What is the Overconfidence Bias in Betting?

What is the Overconfidence Bias in Betting?

Overconfidence Bias Example, Studies, FAQs & More in betting

We’ve all heard about overconfidence bias, or known a friend who suffered from it, or we ourselves have experienced it.

You win, and you win when you shouldn’t have. And that convinces you that the same improbable outcome is now normal for you. Where others don’t take the risk and don’t profit, you can. And, more destructively, you believe you should.

It’s an overestimation of our abilities fueled by an overestimation of our knowledge of a particular sport or sporting event outcome. It’s not unlike the hot hand fallacy, where people believe that they are more likely to keep winning because they are on a streak.

We know inherently this isn’t true. Your last roll of the dice has zero effect on the result of the next roll of the dice. But we human beings are strange creatures at times, and our brains tell us to keep going. Or the opposite phenomenon of being “due.” I just lost a bunch, so now I must win.

But like our previous dice rolls, the odds reset to their base for each throw. The dice have no concern for previous results.

Being overconfident and becoming subject to overconfidence bias can have the same destructive end. The problem, however, is that we don’t see the pitfalls as logically as we see the problem with the above dice rolls. We rationalize with “yeah, buts” that usually involve an inability to see our limitations.

Overconfidence Bias Example in Life

The psychology that fuels this bias wasn’t a creation of the gaming industry, nor is that the primary place we see it. It happens in all walks of life, and it can have negative results for people in work, relationships, and the general risks that they take, for example.

An overconfidence bias example that we’ve all experienced is with driving. Either you or someone you know is a very good driver and is confident in their driving ability. So the rules of the road that make driving safer are considered less relevant to them. 

They can drive faster, take chances at stoplights, change lanes when they shouldn’t, and pass when it isn’t safe because they are simply too good of a driver to get in an accident.

Most of the time, they are right. They don’t get in an accident. But just one time of being wrong and the overconfidence bias can come with an extreme price.

Overconfidence Bias Studies

Overconfidence bias in betting doesn’t come with the same potential consequences as the above example. Still, it is a big enough problem for people that the National Institute of Health and the National Center for Biotechnology Information published a study in 2021 titled: Overconfidence in Understanding How Electronic Gaming Machines Work.

Appearing as part of the Frontiers in Psychology series, the study looked at people playing gaming machines of chance and gaming machines of skill and then measured their level of confidence in each.

Interestingly, when people were playing a game of skill, their levels of confidence were relatively equal. But when playing games of chance, like a slot machine, the levels of confidence in their abilities varied widely. 

There was also a correlation between people who enjoyed the games of chance more and the people who were more confident in their abilities in the games of chance.

So if you prefer games of skill, you understand that the game of chance is just that – a game of chance. But if you prefer the game of chance, you believe that you are more skilled when playing the game of chance.

Translation to Sports Gaming

It is obviously false to believe that you can be better than anyone else when playing a slot machine. It’s pure luck and nothing more.

Take that human bias from a game people like to play and move over to a sport that they like to wager – and add in the element that it isn’t pure luck – and you can see how an overconfidence bias can manifest itself with certain sports bettors.

An overconfidence bias example is you like baseball and betting on baseball, and you can name the top three starting pitchers on each team in the American League. You have the knowledge, a love of baseball, and access to wagering, and you believe that you can win at baseball betting.

You may be right. People win consistently betting on sports all of the time. But if you carry the overconfidence bias trait, that initial winning may actually be a bad thing in the long run. It may lead you to believe that your knowledge of baseball is greater than the oddsmakers who are setting the odds. 

You may stray from your American League haven and move to the National League, where your knowledge is slightly less.

It’s good to be confident in one’s abilities, but the line of becoming overconfident is an easy one to cross. And considering how widespread sports betting has become, it can quickly become a detriment to your sports betting experience.

The Three Types of Overconfidence Bias

Not all overconfidence is the same. There are actually three ways that it can show itself and three different ways that it can cause you problems when betting.

The first is being overconfident in your future performance. The overconfidence bias example here is one we’ve all seen. I lost big this weekend, but I’m too good to lose a second weekend in a row, so I should double my bets and win my money back.

This belief that you will be better in the future when compared to how you just performed is one of the worst types of overconfidence bias and the most common.

The second kind of overconfidence is the ability to accurately judge your own abilities as they compare to others. This is problematic when you begin to believe that you know more than the professionals setting the odds or are in pools against other bettors who are also experienced and skilled.

