Cognitive Biases in Sports Betting - When Confidence Interferes with Your Decision-Making

Table of Contents

Sports betting may sound simple to the noob, and overconfidence can become the culprit that quickly drains your bankroll.

1. Dunning Kruger Effect
2. Anchoring Bias
3. Availability Bias
4. Optimism Bias
5. Hindsight Bias
6. Longshot Bias
7. Illusion of Control
8. Self-Serving Bias

The Dunning–Kruger Effect describes the tendency for unskilled people to overestimate their abilities. Someone who has never played golf will say, "Oh, it's just hitting a white ball around; how hard can it be?" Or sometimes, on Quora, you'll see some kid saying, "I want to build a search engine better than Google in one year."

Human beings tend to be supremely overconfident about subjects they know little about. So, keep this in mind if you're new to sports betting. It takes time and effort to become successful. If you start out hot, you can get overconfident and get REKT by overbetting into the upcoming losing streak that inevitably awaits.

Watch the full video Downtown Ricky Brown on Cognitive Biases:

The Anchoring Bias gets its name from people's tendency to put too much weight on one piece of info when making decisions. This piece of information is usually the first information they receive.

Let's say you're collecting data for an upcoming football bet. But before you start, your friend—a former football player with strong opinions about the game—infects your judgment about the outcome.

Because his opinion was the first one you heard, you could start inadvertently cherry-picking your data to fit it to the outcome he predicted. That's because betting judgments are biased by the order in which information is received. So, beware of relying too heavily on your first piece of info, especially if new and better data becomes available later.

This bias refers to people's tendency to assign greater significance to more easily recalled events. One morbid example is that people will pay higher premiums on insurance to cover death by terrorism after a recent terrorist attack. Even though the odds of one American in a population of over 300 milliong getting killed by a terrorist is extremely low.

For sports bettors, we also need to be aware of placing too much significance on recent or memorable results. Are you more likely to recall an American football game that ended with one field goal and a 3-0 score or an exciting, high-scoring shootout? In the EPL, football punters tend to screw up their betting behavior because of ill-perceived probabilities. It's easy to recall red cards and corners; therefore, they tend to overestimate their frequency.

The main thing to be aware of is emotionally charged recent memories, which can change our perceptions and skew the likelihood of an event reoccurring.

The Optimism Bias applies to overly optimistic people. It's great to be an optimist in life, but at the extreme edges, it becomes nothing more than wishful thinking and can lead you to make stupid bets. At the opposite end of the spectrum is the Pessimism Bias.

Hindsight Bias, or the "I Knew It All Along" phenomenon, is a common fallacy for those who review a past game as if it were predictable. Hindsight Bias can distort your memory. You'll see people betting with the crowd and picking the favorite. But afterward, when the underdog wins, they'll say, "I knew the underdog would win. I just knew it!" But without skin in the game, saying "I knew it" is, at best, meaningless and, at worst, misleading. You're kidding yourself that you won if you bet on the loser.

This bias is crucial to sports betting because a bettor's interpretation of their success and failure does influence their subsequent betting behavior. Winners tend to discount luck or variance as irrelevant when winning, and losers reframe losses as "near wins." It's essential to take an honest, objective evaluation of your betting action to improve and not use Hindsight Bias to sugarcoat your failures.

This bias occurs when bettors overvalue long shots and undervalue favorites. Research using betting margins and true odds proves that betting on Long Shots is far worse than betting on favorites in the long run.

You'll hear different psychological theories for why this bias exists. I hypothesize that people like betting on Long Shots because it's more exciting! There's a lotto fever mentality to it. Even with far worse winning percentages, if a bettor has $1,000 on a 300-to-1 Long Shot, it's a "rush" to think, "Wow! I could win $300k on this one bet!" It's more stimulating than betting a favorite, where the same bet returns $1,500 ($500 profit).

So, if you find the fantasy element or lotto fever kicking in, be aware that the longshot bias could affect your betting judgment.

Fortunately, there are ways to eliminate or at least mitigate this bias. You could go "cold turkey" and avoid placing bets on Long Shots altogether. However, if you're like me and enjoy betting on Long Shots, you can still indulge by betting smaller amounts. Since we know that betting on Long Shots leads to more losses, that negative can be offset by huge gains when a Long Shot hits. Thus smaller wagers can be the compromise.

In other words, if you typically bet $100 on favorites, you wouldn't want to bet $100 on a Long Shot. Instead, you could bet ten longshots at $10 each or four Long Shot bets at $25 each.

The Illusion of Control is the tendency to overestimate one's influence over random or unpredictable external events.

You've seen people watch a football game at home and refuse to sit during the 4th quarter because they think it will cause their team to lose. This Illusion of Control makes them feel the game's outcome depends on whether they sit down.

You'll see a lot of superstitions in betting. People will blow on the dice before rolling them. Or they'll wear their lucky hat when playing slot machines. So, being realistic about how much control you actually have over a game's outcome with superstitions will save you money and needless time obsessing.

The Self-Serving Bias describes situations when we take all the credit for our wins but blame our losses on others. To keep a level head in sports betting, you don't want to get too high when winning. That's because the element of luck or variance can be responsible for the outcome of a match. If you're on a winning streak, variance can make you think you're a genius at picking winners. You want to stay focused on making favorable EV bets and not get your ego overly attached to your win/loss column.

Check out the rest of the Cognitive Bias series below.

Cognitive Biases in Sports Betting Series:

1. Introduction
2. Confidence Biases
3. When the Data Fools You
4. Biases that Distract Us
5. Feel Good Biases