Finally getting back to betting properly this week, with trading to follow from Tuesday on-wards next week. It feels great to restart, and looking ahead at the racing schedule it will be full steam ahead now.
Today I want to cover the 'Sunk Cost Fallacy', which I'll explain exactly why this is essential information to help you make better life decisions, and positively impact your betting and trading.
If you've never heard of this before, the sunk cost fallacy was identified by two Israeli psychologists, Daniel Kahneman, and Amos Tversky. This fallacy is actually key to human nature.
Human beings are reluctant to accept losses, in fact extremely reluctant. In most cases people will forgo earnings in order to not have to realize losses. This is a simple fact which I think everyone can relate to at some point.
I see this a lot running a site like this, as people will read the information I post, follow a strategy which may hit a losing spell, as they all inevitably do at some point, you can see this looking at any of my profit and loss graphs.
Anyway, at this stage they will then begin throwing good money after bad on other random bets, not following the strategy and sticking to the plan, desperate to recover the loss in any way possible, or by increasing the staking way above recommended levels, just to avert the feeling of losing.
This feeling of chasing a loss can ruin people, it's truly horrible, and is a reason that gambling when not applied correctly can be so dangerous, in fact all forms of addiction can in some way be destructive if not faced head on.
People are just very reluctant to realize any loss, it's as stated human nature, but habits can be broken, and in this instance it's required to be successful long term. I've broken my habits and made the tough choices, so if I can do this anybody can.
Let me give you an example of what I'm getting at. How many times have you broken up with some girl/guy, and then you got back together, because you'd forgotten the bad things or crappy times when together. This is what happens all the time, and you can relate this exactly to not wanting to let go of a loss with a bet.
In this example you're moving forward with your life, and then you start thinking about the ex girlfriend/boyfriend, remembering the good times you had, all the great memories, you had a good time and the sex was great yeah, but you forget the bad things.
Which is the problem, human beings will keep forgetting about the bad things, because the bad memories are overwhelmed by the good memories.
Which means we repeatedly pick up the phone and call the ex, and the same feelings are happening to them, they've also forgotten the bad things and fights etc, so our fictional couple in this example get back together.
Things are going great for a while, then inevitably the old problems creep back in to the relationship. All of a sudden they're right back where they started, and the realization hits that it's a terrible decision, back in a toxic relationship. It has to be ended, so another messy break up ensues, a few weeks pass, and they are missing each other again.
It's happened to you, me, and everybody.
It's because we all fall for this fallacy, and it's much more important than this example above, it's your life. You can hopefully see what I'm getting at applying this to betting or trading.
The cycle of betting, having a good time winning for a while, then losing a lot after a few stupid decisions to chase a loss, or not stopping when ahead for example. That feeling like you're never going to make that same mistake again, but then you do it again and again. It's just soul destroying and time consuming, it's time better spent making your life amazing, and applying control to these destructive human urges. Spending time to identify when these feelings rise, and knowing how to resist and stick to the plan.
If you were to dissect the lives of people who've had shitty lives, you will discover that most of them had shitty lives that didn't amount to much or do anything with the opportunities they had, because of the sunk cost fallacy.
Obviously in regular life it's not called the sunk cost fallacy, but instead something like, oh well I fell in to a rut.
This rut can consume peoples lives if not addressed and realized, instead of dreaming about life and never doing anything to live it.
It's because as stated people are unwilling to accept losses, and right off the sunk cost of the situation. It's easy to forget the bad times, which will be outweighed by the good memories and the feeling of winning. Which will cause the same mistakes to be repeated.
It's being unwilling to acknowledge that something has to change, ie your betting or trading patterns, your relationships, business dealings, or whatever routine is negatively holding you back. The table has to be tipped over and everything has to come off to start again.
A rut is basically somebody who is trapped in the sunk cost fallacy, which is the worst place to be trapped. It's being unwilling to break out, and remaining in the same negative cycle for years, or even their entire lives until regret finally sinks in.
If you're in a rut that's not particularly a bad place, you're comfortable, but not achieving as much as you could be, most people will just stay in this place. It's the easy option right. It's like the old story of the frog in the boiling water. If you toss the frog in the boiling water it will leap right out, put a frog into cold water and then boil it, the frog is going to stay there and be boiled alive, and without complaint.
My advice is, don't let this happen to you.
If you ever feel like you're in a rut, like things are shitty, you're stuck making the same stupid mistakes again and again keeping you down, what you have to do is break out.
Don't worry about what you break along the way, just break up with everything holding you back and the life you want to leave behind. Just break up with whatever and whoever in this situation that's making you feel stuck.
It's not the easy option as it's comfortable and soothing to continue in a static situation, any stability even a shitty stability can often feel nice and often preferable to change. As we're all human and afraid of change, as the sunk cost fallacy affects everyone.
For me personally I've been stuck in a situation that's not healthy for me, and it's been miserable, but not miserable enough if that makes sense. Just not terrible enough for me to want to change things. I'd make the same stupid mistakes again and again, or live a mediocre existence, because that was the easy route.
As I repeatedly emphasize in these blog posts nothing worthwhile comes easy. Breaking out, and making tough decisions to influence positive change in your life is never going to be simple, but it's your life and what's more important.
What would snap me out of any sunk cost situation was often an outside influence, a royal kick up the arse, a slap of realization that would wake me up like an ice bucket challenge. Maybe even reading this blog post may give you the required firm nudge, who knows.
Something like this would then get me going and give me what I needed to break out the rut. This has happened to me and it's happened to everybody. I could give you a long list of professional people I know, who've repeated poor business decisions by not acknowledging regular failure, destructive relationship cycles, and of course betting to chase losses.
If you are reading this and feeling that in some way you are stuck in a rut, once you realize the situation you're in is static but not quite miserable enough, then you need to break out and change in order to progress with whatever it is in your life you should be doing.
Just identify what the problem is, and get out of the rut while you have a chance. If you remain comfortable but don't break out, you'll watch as your whole life vanishes...
Why do I share these posts on a Sunday somebody asked me recently, someone who's been reading for a while and actually enjoys them, but they asked if it's some kind of self help, or personal confessional style psychological analysis, well not really.
It's just me sharing things I've experienced in my life I feel may be useful.
Things I feel are linked to making the most out of our time on this planet, and also having what I consider the right tools to get the most from Exponential Bet.
Betting to increase an investment of money over time requires a totally different mindset to someone looking for daily tips on the nags.
To make any investment of your time, energy, and have your money work for you, needs some process of thought founded on logic.
The strategies and services at Exponential Bet are all based on research and data, not speculative hunches.
It's still gambling regardless of whether we're betting over a longer period for incremental steady growth, or trading in various horse races or football matches, as we're using a betting exchange, but as proven over the years we've more chance of generating a consistent income, or end of year yield, than putting it all on the nose on the next at Kempton for example.
I enjoy sharing my life experience and personal opinions on specific topics. We won't always agree, but I'll always give my rationale and remain open to be convinced otherwise.
Next Sunday's Slant will cover 'Burnout'.
Thanks for reading.