Life Is (not) a Gamble
On Domain Specificity and the Generality of the Gambling Metaphor
If you would never willingly set foot in a casino or gamblers strike you as a particularly irrational lot, then you may be wondering what this Substack—with most examples taken from casino gambling—has to teach you about judgment and decision making more generally. This essay is an attempt to address that concern.
Contents
The Gambler’s Fallacy and the Illusion of Cyclical Luck: Examples of Domain Specificity and Generality
I want to start with a quick nod to the previous Substack essay which touched on a common misconception among gamblers about the law of large numbers, and on the relationship between that misconception and belief in both “the gambler’s fallacy” and “cyclical luck” (a.k.a., “the hot hand”) among casino gamblers. If you didn’t read that essay, you’ll want to take a look at it first, or this section won’t make as much sense as it might. Those two so-called fallacies are good examples that seem domain specific (to gambling), and so it is reasonable to wonder how does that discussion generalize to other people and to other kinds of decisions.
Domain Specificity and Generality of the Gambler’s Fallacy
While many experienced gamblers have a misconception of the law of large numbers and have false beliefs about luck, most non-gamblers misunderstand the law of large numbers too. When non-gamblers watch a roulette ball land on the same color repeatedly, the idea that black is due is common (I can attest from personal experience discussing the idea with non-gambling, non-decision-scientist friends and students). The initial understanding among non-math-nerds—who have not been regularly exposed to the distinction between frequencies (total numbers) and relative frequencies (ratios)—is that the rules of probability imply that unlikely sequences of events must somehow even out over time. It turns out to be non-gamblers or early-stage gamblers, when first exposed to roulette or other games of chance, who immediately make choices that suggest they believe in the gamblers fallacy. Experienced gamblers have usually learned that such a strategy has dangerous consequences.
There is something about games of chance such as roulette that is unlike most other daily experiences and in that sense is domain specific. That distinctiveness includes repeated exposure to the same kind of random, near 50:50 outcome, over and over again over a relatively brief period of time, with financial stakes that make those outcomes emotionally salient, and where it ultimately does not matter which choice is made (since continuing to be on the same color, say black, has the same likelihood of winning as changing to red). It provides the rare necessary environment to experience conditions that might elicit belief in the gambler’s fallacy. But the belief itself, once exposed to that environment, is not something unique to gamblers. On the contrary, it is beginner or early-stage casino gamblers who are most prone to it. In short, the gambler’s fallacy could be considered domain specific in the sense that it is only when playing certain games of chance that the fallacy has an opportunity to arise, but domain general in the sense that people across cultures are apt to use strategies that look like the gamblers fallacy when first exposed to such environments.
Domain Specificity and Generality of Belief in Cyclical Luck
Belief in the cyclical nature of luck itself (a.k.a., belief in the hot hand), however, is a good example of something that differentiates gamblers from many other people. This is true in the sense that the kind of people more prone to gambling are more likely to believe in it in the first place, whether due to cultural or individual differences in conceptions of the nature of luck. But it is also true in the sense that people with long-term exposure to games of chance tend to “learn” from experience that luck is cyclical in a way that and can be used to predict short-term future outcomes. Learn is in scare quotes because of course this lesson is false. But the perception that it is true, from both direct experience and vicariously, from repeated testimonials from other gamblers, is compelling—even to people who may have begun gambling convinced that there is no such thing as luck.
These two examples point to distinct aspects of gambling and gamblers that are both domain specific and distinct aspects that generalize to people and to risky decision making outside the casino.
Casino Gambling as a Case Study
A central theme of decision making in the wild, at least in this Substack, concerns the tension between how cases do and do not generalize, and the importance of both—of generalization and of uniqueness—to understanding and evaluating decision processes. Casino gambling was chosen because it’s a great example, a case, that generalizes in important ways to life in the contemporary industrialized world, and as a topic of scientific inquiry that generalizes to how we study understand and evaluate risky and uncertain decision making in other domains. It was also chosen because it is a wonderful demonstration of what does not generalize, about the hazards of domain-general and species-general models of rational choice or of human cognitive heuristics and biases. Much of what goes into understanding how and evaluating how well people make risky and uncertain decisions is either domain-specific (for example to blackjack or to gambling) or person-specific (for example, to blackjack players, or to a particular kind of blackjack player). Casino gambling helps highlight these contrasting goals of empiricism.
How the Case of Casino Gambling Generalizes
Casinos may seem like the extreme on the side of artificiality, deception, and manipulation, an unrepresentative outlier relative to the other environments in which members of industrialized societies spend their time. But casino environments are more like supermarkets, office buildings, and even our own homes than they may originally appear. More of what they offer is there because the users choose it and are willing to pay for it than might first meet the eye, and more of what we buy outside the casino is presented to us in deceptive and manipulative ways than we might initially suspect. Casinos may make these qualities more obvious than most environments, but it is in that transparency that they help illuminate similar characteristics of other built environments. Our decision contexts are a complex, co-evolving dance between buyers, sellers, creators, and intermediaries. Casinos are a great case because they lay bare this relationship more explicitly and transparently than most built environments do: partly built to deceive us and keep us coming back, and partly built to provide us what we are asking—and willing to pay—for.
