impression that gambling may be favorable to you, resulting to a continuous betting of your money. From this experience, you would deem to think that every bet that you make will garner you returns of cash.

That is where the problem exists. When you have that kind of mindset, it would slowly cloud your judgement and decision making skills which would aggravate your situation into losing your cash. After that, it would cascade thinking that the only way to overcome your losses is to gamble again. From this alone, this creates an endless cycle wherein you gamble and gamble until every cash is drained.

[Dreamchaser21]

This is a very good idea and not bias on us gamblers, we become bad in gambling into other eyes because they know that gambling might get you addicted gamblers if you don't know how to handle with it perhaps better to quit in gambling. One of the best aspects of gambling addiction is to chase profit on gambling which is a very bad idea. Gamble that you can afford and enjoy every moment that you are in gambling site because it's a cool and wise move.

This is the thinking of ordinary people who don’t understand gambling, they see people who goes to casinos are bad but we can’t deny the fact that a lot of gamblers becomes addict as well. Gamble excess money, stay fit and always have fun. Gambling is not always take profit, its bad if you do bad decisions and take more greed.

[maydna]

This is a very good idea and not bias on us gamblers, we become bad in gambling into other eyes because they know that gambling might get you addicted gamblers if you don't know how to handle with it perhaps better to quit in gambling. One of the best aspects of gambling addiction is to chase profit on gambling which is a very bad idea. Gamble that you can afford and enjoy every moment that you are in gambling site because it's a cool and wise move.

I don't think that chasing the money will be the best aspects of gambling addiction because if we thoughts behind that, we have a big chance to miss all of the money. Besides that, we know that we cannot recover the loss of the money and no matter we try hard, we still hard to get the money's back. So when you still have time to quit, make sure you can quit gambling as soon as possible and don't wait until your money reduces too big.

[Aero Blue]

What makes you say that humans are very bad at gambling?

Throughout our evolution, we as a species have had to make several extremely risky gambles that have paid off, I wouldn't say that we're bad at gambling.

We had to risk crossing the oceans to find new lands, we had to risk overthrowing and electing certain leaders and we've had to wage wars we might not have won.

We're definitely not bad at gambling.

I agree, we are not that bad at gambling, I think the things that make it bad is when the gambler got addicted and don’t know how to control himself at the game and that they forgot about the plan.

I don't really think it's fair to compare slots or dice to "evolutionary gambling", they are just to completely different things. Psychologically we are awful at games of chance, and there are a lot of reasons for this. A lot of it has to do with the fact that we aren't computers, we can't calculate risk and statistical outcomes very easily, and to relate back to evolutionary "gambles": these were fairly simple. There was no 1 in 200 million odds to win the lottery, it was more like 20 men vs 5. I think this is the main reason we fail at gambling, it's very hard for us to understand the mathematics behind it all.