I had a funny thing happen to me the other day. I was in Las Vegas playing baccarat. Turns out, the game is really simple: There is no skill to it, and all you have to do is flip the cards over and pretend to be lucky. I was having a hell of a time with it – great fun and even greater luck, and ended up with a pile of chips on my table.
Here’s the funny thing: I was annoyed because I expected to lose.
Even though I pretty much always lose, I love gambling. The energy and noise of a crowded table, the bright colors of the chips, the sound of the dice hitting the back of the craps table, the cackling of the roulette ball as it bounces around the wheel. Even the carnival lights of the slot machines have been known to pull me in a time or two.
I’m a smart enough guy. I know that over a lifetime, I’m going to lose a lot more money than I’ll ever win. I know that over-stimulation, like the kind intentionally created in casinos, causes humans to make bad decisions. But even armed with that knowledge, it’s hard to resist just one more hand, one more roll, one more spin. This is especially true if I’ve had a run of bad luck. Bad luck has to turn around eventually, right?
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Wrong. Not just a little wrong, but disastrously wrong. A large group of gamblers at the famous Monte Carlo Casino found this out the hard way on August 18, 1913. It was a typical day at the roulette table until the ball started landing on black and didn’t stop. First five black numbers in a row, then 10, then 15. The excitement and the crowd grew as everyone bet on red, sure that after so many black numbers, a red must be coming up. But they kept losing money as the string of black numbers grew to 20, then 25. You can imagine the groaning and cursing as the crowd reached into their pockets to bet again and again. But the ball landed on black 26 times in a row. By the 27th time, when red finally hit, the gamblers were out millions of francs, and one winning bet on red wasn’t nearly enough to make up for the previous losses.
You’re not alone if you read this and feel sorry for the gamblers, assuming how crazy it is that black hit 26 times in a row. But here’s the thing: the probability of black hitting one more time is exactly the same as any other combination and, like flipping a coin, the probability of the 26th play landing on red is exactly the same is it was the first time. The probability of a random event does not change because of the events that preceded it. The belief that you are more likely to win after a loss is a classic gambler’s fallacy (also called the Monte Carlo fallacy).
Why is this so hard to wrap our brains around?
The reason is that our brains don’t deal in probabilities; we deal in frequencies of events. Back in the wild, as we were evolving, probabilities were pretty unimportant. But frequencies were the difference between life and death. If you saw seven elk die after drinking from a lake, you didn’t need to analyze the probability that the water might kill you, you just found another lake. So we evolved with frequency radars, much like bats evolved with sonar. We use that frequency to see into the dark crevices of data and make gut decisions. That is a key reason why we survived the wild, but it eats us alive in the daily grind of civilization.
As a result, the brain has trouble making sense of long odds. A number like one out of 10 is pretty easy for us to understand, and maybe we can even fathom one in 100. But the odds of winning the Powerball are about one in 175,000,000. We simply can’t compute or comprehend numbers on this scale. So, we anchor on something we can understand and focus on the “one” – as in one person will win, and it could be me! This is why most of us irrationally prefer to take longer odds on a higher value than to make safer bets on smaller values.
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The moral of the story may be to stop gambling, but that doesn’t seem like any fun at all. Plus, frequencies are everywhere, so these issues don’t just come up in casinos. Maybe you want to enjoy a nice day off without getting fired: What are the odds of successfully playing hooky versus getting caught? How about the weight you will gain eating that Twinkie versus downing that Coke? Is it safer to fly or take a train?
So, how do we give ourselves a fighting chance? To overcome the gambler’s fallacy, think carefully about whether events are independent or linked. Just because an airplane got struck by lightning and crashed last week doesn’t mean airplanes are any less safe, nor does it mean they are safer because “lightning doesn’t strike twice.” If you are winning at craps, leave, not because the streak is likely going to end, but because the odds are against you, in general.
You may reason that after decades of playing the lottery and losing, surely you’re “due” for a win. Or maybe the stock market was down for seven days in a row so you think, surely it will go up tomorrow. That’s the gambler’s fallacy, and the only way to avoid it is to discard irrelevant past experiences, consider only relevant data or stop gambling.
That brings us back to my Vegas story and why I was so unhappy about winning. I have worked hard to train my brain that gambling doesn’t pay and that the odds are always against me unless I have relevant data. So I go to the casino to lose, not to win. As it turns out, I am surprisingly good at it!
Jeff Stibel is the former CEO of Web.com and vice chairman of Dun & Bradstreet, a partner of Bryant Stibel and an entrepreneur who also happens to be a brain scientist. He is the USA TODAY bestselling author of “Breakpoint” and “Wired for Thought.” Follow him on Twitter at @stibel.
The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.