Similarly, casino gamblers may seem like the extreme side of decision irrationality, unrepresentative outliers along the continuum from more to less rational, making risky choices that seem transparently designed to give the player a negative expected return. But studying gamblers’ beliefs and strategies up close helps teach us how often decisions that look nonsensical from a distance may have a rationality that the onlooker has simply failed to understand. However, it also demonstrates that all of us, not just gamblers, have persistent commitments to false or incoherent beliefs that can only be recognized as such from a more distant perspective. Gamblers are a great case because they illuminate general features of both how readily we attribute irrationality to that which we do not understand, and also how readily we ourselves may misapprehend a situation when we view it from a particular perspective.
How the Case of Casino Gambling Does Not Generalize (and Why That May Be the Most Important Lesson)
While there can be no doubt that many lessons from casino gambling and casino gamblers generalize to other domains and to other people, many of the lessons throughout this Substack are about the importance of domain specificity and the value of understanding what makes situations and people different as opposed to what makes us all the same. Gambling decisions have many characteristics that are unlike other risky or uncertain decisions. That is not a reason to conclude gambling is a poorly chosen case. Instead, it points to the fact that all cases are special. Important aspects of decision strategies are—in part—unique to the specialized situation. Decision processes develop with experience in a particular domain, and with the accumulated individual and cultural experience interacting with that domain. Understanding how those processes work, and evaluating how well they work, is enhanced by carefully considering the particular case, in the wild. Decision processes when playing blackjack or roulette are entirely unlike decision processes when deciding “whether or not to go to war or whether or not to carry an umbrella” (to use one of my favorite quotations from Tversky & Kahneman in justifying the use of simple gambles to study more general processes of decision making under risk and uncertainty).
Scientific psychology tends to look for domain- and species-general psychological processes, part of the inbuilt nature of the mind that we humans share. By searching specifically for those things, cognitive psychology also tends to miss what is unique and different: what varies across individuals, across cultures, and across decision domains. As the example at the top of this Substack essay emphasized, roulette and other games of chance provide one of the rare environments where people get to interact with near random, equiprobable, binary (red or black, odd or even, 1-18 or 19-36) repeated choices, over and over again. It is in that strange, artificial, intentionally designed domain that one can directly experience patterns in randomness and a disconnect between choice and consequence that is unlike almost any decisions under risk and uncertainty in the natural world. I cannot think of a single decision outside of intentionally, culturally designed contexts where repeated decisions have a near random and near equiprobable impact on outcomes; yet they are omnipresent in casinos… and in many sports.
But domain- and individual-specificity describes most decisions, in other “wilds.” Laboratory decisions making is unique because it is designed by scientists trying to disprove a particular hypothesis and lend support, instead to their favored hypothesis; because the scenarios tend to be hypothetical and are often unrealistic, because the participants tend to be university students, because learning and expertise tends to be absent or short lived, and because they are made outside a cultural and physical context that non-laboratory decisions tend to entail. Alternatively, supermarket shoppers make their decisions in part because of how the supermarket is designed, because of culture-specific practices, values, and beliefs that were encountered as part of growing up in a community of super-market shoppers, in part because of individual differences, including genetic differences, in part because of unique experiences outside the market, and in large part because of “expertise” and corresponding strategies developed after hundreds or thousands of hours spent in various supermarkets and in conversations with other shoppers. With the development of expertise in a domain, all of those unique features feed back on our neural development and change our brain structure and function so that even the cognitive processes are interdependent with the domain specificity. Both the decision processes and how well they work (their rationality) is interdependent with the domain, with experience, and with the individual and cultural differences that co-evolve with that domain over time. Focusing only on what is universal, shared across domains and across decision makers, misses much—arguably most—that is important to understanding and evaluating decision processes.
TL; DR
In short, I am convinced that casinos, gamblers, and gambling strategies and beliefs—together—have much to teach us about how we make decisions more generally, even if you have no interest in casinos or gambling, and even if you see yourself as nothing like a casino gamblers. But most of what it has to teach is about domain-specificity and non-generalization; about how different we all are and about how those differences develop with experience in distinct contexts; about the value of studying what makes us different and not just how we are all the same. Much of psychological science has been focused on what makes decisions all the same (e.g., the gambling metaphor and domain-general models of rational choice) or on what us, as humans, all the same (e.g., inbuilt cognitive processes associated with heuristics and biases), often with a naive assumptions that the psychologists’ point of view, or the undergraduate-psychology-student participants’ points of view, are more representative of people, as a species, than they actually are. Looking at the psychology of gamblers in the casino helps make clear both the truth and the absurdity in the idea that we are all alike.