1st World Congress on Logic, Chance, and Money

Speaker: Akbar Qorbani, Azad University of Isfahan, Iran

One of the cognitive biases is the gambler’s fallacy, or belief in a streak. This fallacy is an incorrect belief about the influence of past independent events on future independent events. According to the gambler’s fallacy, people mistakenly believe that if an independent event occurs more frequently than normal in a specific time period, then the probability of that event occurring in the future will be lower, and vice versa.

For example, the probability of rolling a 6 on a die is 1/6, but according to the gambler’s fallacy, people believe that if a 6 is rolled several times in a row, the probability of rolling a 6 the next time will be lower and a different number will appear. Clearly, this belief is a logical error, because according to logic and the laws of probability, each die roll is completely independent of previous rolls, and previous rolls have no effect on subsequent rolls.

This talk, using a descriptive-analytical method, attempts to show the impact of the gambler’s fallacy on business. Someone who falls into the gambler’s fallacy in their business and trade has made a logical error and links independent transactions together. For example, they believe that if they have had more customers than usual and made more money in a past independent period, they will have fewer customers and make less money in the future independent period, and vice versa. To avoid the gambler’s fallacy, one must understand logic and the laws of probability and realize that there is no way for past independent events to influence future independent events. Therefore, in business and trade, we must have careful and logical planning for buying, selling, and marketing to achieve more money and success.