![]() ![]() They publish in order to get their research out there, maybe to get tenure, etc. It’s called “ Decision-Making Under the Gambler’s Fallacy.” It’s the kind of paper that academics publish by the thousand. So, Toby Moskowitz and his co-authors, Daniel Chen and Kelly Shue, have written this interesting research paper. So these probably aren’t the kind of decisions we should be making based on a coin toss. Some of these decisions matter so much they can mean the difference between life and death. In fact, the genesis of the paper was really to take this idea of the gambler’s fallacy, which has been repeated many times in psychological experiments, which is typically a bunch of undergrads playing for a free pizza, and apply it to real-world stakes, where the stakes are big, there is a great deal of uncertainty, and these decisions matter a lot. You go to the slot machine, it hasn’t paid out in a long time and people think, “Well, it’s due to be paid out.” That is just simply not true, if it is a truly independent event, which it is, the way it’s programmed.ĭUBNER: So Toby, you have co-authored a new working paper called “Decision-Making Under the Gambler’s Fallacy,” and if I understand correctly, the big question you’re trying to answer is how the sequencing of decision-making affects the decisions we make. MOSKOWITZ: This is a common misconception in Vegas. This notion has come to be known as “the gambler’s fallacy.” But people have this notion that randomness is alternating. And, of course, it’s very probable that you might get eight heads and two tails and it’s even possible to get ten heads in a row. The problem is they think that should happen in any ten coin flips. And if you flip a coin, say, ten times, most people think - and they’re correct - that on average you should get five heads, five tails. MOSKOWITZ: We like to tell stories and find patterns that aren’t really there. Toby MOSKOWITZ: That doesn’t sit well with people. O.K., if I were to flip the coin one more time, what are you predicting? Here’s what a lot of people would predict: “Let’s see, heads-heads-heads … it’s gotta come up tails this time.” Even though you know a coin toss is a random event, and that each flip is independent - and therefore, the odds for any one coin toss are … 50-50. One more time … and … wow, that’s three heads in a row. Let’s say I flip a coin and it comes up … heads. ![]()
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