Confidence in betting and the Dunning Kruger Effect

Confidence in betting can be both a good and a bad thing. When we go on win streaks or have a huge winning night, we risk overestimating our own ability to find an edge in betting. We may start taking risks we otherwise wouldn´t and we may cap a fighter at a much higher win rate than we otherwise wouldn´t. Instead of capping a fighter at 70% chance of winning the fight, we may now cap them at having 80% chance to win the fight, simply because we have become overconfident in our own abilities.

 

Just like win streaks can cause us to become overly confident in our own abilities, losing streaks can leave us unconfident, scared, and reluctant to trust our own abilities in finding an edge. What we need is a balance. Some bettors when determine how much to stake may even use a confidence staking method which can be as simple as between 1-3 units.

 

1 unit = Low confidence

2 units = Medium confidence

3 units = High confidence

 

Confidence here can be viewed as believing the bet has a high win chance of winning, and/or has a high expected ROI calling for a bigger bet.

The Hot Hand Fallacy In betting

In order to understand better  how to deal with confidence in betting, we have to talk about the hot hand fallacy. To explain the hot hand fallacy as simple as possible, let´s imagine a coin flip. If you guess tails and you get it right 5 times in a row, one might say they have a “hot hand”. This may lead you to think that you have more than 50% chance to correctly predict whether the coin on the next flip will land on either heads or tails, even though mathematically you still only have a 50% chance of being correct.

This concept is often seen in sports betting. If we take a look at a fighter like Israel Adesanya who was undefeated before he faced Jan Blachowicz, if you had bet on Adesanya before that fight you would had been on a 9 fight win streak, and you would probably be more likely to overestimate Israel Adesanya´s chances of winning vs the at the time current LHW Champion Jan Blachowicz. When we think about the current MW champion going up against the LHW champion we would likely favour the LHW champion if we knew nothing about the fighters, as we got weight classes for a reason. At the time of this fight however Adesanya had around a 70% chance of winning according to the odds. Think about that for a minute. If you had bet on him you would think he had an even bigger chance of winning, so you would likely have to cap him at 80% minimum to make a bet that would be worthy of the risk.

Just like “Hot hands” exists the same goes for “cold hands”. If you bet on a fighter, or even different fighters, and you lose 10 times in a row, you may start to lose confidence in your own ability to properly handicap a fight. You may start to question your process and strategy, and you may even adjust them. This could be a major mistake. Why? Because before we make any changes to our process or strategy we should base this on simulations and patterns, otherwise we may ruin a good process and strategy just because of variance and a “cold hand”. Our lack of confidence could have a majorly negative effect if we do not maintain control of our emotions and strategy.

This is of course far easier said than done. As emotions can run high in betting. The thrill of a win, and the puking feeling of a loss, or string of losses. This is why the more emotion less you can be the better. If you can remain calm, collected and calculated then you will increase your chances of winning long-term.

How can confidence then help in betting?

Most bettors who have enjoyed continued success will likely tell you that it’s the result of a lot of hard work, as well as acquiring the knowledge and skill that needed to be able to identify value in a betting market, you also need a bit of luck some patience in order to rack up a decent sample size of bets. Confidence however, can help you find the motivation and drive to keep going, and to do the hard work necessary. It may help you become more focused, and this is why some believe that the hot hand is a real thing, a better word for it, could be momentum. Momentum is slightly different, as momentum is more often seen in fights, where we a fighter may have done well, but suddenly you can sense the momentum shifts, and the other fighter starts winning. This is why it´s also vital for fighters to maintain momentum. However if we are talking a bout a coin flip, the chance is always 50% regardless how many times you guess the correct answer.

 

However, for betting confidence can certainly help you deal with variance and inevitable losses that happen on the way to achieving success. If you know you´re a long term winner it may help you to remain calm during very cold streaks which will happen to everyone no matter how skilled you are at betting.

 

I spoke briefly about staking methods in the beginning of this article, and confidence can most certainly help you place those big bets you definitely should do when you have a huge edge on a bet. It could be a very big underdog that you feel very confident in has a decent chance at winning, and you think and feel that you have a large edge over the bookies. In this case confidence can help you bet big, where you otherwise may bet smaller.

