And here comes the fourth and last article of the series “Thinking, Fast and Slow”: Lessons for Punters (Part 1, Part 2, Part 3). Today we are going to dive into the successful punter’s habits. It has surely taken a while to get it all out, so my apologies go to anyone who was wishing for more content in these last months. Summer has come and with it betting activity of any kind has been reduced quite a lot and has been exchanged by spending some time outdoors and watching World Cup games.
Speaking of which, even though we are in the dry season, the World Cup has been offering quite a few arbing opportunities. The World Cup Specials in particular have caught my attention this year. Even though they are often not covered by any arbing software, you have those on offer at just about any bookmaker these days. With reduced risk of restriction and high limits, the World Cup Special arbs are the place to be, if only you are willing to invest some time and work to find those out.
By the way, RebelBetting is offering a discount on all subscriptions purchased today, depending on how far Sweden advances in the World Cup (RebelBetting is founded and based in Sweden). This seems to be a gamble worth taking.
The World Cup is an exciting topic in itself, but not the focus of today’s article, so here they are: successful habits and policies that will improve your betting activity, deducted from Daniel Kahneman’s “Thinking, Fast and Slow”.
Successful Punter’s Habits
Priming and cognitive ease – Stay focused
The decisions we take seem to be strongly influenced on a subconscious level by the environment in which we find ourselves at the time of taking the decision. The process by which the environment influences our decisions is called priming. An experiment has shown that you might be influenced to pay more for a good with an undetermined price when there is a picture of judging eyes watching you hanging on the wall when you take the decision of how much to pay.
Naturally, big bookmakers are fully aware of that and can prime the environment in a physical shop or even on their website so that they encourage you to place a bet that has a negative expected value for you. An example for that would be the bookie trying to get you to place a perm bet while showing you the largest profit another player has made with a perm this week. You are lured by the big potential profits, while forgetting that a perm bet, provided you don’t have an edge on any of the single bets in it, has the worst expected value of any bet you can make at a bookmaker, since the bookie’s advantage against you is increasing exponentially with the number of bets in the perm. You should always ignore such distractions and focus only on your priorities – be it arbitrage betting or a certain betting strategy.
Interestingly, priming can have a positive role for you too. By modelling your environment you can force yourself to act more analytically and less emotionally. An experiment has proven that students who receive an analytical task written in a barely legible font are more likely to answer it correctly than if the font is clear. Another experiment has found out that while you are frowning (as compared to smiling) you are less likely to fall into logical traps laid into small analytical exercises and you are in general more sceptical and analytical about anything you hear or see. This does not come to say you need to frown all the time (which I hope you don’t), but you do need to approach your betting activity with the needed seriousness and stay focused at all times. There is a reason marketing materials and ads always attack you with strong letters, loud voice and music and a clear message for you to remember. All this does not work in your favour when you are faced against the average bookmaker. Do not allow others to set the rules of the game but do so yourself.
Furthermore, all too often punters are placing bets at the pub, while drinking a pint with friends – certainly not the perfect environment if you want to think clear and remain focused. Regardless of whether you are betting, arbing or trading, you need to have a silent environment free of distractions and a sober mind. This is a simple rule which, when ignored, can cost you dearly.
Overestimating the joint probability of highly likely outcomes – be careful with perms
We mentioned perms, so let us look at them at more detail. Permutation bets (perms) are an all-time favourite of bookies. They get you to make a couple of bets at once, effectively increasing the overround you pay to the bookie exponentially. No wonder that in the early days of bookmaking these were the only bets bookmakers were willing to take. But what’s in it for a punter?
Behaviourial psychology might have the answer to that. Think about the two options below and try to evaluate which of them is more likely:
- Christiano Ronaldo scoring a goal
- Christiano Ronaldo scoring a goal and Real Madrid winning the game
Even with the most basic training in statistics you will clearly see the first option is more likely, however the majority of people out there would intuitively prefer the second one. We tend to evaluate probabilities in sets, especially if we add a highly likely event to the set. We seem to ignore the fact that even if the added event is highly likely, the resulting set will always be less likely as it has to meet one more condition to be true.
In the same fashion, adding a number of highly likely events to a permutation bet will reduce the total probability of winning the bet more than you would intuitively feel. In general, the only condition in which you would place a permutation bet would be if all your bets have an edge to them. If that is not the case, avoid these at all cost.
Intuitions vs. Formulas – make your rules and follow them
In a previous article I already talked about how hard it is to find a tipster whose betting advice is worth a dime. Betting is a field where expert judgments are rarely reliable, and Kahneman suggest an alternative. Kahneman tells us the story of wine collectors trying to estimate the future price of a bottle of wine. It turns out that a simple formula factoring in three important meteorological factors (average temperature over the summer growing season, the amount of rain at the time of harvest and the total rainfall during the previous winter), outperforms a sample of wine tasting experts in predicting future wine prices. Needless to say, the study that made this discovery received less than enthusiastic reception in the wine tasting circles, however no one managed to actually disprove it. Similar findings have been made in the area of clinical predictions and many others.
