One of the most popular bets made in a casino is betting red or black on the roulette wheel. Simply choose the correct color of the selected number and win. On a standard roulette wheel, red and black each have a 47.4% chance of hitting with green representing numbers 0 and 00.
Choosing the correct color is extremely luck-based, but what happens when emotional thinking gets involved? That’s what happened at the Monte Carlo casino in Monaco, France in 1913. During a game of roulette, black hit 26 times in a row and the result was gamblers lost millions of dollars betting against black – incorrectly reasoning that the previous spin had an impact on the next spin. This was later dubbed the Monte Carlo or Gambler’s Fallacy.
The easiest example of the fallacy is a coin toss. The outcomes in different tosses are statistically independent from one other. Whether there were 10 straight heads or 10 straight tails, they each have a 50/50 chance of hitting on the next flip.
Why Do People Fall for the Monte Carlo Fallacy?
Cognitive bias. Humans have the ability to notice random patterns in certain events and expect them to reverse. The problem is regarding the sample size. If a coin lands on heads 5 straight times, that doesn’t mean the next one will land tails. Over 1000 tosses, the heads/tails split will become more even, but in the short-term that has no bearing.
Monte Carlo Fallacy & Sports Betting
New bettors tend to fall for the gambler’s fallacy. Let’s say the Kansas City Chiefs lose a game outright. Most bettors will think “there is no way they lose back-to-back games”. At first, it sounds reasonable, but that is exactly the Monte Carlo Fallacy – people expect that a short run of outcomes should share properties of a longer run. In the long run, the Chiefs will more than likely win the majority of their games, but that doesn’t mean they cannot stumble multiple games in a row. The previous results have no impact on the next game.
How To Avoid the Monte Carlo Fallacy?
This is easier said than done, but you need to look at matchups and potential bets with a clear mind. When handicapping, of course past stats and matchups against other teams are important, but “they lost last week so they should win this week” should not be a part of your handicap. Sure, some teams react better than others to a winning or losing streak, but there is always more to the handicap than simply a win or loss of their last game. Being able to break down games without bias is a very underrated part of handicapping games and betting on sports. You don’t want to end up like the gamblers at Monte Carlo in 1913…