It is called the Gambler's Fallacy, and was recently explained in the British Broadcasting Corporation's (BBC) The Simple Maths Error that can lead to Bankruptcy. There is an inherent tendency to ignore the reality of probability mathematics and to allow emotion to intervene in decisions. The math is more reliable.
The fallacy has been illustrated in various situations. In Italy, there was documentation of the phenomenon in the "mass hysteria known as '53 fever.'” In the national lottery, the number 53 was noted as not appearing in any draws for an extended period. Gamblers concluded that the absence of this number from the draws meant that it was increasingly likely that the number would appear. They "place(d) increasingly big bets on the number in the certainty that it must soon make a reappearance."
This faith did not lead to wins and fortune, but instead "apparently led thousands to their financial ruin." The BBC reports that some blame the hysteria for "a spate of suicides," and about "four billion euros worth of bets." The thought process that led to those bets, to the belief in an eventuality, or increased probability, of 53 coming up, illustrates the fallacy.
There is risk in this mindset. There are obviously implications for the gambler. However, there are implications in the professional world as well. Unfortunately, there is research supporting "that people with higher IQs are more susceptible to the gambler’s fallacy." There is speculation that their intellect leads them to believe in some superior prediction ability. In other words, there is a potential to overthink the odds and those who think a lot are more likely to succumb.
The fact is that probability in any particular discrete instance is likely not influenced by outcomes in any previous iteration. That is, the odds of a coin flip resulting in "heads" or "tails" is a 50/50 proposition. The probability of a "heads" remains the same 50/50 regardless of how many "tails" results occur. If 100 coin flips each (as unlikely as we might deem it) results in "tails," the odds of a "heads on the 101st flip is still 50/50.
But, the BBC explains, our brains are likely to struggle with that reality and to find it "inevitable that a heads will come next." However, the odds remain the same despite our intellectual detour into feelings of inevitability. Whether we believe or not is irrelevant to the outcome.
The fallacy has been demonstrated to implicate loan approvals at banks. The decision-makers who grant or deny loans have been shown to have a higher propensity for rejecting a particular application when their decisions regarding immediate prior applications have been negative. In effect, the brain concludes subconsciously that not all applications should be rejected, and thus the rejection of several must mean it is time for an approval. The same subconscious thought process as it must be time for a "heads," interfering with the static probability of a case-by-case evaluation on the merits.
The implications have appeared in studies of the stock market. There, short-term random stock price fluctuations may influence shareholder decisions. The traders are encouraged by the "even out" fallacy to see a streak (successive increases or decreases) and then to ignore the facts of some stock's performance and instead "trade against a streak." This is not an intellectual determination of where a share value should be, or the quality of an investment, but an emotional reaction to the improbability of the streak.
The BBC cites research into the role of umpires in baseball. In calling balls and strikes, the same "streak" influence was documented. The umpires are less likely to see a second strike in a row. There is a perceived predilection to avoid the streak in the first instance.
The implications are possibly important in legal adjudications. The BBC reports on research in this regard that centered on judicial decisions regarding "asylum to refugees." The decisions on those applications should obviously be made on the merits of each individual case. The "ordering of the cases should not matter." However, the researchers concluded that judges who had "granted the two previous cases" were less likely to approve the third. This may or may not be conscious, but the author alleges this is simply another example of the "breaking the streak" reaction to the fallacy.
The BBC author asserts that this reaction, intended or not, may influence which job applicants are interviewed, which proposals are afforded a second review, and more. The "Gambler's Fallacy" may be at play in the most mundane and rudimentary decisions of the normal workday.
Just like the immigration decisions, all workers' compensation adjudications should be on the merits. It is worthwhile that all adjudicators recognize the potential for fallacy to subconsciously influence outcomes. But, the same is true of the adjuster who is making decisions regarding authorization or denial. Or, the decisions regarding acceptance or rejection of compensability.
Similarly, an attorney evaluating potential claims might be well advised to remember the fallacy and its subconscious implications. This may be aptly engaged in evaluating the claims to be pleaded or defenses raised. The evaluation process should be on the merits of this situation, this case, and this petition. The struggle should be against the hope or belief that eventually "53" or "heads" is somehow more likely now than it was the last time it did not come up in the draw.