The reality is that you may be exceptional when it comes to handicapping college football games, but you always need to have a realistic view of your place in the sports betting world. If you falsely believe that you are more skilled than others, the fall from that pedestal can be painful.

Finally, the third type of overconfidence is the inability to put your own sports betting accomplishments into a proper perspective. If you put money down on the Cincinnati Bengals to win the AFC prior to the 2021 season, you got odds of +7500. 

Congratulations to you on a huge payday. Well done.

But don’t lose sight of reality. You got lucky. Very lucky. Enjoy your winnings, but don’t think that you are now some sort of longshot guru who can pick out the next team to make a meteoric rise to the top. Don’t you yourself become an overconfidence bias example.

Is Overconfidence Contagious?

According to some psychologists, the scary answer to the above question is yes. You can, in fact, “catch” overconfidence if you’re not careful and if you’re not protective of your own biases.

It works with simple human psychology. You have a bet in mind, and you ask someone what they think of your bet. That person confirms your bet, and you go ahead and place it without any further thought.

Or, on the flip side, because we as people tend to believe that our ideas are better than the ideas of others, we change our bet based on the agreement of someone else.

Humans also like to impress others or feel like part of a social group by agreeing with others. Or decide to join in on a bet because we want to feel the camaraderie of the shared wager.

All of these have the potential to be bad, and it’s why many smart people who study the psychology of sports betting suggest that people keep their planned wagers to themselves. The more you talk about it, the more you are going to be influenced by outside voices.

Overconfidence in Experts

Sports betting experts are everywhere, telling us who we should bet on and why. And because they have a website or a television show or a podcast, we tend to believe that they are, in fact, an expert that knows more than we do.

This can be a mistake for multiple reasons.

First, experts are quite often the biggest victims of overconfidence bias. One study, in particular, showed the quintessential overconfidence bias example. A group of economists and a group of zoologists were asked to predict the price of oil. 

Both were wrong, but the economists were convinced that they would be right.

Experts may have greater knowledge, but they often have less ability to acknowledge their limitations.

And this is when the second reason overconfidence in experts can hurt you. You yourself believe in them because they are an expert, and you trust them when you shouldn’t. Instead of diligently doing the research yourself, you rely on an expert’s tip, and it leads you astray.

How to Avoid the Overconfidence Bias in Betting

It’s human psychology; how can it be avoided? How can anyone keep themselves from falling victim to overconfidence?

Psychologists call it The Goldilocks Zone, which makes perfect sense. You don’t want your bets too hot, and you don’t want your bets too cold. You want your bets just right, the same way Goldilocks likes her porridge. 

As written in Psychology Today, it “is where rational beliefs meet reality.” It is rational to believe that Alabama will win the college football National Championship. But it is the reality that someone else might win. 

This isn’t living in the zone of mediocrity, as some bettors decry. It’s making smart and measured choices that serve the singular goal of being profitable without risking losses you can’t afford. You don’t live in fear of the loss, and thus you freeze when it comes to making bets. But you don’t also live in the belief that you can’t lose.

There is a reason that when each state legalizes sports betting, it is flooded with dozens of sports betting operators, and it’s not because they are giving money away.

Know your limitations to remain in the Goldilocks Zone and outside of overconfidence bias. It’s not a knock against you as a sports fan or sports bettor to accept what you don’t know. It’s a key acknowledgment required to make you better.

Also, understand that nothing in sports betting is finished. You never have all the knowledge, and you’re never as good or informed as you can be. And on the flip side, you’ve never hit your ceiling of knowledge, nor are you unable to get better. Everything in the sports betting world is fluid, including your place in it. Want to learn more about Overconfidence Bias? Follow us on Twitter

Overconfidence Bias FAQs

Overconfidence bias is the human tendency to overvalue our own skills, talent, and knowledge. In sports betting, the overconfidence bias leads to people placing bets that they shouldn’t.

In sports betting, examples of overconfidence bias can be a false belief that your information about a sport is greater than it is or your ability to predict game results is better than others.

The bad news is that everyone can become overconfident and then have it change their betting. The good news is that self-appointed experts are more susceptible, as are people who are wagering in groups.

Be skeptical of your abilities. Understand that you have limitations, and accept those limitations. And then use that acceptance as fuel to get better and more knowledgeable. Understand that there are things you will never know, and then place your bets accordingly.

Problem gamblers have a much higher rate of overconfidence bias than others. If you see someone chasing losses, either by doubling their next bet or betting on games, they were planning to, that’s another clear sign of overconfidence bias.