Your Guide to the Gambler’s Fallacy
Most gamblers have all sorts of peculiar beliefs that simply don’t hold up to scrutiny. Whether it’s blowing on dice, carrying a lucky rabbit’s foot, knocking on wood, refusing to enter the casino through the front door, or being convinced that certain banknotes or chips are cursed, these seemingly harmless superstitions have no place in reality. When playing games of chance, success is really just a matter of probability and variance. Yet even players who admit this often fall for the gambler’s fallacy, which is essentially the false belief that events have a way of balancing each other out over time. Unfortunately, even the most level-headed people fall victim to the gambler’s fallacy while betting, and even in life at large!
Getting to Know the Gambler’s Fallacy
The gambler’s fallacy is a psychological phenomenon that’s surprisingly easy to demonstrate and quell. This common misconception is often called the fallacy of the maturity of chances, which is certainly a mouthful, or the Monte Carlo fallacy thanks to an unlikely event that occurred over a century ago, which we will get into shortly. As we mentioned, the gambler’s fallacy is the false believe that random events will balance each other out, but if you truly hope to avoid the pitfalls of this widely held misbelief, you’ll need to dig just a little deeper.
As a misconception that’s based on a balancing act, the gambler’s fallacy has two related beliefs. The first false belief is that if something happened more frequently than you would expect in the past, then it will happen less frequently in the future. The second false belief is just the flip side of the same coin, namely that if something happened less frequently in the past, then it will happen more frequently in the future. Yet when events are truly random, like in just about every casino game, past outcomes have no bearing on what happens next. There is no balancing act.
The gambler’s fallacy has plagued people for centuries, but it really gained prominence after an episode at the Monte Carlo Casino in 1913. If you aren’t familiar with roulette, the game features a wheel with equal black and red numbered slots ranging from 1-36 plus a green 0 slot. On a given spin, there is a roughly equal chance of the ball landing on red or black and a 2.7% chance that the ball will land on green. But on this infamous night, at least as far as the losing players were concerned, the ball managed to land on black a whopping 26 times in a row. Bettors lost millions believing that red was overdue. In reality, every spin is a random event bound by the laws of physics. If a game is fair, every spin should be entirely independent and unrelated to what happened before. Though somehow, most people believe otherwise.
Do Try This at Home
The simplest way to illustrate the gambler’s fallacy is by flipping a coin. Grab any coin you want, as long as it’s fair. If you flip it 10 times in a row, you might expect it to land on heads 5 times and tails 5 times. Yet if you conduct this experiment, you might get 8 heads and 2 tails, 3 heads and 7 tails, or 6 heads and 4 tails. Does that mean the coin is rigged? The fact is when flipping a coin, every toss is an independent event. It’s entirely unconcerned and fully unaware of what happened on the previous flip.
Although just about everyone will admit that coins have no memory, people still believe in the gambler’s fallacy. What’s worse is that this false believe is even more prevalent in the heat of the moment. Maybe when you’re trying to win money, it’s easy to get wrapped up in the apparent magic of the roulette wheel. Of course, we know there’s no sorcery in games of chance.
When playing games of pure chance, what happened before has no influence on what is about to take place.
Accounting for Variance
Most gamblers know that casinos take in more money than they pay out. Even when the games are fair, the rules give the casino a slight advantage, which is known as the house edge. Back to our roulette example, the casino pays even money for winning bets on red or black but still holds a 2.70% advantage since the ball can also land on 0, which is green. That seems reasonable, but it raises questions for bettors who are afflicted by the gambler’s fallacy. How can the casino expect to make a profit if every event is independent? The answer is variance and it may appear a little contradictory at first glance.
While random events are independent, when the sample size is large enough the effects of variance, which is a measure of how much an outcome differs from what you might expect, are reduced. In other words, over time the probabilities are true. It’s important to understand that this sample size is larger than your individual playing session. It could take thousands upon thousands of roulette wheel spins before red and black even out.
Of course, variance not only makes games of chance fun, but it means it’s possible to win since anything can happen. At the same time, it’s important to always play responsibly by treating gambling as entertainment. You should never bet more than you can afford to lose.
The Truth About Betting Systems
Whether you play roulette, baccarat, craps, or other games of chance, you’ll probably encounter a variety of popular betting systems. The Martingale method is by far the most popular technique. If you aren’t familiar with this betting system, it requires you to double your previous bet whenever you lose. The Martingale has two fundamental flaws. The first is that if your losing streak is long enough, you’ll eventually hit the table limit since you need to keep upping your wager. The second problem is that it is based on the gambler’s fallacy. It falsely assumes that events will balance themselves out in the short term, which we know isn’t true.
Of course, these betting systems aren’t all bad. Betting systems force you to take a disciplined approach when placing wagers. Be that as it may, it’s important to measure your expectations and understand the fundamental flaws in this approach.
Avoiding the Fallacy
If you’ve fallen for the gambler’s fallacy, you’re not alone. Most people including skilled gamblers continue to believe that past events have influence on future outcomes. By merely acknowledging that this is failed reasoning at best, you are already several steps ahead of the game. The gambler’s fallacy rears its ugly head outside the casino too. Not only have psychologists observed the gambler’s fallacy in various lab experiments, but you can find it just about anywhere people look for patterns where none exist. For example, football referees might attempt to balance previous calls and loan officers might deny an application just because they approved the previous one.
Looking for patterns and trying to make sense of your world is human nature, but you shouldn’t let it undermine your bottom line. Acknowledging the existence of the gambler’s fallacy is the first and perhaps final step to avoiding it.
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