What is the gambler's fallacy?

We all know about the gambler’s fallacy, even though we may not be immediately aware that this is what it is called. Picture a roulette player who starts betting on "red" because the wheel is "due for a red outcome."

This is, of course, not true and is a prime example of what the gambler’s fallacy is, also known as the Monte Carlo fallacy. In this article, you will learn all there is to know about the gambler’s fallacy and why it is a unique human behavior that applies across different walks of life.

What’s the gambler’s fallacy, really?

The gambler’s fallacy is the erroneous belief that because a series of events resolved in a certain way, the next random event would be different. There is a famous example from 1913 when, at the Monte Carlo Casino, the roulette wheel rolled black outcomes 26 consecutive times.

Bettors would be betting on red after almost every one, because they now felt confident that events were due for a change. However, this is not the wheel of roulette, or random events work. The anecdote gave the gambler’s fallacy its other name: the Monte Carlo fallacy.

Why do humans fall for the gambler’s fallacy in the first place?

As recently noted by a professor in Ohio, humans tend to be biased, and they tend to think that just because they like card games or sports, they somehow can have a "sort of impact on it."

Human brains are hardwired to seek patterns, which is to say that it is in our nature as a species to try and discern events that happen in a specific order.

This is why randomness confuses us; we default to our deeply-rooted understanding that 26 consecutive roulette spins should not happen, backing a different outcome instead.

Because we understand and like activities, we then tend to indulge in the belief that we can have control over it, even when it comes to a sports bet, for example. Many young people today, about 40% of Gen Zers, think that sports betting is a form of investment, for example.

The example with the flip of a coin

To help you illustrate the gambler’s fallacy, let’s think of the flip of a coin. You have two outcomes - heads and tails, and they are exactly a 50% chance of any outcome.

If you flipped a coin and it landed six times on heads, this doesn’t mean that the chance of it landing tails on the seventh attempt has increased. It is exactly as it is - 50%.

People argue, however, that the chance of seven tails is smaller than that of different outcomes, for example. And they are right about this.

Getting seven tails in a row is about a 0.78% chance, compared to an12.5% chance for three tails in a row. But even then, the fourth toss of a coin would be exactly a 50% chance of landing on either outcome.

The main distinction here is that the sequential probability is small, but this does not rule out the basic maths of each flip of the coin.

Not to be confused: Gambler’s fallacy versus hot hand fallacy

Now is a good time to bring up another cognitive bias, known as the hot hand fallacy. While it shares some similarities with the gambler’s fallacy, the two still represent different beliefs. So, what exactly is the hot hand fallacy?

Unlike the gambler's fallacy, which believes that a certain event is "due," the hot hand fallacy reinforces a different bias - the understanding that because someone performed well in a previous event, they are bound to perform well again. In other words, "someone is on a roll." Here are two concrete examples to help you differenatite between the two:

• Gambler's fallacy: After five rounds of black roulette outcomes, a player now bets on red, convinced that it would be the outcome the next spin of the wheel produces. However, the odds of a red/black outcome haven't changed - they are exactly 50%.
• Hot hand fallacy: A player wh is playing, let's say, a slot machine and has had three wins in a row now believes that the machine is "hot" and should therefore continue to play.

What is the real-world impact of the gambler’s fallacy?

While this phenomenon may be attributed to gambling and games with random outcomes in general, there is a very real impact on people’s well-being, mental health, general well-being, finances, and relationships.

A person who is misled by the idea that an event is due because it has not happened recently could make poor decisions in other walks of life as well.

First, though, players may bet increasing amounts because of the gambler’s fallacy, leading to losses and a knock-on effect on personal well-being. Or you may invest in a stock or company because it is "due" for such a company to be a success.

An even more banal example would be the gender of your next child. For example, just because you had two boys, it doesn’t mean the third would be a girl.

Will I fall for the gambler’s fallacy?

In honesty? It is possible. The gambler’s fallacy is inherently mischievous. It’s the very human idea that because we understand a certain event - whether this is cards, casino, or sports betting- we are also likely to be able to outsmart probability - change something in the statistical occurrence as if through our sheer will or "knowledge."

Very few people would fail to understand how the Monte Carlo fallacy works in practice. However, we continue following the same patterns and fall into them. It doesn’t help that certain gamblers, such as Niko Tosa and Mikki Mase claim to have "outsmarted" games of chance, such as roulette and baccarat, respectively.

To avoid falling for the gambler’s fallacy, it is best to just remind yourself of how probability works and why events based on chance (such as a certain outcome occurring) are independent, not consequential, and not influenced by preceding events.

FAQs

Is there really such a thing as a gambler’s fallacy?

Yes, there is, and it is a well-documented psychological phenomenon. It is the idea that after a series of random events, a particular outcome is "due" simply because it has not happened recently. It is best exemplified in gambling, but it also grafts itself onto real-world events, such as investing and financial decisions.

What’s an example of a gambler’s fallacy?

The most famous example of the Gambler’s Fallacy is a famous casino play in 1913, which actually gave the fallacy an alternative name, the Monte Carlo Fallacy.

At the time, a roulette wheel spun 26 times on black, even though gamblers were increasingly betting on a red outcome to happen because of the fallacy and the understanding that a change was "due."

Is the gambler’s fallacy different than the hot hand fallacy?

Yes, these are two different cognitive biases, which are closely related, but exemplify different ways of perceiving events. The hot hand fallacy argues that because someone has recently won - or won repeatedly - they are more likely to win again.

The gambler’s fallacy takes events as sequential, i.e., because a red in a game of roulette hasn’t shown up for 26 spins of the wheel, a red outcome is more likely. The truth is, it is not. Put simply, the fallacies are down to "someone is on a roll" versus "things are due to change."