What have you learned about the mistakes that people often make when trying to predict the outcome of games? For example, in the section in the book on horse racing, you mention that people often gamble too much on underdogs. Are there other common errors?
There’s a number of biases we fall into. One is the “favorite-long-shot bias.” In horse racing, if you look at the horses that are in the back of the pack, they have higher odds than their performance suggests they should. In other words, people overestimate the chance of long shots winning. That feature also pops up in other sports, and even in how we predict weather or severe political events. People tend to focus on things that are surprising and overestimate the chances of unlikely events.
Another is known as the Monte Carlo fallacy. This originated in roulette, where when the same color comes up multiple times, people tend to start piling money on the other color. They think that if black has come up a lot, then red must be due. Of course, it isn’t, because the result is still completely random, but there’s this psychological bias dragging us one way.
A third psychological quirk which pops up a lot in games is what’s known as gambler’s ruin. This is the tendency where if people win at a game, they increase the amount of money they’re risking. But often when people lose, they don’t decrease the amount that they’re risking. Mathematically, this will always lead you to bankruptcy. This is why bankroll management is incredibly important, because you need to resist this temptation and adjust the amount you’re risking depending on where you are in the game.https://www.washingtonpost.com/news/wonk/wp/2016/07/13/the-scientific-way-to-win-in-vegas/