I got asked to comment for a piece on gambling in Men’s Health magazine.  Apparently increasing numbers of people are looking to gambling as a way out of financial trouble.


 Sadly, the magazine doesn’t hand out copies for free, so since they said it was great comment(!) I thought I’d share the gist of what I said.


There are three main reasons why gambling is a problem for people, apart from the fact that a “big win” gives them a buzz:




Most people have heard of Pavlov’s Dogs. In psychology, it’s called “conditioning”.  You train people (or in that case, dogs), to produce a behaviour in response to a stimulus (like a bell ringing).  Some other famous ones were by Skinner, who got rats and pigeons to press levers, peck at coloured disks etc. The rewards, (either nice things like food pellets or the removal of nasty things, like electric shocks)  are called reinforcement.  And you can find out how powerful the reinforcements are by looking at “extinction”, which is how fast the behaviour stops when it isn’t being reinforced any more.

When you analyse all the different studies over the years, as happens in a psychology degree, you find that the most effective form of behaviour change in this field is to have a “partial reinforcement schedule”.  That means that instead of getting a reward (food, praise, an end to being Tasered etc.) every time the subject (rat, pigeon, human) performs the behaviour, you give them a reward only sometimes, and you make it a surprise rather than allowing them to predict what will get them a reward.  So they can’t tell if the 3rd action, the 20th, the 1,000th or whatever will get them the reward, or whether they’ll never get the reward again for that action.

So, slot machines are set up to give you a partial reinforcement schedule for the behaviour of playing them.  You get the money – (and more important the rush of winning) only some of the time, at unpredictable intervals.  Same with bingo, lotteries, and even games like poker and horse racing.  

And the whole thing is set up to make sure that you keep thinking that you’ll win “next time”, so you keep doing it.

Overconfidence that you’re “Special”

People are overconfident of their own abilities – there’s something called the “Fundamental Attribution Error” that humans have.  This basically means that we all think like this,


“If I succeed it’s because I’m great, if you succeed you were lucky.  If I fail it’s because I was unlucky, if you fail it’s because you’re a moron”.  


We go though life like that, try asking a crowd of people to tell you if they are better drivers than average and about 83% will say yes – then try to work out how 8 out of 10 can be better than average and work out what that does to the average!  


Or ask them about whether they are better in bed than other people (where even more will say they’re better than average!)  


We also have something called optimism bias, we look on the bright side.  So despite divorce rates going up to 50% or so we get married, despite business failures being at 95% in the first five years we start businesses.  Ask somebody getting married for the fifth time, they will tell you “this one’s the real thing” – nobody gives more than a “one in a million” chance that their business will fail.


We think we can beat the odds, that the problems that will defeat others won’t defeat us.  


That’s also why projects go over budget and over time, reports and PhDs come in late or not at all, people are late for meetings, we all think we’re more in control than we really are.

So naturally, the fact that nobody has won a jackpot on that machine for five years means that “it’s due” and that I’m going to win it. So I keep going.

And of course, that same optimism (plus some other stuff in our minds) means that we forget the huge number of small losses and only remember the one big win.  


That’s why bankers, traders, stock market “experts” etc. all talk about the time they nearly broke the Bank of England and fail to be able to justify their salary or their self-designed tag of “expert” if you look at their real performance and returns.  


They’ve forgotten the 2,000 trades on which they made at most £10,000, and on which they made a grand total of £350,000 in share value, while spending over £1 million on transaction costs.  They remember the big win, the £150,000 big hit in a day, and ignore the fact that the trading costs alone were more than their total profit, not even counting all the trades they did that either lost them money, or didn’t gain them anything.  


Anybody who keeps good records is almost certain to realise that they have lost by trading, but nobody keeps those records honestly or believes that they lose, it’s always “the other guy” that is a mug, the person you talk to is better than Buffet and Soros combined.  As in the old saying, if you play poker for half an hour and don’t know who the patsy is, it’s you – something bankers ought to remember!

Ignorance of statistics and probability

Most of us aren’t very good at maths.  It used to have to say on slot machines what the payout is.  There would be a plate saying – “payout 72%” or something.  So you knew that for every pound in, only 72 pence came out.  If there was a jackpot of £1,000, it would mean that about £1,390 would have to go in (and the slot machine company would keep the odd £390).  People still focus on the jackpot, not the fact that, on average, they’ll have to put in about £1,400 to win £1,000.

And with the lottery, if you ask people, “what are the odds of the numbers being 1,2,3,4,5,6” they’ll tell you “impossible”.  Actually it doesn’t matter what numbers you pick (I explain this fully in Taming the Pound –, 

“The odds are the same, just under 14 million to one against.  So whether you pick birthdays, astrologers predictions, your lucky number or 1,2,3,4,5,6, the odds stay at just under 14 million to one.  But we think 1-6 is unlikely, and therefore that our own numbers are relatively more likely.  And even though you can look on the lottery website and see that they actually distribute less than 70% as prizes (or else how could anybody get “lottery funding”), people still think they can “win” on the lottery.”



People get swept up in the big win and the reinforcement it gives them, they forget all the little costs and losses, they think they can control the dice, the balls in the lottery, the cards, the horses, that they understand the fundamental nature of the universe better than other people.


In fact they don’t have any control and they don’t understand the odds either.

And consequently, they gamble, and when they lose they just think that it has taken them one step closer to the “big win”.  And it might have done.  Except that probably 20 million people have taken one step nearer the big win, all of them have just paid out, but only one of those people is ever actually going to reach the big win, and you have absolutely no control over who that one person is, whatever you choose to believe.

The odd flutter on the Grand National, a couple of pounds a week on the lottery to give you a few hour’s pleasure thinking about what you’d do with the money etc. probably isn’t going to hurt you (but it still might, if you don’t actually have the money to gamble with).  But if you look at gambling as a way to solve problems – you probably need help.





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