- Clearer Thinking Team
Gambler's Fallacy: Definition, Examples and Effects
Updated: Jun 2
The Gambler’s Fallacy is the belief that past events can influence future outcomes. It is based on the false assumption that a certain outcome is more likely to occur if it has not occurred in the past. For example, if a coin has been flipped heads five times in a row, a gambler may believe that the next flip is more likely to be tails.
Examples: One of the most famous examples of Gambler’s Fallacy occurred in 1913 at the Monte Carlo Casino. During a game of roulette, the ball landed on black 26 times in a row. This led many gamblers to believe that the next spin was more likely to be red. As a result, many people placed large bets on red, only to be disappointed when the ball landed on black again.
Effects: Gambler’s Fallacy can have serious financial consequences. It can lead people to make poor decisions based on false assumptions, resulting in losses. Additionally, it can lead to a false sense of security, as people may believe that their luck is bound to change. This can lead to people taking unnecessary risks in an attempt to recoup their losses.
Overall, Gambler’s Fallacy is a cognitive bias that can lead to poor decision-making and financial losses. It is important to be aware of this bias and to make decisions based on facts and logic, rather than false assumptions.
Do you want to expand your knowledge on this topic? Read our full in-depth article on cognitive biases.
Do you have extra 15 minutes today? Take our fun and interactive quiz to learn which of 16 reasoning styles you use, your overall level of rationality, and what you can do now to improve your rationality skills.