We all dream of getting rich, and that’s why people buy the lottery. Although the odds of winning the jackpot are frustratingly low. But how low are the odds, and what can you do to make a lot of money by betting?
The human brain can be extremely rational. But sometimes, we act irrationally. This is what psychologists call cognitive bias. Once we understand the cognitive bias. We can correct our decisions when it comes to making money from betting, or at least avoiding losses.
What is Optimism Bias
Optimism bias is the belief that we are less at risk of experiencing negative events than others. When we are in a group, optimism bias can also be interpreted as a “not me” bias. It makes the chance of being exposed to unfortunate events seem low.
Classic examples of optimism bias include smokers who believe they are less likely to get lung cancer than other smokers. An investor feels they are less exposed to market risk than others.
Interestingly, the optimism bias can also be applied in reverse to positive events. In times of stressful events, our brains often exaggerate the odds of low contingency events occurring. This is why the players continue to buy the lottery every week.
If I win the lottery…
Behavioral studies have shown that the human brain is not good at processing events with small odds.
The odds of winning the jackpot are extremely small – just one in 14 million. If you spend $1,000 a week on a $1 lottery ticket for 270 years. The average number of times you can expect to win the jackpot is once.
So why do we keep buying the lottery even though we know the odds? Simply speaking, it’s because our brains block out the less likely but more likely outcomes, and that keeps us going.
Not being confused by randomness
Because our brains are not good at evaluating small odds, it relies on the imagination of the outcome. In the case of the lottery, for example, the winner is usually heavily reported. The press may leave a lasting impression. For instance, you may think, “If they can, why can’t I? This makes the idea of an easy win tempting. But the truth is, winning is not common.
Survival of the fittest
Ever wonder why the lottery continues to be so popular, even if buying lottery is a betting strategy with negative expectations? Besides heartfelt hope, there is another bias that contributes to this behavior.
No matter how much we believe ourselves to be rational beings, even smart people fall into the trap of some kind of bias. It is almost impossible to know which bias will occur in a given situation. To further complicate the situation, the same person may use different biases for the same situation in different environments.
One way to win the lottery is to invest time and money. Another way is to develop a positive expectation strategy and apply it consistently. Statistics indicate that you should ideally adopt the second approach.