Betting Traps - Social Proof

The Experiment

Imagine you have agreed to take part in an experiment; you are sitting in a room and are about to answer what seems like a really easy question. 

The researcher has shown you one card with a line on it, and then another with three lines of varying lengths, labelled A, B, and C. 

All you have to do is tell the researcher which line from A, B and C is the same length as the first line. 

You know the answer, but the one thing that is worrying you is that all seven of the other people who are doing the experiment have given a different answer. 

What do you do? 

Do you give the answer that you know to be correct, or do you agree with the other people who have all answered wrongly? 

Most people when asked will say no, they say they wouldn't deliberately give a wrong answer just because other people have answered incorrectly. 

But when just this experiment was done using actors for the other participants it was found that a lot of people did just that. 

A Psychologist named Solomon Asch did this in the 1950s and found that 75% of the real participants gave at least one wrong answer when the other people (who they thought were also taking part in the experiment) answered incorrectly. 

When he did the same thing with his actors giving the right answer, less than 1% of people gave wrong answers.

Social Proof

This phenomenon of people tending to copy other people's actions is called social proof, and I think it is something I have seen in people's betting behaviour.

The big story of the Gold Cup was undoubtedly the victory of Coneygree under Nico De Boinville, but for the purposes of this blog I am going to ignore this and focus on the beaten favourite, Silviniaco Conti.

I was sitting with some friends in a pub on the afternoon of the Gold Cup, having a conversation about who we thought would win the big race. Of the five people having the conversation, it emerged that I was the only one who didn't think Silviniaco Conti would win. 

When I asked why people were so sure that Paul Nicholls' big hope would win, I was surprised to hear them mention the fact that he was favourite for the race. 

It seems odd to me to pick a horse to win a race purely on the fact that it is favourite, because what this effectively means is that lots of other people have backed the same horse. 

If you back a favourite on the basis, this is like saying, I am backing this horse because other people are doing so, almost like saying line A is the same length when you actually know that the correct line is line C.

Tulips From Amsterdam

This sort of mentality happens in other fields as well; in the 1600s in the Netherlands, people were willing to pay very high prices for Tulip bulbs. 

The plant had been brought from the Ottoman Empire quite recently and was coveted as a luxury item. 

At the height of what would be described as the Dutch Tulip Bubble, people were willing to pay ten times the amount that other people earned in a year for a tulip bulb.

I am sure that at least some of the people paying for tulip bulbs must have had an inkling that they weren't really worth that much, but they bought them because large amount of other people were saying they were worth that much.

Dot Com Bubble

This is often given as the first example of an economic bubble, a more recent one was the dot-com bubble which happened during the late 1990s. 

Nowadays everyone sees Google as a successful company, but during this period there were various other dot-com companies whose shares were being sold for a lot of money, who are much less well known now. 

When was the last time, for example, that you used Yahoo to do an internet search?

Favourites In Horse Racing

What I am saying here is not that it is never good to back a favourite in a horse race, on the contrary, I often back favourites. 

But my point is that it is only a good idea to back a favourite if you believe that the chances of the horse winning the race are greater than the chance implied by the odds.

Silviniaco Conti went off as a 3/1 favourite for the Gold Cup which implies it had a 25% chance of winning the race. 

Racing off a BHA mark of 174 he was the highest-rated horse in the race, but he was running against 9 horses with marks in the 160s, and as well as this, he had never won a race at Cheltenham. 

Had the race been run 100 times I do not think that Silviniaco Conte would have won 25 of them. 

Obviously, as the highest-rated horse in the race, it wasn't to be ruled out that he could win the race, but I certainly thought that his price should have been much longer than it was.

It is my belief that at least part of the reason why it was so short was because of the same phenomenon that was demonstrated by Soloman Asch and which is responsible for the bubbles in the economy.

People see that others have a different view of things to them and then tend to agree with that view, purely because it is held by others. 

Silviniaco Conti is not alone in having his price affected by this either, I suspect another good example could be Shutthefrontdoor in the Grand National this year. 

A combination of the Tony McCoy factor and people backing the favourite because it is the favourite could mean that Shutthefrontdoor goes off as short as 6 or 7/1. 

Last year there were six unseated riders, seven pulled up horses and eight fallers, in a race with 40 starters; to me it seems that odds of 7/1 (implying a 12.5% chance of winning) are probably too long for any horse.

Create Your Own Tissue

A simple trick that might help avoid falling into the social proof trap is to evaluate the chances of a horse winning a race before looking at the odds available. 

Why not create your own race tissue? (If you are unsure what a betting tissue is please check out A Guide to Understanding Bookmakers & Full Explanation of Betting Odds.)

If this is done, and a decision is made that a bet will only be made on the horse judged most likely to win, and only at odds that suggest a smaller chance of winning than the one arrived at before looking at the odds.

This blog is inspired by a book I have been reading called, “The Art of Clear Thinking”. The book looks at various ways in which people tend to make mistakes in the way that they think about situations. 

The book does not specifically apply these mistakes to the field of betting, but I think it is still an interesting read.

I plan to write a series of blogs based on some of the ideas in the book; if you enjoy these blogs then I recommend you read the book.