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Gambler’s Fallacy – What It Is, Examples And Ways to Avoid

Gambler’s Fallacy – What It Is, Examples And Ways to Avoid

Gambler’s fallacy is a false belief that if an event recently occurred one or more times, it is less likely to occur soon.

A bizarre event occurred on the 18th of August, 1913. Though over 100 years have elapsed since then, the world remembers the day because no such incident has ever occurred ever after.

On that day, in the city of Monaco, gamblers lost cartloads of money on a roulette wheel in the Monte Carlo Casino. For those unfamiliar with that casino game, visualize a wheel that consists of numbers from 1-36 marked in either red or black. On each round, a small is spun which lands on any one of the partitions.

Though you can place different kinds of bets on a roulette table, we’ll only speak about the form significant to the story – betting on the color red or black. If you guess right, you double what you put in. If you choose the wrong color, you lose your money.

Gambling on a color on the roulette wheel is no different than betting on a coin toss where you have 50-50 chances of winning and losing.

gambler's fallacy

In the Monte Carlo Casino, on that particular day, the roulette wheel had landed on black consecutively a few times. Gamblers were convinced the next round would land on red as they waited each round.

Can you guess how many times in a row the roulette landed on black that night?

7 times? 9 times? 12 times?

Wrong! Gamblers watched in awe and distress as the wheel landed on black 26 times. Yes, that’s right. A whopping 26 times. After the first few rounds until the end of the 26th, people kept shoving their money onto red hoping it would show up sooner or later. But, it took a lot longer than expected. In the meantime, many people lost all the money they came with. Several went bankrupt.

Even those who won on the 27th spin where red finally showed up could not hold on to their winnings either. They assumed red would occur repeatedly in the future rounds, but again, it didn’t.

Such a tendency to assume that a previous streak influences the future outcome is called the Gambler’s fallacy. In this article, we’ll go through the effects of the fallacy, the ways it impacts you in daily life, and how you can avoid such disastrous consequences.

What is the gambler’s fallacy?

The gambler’s fallacy is the tendency to assume that an event is less likely to occur in the future if it has frequently occurred in the past. Your mind falls victim to the reverse logic too, where you feel an event will occur soon because it was nowhere in sight in the recent past.

gambler's fallacy explained

That’s exactly what happened in the Monte Carlo Casino. Gamblers assumed red had to show up sooner or later and kept betting their money. By the end of 26 spins, people had their jaws and pockets open while the casino raked millions.

Related article: How to avoid analysis paralysis

By the way, the roulette wheel did not involve any foul play by the casino to fleece people. It was an extremely rare occurrence with an odds of 1 in 67 million. If you failed to realize the rarity of the event, the Monte Carlo consecutive roulette run was 100 times more unlikely than an asteroid impact that destroys major life on earth. A moment of silence for the people who lost money that night.

“But what are the chances I’ll encounter such a scenario in my life?” you ask. That’s a valid question. Though the chances of witnessing such a casino event are close to none, you bump into realistic events and fall victim to the same mindset the gamblers did that night.

For example, if you came across the following scenario when tossing a coin, what would you decide based on your gut feeling? Be honest.

You toss a coin and it lands on tails. You toss the coin a second time and … tails again. A third toss and yet another tails.

Knowing the coin is genuine if you had to guess the outcome of the fourth toss, what would you believe is more probable – heads or tails? Most choose heads because it hadn’t occurred the last three times and therefore more likely to occur in the next toss.

But that’s where your logic goes wrong. In reality, one or more previous occurrences have no impact on the next coin toss. Even if the coin has landed tails 50 times in a row, the next toss landing on a heads or a tails is equally likely(unless the coin is counterfeit)

Examples of the gambler’s fallacy:

Even if you have no interest in gambling, betting, or odds of any form, you’re vulnerable to the gambler’s fallacy in daily life either way. Here are some examples which shed light on how any person can think like a gambler.

1. Girl child boy child

girl child boy child

After a couple has a baby, many falsely believe that the next baby is more likely to be of the opposite sex. The effect is magnified when the mother gives birth to two babies of the same sex.

For example, after giving birth to two girls from the first two pregnancies, neighbors, relatives, and the couple themselves exclaim, “the first two were girls, the next has to be a boy.”

Such expectations had far more disastrous consequences a few decades ago where society was keener on having a boy instead of a girl child.

Laplace noticed the pattern way back in the 19th century. He published his findings as a part of his book Philosophical Essay on Probabilities where he mentioned that every time parents had a boy, they anticipated that the next baby would be a girl. The reverse was true too.

2. Board games

dice

When you roll the dice and it lands on one consecutively, you’re certain that the next toss will turn out better. If at all, you land one a third time, you shake your head in disbelief. You curse your luck, the position you’re seated, or the dice itself. You go through a similar thought pattern when your opponent friend lands sixes one after another. You wonder if your buddy is cheating you somehow.

Winning the board game has little impact on your life, but the dice sheds light on how your mind thinks when it encounters a sequence of good or bad events.

3. Predicting outcomes

magician

When you predict outcomes of events, your mind subconsciously takes into account the previous results that have occurred. You can use sports as a common reference. Some examples of gambler’s fallacy acting upon your thoughts are:

  • This sportsperson had a great run for the last three games. A bad performance is due soon.
  • This team won the toss the last two times. They cannot win three in a row for sure.
  • The last two times our team faltered in the final. This time the trophy is ours. Third time lucky, you see.

