Cognitive Bias in Gambling

We humans don’t like to feel like we aren’t in control of what happens to us, even when we know, deep down inside, that we aren’t – especially when the stakes are high. So we tell stories to try to fool ourselves and others into thinking that we are in control or can at least predict what is going to happen to us. These stories form the basis of a surprisingly common phenomenon that neuropsychologists refer to as “cognitive bias”.

Cognitive bias exists where a person has become so convinced of one of their stories about being in control, that they base their decisions on it. The most familiar incarnation of cognitive bias for most of us involves engaging in risky behaviour based on the irrational but convincing assumption that “it will never happen to me”. Clearly, basing one’s decisions on a false perception of control is a recipe for disaster and yet it persists in all human activity.

In few places is cognitive bias more common (and taken for granted) than in the gambling industry. With the potential for huge wins or catastrophic losses on the line, it’s only natural that players would try to devise some sort of system with which to predict outcomes and therefore beat the odds. This perilous territory is ripe for a wide range of cognitive biases, based on which countless gamblers have lost fortunes (while just one or two have caught lucky breaks).

The first step to preventing yourself from falling into the same trap is finding out what these biases are and why they are false. Then you can take a look at how your decisions may or may not be determined by some form of cognitive biases. Here’s an overview of the most common types of cognitive bias that affect gamblers:

The Gambler’s Fallacy

This is the best-known cognitive bias employed in gambling and is often used as a blanket term for all types of cognitive bias in this area.

Players who allow themselves to be taken in by the gambler’s fallacy believe that, in a series of events (as in the rounds of a card came or spins of the roulette wheel), a particular outcome (like the roulette ball landing on red) becomes more likely if it has failed to happen continuously for an extended period of time. Alternatively, such players will assume that an outcome becomes less likely to happen again every time it does happen.

This is fallacious reasoning in games of pure chance because each round is independent of what happened in the one before. Theoretically, the roulette wheel could go on spinning forever and never land on red again. Casinos might give you the illusion of control by displaying the results of the previous 20 spins as if it matters, but the roulette wheel does not care about your statistics.

Of course, when you play a strategy game like blackjack, where there are a finite number of cards of each number in each suit in the deck, it is possible to make better informed decisions through a process of elimination. However, unless there is literally only one card left in the deck and you’ve seen all the other cards, you have no way of knowing for sure which card will be dealt next. Probability is not certainty.

Recency Bias

This form of bias most commonly takes the form of gambler’s fallacy but can also present itself in other, often subtler ways.

Players under the influence of recency bias place undue value on the significance of the most recent events in a game or series of games. Recency bias is particularly popular with sports bettors, causing them to believe that each subsequent horserace, for example, influences the outcome of the next. Based on this, they believe that they can identify trends and thereby correctly predict the winner.

Confirmation Bias

Confirmation bias is possibly an even bigger problem in everyday life than on the casino floor, but it is somewhat easier to identify in the latter. It is through confirmation bias that we doggedly cling to our irrational belief systems, even in the face of overwhelming evidence against them.

That’s because confirmation bias is a (generally) subconscious process by which we naturally seek out information that confirms our existing assumptions and ignore anything that contradicts them.

Watch out for “experts” who claim to be able to give you a scoop on the winning horse. Much like horoscope columns, these hucksters like to prey on your confirmation bias by presenting you with a whole lot of irrelevant or vague trends from which you will draw your own, predictable conclusion.

Outcome Bias

This is the most tempting cognitive bias to succumb to because it appeals to our vanity. It convinces us that, because we guessed correctly once or twice before, we have somehow developed an almost supernatural ability to continue to guess correctly. Many a fortune has been lost over this kind of delusion.