What Is The Hot Hand Fallacy In Betting?

What Is The Hot Hand Fallacy In Betting?

Hot Hand Fallacy: Origin, Effects and How to Avoid it

The hot hand fallacy is described as being an irrational belief that someone experiencing a positive outcome in an event will have a greater chance of success in further attempts. The concept is most often discussed when referring to sports and gambling. 

For example, a specific player makes his first five shots from the field during a basketball game. Some may predict that the player will continue to make shots because of a ‘hot streak‘ without considering their actual field goal percentage. 

The fact that humans are overall very stubborn in accepting pure probability is one reason why casinos and sportsbooks, both online and in-person, make such big profits. Most people are under the impression that their success will continue when they have a winning streak. While there is a chance of that happening in most types of gambling, in reality, most casino games are games of chance, and future performance is not at all related to past results.

The gambler’s fallacy is another concept that works the opposite of the hot hand fallacy. This idea suggests that the gambler’s luck will likely return during a losing streak, and they will soon start winning again. The belief is that getting the same negative outcome decreases the chances of it happening in the future. 

Where Did the Hot Hand Fallacy Originate?

In 1985, three behavioral science pioneers, Thomas Gilovich, Robert Vallone, and Amos Tversky (known as GVT), first described it as the mistakes humans make in thinking they can make predictions about future results based on a small sample of previously successful outcomes. At the time, they referenced having the ‘hot hand’ in basketball, where a player making consecutive shots will continue to do so. 

The group of scientists tested the concept in a study involving the Cornell University basketball team to research whether players’ shooting got better while on a streak of made baskets than when having a streak of consecutive misses. They found that the players’ shooting percentages weren’t any more significant after a streak of successive baskets than they were after missing a series of shots. 

According to the research, even coaches and players believe that a positive performance for a short period will indicate how the player will perform for the rest of the contest while overlooking their actual statistics. So, for example, instead of realizing the first three shots in a row that the player made were just random successes, they are likely to think the player has a ‘hot hand’ and will continue sinking shots at a high percentage. 

Many people were in disagreement with GVT’s findings that the hot hand does not exist. Hall-of-Fame basketball coach Red Auerbach of the Boston Celtics commented about the results saying, “Who is this guy? So he makes a study. I couldn’t care less.” 

There was also some resistance from the academic community. Although many were still skeptical, the study’s results were eventually accepted as the consensus among scientists. 

Why It Happens

Intuitively, the hot hand fallacy makes sense for most humans. It happens because humans have a tendency to think that being on a successful streak is likely to lead to further triumphs. It makes it difficult to understand the real chances of getting wins because people place the data into non-existent patterns. People expect sequences to alternate between the available outcomes more than they actually do. 

Another reason is due to the law of small numbers. All people have a habit of believing that a small sample represents the overall larger sample it originates from. However, smaller samples will sometimes show a pattern that is non-existent when looking at more extensive progressions. 

The Effects On Betting

When following sports, bettors will always notice when a team goes on a long winning streak. This results in more bets being placed on that team in their next matchup. 

However, if bettors are committing the hot hand fallacy in this situation, the bet could be overestimated. If a team is on a winning streak, the chance they will be more likely to start losing is higher than bettors think. This means that teams on cold streaks that are not bet on as often will be more likely to start winning and offer more positive value to the bettor. 

When playing games of chance, such as in a casino, future outcomes are totally independent of each other. For example, if a roulette ball lands on black after one spin, it does not affect what will happen on subsequent spins. This means that streaks don’t mean anything when playing games of chance, and no matter how many times in a row there’s a positive outcome, the following result will not be affected.  

In sports betting, because of the inability to properly weigh probabilities, people routinely miscalculate the chances of an event occurring, which results in them betting too much or too little on underdogs or favorites. This effect is also called the “favorite-longshot” bias and is prevalent in many sports betting markets. 

Players on losing streaks tend to make riskier wagers by making picks with higher odds in hopes of a big payoff that will cover their previous losses. Those on losing streaks often will go the other direction and make bets that have a higher chance of winning as the streaks continue. 

This behavior is similar to the gambler’s fallacy in that winning players believe that several wins in a row make it more likely the next bet will go the other direction and create a safe bet assuming they will lose. Losers are under the assumption that their luck will change and will make riskier bets that lead their negative streaks to continue.

How To Avoid It

The best method of avoiding the hot hand fallacy is understanding that every occurrence is totally independent of the last outcome. The chances of winning a bet are always the same when playing any game of chance. Casinos are very familiar with this very real concept and depend on it to make a profit. They know people as a whole are superstitious and are susceptible to the fallacy. 

When playing any casino game or wagering on sports, players are always free to stop at any time. If you risk committing the hot hand fallacy, take a break and tell yourself that the game has no memory and that the subsequent hands or spins of the wheel are brand new and completely independent of previous occurrences. After that, return to the game after feeling secure that you’re aware subconsciously that everything is completely random. Want to learn more about Hot Hand Fallacy? Follow us on Twitter 

Hot Hand Fallacy FAQs

The hot hand fallacy is the opposite of the gambler’s fallacy. The hot hand fallacy suggests that future outcomes will be the same as previous results, while the gambler’s fallacy is when the bettor believes the future outcome will be the opposite of prior results.

The hot hand fallacy is a belief that comes from illusion control. This is the concept that people believe that random events can be controlled by themselves or others. This fallacy is similar in that people think that after a series of wins, they will continue to have success in subsequent events.

The 1985 study by GVT suggests the phenomenon is a fallacy, as their research points out. Among the basketball subjects that were part of the study, hitting a consecutive streak of shots had no effect and didn’t make a difference in the odds of hitting another shot. Some people still believe the hot hand is a genuine concept in the sport, suggesting there are a few players that have the ability to increase their chances of their next shot going in when on a streak.

The hot hand fallacy suggests that people don’t always make gambling decisions based on logic and tend to base their choices on faulty reasoning. They make less than optimal decisions as a result. This is done because gamblers sometimes don’t identify patterns correctly and base subsequent decisions on trends that aren’t accurate. 

For example, making decisions because of feeling we’re on a hot streak even though the past wins do not affect winning the next event. Gamblers often base their decisions on a small amount of information from previous trends, which don’t reflect the overall patterns that constantly change randomly.

When playing games of chance, the hot hand fallacy seems to have a more significant influence if people believe that individual skill can affect the outcome. This is because it directly contradicts the gambler’s fallacy and is caused by the increased confidence the gambler will have after a successful streak. However, the gambler’s fallacy is more likely to occur when bettors believe future outcomes are only influenced by sources other than the player’s skill.