When I was in college, I dated a guy with money problems.
For instance, six months into the relationship, I found out that he owed a few people money. Like his ex-girlfriend. And then his dad, who gave him the money to pay the ex-girlfriend. And then he still owed the ex-girlfriend, since he spent the money his dad gave him on who knows what.
Soon after, we went to New Orleans during spring break and he gambled away all of his money for the trip. As in, the money he needed for the remainder of his share of gas, meals, and incidentals. It wasn't even in a casino — it was in some random little store we walked into, and I wasn't sure that it was entirely legal. But there was a big plastic case filled with white numbered balls, and the idea was that you bet on certain numbers popping up. The details of the game are hazy. Anyway, his $20 bets soon turned into $50 bets, as he continually lost money and tried to win it back. Each time the guy running the booth pointed out that for just $50 more, he could win back $300, and so on.
Eventually, he crapped out, so to speak. He had no money left.
So why would someone continue to bet money when they're clearly on a losing streak?
The problem is gambler's fallacy
At the time, I knew that his “I can win it back” mentality was flawed. For one thing, he kept losing! But what I didn't know is that gamblers on streaks often are influenced by gambler's fallacy.
“If you've ever called heads on a coin flip, seen the coin land tails up, and then called heads again because ‘heads is due,' you've been caught up in the gambler's fallacy,” writes Jay Caspian Kang for The New Yorker.
And new research explains how gambler's fallacy affects gamblers during streaks, says Kang.
“What the research [found] was that gamblers on streaks — good or bad — acted under the influence of the gambler's fallacy,” he writes. “Winning bettors began placing more prudent bets because they assumed their luck would soon run out. Losers began placing bets with longer odds because they wanted to win big when their luck finally, inevitably changed. What this means is that streaky gamblers who win do so because they expect to lose, and streaky gamblers who lose do so because they expect to win. Or, more simply put, when you're losing, you're wrong, but when you're winning, you're also wrong.”
But your confidence because you're winning or your feeling that your luck is due to change doesn't influence the outcome of the cards, dice, or numbered balls.
My ex thought that after so many losses, he was “due” for a win. So he went from $20 bets to $50 bets so that he could win back his money when his luck finally changed.
But his expectation that he would eventually win a round didn't affect which numbers popped up in the ball machine. The only thing that he had control over is the size and riskiness of the next bet he made.
And here's what The Grail Knight would say about that:
My thoughts on gambling
Personally, I've never gambled for anything except unbacked colored chips at my in-laws' kitchen table. I've never been to Vegas, and I have no inclination to go. So my thought is, take that gambling money and buy a ribeye dinner instead. To me, it's a slippery slope.
It's likely that my feelings on the matter have something to do with that trip to New Orleans. But I also don't like the idea of throwing my money away, which is what it would feel like if I lost.
But I concede that some people who enjoy gambling can do it like Kenny Rogers says to do: They know when to walk away. For instance, my friend enjoys going to Vegas, but he has a predetermined amount of money he's willing to lose. He always walks away if he loses it. More often than not, he wins $200 at blackjack, which I have to admit, is pretty cool.
Walking away requires discipline, though. And if you don't have that kind of discipline, you might end up like my ex, calling your dad to wire you money for your trip home. Or worse. Just ask Matt Damon and Edward Norton. (Okay, so Worm kind of deserved it…)
Readers, what are your thoughts on gambling? Is my position too rigid, or do you agree that gambling is a slippery slope?
Author: April Dykman
As a freelance writer, editor, and blogger, April Dykman specialized in personal finance, real estate, and entrepreneurship topics. Her work has been featured on MSNBC, Fox Business, Forbes, MoneyBuilder, Yahoo! Finance, Lifehacker, and The Consumerist. Now she does direct response copywriting but, in her free time, April is a wannabe chef, a diehard Italophile, and a recovering yogi.