The “gambler’s fallacy” - which can affect everyone
from athletes to loan officers - creates deceptive biases that lead you to
anticipate patterns that don’t really exist.
“To find out if you fall for the gambler’s fallacy,
imagine you are tossing a (fair) coin and you get the following sequence:
Heads, Heads, Tails, Tails, Tails, Tails, Tails, Tails, Tails, Tails, Tails,
Tails. What’s the chance you will now get a heads?
Many people believe the odds change so that the
sequence must somehow even out, increasing the chance of a heads on the
subsequent goes. Somehow, it just feels inevitable that a heads will come next.
But basic probability theory tells us that the events are statistically
independent, meaning the odds are exactly the same on each flip. The chance of
a heads is still 50% even if you’ve had 500 or 5,000 tails all in a row”.
Related:
The gambler’s and hot-hand fallacies: Empirical
evidence from trading data