Top tips for eliminating Outcome Bias in your betting
Tim is sitting down to watch Manchester United play Arsenal. The betting odds are:
5/4 (2.25) Man Utd
29/10 (3.90) Draw
9/5 (2.80) Arsenal
The teams are warming up and suddenly both Bruno Fernandes and Marcus Rashford break their legs and will miss the game. Tim understands how important those players are for United, and suddenly realises that Arsenal are now a value bet. He quickly rushes to his computer and puts £50 on Arsenal to win at 9/5.
One minute before kick-off he checks the odds on Arsenal again and he sees that they are now 6/5. The game kicks-off and Arsenal are nothing short of horrendous, while United play brilliantly, beating Arsenal 3-0. Tim is fuming because he lost £50. Then his annoying mate asks him;
“If you wound the clock back a few hours and had your time again, would you place that bet?”
Tim hastily replied; “Of course not, why would I want to lose $50 again? I’m not an idiot.”
Tim just succumbed to outcome bias.
The definition of outcome bias (Investopedia?: Outcome bias arises when a decision is based on the outcome of previous events, without regard to how the past events developed.
In betting lingo, it means judging the performance of a bet based on whether it won or lost, disregarding the reasons why it was placed, whether they were good or bad.
Everyone remembers their first bet. If it won, you probably thought betting was easy and you could make some decent money from it. If it lost, you were probably shattered at losing a couple of quid and promised you'd never do that again.
But no matter whether the bet won or lost, it doesn’t tell you whether it was a good bet or not. It’s actually irrelevant.
Avoiding Outcome Bias in Betting
The only way to judge the success of a bet is to see whether you beat the margin-free closing line, which is discussed further in this article.
The example I gave at the start is a situation where a really good bet was placed, but Tim was so upset by the result that he completely neglected his great work and succumbed to outcome bias.
Arsenal closed at 6/5 in odds at Pinnacle. Take their margin away and the true odds are something around 5/4, which means Arsenal are a 44.4% chance of winning. Getting odds of anything above 5/4 would be a value bet, in other words, long-term profitability.
Good bets can lose and bad bets can win. Just recently I bet Under 4.5 Goals in the Liverpool vs Man Utd game on the weekend, taking odds of 1/4. I won that bet comfortably as the game ended 0-0. But if I could go back in time I wouldn’t place that bet again, as the closing odds at Pinnacle were also 1/4. So once you add their margin in, the true odds were at something around 2/7.
Tips for Eliminating Outcome Bias
So with all that said, here are four tips on how to implement this way of thinking into your everyday betting:
- Don’t follow a tipster, use software or follow your own opinion just because they/you are backing winners. Follow them or back yourself if they/you are consistently beating the closing line over a big sample size of bets.
- Keep records of all your bets and the closing lines of all of them. If that’s too much effort, just note whether the bet beat the closing line with a simple yes or no.
- If you’re watching the game you’ve bet on, check the closing odds just before the game starts. Then you know whether it was a good bet or not regardless of the what happens in the game.
- This is very hard and not very fun, but try not watching the game or checking the score if you are just waiting to see the outcome of your bet. It actually brings you no benefit at all, unless it’s your favourite team that you like to watch/support.
I hope these tips help in eliminating your outcome bias in betting. And as always (shameless plug incoming), if you’re looking to place bets that consistently beat the closing line then head over to Trademate Sports and start a free trial.