What a taste of online gambling taught me about my relationship with money
This past week I signed up on an online betting platform, loaded $100, and placed several bets on Dota 2 matches. I’ve had a stellar record of predicting match outcomes for years, and after doing very well at a fun prediction game for a recent tournament, I felt compelled to interrogate why it is that I’ve never tried to make money from this skill set. I mean I’m literally busy with a Masters degree which was generously crowdfunded by my social network. Couldn’t I have been making this “easy money” all along and not needed to ask for that kind of help?
I’ve always felt a bit strange about gambling. I have a general notion that the industry is ethically problematic and exploitative. I’ve also hardly ever had significant disposable income to risk losing. I remember a decade ago, when friends of mine started making big money off poker, feeling reluctant to get involved, despite on the surface being equally qualified to excel as they were (strong strategy games background, good critical thinking etc). I guess I’ve always had this feeling that gambling involves relating to money in a way I’m not ready to relate to it even though I’ve struggled to unpack what that means. And of course there’s the worry about getting hooked, forming an addiction.
This combination of vague, long-standing reservations against and solid, objective reasons for felt like it could only be resolvable by an experiment. And so, I committed a modest $100, primarily for the purpose of seeing how it would feel to participate in this kind of gambling. The site I registered on offers a promotion for new players to match your first deposit up to a certain point, so effectively I had $200 to play with.
The results
I felt optimistic that long term success predicting outcomes would easily convert into betting gains. And maybe, if I keep at it long enough, they still will. But as of now I am down from $200 to $50, having placed seven bets and lost all seven of them. Let me just immediately state for the record for those of you who are betting experts, that yes, I know the convention is to only bet a small fraction of your bankroll. And yes, I know, it’s good practice to make a spreadsheet and look at the data objectively, visualising exact thresholds and decision points. And no, I didn’t do either of those things. Mostly because my intention was never to take the first step into a serious gambling career, but just to see how it would feel to lose (or win!).
The good news is that it turned out that I didn’t feel that bad about losing some money. In fact, my main feeling was intense curiosity. I spent a few days trying to puzzle out why I had done so terribly. Ultimately there was a fairly obvious interesting trend to my bets, which also neatly explains why they were all losses. All of my bets were on big underdogs offering very favourable odds. At the time, my rationalisation for each bet was the same: “yes, this team is an underdog, but I don’t think their chances are quite as low as the odds suggest”. I genuinely still hold all of those assessments. This might even be a valid way to place bets, if my bankroll was big enough (or bets were small/exact enough) that I could explore a large enough sample for things to even out over time. But putting $50 of your $200 on a team you acknowledge aren’t the favourites is just an odd decision.
Further, I noticed that after betting on an underdog I’d quickly start to believe more and more that they might actually win. It starts off that the site gives them 25% and I think they have 35% so I place a bet. By the time the match starts I’m telling my friends I think it’s basically 50–50. This is obviously a dangerous kind of self-deception. It’s one thing to be a fan of a team and wilfully believe against the facts that they will win every game (as I do with Arsenal, every week) but it’s another altogether when you’re putting money on a team. At that point the self-deception stops being a fun way to show support and starts being a dangerous way to form thoughts.
The most telling thing for me is not that I lost a lot of bets on underdogs, but that I didn’t even place a single bet on a bookie favourite. In hindsight, this just seems to be obviously absurd. If we rewind to the time I was just doing fun predictions, while I would pride myself on correctly foreseeing when an underdog would upset a favourite, I still backed the favourites plenty of the time. I would not have been doing so well any other way.
Loving a bargain
I grew up in a relatively poor household. We had all the basic things we needed like food and shelter, but we did not have money for luxuries. I still remember as a kid my mom had this system called the “something else” which involved my brothers and I, once a week, getting to fill a tiny cup with exciting snacks that were hidden away the rest of the time. We didn’t have cool things. For fun we played with the neighbours in the street. In stark contrast was the private school I went to (on a scholarship) where almost all of my classmates came from very wealthy families. I’m ashamed to say, but at many points in my childhood the most exciting thing about going to a friend’s house was getting to indulge in all the cool stuff they had.
When you grow up like that, it affects the way you evaluate things. You find creative ways to get access to more than you can actually afford. And as I grew older, these lessons were further reinforced by the explicit habits and advice of my parents. Don’t spend money on things you don’t need. Always look for the cheapst option. Buy in bulk. Buy on special. Effectively, my guiding principle when it comes to money has always been to try to get more for less.
