Why We See Gambles As Certainties

As someone who had worked for a bookmaker for a couple of years, I have seen countless examples of individuals following their reasoning into financially damaging betting strategies. It always comes across as absurd when an average sports fan truly believes they can pick a good bet from a bad one, knowing well that the industry takes enough money to form markets so efficient that only select few individuals can consistently beat them. And this absurdity has fuelled the growth of online gambling into a billion-dollar industry over the past decade.1

Why people mistakenly think they’re skilled gamblers

The question I have always wondered as a bookmaker is simple: What makes people so sure they’re right? Most customers are aware that these companies are wildly profitable, so why do they view themselves as an exception? Recent work2 argues for a simple conclusion — gamblers intuitively form biased interpretations of how gambling works and can use their experiences and motivations in a self-serving manner to align with their decision-making. In other words, we’re good at convincing ourselves that we’re more skilled than we really are. 

The product is the so-called ‘mother of all psychological biases’: overconfidence. Bettors believe themselves to be more skilled and informed than they truly are, and they underestimate the extent to which the odds are stacked against them with any commercial sportsbook. And bookmakers use this to their advantage.

Some firms want to teach customers to gamble better

While most online firms would much rather exacerbate this bias instead of helping individuals acknowledge their limitations, the ‘sharp’ bookie Pinnacle has become an anomaly by producing genuinely useful guides on how to apply insights from mathematics, economics, and psychology to gambling behavior. In recent times, Pinnacle has published articles on the effects of confirmation bias, heuristics, the halo effect, the hot hand phenomenon as well as the illusion of control, all noted facets in behavioral science. This has occurred alongside a successful business model of both running less juice (i.e. margin) than competitors and offering customers the highest betting limits one can find.

This doesn’t entirely add up, does it? Pinnacle has no problem in allowing sharp customers to stay around — and they even try to teach you skills that will make you more effective in playing against them — yet their business has reportedly only become even more successful over the past couple of decades. 

There is one clear insight here. Pinnacle can afford to inform gamblers of their limitations because simply informing them isn’t enough to deter them from loss-making strategies. The age of cognitive psychology research that led to the birth of behavioral economics was heavily built on the notion that humans are not good statisticians, and that when offered an opportunity to display effective probabilistic reasoning, they often fall short. The profitability of sportsbooks is a grand illustration of this. 

The future of gambling

Following a 2018 Supreme Court ruling overturning a long-held prohibition on sports betting, online gambling is nearing an explosion in the US market. Meanwhile in Europe, several mergers and acquisitions have left the industry creeping towards a powerful oligopoly. As neither of these evolving situations face any sort of intense regulation, it is a pressing question to policymakers as to whether this is a problem or not.

From a behavioral perspective, we cannot dismiss the act of engaging in loss-making gambling strategies as irrational.

Most bettors gamble in the company of friends, with the purpose of making the sporting experience more enjoyable. For most of them, that is a price they are willing to pay. The issue is that in deciding to dismiss the application of more rationality-based economic models to gambling behavior, we don’t have enough research to put forward anything better. 

Two years ago, Nature ran an editorial titled ‘Science Has a Gambling Problem’, in which it is argued that neither governments nor academia pay enough attention to the problem of gambling, and that research is sparse and underfunded. It’s concerning that two years later — while online gambling has skyrocketed even further — this position has barely changed.

A paper from Livingstone & Adams3 set out some key principles for the practice of effective gambling research, but this is an ideal that still feels a long way from fruition. In fact, the only major published report on the potential for behavioral science in gambling4 falls rather short. While this report notes that small interventions prove effective in reducing excessively risky play, it’s a very small first step. 

Working with SkyBet and Bet365, the interventions aimed at reducing friction in accessing responsible gambling information showed a fairly small level of practical significance. They were also relevant to only the small percentage of customers that the bookmakers in question had decided had already crossed into ‘at-risk’ territory. 

Opportunities to nudge gamblers

So, what about the numerous opportunities for nudge style interventions in the actual act of placing bets? Why should we wait until someone is dealing with the serious mental costs of gambling before trying to help them consider their actions?

