- Your betting mentality has very real implications in terms of how much you win or lose.
- If you’re aware of problems in the way we think about things, you can eliminate them.
Betting mentality: cognitive biases in betting
Good punting calls for clinical, objective decision-making. But the fact is we’re human and we often make decisions based on emotion, which is not great when you’re a punter. So it’s important to understand the role of cognitive bias and ensure your betting mentality is as well developed as possible.
Cognitive biases (or simply biases) are tendencies to think in ways that are not rational or objective. Biases are important to know as a punter because they are traps – punting traps. Knowing they exist helps you recognise when you’re falling for them, so you can stop yourself from making a poor decision. In the long-term that results in better decision-making, which means more cash in your back pocket.
In this two-part series I will cover the important biases in gambling and what you can do to avoid the most common traps:
Betting mentality: Gambler’s Fallacy
We’ll start with the most well-known bias in gambling: the Gambler’s Fallacy.
We’ve all had that feeling when we’re having a bad run and we’re thinking we must be “due” for some winners.
That’s the Gambler’s Fallacy.
Sometimes we might bet more than we should to catch up the losses or place bets that we had no intention to in the first place.
It’s true that punting graphs have ups and downs and results do revert to the mean. That’s why we feel this way… we know that things balance out in the long run. And eventually after a bad run, you will have a good run at some point.
But that’s the problem, and the key thing to remember here: we don’t know when the good run will happen. This bias makes us think it’ll happen sooner rather than later, but it could be another 100 bets. In that time we might have lost a lot more than we should have.
Probability has no memory. Every event is independent and losing runs always last longer than we’d like. You always need to bet the correct amount based on your bank, and make the right bets for the right reasons.
Betting mentality: Recency Bias
Also known as the ‘availability heuristic’, recency bias is when we give more weight to recent events when we make decisions. It’s a mental shortcut (a heuristic) based on the idea that if something can be recalled, it must be important.
There are multiple examples of this trap in punting. Here are a few:
- You make a good decision not to bet but it wins… the dreaded missed winner! So next time in the same situation you back it – even though it’s a bad bet.
- You make a bad decision to bet and it wins, so you make the same bad decision next time and back it again
- When you’re on a winning streak or get a big collect, you outlay larger amounts on more bets (instead of the correct amount on value bets) because you think when you bet, you win
- You notice a specific characteristic in a recent winner, so decide that’s an important factor in picking future winners
- Outlaying more on tips on a winning run
- You stop following tips on a losing run
The reality is that recent events have little impact on the best future decisions.
Everyone makes betting mistakes that are important to learn from. And we need to make short-term decisions when we bet, like whether to take a certain price or how much to bet. But our decisions should be based on the best long-term play, not what happened last week or five minutes ago.
Betting mentality: Optimism Bias
The tendency to think we’re less likely to experience negative outcomes than others is known as optimism bias. It’s basically the idea that “I’m me, I’m special, I’m the lucky one”. It makes us think that when we bet, we’ll win, when the fact is that none of us are special to the punting gods. We experience the same good and bad luck over a period of time as everyone else.
The problem with optimism bias is that it can result in poor bets based on hope, rather than the correct decisions. It’s fine to be optimistic at the start of the day. That’s part of the excitement of punting. Just make sure your bets are based on good decisions, not optimism.
See also fading effect bias.
Betting mentality: Confirmation Bias
Confirmation bias is the tendency to seek, interpret and remember information in a way that confirms our pre-existing beliefs.
In a nutshell, it’s seeing what you want to see. It happens all the time in the betting world and elsewhere.
You might think that wide barriers are a long-term losing proposition, so when a favourite loses from a wide barrier you might think, “yep, I’m right” and continue to believe that as gospel. In reality though, the best selection in a race depends on multiple factors and barriers alone are a poor indicator of value.
We all have pre-existing ideas. Some will be valid and some will be opinions we’ve formed based on not much more than thin ait. Or perhaps they were misconceptions spread by the Truth Effect.
Be open to testing your ideas, and the possibility that your pre-existing beliefs may be out-dated or wrong. Make decisions based on the evidence, rather than pre-conceived, untested hunches.
Want to know more? Read about choice-supportive bias, conservatism bias, continued influence effect, bandwagon effect, selective perception, Semmelweis Reflex, status quo bias, attentional bias and belief bias.
Betting mentality: Outcome Bias
Outcome bias is the tendency to judge a decision by its outcome rather than the quality of the decision at the time it was made. When a tip loses we tend to see it as a bad tip, but when it wins we tend to see it as a good tip. The quality of a tip is based on the process that went into making the selection, not the result. Individual results are just random luck.
It’s worth keeping half an eye on individual results to pick up whether there is something valuable to be learned, but never consider a bet as bad simply because it lost (or a bet to be good just because it won).
An extreme example here is if you took $1.50 on a fair coin toss and won. Yes, you won. But it was still a bad bet.
If you took $2.50 on the coin toss but lost, it was still a good bet and one you should make as often as possible regardless of short-term results.
So it’s clear that a good decision to bet remains a good decision regardless of the result. Analysis of results must be done on large samples, not individual events. In the long run, the same good bet that lost today will be the same bet that makes you a nice profit in the future.
Betting mentality: Hindsight Bias
The tendency to see past results as predictable when they’re completely random is called hindsight bias. It’s the idea that we “knew all along” when there was no actual way to know. The problem with this bias is that we might attribute specific causes to random events and create false information in our minds.
When you analyse results, make sure that the causes you assign to results were foreseeable. Some results are simply due to random luck and we just need to accept that.
In the second and final instalment of betting biases we will discuss risk aversion, hyperbolic discounting, illusion of control, commitment bias, normalcy bias and avoiding the traps.