Imagine the scenario. You’re a doctor in an emergency department. You’ve been working for 14 hours that day and over 80 hours that week.
You’ve just received news that your budget has been cut, again. You can hear the clamour of a busy waiting room, with patients demanding attention. In front of you is a crying child with a bruise on their forehead. They have suffered a heavy fall, head meeting concrete. The father is shouting at you, demanding that you sanction a costly head scan.
What do you do? Not sure?
I’ll come back to you.
In a series of articles, we have examined various cognitive biases and how they might negatively affect your betting. We’ve seen how acting like a chimp makes us too emotional; how we seek information which confirms our beliefs, ignoring anything that doesn’t; how we prefer recent information and the here and now, ignoring past data and being unable to project sensibly into the future; how we think our actions affect the outcomes of events, even when it is obvious they can’t; how we think we know more than we know, even when presented with evidence of our fallibility; how we’re bad at assessing risk; how we listen too much to experts; how we see patterns in data where there are none; and how we are too confident in our own predictive ability.
It’s a wonder that any of us ever win a bet.
Most don’t, of course. At least, not in the long-run. They might pull off the occasional coup, win big on an unnoticed outsider, or successfully lump-on an odds-on certainty, but, over time, the vast majority of punters lose money.
If punting is a pastime for you – a harmless diversion from the ennui of daily life – then this, perhaps, isn’t a problem. After all, a few dollars wasted on a golf or footie bet to enliven your television viewing is no different to a few dollars wasted on a pizza.
But if you’re reading this, it likely means that returning a long-term profit from your punting is of some interest to you and, if it is, then tackling your cognitive biases – the biases you share with most human beings on the planet – is key. After all, on a betting exchange, it is those other human beings that you are competing against.
At a roulette table in the Monte Carlo casino in 1913, black fell 26 times in a row. Gamblers lost millions of Francs. They believed the law of averages meant that red had become an increasingly likely outcome and bet accordingly.
In our evolutionary past, we competed with them too. And scientists believe our cognitive biases gave us our edge, allowing our genes to survive. In the natural world we lived in, we needed to be able to filter, to fill in gaps in the information we were given, to make fast decisions to stay ahead of others, and to only recall the things that helped us progress.
We are designed to remember the time a family member stepped on a patch of straw, only to be bitten by a snake. We forget all the other times people have stepped on a patch of straw safely. Whenever we are out hunting and our eyes spot a patch of straw, we avoid it, almost without thinking. It is this ability to “thin-slice” – a term first used by Ambady and Rosenthal – that has likely meant that our genes won the evolutionary competition that others lost.
Life though, is more complex now. And whilst thin-slicing may have advantaged our deep-ancestors, it is not necessarily that helpful when working in the financial markets, or judging a court case, or deciding whether to give a head scan to the child of an angry parent in an emergency department.
To combat our cognitive biases, many hospitals around the world now insist that doctors employ algorithms to assess the patients they are presented with. They have been shown to improve diagnosis rates and reduce cost. In the case of infant head trauma, many doctors use the PECARN algorithm to objectively decide on the likely risk of certain symptoms. Presented as a flow chart, it offers a tired and emotionally-strained doctor the opportunity to make a rational, and better decision.
PECARN, like other similar medical algorithms, combines two key elements: it insists that a process is followed; and unbiased data drives that process.
This website contains a wealth of information about how to accurately assess the relative chance of different outcomes in a sporting event, how to convert those chances into “true” odds, how to decide when to bet, and how much to bet.
No-one is trying to suggest that recreational punting doesn’t have a place, as long as the punter is clear that it will only ever provide excitement and entertainment, rather than any long-term profit.
But if you’re serious about making this game pay, then you must recognise that your cognitive biases, perfected by years of evolution, are an enemy that must be caged and controlled. Process can do the caging; data can do the controlling.
As a passionate sports’ fan and punter, Jack has written about sports and betting for over a decade, winning the Martin Wills Award for racing journalism in 2002 and writing Winning on Betfair for Dummies, first published in 2006 and now in its second edition, having sold over 35,000 copies in two languages.
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