Bias covers a large amount of area where you are misinterpreting the information needed to make a bet. You are miscalculating the odds due to a skewed frame which causes you to make mistakes. Often, these mistakes lead to losses where wins may have been possible. There are many types of bias — in this article, I will start with two:
- False Feedback: Let’s define a “GOOD BET” as a wager that has a proper risk/reward ratio. Simply put, you are potentially getting compensated at rate that reflects the risk in the wager. A “BAD BET” is the opposite – a wager where you are not potentially compensated at a rate which reflects the risk in the wager. This is reflected in the chart below.
|GOOD BET||BAD BET|
Quadrant 1 is an unfortunate place to be, but the best place to be if you are losing. With an edge, it is only a matter of time before you start to win (however, remember the gambler’s fallacy). Quadrant 2 is far more unfortunate. Not only is luck not going your way, but you are making bad bets without an edge. Quadrant 3 is where bettors aspire to — bets here win and were good bets that reflected your edge. Quadrant 4, however, is where most bettors get killed because they develop a bias from bad bets that win (and bad bets do win). The long-term ramifications of bias from the misinterpretation of winning wagers that were bad bets are great. On the surface, it is very hard to identify a winning wager that was a bad bet, but deep down inside, we know that we just got lucky. We need to listen to that voice to avoid false feedback turning us away from our edge.
- Confirmation Bias: With this bias, you interpret new information in line with your pre-existing beliefs. Under this bias, this new information can lead to the strengthening or weakening of feelings about teams, horses, or whatever you are betting on. But instead of accurately discounting or adding to the your belief, your original belief–i.e. this team will cover the spread — shapes how you deal with the information; this is confirmation bias. In contrast, a bettor needs to look at each piece of new information carefully and objectively ask whether it makes the desired outcome more or less likely. It can be almost impossible to change one’s mind about a bet, especially with the “woulda, coulda, shoulda,” fears. Yet, if the new information suggests this, the unbiased bettor would make the move. You can’t be afraid to change your mind in light of new information that contradicts your original beliefs.