Betting Pyschology & the Addictive Power of Maybe
Posted 2nd November 2017
When people strike a bet it is reasonable to assume that they do so in the belief that they hold some advantage over the odds. More specifically, whilst most punters are aware that the bookmaker shortens his odds as a way of paying himself a commission, they nonetheless still make those bets. We are thus faced with two alternatives.
1) Punters are behaving irrationally.
Rational choice theory dictates that we always make rational decisions by trying to maximise our advantage whilst to minimising our losses. Financially, that means doing things that will increase our wealth, whilst not doing things that will decrease it. If the bookmaker's margin ensures that, on average, his customers are facing negative expectation, this would imply that punters are behaving irrationally. Of course, most people aren't irrational. They don't like throwing money away simply for the sake of it.
2) Punters are overconfident.
Alternatively, whilst punters may understand that betting is, on average, a losers' game, their perceived skills ensure that this rule does not apply to them. Ask a group of 100 people whether they believe they are good drivers. The outcome is predictably obvious, with typically more than three-quarters saying they are better than average. Of course, it's not possible for more than half of them to be above average, so many of them will be wrong. The same will arguably be true in sports betting, although the discrepancy between perception and reality will be even greater. Most people will believe they've made a bet because it's a good bet, with a good chance of winning, or at least a better chance of winning than implied by the odds, otherwise they would not have placed the bet in the first place. Yet most punters will end up losing money over the long run. Those perceived skills of forecasting sporting outcomes are largely illusory. Whilst most punters will challenge this suggestion, the data (on customer betting returns) simply speak for themselves.
Psychologists describe the bias of overconfidence as illusory superiority. We might now very well ask: what is it that breeds such illusory superiority? The answer can be found in the way we are fooled by another illusion: the illusion of causality.
The illusion of causality
Illusions of causality occur when people develop the belief that there is a causal connection between two events that are actually unrelated. In linear environments like hitting a tennis ball, the way I hold and swing a racquet will have a significant influence on my quality of play. Such things can be acquired through learning. In mostly random environments like sports betting markets, the links between cause and effect are far more tenuous. This is not to argue that it's a matter of luck whether Manchester United beat Huddersfield Town in the Premier League - we know Manchester United's players possess more skill. Rather, in a fixed odds betting market where the prices will closely reflect the 'true' outcome probabilities, such handicapping reduces the reward I can achieve by backing the better team. By doing so, whether I hold any profitable expectation is then much more the subject of chance.
Sadly for bettors, the idea that most of what happens in betting is random is a difficult pill to swallow. Humans evolved in a world where it pays to think linearly in terms of cause and effect. As Nobel-prize winning psychologist Daniel Kahneman explains in his book Thinking, Fast & Slow, seeing patterns where regularities appear by design, not chance, was part of a general threat detection and avoidance mechanism, preventing us from becoming something else's lunch. Consequently, it's easy to assume that when we win a bet our knowledge and forecasting prowess had something to do with it. 'I made money from my predictions ⇒ I am skilled at prediction ⇒ I caused my wealth to increase' is a far more coherent, appealing and psychologically rewarding narrative than 'I was merely guessing and got lucky', giving us a sense of control (in our ability to cause things to happen) that is equally illusory.
Yet if the sense that we can predict the future is largely just an illusion, what has us trying and trying again? We need to turn to evolution again to find an explanation.
The addictive power of maybe
Whilst people's predisposition to risk taking can vary, the engine for much of the behaviour can be found in a part of the brain called the limbic system, the oldest part of our brain. The limbic system is responsible for endocrine (hormone) function and regulation, and is involved, amongst other things, in motivation and goal-directed behaviour. In large part it is the source of intuition and hence our predisposition to suffer cognitive biases, particularly in random environments. The hormone dopamine is implicated in directing you to get what you want. Contrary to popular belief, however, it is not about reward per se, but about the anticipation of reward, or the craving response. Paradoxically, dopamine levels for a bettor will be at their highest not when Huddersfield Town beat Manchester United, but when they are anticipating a successful outcome after backing them to do so.
It turns out that the dopamine response is greatest when outcomes are uncertain. Disappointment lies not so much in the failure to achieve a reward but in the habituation of a guaranteed one. Play tic tac toe for more than 5 minutes with a young child and you're likely to get very bored. Professor Robert Sapolsky explains what happens to monkeys where rewards for doing work are only given 50% of the time: their dopamine levels "go through the roof." When rewards are guaranteed, there is no longer any need for the brain to elicit a craving response, since reward expectation can be taken for granted. When rewards are uncertain, a craving response ensures that you keep trying, even after the reward has failed to materialise. Sapolsky calls this the addictive power of 'maybe'. Now we know why Asian handicap and point spread markets, which aim to equalise the probabilities of outcomes, prove to be so popular.
It's easy to see how the unpredictability of sports betting can hijack the brain's reward centre. Games of chance prey on this dopamine system. Win a bet and the reward centre constructs a pattern of causality for the purposes of anticipating future rewards. Whilst most sports betting is random, we prefer not to see it that way. Now we have a neural explanation for the illusion of causality. Instead of switching off, of getting bored by the haphazard payouts, our dopamine neurons become obsessed. The random rewards of gambling are much more seductive than a more predictable or even guaranteed reward cycle. It is the uncertainty and anticipation in sports betting, rather than the financial rewards themselves, that are utility-causing. In fact we are simply playing to play, rather than playing to win.
You can find more about the psychology of betting in my latest boik: Squares & Sharps, Suckers & Sharks: Science, Psychology & Philosophy of Gambling.
If you think you have a betting or gambling problem, Football-Data encourages you to seek help and advice from the following organisations: