The Seven Deadly Sins of Sports Betting
August 04, 2005
Have You Ever Made These Mistakes in Sports Betting?
The investment world is becoming increasing familiar with the field of Behavioral Finance. This discipline unites key principles from Economics and Psychology to explain how investors come to make irrational decisions. Nowhere are these same principles more applicable than to sports betting "investors". They are the source of the Seven Deadly Sins of Sports Betting:
1. Confusing Risk and Uncertainty:
"Risk" denotes "possibility of loss".
"Uncertainty" refers to the "unknown".
Properly conceived; sports betting is a probabilistic exercise. We make our own lines and then compare them to the linesmaker's. When we bet, it means that we should have decided that our team has an acceptable probability of winning at the given level of risk (usually odds of -110). Every sports bet ever made past, present and future; comes with a possibility of (monetary) loss. A sure thing/lock/can't lose sports bet is an oxymoron.
In addition, every game ever played past, present and future; is a once-in-eternity happening, the details of which are unknown until they actually take place. This is simply a fancy way of saying "Sh*t Happens". To the bettor, uncertainty means that you're never sure if it's going to happen to you. On a Friday night, a gnat may fart in the Brazilian rainforest initiating a chain reaction of events which causes a Sunday afternoon gust of wind that blows the bald-headed ref's hat off; ha ha. Had the gnat "held it" and broke wind two minutes later, a different gust might have been enough to carry your team's would-be bet-winning TD pass an inch past a receiver's fingers for a bet-losing incompletion.
The money you bet is always at risk; uncertainty may or may not have anything to do with it (that's what makes it uncertain).
2. Not Being Your Own Man, or Woman:
Too many sports bettors fall victim to Herd Mentality. Something gets repeated enough on talk radio or by the talking heads on the pre-game shows, reaches "critical mass", takes on a life of its own, and another sports betting urban legend is born. Don't think that the linesmaker hasn't got wind of this too, and already incorporated it into the line; and then some. Remember the Patriots' vulnerable secondary in the 2005 playoffs? That's right, the one that helped hold Manning and the Colts to 3 points in the AFC Semi-final. If everyone is talking about something, it's time to dig a little deeper and find out if it's really true. As Mark Twain said, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."
3. Getting "Framed":
Many sports bettors could benefit from a "zoom" feature that they would turn on before they started handicapping games; that way their framing would be just right. Framing refers to your frame of reference; it can't be either too small or too big. For every sport, there are certain factors that are predictive and others that are irrelevant. Bettors using small frames exclude significant factors by simply looking at a game and "going with their gut" or betting on a "hunch"; they need to "zoom out". Small frames can also suffer from Representativeness, the tendency to see patterns where none exist; yet betting on the supposed system/angle/trend anyway. Those with frames that are too big get bogged down in meaningless statistical minutiae or study too many angles, trends and systems and suffer from paralysis-by-analysis; they need to "zoom in".
4. Living in the Past:
The first cause of this sin is the phenomenon of Anchoring; an over-reliance on an initial anchor for one's assessment of something. It leads to betting based on reputation or last year's record, rather than on the current facts. The result is the Status Quo Bias. Combine this with Loss Aversion, people's reluctance to take a loss or acknowledge a mistake, and you have bettors betting good money after bad. Also beware of living too much in the recent past. The importance given to information is often dependent on its Availability; more recent is more available. This is the post-blowout syndrome; betting as if last week's results will win this week's bets. Aberrant results usually return to the norm based on a statistical phenomenon called Regression to the Mean.
5. Wearing Rose-colored Glasses:
These seem to be for sale, or at least for rent, at every stadium and sports bar in the country. Put them on and you risk the double-whammy of making, and then watching, your bets like a "fan". How many unbiased, objective fans do you know? At sports bars I occasionally feel compelled to take a detour on my way to the can to verify that some guys are actually watching the same game on the big screen as I am; you'd swear against it based on their reactions. Sports betting fans suffer from Confirmation Bias; they look for evidence which confirms their original bet, while ignoring evidence to the contrary. As the game goes on, the also exhibit Hindsight Bias; thinking that they knew what was going to happen before it actually did.
This sin is usually the result of the two biases in sin #5; they are instances of the Self-Attribution Bias. All winning bets are attributed to and confirm good handicapping, while all losing bets would not have been made in hindsight. The wins were never simply lucky, nor were the losses ever simply bad bets. As I've said elsewhere, sports betting is not "rocket science", but neither is it "connect-the-dots". No one, and I mean no one, can win more than 60% over the long term; although almost anyone can do it for a little while. Many sports bets — I estimate 50%, are decided by luck; based on that fact, short term records are virtually meaningless. At the same time, give the linesmaker credit; most games on the board are not betable. Most winning bets will be based on a well-founded difference of opinion with the (usually overconfident) betting public.
7. Not Performing an Autopsy:
The secret to immunizing yourself from the biases above is to perform an impartial post-bet autopsy on both your losers and winners. The purpose of the autopsy, just like those on "CSI" is to tell you how the bet met its end. Were your losses victims of the "football gods" or the inevitable result of "unhealthy" betting? Did your winners live a full life based on sound, "healthy" handicapping or win by dodging bullets.