Research forays such as this are mirrored by comprehensive evidence that bookmakers themselves have been taking advantage of behavioral factors in their marketing campaigns for quite a while now. In a survey of bookmakers’ advertisements from the 2014 World Cup,5 evidence suggested that ads which incited the representativeness heuristic, such as the odds that a team’s star player scores the first goal, helped move customers toward bets with the highest expected loss. Additionally, papers from Lopez-Gonzalez and colleagues6,7 highlight the power of gambling advertisements in playing into the illusion of control, as well as the perception of ‘normal’ gambling behavior.

All of this and more is highlighted in Newell’s paper on ‘Dark Nudges in Gambling,8 which further emphasizes one key point: Gamblers are being influenced into playing a highly unfair game, and regulators are not doing much about it. Bookmakers publicly claim to value responsible gambling, but the pitiful offering of such resources on their online platforms suggests otherwise. In any case, attempts at nudging gamblers towards these resources are outweighed by the attempts to nudge them towards the bets that got them in trouble in the first place. 

What can be done

As the world emerges from quarantine in the coming months and professional leagues resume, many people will be influenced into losing more by betting online, and behavioral science has the tools to try and help them. While the path from here to better research (and eventually to better policy) will be complex and time-consuming, I thought I would end with some low-hanging fruit that forms a foundation to be built on:

  • Remove the ability for bookmakers to place pending periods on cash withdrawals from accounts. On most sites, customers can deposit money to bet instantly but must sit through a waiting period to take out their winnings, allowing them to cancel their withdrawal when they’ve been enticed into another bet or have changed their emotional state. In behavioral science, this is called ‘sludge’.9 
  • Increase salience of overrounds/juice. Most customers will not be aware of the margin placed on the ‘true odds’ of bet outcomes. Increasing its visibility makes it clear how much of an edge the customer needs to be profitable. This would also discourage bookmakers from pushing their margins too high and promoting bets that maximize the customer’s expected loss.
  • Decrease friction in seeing one’s lifetime P/L ratio. Most betting customers will not know how to see their total net profit/loss with a firm. This should be accessible within one click from the bookmaker’s homepage. Seeing one’s past losses may help them question their current prospects.

Gamblers are being influenced to play an unfair game crafted by firms that use the irrationalities of gamblers against them. Through easy changes such as these, the 2020s can be the decade in which gambling becomes fairer. 

How To Fight Fake News With Behavioral Science

There has not been a time in recent history when the truth has mattered more than today. As governments, the medical system, and global citizens grapple with misinformation surrounding the economic and health costs of COVID-19, knowing what information to trust is now a matter of life and death, and helping people separate fact from fiction is critical.

False beliefs can be stubborn, and popular fact correction strategies such as the myth-versus- fact format may actually backfire.1 Take for example the flesh-eating bananas hoax of the year 2000. Stories of bananas causing a flesh-eating disease spread like wildfire via emails, text messages, and word of mouth. The Centre for Disease Control and Prevention (CDC) set up a hotline to counter misinformation and to assure worried Americans that bananas were perfectly safe. While clearly a hoax, the CDC’s efforts, in fact, lent credibility to this crazy story and even increased some people’s acceptance of it, so much so that similar stories were doing rounds even a decade later.2,3

The cognitive sciences suggest that we have information processing blind spots that make us susceptible to believing false information. When we encounter a claim, we evaluate its truth by focusing on a limited number of criteria. We ask ourselves at least one of the following five questions: 3,4

1. Do Others Believe It?

We tend to turn to social consensus to evaluate what is likely to be correct. Research shows that we are more confident in our beliefs if others share them, and we trust our memories more if others remember events the same way.5 In order to gauge consensus, we turn to external resources, or we simply ask ourselves how often we have heard this belief. Chances are that we are more frequently exposed to widely shared beliefs than to beliefs that are held by few people.6 The popularity of a belief is actually quite a poor measure of veracity, and, to complicate this, we tend to do a poor job at tracking how often we have heard something and from whom. So, we end up relying on messages that feel familiar. Small but vocal groups can take great advantage of this situation by employing the illusory truth effect: the more they repeat their message, the more familiar it feels, giving the impression that there is wide social acceptance — when really there isn’t any at all.