There is an extent to which this is just practical thinking. Getting more for less is just being prudent. But as a heuristic, it is only as good as the context that created it. It makes sense to use something sparingly when you don’t have a lot of it. Does that mean that in any situation where there is an option that presents itself as more for less we should always go for it? Clearly not. Sometimes we aren’t lacking in resources. Or maybe we are, but our goal is a want rather than a need — it’s totally valid to want things!
Worse yet, we live in a world where often something is presented as being more for less despite that not really being the case. You are not saving money on a bulk buy if you don’t actually need the bulk amount. You are not saving money on a two-for-one takeout special if the alternative was cooking at home, or just a cheaper single item. And I was certainly never saving money by only wanting to bet on underdogs. Even so, I am convinced that my strong association with always trying to get more for less is a big part of what pushed me to only bet on underdogs.
The only difference between my betting habits and my prediction habits is that once I was betting there was money on the table. And once there was money on the table, instead of making a well-rounded informed decision, my instinct, based on years and years of conditioning, was to choose the option that looked like it might get me bonus value at a lower cost.
And here’s the kicker. It is again not just about the underdog bets looking attractive, but also about the favourite ones looking unattractive. See, to me, it feels like betting $50 on a favourite to hopefully get back $60 is just not worth my time, nor the (admittedly smaller) risk that I might lose. But I think this is only because I’m dealing in such small numbers. If, instead of putting down $50 for a return of $60, I was putting down $5000 for a return of $6000, suddenly it wouldn’t look that bad because winning $1000 has real significance that winning $10 just doesn’t.
Thus, I think that in addition to being conditioned to always look for bargains (or things that look like bargains, anyway) another key factor that has led me to make bad betting decisions is just not having that much money to bet with. This got me thinking about some research I have encountered in recent years on something called “scarcity mentality”.
Scarcity mentality
Princeton psychologist Eldar Shafir has spent much of the last decade doing behavioural research on the psychology of scarcity. While we should all have a healthy skepticism of sexy, far-reaching conclusions drawn from specialised behavioural experiments, Shafir’s work has thus far shown fairly consistently that poverty directly impedes cognitive function. Most of us are aware of the value-laden debates that happen over and over about why poor people seem to often make decisions that reinforce their own poverty. Typically it’s some version of right-wingers arguing that poor people simply lack important traits — that there’s something wrong with them — against left-wingers insisting that challenging environments are to blame. Shafir’s work considers a third line of thought: that the mere fact of not having money can lead to worse decision-making about money. Scarcity, he suggests, changes the way people allocate attention, leading to deeper engagement with some problems to the neglect of others.
A bit like how I naturally obsessed over which bets might be able to get me more for less and progressively lost track of who I actually thought would win. It’s difficult to know whether I would have made the same bets if I started with a much bigger bankroll. It’s difficult to know if I’d even still feel conditioned to always look for good deals if I just, you know, had a lot more money. My instinct is that Shafir’s work is onto something, and certainly in my case my entire decision-making process would have looked different if I started off with a much bigger bankroll.
Popular historian Rutger Bregman has used the research of Shafir and others to motivate for universal basic income. Poverty, he argues, is not about anything deeper than how it presents: a lack of money. In his 2014 book Utopia for Realists, Bregman argues that in fact pretty much all of the experimental data that exists on UBI shows that not only does it work but it’s cheaper than the alternative costs states incur as a result of the continued effects of poverty. It’s a well researched book that thoroughly engages a multitude of historical experiments to convincingly argue its case. It turns out that even famously conservative president Richard Nixon was on the verge of enacting UBI nearly 50 years ago!
Basically, not having money is bad for all the obvious reasons and then some. Scarcity puts us under pressure that reduces our cognitive capacity. We learn to rely on heuristics that aren’t actually generalisable.
Conclusion
Coming back to where we started: were my bets really that bad? Probably. I don’t know. What seems clear to me is that in many ways, we are all held captive by the financial systems we exist within. Add money to an equation and our decision-making processes change, often for the worse. Certainly, I am convinced that mine do. Clearly, this is unhealthy. But what does a healthy relationship with money even look like? And just how much Capitalism do you have to Capitalism to be afforded the privilege of testing out that feeling?
