Are you one of those punters who has chased losses by increasing your stake in the hope of winning back your losses, only to lose your bankroll? Even worse, are you one of those punters who repeatedly does this or has let these experiences affect the way you gamble?
If the answer is yes to any of the above questions, take a few minutes to read our punter’s guide to the sunk cost fallacy.
What Is a Sunk Cost?
Economists are the people that coined the phrase “Sunk Cost” and they use it to describe any cost you’ve paid for that can’t be reclaimed or regained. It mainly refers to financial costs but can also refer to both your physical and mental well-being.
A hypothetical example of a non-gambling related “Sunk Cost” is the half-price football ticket you bought off a tout only to refused entry at the turnstile because it was a fake. You can’t find the tout you bought it off, so you now don’t have enough money left to buy a full-price ticket. You’ve also missed out on watching the football match and making memories with your mates. That’s an example of a financial, physical, and mental “Sunk Cost”.
What is the Sunk Cost Fallacy?
The Sunk Cost Fallacy is based on the idea that most humans concentrate too much on the negatives in life and think about the bad things twice as much as they should. This aversion to loss makes us make bad decisions instead of learning from our experiences and making better decisions in the future.
If you had bought that half-price ticket off a tout, what would your future actions be? Would you spend the rest of your life trying to find the tout that ripped you off? Would you never go to a football match again? Or would you simply learn from your mistake and purchase a proper ticket next time which would allow you to watch the match and have fun with your mates?
It’s the same with gambling. If you’ve made mistakes in the past such as chasing losses instead of sticking to a solid staking and bankroll system, how are you going to let that impact your future gambling? Are you going to wait until you’ve got more money and then bet it wildly in an attempt to recoup those past losses? Are you never going to gamble again? Or are you going to adopt a recommended staking plan and betting bank and make a long-term plan to recoup those losses and to make long-term profits?
Don’t Be Embarrassed by Past Mistakes
If you think you’re the only person to have fallen foul to the Sunk Cost Fallacy – think again!
The best business example is the Concorde. The idea of a passenger jet that could fly at 1,300 miles an hour and arrive in New York just 3½ hours after it had taken off from London was a beautiful thing, but experts predicted that is was doomed to failure from the outset as a journey cost 30x as much as that of a normal passenger jet.
The English and French governments were proud to have the Concorde as a flagbearer and subsidized its early flights in the hope that it would become cost-effective. But the Concorde never proved profitable and the governments continued to blindly pump more money into the project in the hope of recouping their losses. What they should have done is pull the plug when it was obvious that they were onto a loser and invest the money in another venture.
That just shows that even the most powerful and intelligent people make mistakes, but they did learn eventually. There are also still plenty of airlines making a tasty profit each year by offering flights that are economically viable.
Never Chase Losses
The biggest mistakes that amateur punters make is to chase losses.
Most punters start with the best intentions. For example, if they find four horses that they fancy one day, they have £5 on each. For whatever reason, all four lose. It could be that the ground changed or there was a strong headwind that put the emphasis more on stamina. Whatever the reason, you simply must right that day off and stick with the staking system and betting bank you began with.
But plenty of punters don’t. They see an even-money favourite in the next race and think they’ll have £25 on it to win their £20 losses back and make a £5 profit. The problem is that you hadn’t picked this horse out as a bet earlier in the day, so why would you have five-times your normal stake on it.
What you should do is stop gambling for the day. There are plenty of more days to win back your money backing horses that offer value for money. Remember, winning money from gambling needs to be a long-term goal, not a get rich quick scheme.
Don’t Fall Victim to The Sunk Cost Fallacy
If you think the sunk cost fallacy has made you a bad gambler, it’s time to put the past behind you and move on. It’s time to give yourself a break, make a fresh start.
Write off any losses you’ve endured in the past. Blank out the mental scars. Forget what a bad gambler you used to be.
If you want to make a profit from gambling – it’s time to gamble the right way.
Step 1. Set up a betting bank that can sustain you through the ups and downs that all gamblers go through.
Step 2: Set up a staking plan that will help you utilize your betting bank to the best effect.
Step 3: Start betting on selections that will allow you to make a profit from gambling.
If you’re not sure how to follow any of these steps, there are plenty of articles on how to set up a betting bank and a staking plan. Alternatively, for a monthly fee, you can acquire the services of a variety of tipsters that can stop you from falling victim to the sunk cost fallacy.