2. Is There Much Evidence to Substantiate It?

It is not surprising that we are more likely to believe something when there is evidence to support it. Often, we look for evidence in peer-reviewed scientific articles, news reports, and other sources we trust. More often though, we take a far less taxing and speedier approach by making a judgment on the basis of how easy it is to retrieve or obtain some pieces of evidence. For example, when recalling evidence feels difficult, we often conclude that there is less of it, regardless of how much evidence is actually out there.8 This is an example of the availability heuristic bias, which can have a profound impact on human decision making.5

3. Is It Compatible with What I Believe?7

We are inclined to believe things that are consistent with our own beliefs and knowledge. When something is inconsistent with our existing beliefs, we stumble. This shows up even in simple tasks — we take longer to read a text that we disagree with, and experience negative feelings while doing so. So, it is possible that we believe in false facts simply because they are more compatible with what we already believe.9,10 This is a particular case of cognitive dissonance, where we might try to rationalize our belief of what is known to be false by changing our other beliefs and cognitions.

4. Does It Tell a Good Story?

Who doesn’t like a coherent story? When details are presented as part of a narrative, and individual elements fit together in a coherent frame, we are more likely to think that they are true.8  Research suggests that we react positively to efforts that help improve the coherence of the information we get.11

5. Does It Come from a Credible Source?

Indeed, we are more likely to accept information from what we believe to be a more credible source.12 People evaluate credibility by looking at the source’s expertise, past statements, and likely motives. And as expected, the ‘familiarity’ of the source matters. Even repeatedly seeing a face is enough to significantly increase perceptions of honesty, sincerity, and general agreement with what that person says. What is more surprising is that even the ease of pronouncing the speaker’s name influences credibility. A study in 2010 demonstrated that people are more likely to believe statements when they are made in a familiar and easy-to-understand accent compared to one that is difficult-to-understand.13

How fake news takes hold

We know that we humans process information imperfectly, so it isn’t a surprise that fake news takes hold so easily. The myth-versus-fact format we most often adopt to combat fake news isn’t working. A growing number of studies show that this strategy can have unintended consequences, namely increasing the acceptance of false beliefs, spreading them to new segments of the population, and creating the perception that these false beliefs are widely shared.14 As seen in the case of the terror bananas, just knowing that there might be some controversy about a fact seems to undermine people’s beliefs about the truth. 

The perfect example of this is the debate on the efficacy of vaccines.15 The anti-vaccine movement owes much of its origin to a paper published in The Lancet, a highly prestigious peer-reviewed general medical journal. This paper, which linked the Measles Mumps Rubella (MMR) vaccine to autism, managed to ignite fierce debate about the supposed relationship between vaccines and autism, all despite the eventual retraction of the paper in 2010. Even though several scientists have since debunked the study — in addition to the author being charged with misconduct and barred from practicing medicine in the UK — some still subscribe to the belief that vaccines cause autism to this day.16

Takeaways

How then can we fight the uptake of false information? Recent research suggests that some simple ploys can be effective:17

  • Ideally, ignore false information, and repeat the correct information.
  • Remove anecdotes and photos from communication on false information, as they only further serve to capture attention, boost comprehension, and enhance the acceptance of the false claim.
  • Make communication as clear and as simple as possible.
  • Make information accessible through clear, step-by-step exposition and avoidance of jargon.
  • Keep the public informed — one of the most powerful strategies for avoiding misinformation is knowing that it is coming.

It is true that our era is not the first age of widespread falsehoods. These are early days in the war against fake news and false information; and we will find effective ways to fight them — such as the use of technology and artificial intelligence. While we may never fully quash the scourge of false information and fake news, we will surely find new ways to put up a solid fight.