How to Bet Badly

I feel like I’ve been light on psychology over the last few blogs, so I’m going to introduce a few concepts that I haven’t previously touched on. I’m going to do that by talking about the Tournament of Champions, a gambling game I bodged together for my MSc Psychology dissertation.

I started off by thinking about how people make their gambling decisions. I’d become fascinated by Dual Process Theory, which is the notion that our brains have two different channels. One is the slow, deliberate, rational human voice inside your head. The other is the fast, subconscious, emotional one that we share with the rest of the animal kingdom. You can learn more about it in Daniel Kahneman’s Thinking, Fast and Slow.

It isn’t a universally accepted theory, but it’s been proposed dozens of times in multiple disciplines across many decades, and there’s a decent amount of evidence to support it. That track record almost sounds like real science, so it’s good enough for me.

Anyway, I wanted to know whether people put intelligent effort into their gambling decisions, or if it is mostly the mad mental pin-sticking of our monkey mind. That meant devising a simple game where an advantage could be gained from expending a bit of cognitive energy. On the bus ride home from lectures I came up with the Tournament of Champions.

I wanted it to sound grandiose but participants just had to choose which of one five warrior characters they wanted to bet £3 on. They were shown pictures of each character, as well as their assigned prize money and probability of winning. The bets were funded by me as a reward/incentive for taking part. It cost me £192.

The format provides enough information for an Expected Value (EV) calculation, which tells you objectively which character is the most profitable to back over the long run. Alternatively, you could look at the pretty pictures and choose the one with the best muscles. This is what they looked like:

The artwork was “borrowed” from a trading card game from the 1990s. I wanted pictures that people had probably never seen, and, as a closet fantasy fan, I just really liked Steve Jackson’s BattleCards.

I asked participants to talk me through their thought process as they picked their character. That gave me a window into their thinking, and as they didn’t know what I was investigating, they didn’t hide anything from me. I coded the answers on a five-point scale from “Totally random” to “Perfectly rational” and timed how long the decisions took.

Humans are cognitive misers, so I predicted that less-sophisticated strategies would be more common; but I did not expect a landslide. Only 10 of 82 participants got somewhere near performing an EV calculation. Only one of those completed it in full, and he still knowingly plumped for a sub-optimal choice. Most people had no idea about EV calculations or how to do one.

A hefty majority of my sample made their choice based on one or two factors that did not have any rational bearing on the quality of their decision. Usually, it was how the character looked or the prize amount on offer. The crucial probabilities were largely ignored.

This is a good example of Herbert Simon’s “satisficing”. That’s the human tendency to come to a quick decision that is good enough for the purpose. It’s not perfect, but it will do. Up until this term was coined, psychologists and economists believed our decision making was entirely rational. It has now been proven unequivocally that it is not. And I mean by proper researchers, not my amateur efforts.

This element of my dissertation offers some insight into how recreational bettors make their choices. Basically, a couple of loose criteria are applied and a ‘good enough’ answer is reached. It is mostly an emotional choice with little rational rigour applied.

If you’re not sure that’s true, then think about how you pick your Grand National horse. There’s a good chance you apply a kind of “Elimination by Aspects” algorithm. Something like this:

  • Disregard the favourites because the prize money is too low
  • Rule out the 100-1 (and worse) longshots because they don’t stand a chance
  • Look at the ones in red silks so your horse is easy to spot
  • Pick the horse that’s left with the best name

There’s no shame in making a choice like that. If you’re not a horse racing expert then there’s no point complicating the process. You don’t have the tools to make a better selection, so take the quick and easy option that ticks your personal boxes.

I do something like this when I make chumpy soccer bets – whilst simultaneously kidding myself that I’m shrewdly using my sporting knowledge to gain an advantage. If I’m really honest though, I’ve been patchy on football since the BBC discontinued Ceefax.

And that’s where the problem lies. We frequently think we’re making good choices just because we have taken some information into account – irrespective of the quality of that information. Gamblers do this in a couple of dangerous ways.

The Gamblers Fallacy is when past information is considered when it has no bearing on a future outcome. For example, a coin that has landed heads several times in a row is just as likely to come up heads the next time, but research shows that people believe tails is more likely.

You see this thinking a lot at the roulette table. If there have been five simultaneous reds, then someone will inevitably pass comment on it and place a bet on black. Or they’ll avoid a certain number if it has come up several times in recent history. It doesn’t actually matter in roulette because every bet has the same edge, but it’s still wrongful thinking.

Perhaps more dangerous is the Illusion of Control. This is where gamblers incorrectly believe there is a skill element to a game of pure chance. This has been found across many casino games, including slots. It is most common in seasoned players who have convinced themselves their experience confers an advantage.

When you think you’re good at something, you tend to stick with it. That can be a serious problem when that game is unwinnable. It’s a recipe for throwing good money after bad in an inescapable cycle of loss-chasing.

The Tournament of Champions was a wake-up call to me. I had no idea people defaulted so strongly to irrational or sub-optimal thinking. Now that I know, it worries me how easy it is for gambling operators to exploit. So punters beware, you’re probably not as clever as you think, and it’s going to cost you money.

Bobby’s Bets

I forgot to do this last time, so a quick recap. I lost £14 on a day of Premier League tickler bets, but then used a free £5 bet on Leicester to win the FA Cup and wound up slightly ahead. Those funds are now placed on a few value options at the USPGA Championship golf. At the time of writing, Brooks Koepka and Paul Casey are giving me some sweat value.

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