Kahneman goes on to argue that the reason why algorithms beat human intuition in so many fields is that they weed out the countless ways in which we humans make irrational decisions. An example is quoted from a study which found out that judges tend to grant parole to victims less often when they are hungry than right after their lunch breaks. You are not you when you are hungry!
We are often subjective in our evaluations in more ways than we can account for and this also holds for betting. In a low-validity environment such as sports betting the best approach is to define a strict set of rules and follow them. The question how do you define the rules remains, but this way of thinking already puts you one step away from the emotional side of gambling and gives you a more clear perspective of your betting activity. In betting you should rarely thrust your (or anyone’s) intuition and should try to have a scientific approach to every bet.
Reversals – Joint evaluations are helpful
Another anomaly that researchers have found out in our way of thinking is our inconsistent evaluation of joint decisions. Situations in which our preferences about different options change according to whether we are presented with the options separately or at the same time, are referred to as reversals. Normally, joint evaluation will help you make a better decision. It has been shown that a set of dishes consisting of a few pieces in good condition and a few broken ones is being priced lower as compared to the same set with the broken pieces taken out when the two options are evaluated independently to each other. If they are presented together, however, experiment subjects assign a bit higher price to the set with a few extra broken pieces.
The joint decision makes sense, since even if the broken pieces have zero value to you, you can always throw them away so the set containing them should cost at least as much as the other one. However, in the case where the two options are not presented next to each other, experiment subjects fail to reasonably compare them and fall for the negative marketing effect that broken set pieces have.
From a betting perspective, this might mean that comparing similar bets might give you a better indication whether there is value in one of them or not. Of course, as already mentioned, no two games are absolutely alike, but identical situations might still help you to develop an opinion for the adequate price of certain outcomes. If in doubt, always evaluate with the alternatives in mind.
Reference points – don’t take targets too seriously
We do know by now that we intuitively hate losing more than we love winning. However, the question what do we interpret as a loss is not as simple as it sounds. It actually depends on the reference point we have chosen and this reference point can be manipulated quite easily. You could be tricked into thinking of the loss as a cost and vice versa, which would significantly alter the way you feel about a situation. Consider the following problems:
Problem 1: In addition to whatever you own, you have been given $1,000. You are now asked to choose one of these options:
50% chance to win $1,000 OR get $500 for sure
Problem 2: In addition to whatever you own, you have been given $2,000. You are now asked to choose one of these options:
50% chance to lose $1,000 OR lose $500 for sure
If you are like most people you would have chosen the second option in the first problem and the first option in the second one. It is only natural – after all we do know that we are risk-seeking in the domain of losses and risk-avoiding in the domain of profits. However, there is something more here. If you calculate the offered options with the money you’re given in mind you will realize that in both of them you are faced with the exact same problem. In both problems you can either walk away with $1,500 for sure or take a gamble between $1,000 and $2,000 with a 50% chance of each outcome.
If you have exhibited different preference in each of the two problems, that is only because the questions were framed differently. You have accepted a different reference point ($1,000 and $2,000 correspondingly). Moreover, your brain immediately recognized the words “win” and “lose” from the formulation the two problems. At the end you did not realized you are faced with the same choice in both situations.
Reference points might skew your judgement. When you set an unrealistic goal this goal becomes your reference point. If you fall below it (which you probably will since it is unrealistic), you become risk-seeking for no good reason since you perceive your outcome as a loss, although it is not necessarily one. You stand at risk of losing the fruits of your hard work, only because you wanted to stretch yourself a bit too far.
That has happened to me way too many times – calculating the daily average profit from my arbing activity I have often set daily targets for an arbing day. Then when it goes the wrong way (as it inevitably will when you are arbing) due to a manual mistake on my side or simply a lack of good opportunities on the given day, I would start chasing some imaginary target for the day, in effect forcing myself to take on unnecessary risks or in general just take bad decisions.
Kahneman tells the story about whether and taxi drivers and why you can’t get a taxi on a rainy day. Taxi drivers tend to set daily targets based on their average daily earnings throughout the year. Then when it rains and demand for taxis is high they tend to reach their daily target quite early during the day and then go home. On the contrary, when the sun is shining and people rather go for a walk, the taxi driver would work unnecessarily long hours, although external circumstances simply does not allow him to reach his target for the day.
This tells a similar story as me chasing my arbing targets in my early days. Averages might be a good indicator, but never underestimate the influence of outside factors, especially in a volatile field such as betting. Some things are just not in your control and the sooner you learn to live with that, the better your decision making process will get.
This was it – the fourth and last piece from the comprehensive review of Daniel Kahneman’s “Thinking, Fast and Slow” and its importance to punters (Part 1, Part 2, Part 3). I hope you have enjoyed the series. Maybe you could even find ways to apply it to your betting in the remaining World Cup games. Whether you will join the action or just enjoy the games, there will be something for anyone as this summer, again, the world is football.
Thanks for reading and see you around!