How To Avoid The Optimism Bias
The glass is half full! For many obvious reasons, optimism is a good character trait to possess, it makes life easier in many ways.
But why is optimism bad for betting? And why do almost all of us think we're driving better than average? In this article we discuss optimism and how it can adversely impact your betting.
When it comes to betting, your cheerful, optimistic nature can turn into a liability and affect your betting performance negatively.
The Optimism Bias
The optimism bias lets you believe that you are less likely to be affected by negative events, and more likely to be affected by positive events than other people. The optimism bias influences our lives in a range of different areas, some of which are also interesting for your betting.
Everybody Wants To Be The Smoking Grandfather
A classic example for optimism bias is the fallacy held by some smokers that they are less likely to get lung cancer compared to other smokers. By the same logic many people believe they are less likely to be an alcoholic (despite problematic tendencies) or less likely to become a gambling addict.
Of course these are just common examples, but the optimism bias does not just present itself in these rather dramatic instances. It is part of our everyday lives – and part of betting as well.
The 4 Elements Of The Optimism Bias
The optimism bias consists of 4 major elements:
1 – Goals
Fitting your reasoning to suit our goal
Optimism does have a very obvious advantage - it feels good. For as long as you can maintain your optimism it will be easier to suppress doubt and negative emotions. For that reason we intuitively tend to find information that reinforces our optimistic outlook. This is one of the manifestations of the confirmation bias.
You can see this when you decide to make a bet and write up an analysis for it. Usually you will be looking for arguments that support your bet. But in fact you should look for counter-arguments with (at least) the same vigour, in order to judge the merits of the bet as objectively as possible.
This is why statistical betting models are so valuable as they force you to attach some form of objective weight to the facts and establish a consistent relationship between them. Your intuition however will very often lead you to search for more reasons that support your bet, and even violate consistency for the sake of finding these reasons. This leads inexperienced bettors to not place enough weight on reasons that speak against the bet.
Control and the illusion of control
Feeling in control improves your optimistic outlook more than would be justified in many cases. A classic example of this is driving. We feel there is less of a chance of an accident when we're the ones behind the wheel.
We tend to forget very easily that even the best drivers are still very much at the mercy of the drivers of the other vehicles. No matter what our skills (which usually aren't as great behind the wheel as we like to think anyway), a huge part of the risk of accident lies with the other drivers, whose behaviour we can't control. Staying firmly in your lane may be a good idea, but it won't protect you from wrong-way drivers.
Betting gives you a feeling of being in control as well, but it's a feeling of control that you are likely going to overestimate. This is because the final result of any given match is often more random than we assume: Red cards, deflected shots, bad calls by the referee – all of these can steer a match in an unexpected direction.
Because of that you should always actively remind yourself, until it becomes second nature: You only have control over what betting odds you are going to accept for any given bet. You're never in control of the actual outcome. This is precisely why successful sports betting isn't about picking winners, it's about getting the right prices.
# 2- Cognitive Biases
We Are Not Objective
Our optimism is fuelled by several cognitive fallacies, such as the representativeness heuristic. In essence it means that when we make comparisons, we usually think in terms of general stereotypes, instead of thinking in detail over the actual subject matter. This is obviously more economical for our brain, but also often leads to poor decision making.
For instance, when drivers are asked to think about an accident, they will more likely associate a bad driver, rather than an average one. Accordingly we tend to underestimate the likelihood of an accident, since we tend not to believe that we are bad drivers. In fact about 90% of all drivers believe that they are driving better than average, which obviously is impossible.
This above average belief can lead to problems with your betting as well, for example when you think in general stereotypes about a given match. Of course the home favourite wins very often, especially if it's a team like Bayern or Barcelona. But you shouldn't be basing your betting decision just on this general pattern alone, you also have to thoroughly analyse the specific conditions of every single match and put them in relation to the odds of the bookmakers.
Otherwise you essentially run the risk of answering the wrong questions.
#3 - Information About Self vs Target
It is very natural: We know far more about ourselves than we know about others. The main reason for this is that information outside your circle isn't as easily attainable, since access to it is limited. At the same time we tend to treat information we don't have as if it doesn't exist. As a result we underestimate risk and uncertainty caused by unknown factors.
A classic example for this are the 9/11 terror attacks. Beforehand almost nobody would have anticipated an attack of this magnitude and type, simply because this sort of attack was never part of our experience up to that point. Ironically the risk of a terror attack is vastly overestimated just after one has taken place.
This mechanism is very important for betting as well. Typically inexperienced bettors possess a deep knowledge of only some of the teams in a given competition, usually their favourite club or at least a club playing in the same league as their favourite club. The asymmetry of information becomes evident immediately. While fans are typically very familiar with the strengths and weaknesses of their own team, this is usually never true of the opposing team.
Unfortunately this rarely leads to more caution, but rather more optimistic predictions. Of course the overall strength of one of the clubs isn't irrelevant, but it tells you very little about the possible outcomes if you can't assess that information in relation to the overall strength of the opponent – and of course in relation to the respective odds.
In order to be able to correctly weigh the odds in betting, you need to make sure you aren't systematically neglecting information about one of the teams.
#4 - Your Mood
It's a very simple point that just makes sense - when you're in a good mood the whole world looks a little brighter. When you're happily in love the world seems like a much nicer place than usual. And it's the same when you hit a good streak with your betting.
Sadly this impairs your judgement. When you're in a good mood you will make decisions with more optimism than may be justified, and this obviously includes bets that you base on your gut feeling – actually even when you make private bets with your friends. For instance, by betting a case of beer on your club winning the championship, just after a resounding victory that left you drunk on success (and maybe a little drunk in general).
In summary - exuberance is a great feeling, but it never gives good advice. You should always make your betting decisions as sober as you possibly can.