The Gambler's Fallacy Is A Costly Misunderstanding of Chance
The gambler's fallacy -- the idea that something happening more frequently than normal is "due" to happen less frequently in the future, or vice versa -- is sometimes called the Monte Carlo fallacy, after a curious event at the Monte Carlo casino. In August of 1913, a roulette wheel hit black a record 26 times in a row. As a result, there was a panicked rush to bet on red, with patrons doubling and tripling their stakes as the streak got ever higher. Of course, even though the overall odds of this streak happening are low, the wheel can only hit black or red and therefore always has a 50% chance of hitting either one with every spin. This garden-variety statistical event resulted in a windfall for the casino. This misconception affects more than just casinos, however: it happens when a basketball player who makes numerous shots in a row is considered to be "hot," or when loan officers are less likely to grant a loan if they granted one on the last application they reviewed, or when certain stores are believed to sell more winning lottery tickets than others. We've collected some awesome videos on this topic. Watch them now to learn more.