 

You can also gain confidence through sample sizes. If you have a made many bets and you have a very high ROI (return on investment) on let´s say womens MMA, you may be especially good at handicapping womens fights, and therefore as long as your sample size is large enough, it would make perfect sense to be extra confident, and make a slightly bigger bet than normal more often than not on womens mma fights. A bettor I spoke to had around 40% ROI on WMMA, so I notified the person about this, they gained confidence, and have since then been betting more money on these fights. That confidence based on data helped this person to make more money. This is when confidence makes sense, when its based on logic and data. Confidence does not make sense when its based on a streak of lucky 50% coin flips.

This new found knowledge for the person realizing that they are extra good at handicapping womens mma fights, may have led to what is called overconfidence.

Overconfidence in betting

Overconfidence is a product of illusory superiority (or the “above average effect”) and, as the name would suggest, it results in an individual having excessive confidence in their skill or judgement. That is to say that we overestimate our own performance or our performance relative to others. In its simplest terms, overconfidence means we think we’re better than we actually are. 

This is especially risky if we base our confidence on small data sets. If have only bet 10 fights, and won all those 10 fights, we may think we have a solid process. Then when we start to lose, we do not adjust our process, and if we do not change our process we will continue to lose, as we have become too confident based on too small a data set.

 

Overconfidence can also lead to laziness, and arrogance. You have too much confidence in your own ability and discount the ability of others, you will underestimate how difficult it is to be in the small percentage of successful bettors.

 

Questions to ask yourself in order to avoid overconfidence

Let´s look at a potential bet we may make to help with this issue.

Let´s pretend you want to bet on fighter A at odds 2.50 / +150 (40% chance of winning) but you think the correct odds should be 2.00 / +100 (50%) you can ask yourself the following questions:

  • Why do the bookie offer these odds? Are they just trying to get enough action on both sides?
  • Why have other sharp bettors not bet this down to 2.00?
  • Is there vital information that you may have missed? An injury perhaps?

Confidence is about having the right balance. You need a good work ethic, you need to be confident in your knowledge about MMA and in your ability to handicap fights. However just like a fighter should never underestimate their opponent, you shouldn´t underestimate the market. Remember that betting is a highly competitive environment.

The Dunning-Kruger Effect

Lastly let´s talk about the Dunning-Kruger Effect

The concept of the Dunning-Kruger effect is based on a 1999 paper by Cornell University psychologists David Dunning and Justin Kruger.  The pair tested participants on their logic, grammar, and sense of humor, and found that those who performed in the bottom quartile rated their skills far above average. 

The Dunning-Kruger effect is best explained through this picture:

 

A new bettor may be very confident. Remember when you started betting? I do. I was very confident, and I thought I knew everything. But what the Dunning Kruger effect shows is that ignorant people are often the most confident, however that confidence is based on pretty much nothing. While an expert may be confident, he/she may not be as confident as the ignorant person, as they may have realized that fighter X has a bad chin, or may not have the best fight IQ. So they are confident, but not too confident. While the ignorant person may think fighter A is a god, and fighter B is simply just a “bum”. It´s a “lock”.

This is the worst form of overconfidence.

As a simpler explanation for anyone not too involved in betting – then consider this. If you asked your friends and people who are not familiar with MMA and you showed them a picture of Glover Teixeira and Thiago Santos. Very likely nearly all of them would had picked Thiago Santos to win, he is big, looks strong and dangerous, while Glover looks more like your uncle at a grill party. They may even have thought it would be insanity for that fight to be sanctioned…but we all know who ended up winning that fight, and later on becoming the UFC LHW Champion. 

 

 

Conclusion

In conclusion being confident in betting is not as black and white as one might first have thought. It can be both good and bad, the key word is balance. Its important we are honest with ourselves, and trust our data and believe in ourselves, while still respecting the market. If we can find this balance, we have a solid chance of making money and being among the 1% that win long-term in betting.

 

I hope you found this article useful. If you enjoyed this article, be sure to check out all of my other betting guides. Feel free to contact me for any topics that you would like me to cover.  

 

Anders – Pro Sports Bettor & owner of Fimbul Fight Picks.