Related article: How you’re fooled by superstitions – Clustering Illusion

4. Gambling and betting

Going by its name, the gambler’s fallacy has the best examples from gambling. The moment you step into a casino or participate in any form of betting, you undergo a sudden transformation. Some people turn into fortune tellers who have a clairvoyant ability to predict the future. Some others bring out the mathematician in them and start making a sophisticated analysis of previous patterns.

For example:

  • Today is the 13th day since the last jackpot. I have a feeling someone will win big today.
  • The dealer won the last three rounds of blackjack. I’m winning this one for sure, so let me bet big.
  • This poker player had good hands in the last two rounds. How can he bet high again? I’m sure he’s bluffing. Let me call.

Why you make an error like a gambler?

Your mind is designed to analyze patterns around you and make sense of it. If I asked you to guess the next number in the sequence 2, 4, 6, 8, 10, … you’d scream the right answer without even going through the entire list. That’s because your brain has evolved over the years to crack such sequences without needing any pen or paper. But due to your mind’s love for recognizing order, you identify shapes in clouds and patterns in randomness. Your brain tries to find order from an entirely random series of events.

Related article: 13 Brain Exercises to Sharpen Your Mind

slot machine

The confusion with the odds of a current event stems from the lack of understanding of probabilities too. Due to the representativeness heuristic, you hunt for a similarity between events to deduce a pattern. When there really is a sequence, your mind can decipher it. But what if the occurrence is random and no pattern exists? Your mind creates one.

Let’s take an example:

Below are the results of the last 6 coin tosses in order(H-Heads, T- Tails)

HTTHTT

Even without trying, you notice a pattern of a head followed by two tails. If you were in a casino betting on the next toss, you’d opt for heads believing the sequence will repeat. If the coin indeed landed on heads as you expected, you’d continue trusting the pattern. But If your guess was wrong, you try to identify a new pattern out of HTTHTTT. Maybe the next round will have one head followed by four tails?

Your mind can play such deceitful games with you.

The odds of a sequence of events work differently compared to the current event. For example, the chances that a coin toss will land on heads is 1/2 or 50%. The chances that you’ll have two consecutive heads is the same figure multiplied, once for each round.

  • Chances of two heads in a row = (1/2)*(1/2)=25%
  • Chances of three heads in a row = (1/2)*(1/2)*(1/2)=12.5%

These are the odds for future events. But once the event has occurred, you cannot apply the past odds to modify future odds. For example, if the coin landed on heads twice, you cannot use the above figures for the next toss saying, “the odds of a coin landing two heads in a row was 25%. As per my calculations, landing three heads in a row has a probability of 12.5%, so the chances of landing a tail in the third round are 87.5%.”

Such logic is incorrect because the odds of a sequence do not apply to an independent event. No matter how many times a coin lands on heads, the odds of a specific toss landing on heads or tails is always 50-50. Using the odds of a sequence of events to an independent occurrence is what causes the gambler’s fallacy.

But reality does come close to the odds when averaged over a large set of events. When you toss a coin 50 times, heads and tails will have occurred close to 25 times each but not precisely in the 50% ratio. Sometimes you might end up with 17 heads and 33 tails. But the larger your total number of events, the closer the real events will be to the calculated odds. When you toss a coin 5000 times, the number of heads and tails will be close to 50%. More so when you toss a coin 5 million times if you have the time and patience.

How to avoid gamblers fallacy?

Gambler’s fallacy is one of the few cognitive biases where awareness alone does not suffice in combating it. You’d also have to recognize that two events are independent to avoid making a wrong decision. While that sounds easy on the surface, applying it in real life is a different ball game altogether.

man with idea

When you apply weird mathematics to identify patterns of a casino draw, you’re already aware of the irrationality of it. Yet, you prefer to go that route because you find comfort in relying on made-up logic than making a hollow guess.

Two simple tactics can help you avoid the gambler’s fallacy:

  • Every time you identify a pattern ask yourself if the previous event can influence the next outcome
  • Whenever you find yourself making up a logic that isn’t convincing, consider the objects involved, and remind yourself about their inability to affect each other. For example, during a bet over a coin toss, tell yourself that a coin neither has the brain nor the ability to decide the sequence in which it lands.

Though straightforward, these tips can save you from catastrophic consequences because the decisions you make due to the gambler’s fallacy are often instantaneous. A quick reminder might just be the dose of medicine you need to steer clear of such bloopers.

Related article: How to improve your decision making skills

Conclusion

Whether you’re a gambler or not, the gambler’s fallacy still resides within you. Even if you never step into a casino or participate in gambling at all, you can still falter by making a wrong move. You may not place a bet, but you can make an erroneous decision that leads to unnecessary consequences.

Next time you identify patterns out of random sequences, handcuff the gambler within you from pushing all the chips in.

References:

Beach, L. R., & Swensson, R. G. (1967). Instructions about randomness and run dependency in two-choice learning. Journal of Experimental Psychology, 75(2), 279–282. https://doi.org/10.1037/h0024979

Gambler’s fallacy. (2020, December 26). Retrieved January 05, 2021, from https://en.wikipedia.org/wiki/Gambler’s_fallacy




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