Gambler’s fallacy is a behaviour we see in the casino and online casino world, a lot.
Also known as ‘Monte Carlo fallacy’, it is a belief that if something is occurring repeatedly and frequently, a similar occurrence may or may not happen in the future.
It is a logical belief that when an outcome gets repeated often, at some point, the same outcome will become less frequent and, therefore, it is easier to predict the result of something.
A good example of this is in football, where people believe that if a team has frequently been winning, it will soon start losing.
Gambler’s Fallacy Or Monte Carlo Fallacy
Generally, gamblers fail to understand that the outcome of each occurrence is independent.
This means that the result of a game rarely depends on past results.
In business, too, investors tend to fall prey to the gambler’s fallacy. Investors tend to make huge losses out of inaccurate predictions in stock market performances.
People will buy more shares in a particular company, thinking that the gains from their investments will increase. Investors can make wrong judgments based on the past performance of the company.
The origin of this fallacy, known as the ‘Monte Carlo fallacy,’ can be traced back to an incident that took place on 18th August 1913.
This happened at the Casino de Monte-Carlo in the summer of 1913 during the spinning of a roulette wheel. The black colour appeared 29 times repeatedly when the wheel was spun. This led to the greatest gambler’s fallacy of all time.
Speculators continued to make huge losses because they relied on this occurrence not happening again. On seeing the colour black ten times, they continued to play, thinking that the colour red will appear next.
Gamblers went on placing bets thinking that the colour red will appear on the top, but no such luck! The colour black appeared on the wheel, twenty-nine times in a row.
Many ended up placing wrong bets due to this fallacy. Even today, a number of people continue to make losses owing to such uninformed reasoning.
Although it might sound obvious, it still needs to be stated that the wheel cannot memorize its outcomes. Therefore, the chances of getting the colour black or red on top of the wheel occur independently.
The results are also not based on the number of times a particular colour has appeared on the Roulette wheel in the previous spinning.
Gamblers fail because they believe that the outcomes will be based on past results. Such misguided logic has taken deep roots at casinos, and this perhaps might continue in the future.
How To Avoid The Gambler’s Fallacy
It’s good to forsake emotion and superstition and, instead, rely on cold logic.
For instance, a gambler may wrongly conclude that since the coin has landed on the head five times continuously, it will land on the tail in the next game.
It is, therefore, important to bet without using information from past results. For instance, the dice cannot recall previous games’ outcomes, and consequently, they cannot affect the results of the next round.
Gamblers are prone to making wrong assumptions as emotions come into play.
But it’s important to be dispassionate while placing a bet. In this way, the gambler’s fallacy can be avoided. And the bettor can improve his odds of winning.