- Why bettors need to be aware of hindsight bias
- Cognitive biases: A curse or a blessing?
- The illusion of hindsight
Research in the field of neuro-economics, which aims to unravel the mysteries behind human choices, indicates that the thrill of earning money activates the same areas in our brain as substance-induced euphoria, whereas financial setbacks are perceived as serious threats. How, then, can bettors navigate the fine line between joy and peril to enhance their odds of making a profit?
The cornerstone of achieving lasting success in sports betting lies in employing a strategy that promises a positive expected value, coupled with its diligent application. This concept might seem simple, yet it's easy to overcomplicate things.
Cognitive biases: A curse or a blessing?
In 1972, Amos Tversky and Daniel Kahneman brought to light a groundbreaking discovery deserving of a Nobel prize; the existence of cognitive biases, which are systematic deviations from logical thinking in judgment. The realm of judgment and decision-making, to which this discovery belongs, is directly relevant to betting, offering significant insights into the workings of the human mind.
A myriad of misconceptions that we generate has been identified by psychologists. For instance, our tendency to overestimate heights when looking downwards, making us overly cautious about the risk of falling.
These mental shortcuts, or heuristics, however, do more harm than good where impartiality is crucial, such as in betting.
Everything from mental distractions and societal pressures to emotional triggers and errors in processing information can impair decision-making in sports betting due to cognitive biases. They are easily processed by the brain but can lead to serious and systematic mistakes.
If we take the words of the esteemed German scientist Georg Christoph Lichtenber to heart, "Once we know our weaknesses, they cease to do us any harm," there appears to be a silver lining. One such cognitive bias is the hindsight bias, also known as the knew-it-all-along effect or creeping determinism, which emerges after an event has transpired. Thomas Gilovich, a psychology professor, was the pioneer in exploring the hindsight bias in the context of gambling.
In a study aimed at understanding why American sports bettors continue to follow losing strategies, Gilovich noted how bettors' interpretations of their wins and losses affect their future betting decisions.
In his initial study, he observed that following soccer games decided by chance, such as a critical error by the referee affecting the game's outcome, neither winners nor losers expressed a desire to alter their bets.
Losers attributed their defeat to randomness, while winners deemed it inconsequential, focusing solely on the outcome. Thus, Gilovich deduced that bettors are inclined to accept wins at their face value, while examining losses more critically.
In another study, Gilovich sought to assess how past luck impacts future betting decisions by reminding participants of a recent lucky event in a game they bet on. He discovered that this reminder bolstered the confidence of the losing bettors in their teams without diminishing the winners' confidence in theirs.
In his concluding study, Gilovich found that the future betting amounts of losers who attributed their loss to luck, as well as winners in either luck or "skill" scenarios, were significantly larger than their initial bets.*
Overall, the tendency to embrace wins uncritically and reinterpret losses as "almost wins" can lead to overconfidence in one's betting abilities and reduce the likelihood of future success. Bettors, like many others in different scenarios, are often reluctant to acknowledge their mistakes.
Why bettors need to be aware of hindsight bias
Is it possible to overcome hindsight bias? According to Jeff Ma, a former member of the MIT Blackjack Team who amassed a fortune by outsmarting casinos in the 90s, the answer might be no. As humans, we are inherently prone to cognitive biases.
Yet, if we heed the advice of Georg Christoph Lichtenber, "Once we know our weaknesses, they cease to do us any harm," there's a glimmer of hope.
Next time you find yourself rationalizing a "near win," consider whether you're wearing your hindsight goggles. Rather than lamenting your misfortune, take a moment to reflect: What's more important? Being right or being profitable? The answer might surprise you.
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