Imagine you are standing at a roulette wheel in a casino. The roulette wheel has landed on red five times in a row. The probability of landing on red or black (ignoring the green zero for simplicity) is always the same, approximately 50/50 for each spin. The wheel has no memory of previous spins, so the outcome of one spin does not influence the outcome of another. Yet, many of us may feel that a streak of red increases the likelihood of black coming up next.
This is the essence of the gambler’s fallacy, which is a psychological bias that distorts our understanding of randomness and probability.
The principle applies to misinterpretations of randomness and probability in other aspects of life as well. Here are two critical insights about how data and patterns are processed by the human mind that can help us navigate our real-world decisions more effectively.
1. We Don’t (Usually) Have Enough Data To Predict The Future Accurately
In a 2017 study published in the Journal of Experimental Psychology, 118 participants were asked to generate sequences they believed represented random coin flips and also judge the randomness of given sequences. This was done before and after being exposed to a controlled sequence of 200 coin flips.
The experiment varied how participants were exposed to these coin flips by presenting them in different “chunks” or groups of flips—some saw large chunks of 100 flips at a time, others saw medium chunks of 10 and a third group saw small chunks of 5 flips.
The observation of the 200 coin flips significantly altered participants’ perspectives on randomness. After the exposure, participants’ were more likely to realize that each event (or coin flip) is independent of the previous ones.
The study also discovered that how the sequences were presented had a significant impact on this learning process. Participants exposed to larger chunks (groups of 100 or 10 flips) showed a greater adjustment in their perception towards understanding true randomness than those exposed to smaller chunks (groups of 5 flips). This suggests that larger, more comprehensive views of random sequences make it easier for people to grasp the concept of randomness and adjust their biases.
In everyday life, we tend to make our decisions on the basis of smaller chunks of information, akin to the participants who were exposed to just 5 flips instead of 100. The findings suggest that our intuitive appraisal of chance events, such as a run of bad luck being due for a change, can be significantly improved by directly engaging with and reflecting on the nature of randomness. It also highlights the importance of how information is presented to us.
2. Our Brains Are Wired To See Patterns, Even Where None Exist
Even when we are armed with vast amounts of information, such as the data available in financial markets, our brains are inclined to identify patterns where none actually exist. This tendency is known as apophenia, the human propensity to perceive meaningful connections or patterns among unrelated or random phenomena. This psychological phenomenon can lead us to believe we’ve found a predictable pattern in what is, in fact, just noise or randomness.
For example, consider the job hunt process—a situation where the apophenia-gambler’s fallacy combo can mislead us in innocuous ways. Imagine someone has applied to several jobs over the course of a few months and received no offers. Coupled with apophenia, they might look back at their string of unsuccessful applications and perceive a pattern, perhaps thinking, “This next interview has got to be the one.”
This line of reasoning overlooks the fact that each job application and interview process is an independent event, influenced by a myriad of factors such as the pool of candidates, the specific needs of the employer and how one’s qualifications and interview performance align with the job’s requirements. The outcome of one application doesn’t influence the next, and “luck” doesn’t accumulate towards a positive outcome.
Mitigating the effects of apophenia and the gambler’s fallacy in the job hunt, and in real-world decision-making more broadly, involves adopting a more analytical approach:
- Evaluate each event independently. Understand that each job application is a separate event with its own set of variables.
- Focus on what you can control. Concentrate on improving your resume, cover letter, and interview skills. Seeking feedback on rejections can provide actionable advice for future applications.
- Broaden your strategy. If you’re not seeing success, consider whether your approach needs changing. This might mean applying to a wider range of positions, gaining additional skills or seeking networking opportunities.
- Seek objective input. Sometimes, we’re too close to our own situations to see them clearly. Talking to a mentor, career coach or trusted colleague can provide a fresh perspective and help identify any patterns or areas for improvement you might have missed.
While it’s human nature to seek patterns and expect outcomes to “even out,” recognizing and addressing the biases of apophenia and the gambler’s fallacy can lead to more effective strategies and healthier expectations. By focusing on evidence-based decision-making and the factors within our control, we can navigate the uncertainties in our life more successfully.
Part of the Gambler’s Fallacy has to do with a misperception of “optimism.” Take the Realistic Optimism Scale to know if you fall into this category.
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