The gambler’s fallacy is an important example of betting jargon and one that describes a common and problematic mindset that may impact your decision-making when gambling online.
This is also known as the ‘Monte Carlo’ fallacy, and it’s built on the incorrect belief that random results can be pre-empted based on the outcome of previous events. But what exactly is the psychological definition of a gambler’s fallacy, and how can you avoid this when betting online?
What Is Gambler’s Fallacy?
Let’s start with the basics: what is a gambler’s fallacy? Put simply, the gambler’s fallacy encourages you to mistakenly seek out patterns and sequences in a series of random events based on previous outcomes or results.
However, random events such as individual coin tosses exist independently of one another, so the statistical probability of landing heads or tails remains the same, irrespective of previous results.
The gambler’s fallacy can lead to poor decision-making, as it causes you to misunderstand the casual and inconsequential relationship between past and future random events.
The classic gambler’s fallacy ultimately encourages you to frequently change your bets and selections when wagering online, in the false belief that results will be distributed evenly over a period of time.
What Is Inverse Gambler’s Fallacy?
You may also have heard of the ‘inverse’ gambler’s fallacy, which is based on a similar belief that past events can impact the probability of future random outcomes.
However, the inverse gambler’s fallacy encourages you to maintain the same bets or picks based on previous results, in the belief that the odds favor certain outcomes over time.
For example, if you’re playing roulette and the number 19 is called twice in succession, you may continue to place bets on this particular number and consider it to be more statistically likely to occur.
Decision Making Under the Gambler’s Fallacy
The main issue with both the classic and inverse gambler’s fallacies is that they completely cloud and undermine your decision-making. This is because you’re basing your betting choices on completely random and unrelated past results while fundamentally misunderstanding precisely how games of chance work.
In the process, you’re ignoring other key considerations, such as bankroll management and bet coverage, which are particularly crucial when playing games like roulette.
This makes it much harder to minimize the risk and extent of loss over time while putting you at the mercy of random gaming outcomes over which you have no control at all. Ultimately, decision-making under the gambler’s fallacy can be highly harmful over time, potentially increasing both losses and compulsive betting behaviors.
Example of Gambler’s Fallacy
There are numerous real-world examples of the gambler’s fallacy, including observing slot machines and targeting those that haven’t paid out in a while in the belief they’re more likely to deliver a win. However, there are other, more relevant examples, including the following:
Fair Coin Flip
This is the most straightforward example of a gambler’s fallacy. If a coin was to be tossed 10 times, you may be predisposed to think that it would land on tails roughly half of the time. So, if the first three tosses land on ‘heads,’ you’d instinctively expect a deviation from this result next time around.
However, this ignores the fact that the outcomes of each toss are statistically independent of one another, with the probability of landing heads or tails one in two every single time.
Of course, this rule remains unchanged regardless of how many times you toss the coin. The chances of landing five successive heads are approximately 1-in-32, for example, at which point you may be naturally inclined to expect the next toss to produce tails.
However, the probability of landing four consecutive heads and then tails is also 1-in-32, and it’s important to keep this in mind when gambling online.
Gambler’s Fallacy in Roulette
As we’ve touched on, roulette players may also be victims of their own particular gambler’s fallacy. This has much to do with the fact that online roulette is a game of chance and one that sees all results and outcomes produced by sophisticated random number generators (RNGs).
However, if you observe an extended run of red on the roulette wheel, this sequence of results may either encourage you to place your next bet on black or mistakenly believe that the same pattern is statistically likely to continue. Both are excellent gambler’s fallacy examples and are likely to occur when playing roulette both on and offline.
Both strategies are also deeply unreliable, as they’re based on factors that have no direct correlation with future results or outcomes.
How to Avoid a Gambler’s Fallacy?
The human mind naturally looks for patterns and structure in the information that it processes, with the neocortex (the outermost layer of the brain) responsible for our ability to seek out and recognize sequences.
So, learning how to avoid the gambler’s fallacy is counterintuitive on a basic psychological level. However, here are some steps to help you minimize its impact when gambling online.
- Educate Yourself on Probability: Whether you’re tossing a coin or playing online roulette, every outcome has its own unique probability. For example, betting on one number to land in a game of European roulette has a probability of 1-in-37, and the key consideration here is that these odds don’t change from one spin to the next. Once you understand the probability of relevant random outcomes in your chosen games, you can begin to make more informed and rational decisions.
- Learn from Experience: As you play games of chance online, you can begin to see that there are no patterns or sequences in results over time. It’s essential to use this experience and learn from it directly, just as you should identify linked events in games of skill like poker or blackjack.
- Randomize Your Decision: When playing games of chance, you should also consider making random decisions. You could even base these on naturally occurring random number generators, such as the flip of a coin, which contributes to a balanced strategy that respects the random nature of games like roulette. It also simplifies your gameplay strategy and allows you to focus on bankroll management and bet coverage.
Types of Gambler’s Fallacy
Broadly speaking, there are two types of gambler’s fallacy observed at land-based and online casinos. These include:
Type 1 Gambler’s Fallacy
Both the classic and inverse gambler’s fallacies are examples of type one, which is built on the assumption that casino games are perfectly fair and a correlation exists between past and future outcomes.
Ultimately, type one gambler’s fallacies usually occur because of a fundamental failure to understand probability and statistical independence. This makes effective decision-making impossible, especially during fast-paced games of chance like roulette.
Type 2 Gambler’s Fallacy
Conversely, a type two gambler’s fallacy occurs when players start to search for bias and experiment with hypothesis testing.
More specifically, they’ll observe periods of gameplay in the belief that any underlying random number generators are rigged, although this misconception is most common in brick-and-mortar casinos.
Like type one, this is counterintuitive and highlights a complete misunderstanding of how games of chance work. Once again, it’s also a mindset that distracts you from the aspects of gambling that you can control, as you instead focus your time on attempting to identify bias where it does not exist.
The Hot-Hand Fallacy
The gambler’s fallacy mindset can also be applied to more general aspects of betting, such as winning and losing streaks. For example, you may believe that you’re due a win after a string of losing spins or outcomes, which causes you to either continue gambling indefinitely or increase your stake in the pursuit of larger payouts.
You may also continue gambling beyond what you can afford after a series of wins in the mistaken belief that such a sequence is statistically more likely to continue.
This mindset has a basis in neurology and stems from the ‘representative heuristic.’ This means that when we’re trying to assess the probability of an outcome or series of events, we make poor decisions based on existing mental prototypes and stereotypes that are either flawed or not relevant.
Once again, this causes you to overlook more important factors when wagering on games of chance. Like similar versions, the ‘hot hand’ fallacy also fails to recognize that online casino outcomes are completely random and inconsequential to one another.
