The Sunk Cost Fallacy in Gambling

But for some, the world of betting is full of real danger. From the hazards of betting under the influence of alcohol or drugs, to the misplaced belief you can beat the house thanks to a particular system, to maxing out credit cards in the pursuit of that huge life-changing win. And here’s another perhaps lesser-known one: the sunk cost fallacy. 

The sunk cost fallacy in everyday life

Ever watch a movie that was bad at the beginning but which you carried on watching till the end because you’d already watched 2/3 of it when you realised it was bad? Ever carried on trying to succeed with a particular sales strategy in your job that you know isn’t working, just because you’ve invested a lot of time developing it?

Ok, those are both examples of the sunk cost fallacy.  

A good definition of it comes from Oxford dictionary: 

“The phenomenon whereby a person is reluctant to abandon a strategy or course of action because they have invested heavily in it, even when it is clear that abandonment would be more beneficial. Eg. the sunk-cost fallacy creeps into a lot of major financial decisions"

The sunk cost fallacy when betting on casino or sports

You see it a lot in gambling. 

A good example is the slots player at a casino who has been playing the same machine for hours on end, leading to increased heartbreak and bigger losses by the minute. Rather than accepting their fate, they carry on pumping more money into it while saying something like “it has to pay out sooner or later” or “I’ve put so much money in that it’s only fair it pays me out a Jackpot soon”. 

Sadly for them, past results don’t affect future performance, as they say in personal finance. Every spin of a slot machine is completely independent from the previous one, or the previous 10,000 for that matter.  You have the same chance of winning big if you invested one coin in it, or 500 coins.

Or take the racing punter who all day has been backing horses out of Stall 5 and losing. Rather than changing strategy to something based on form, the jockey or the horse’s speed for example, they carry on pursuing the ‘stall theory’ on the basis that it’s too late to give up on it.
It’s not.