The Psychology of Risk: Why We Gamble

When we think of gambling, we usually associate the activity to casino games. The truth is, gambling and risk is involved in many everyday activities. We take gambles all the time and make calculated risks that either pay off or don’t. But we don’t really refer to getting a mortgage on a house as a gamble, nor consider applying for a job; asking for a raise, or even meeting someone through a dating app as a gamble.

Gambling is closely associated with casino gaming or sports betting, which is perhaps the most straightforward application of taking a gamble. However, in terms of what that means psychologically, it is the act of trying to predict an outcome. We have an expectation and enjoy the risk element that comes with the gamble. The win will feel all the better for having taken that risk, and we can rationalize the loss. Yet it is still quite a taboo in some cultures.

How We Perceive Risk

Casino games provide the perfect lesson on how risk works. You stake money to win more, and if you don’t win, you lose the money you staked. It is more concrete than abstract gambles such as buying stocks or a property. Who knows if the property can yield a 5% ROI annually and then you can sell it 5 years later at a margin of 250%. Or if your stocks provide yearly dividends of 10% until you sell them at 150% years later. There are simply so many variables and possible outcomes – and your principal stake does not really get lost, although your assets may end up becoming liabilities, which can cost you further down the road.

The risk at those levels is not very specific, as there are so many variables that can influence what will happen. It is far more palpable in online casino games and sports betting. There, we know exactly how much we can win, and how much is needed to fund those gambles.

Psychology and Neurology of Risks

So casino games are really the best example, and they are equally capable of providing entertainment and stress. The game is uncertainty, and that is a brilliant stimulator. When playing casino games or betting on sports, our brains release dopamine, the pleasure hormone. This makes us feel good and keeps us engaged in the gameplay. Dopamine is released if you win, but it is also released while we anticipate what will happen.

In those moments before the roulette ball finally stops, the final card is drawn in a game of blackjack, or before the reels on the slot stop, we have a moment to anticipate what will happen. In that brief period of time, the game works its magic on players and tickles us with the possibility of winning. This thrill is the entertainment that players want when they play online casino games. A win that we did not expect will release an extra kick of dopamine. It almost feels like your brain rewards you for taking the risk and winning. A loss will not bring a dopamine reward, but it can entice us to try again until we get the sweet satisfaction of a win.

How Emotions Come Into Play

Emotions can easily distort our perception of the actual risk involved, and bias our expectations. These feelings are often entwined with the entertainment factor of the games, but players need to keep a realistic outlook on their expectations. The experienced players know how to curb their expectations and play within their means. However, any newcomers or vulnerable people may have trouble separating their emotional biases from the actual probability of winning. This can quickly become dangerous.

Physiological Aspects of Gambling

The release of dopamine can also cause our adrenal glands to release adrenaline. This is the fight or flight hormone, that, in this context, increases your body to cope with stress and get you thinking quickly on your feet. The adrenaline rush will give you the energy you need to fully dedicate yourself to your gaming. But it comes at a cost. It is difficult to switch off, and you may have to wait 20 to 30 minutes for your body to subside the energy rush.

This is when we are quite vulnerable to these games, as we are riding the rush and feel like our golden opportunity may come soon. Regardless of the real chances of that happening. Players can easily create cognitive biases that warp their understanding of how the risk works.

Typical Gambler’s Biases

Cognitive biases don’t have much reason, as they often concern aspects that have no effect on your chances of winning. The gambler’s fallacy is a key example of a gambling cognitive bias. When assessing previous outcomes, we change our expectations of what will happen in the following rounds.

Optimistic Biases

This is not found on any factual information. The slots and many electronic table games use RNGs, which are not influenced by what happened in the previous rounds. So therefore, if the roulette ball lands on red 5 times in a row, it does not mean the 6th round will have a greater likelihood of landing on black.

Lucky and losing streaks are another bias based on a coincidental turn of events. You have not suddenly got better or have an increased chance of winning if you won the last 5 rounds. A similar boost in optimism can be recorded with near misses in slots. You may be just 1 symbol away from creating a high value payline sequence. Or, just 1 symbol short of triggering a bonus game that has the potential to hit major payouts.

Having Control on the Outcomes

The element of control is something that can also give players an optimistic bias. In games of blackjack, video poker, and poker, you can make decisions during a round which can influence the outcome. Some players use proven basic strategies that increase the mathematical possibility of winning. But they do not take away from the fact that you are still gambling. The risk is there and just because you are using a refined betting strategy it doesn’t mean you will avoid losing. There is always a house edge that ensures the casino will get its cut of the action.

Are the Games Rigged

No – because casinos can make profit using house edge. Plus, it is illegal to rig casino games. The house edge is formed by manipulating the odds so that they do not represent the real chances of winning or losing. The simplest way to explain this is on a straight bet in French Roulette. There are 37 numbered segments on the wheel, and so the real chance of winning on a straight bet is 1 in 37.

But the odds are not 37:1, they are 35:1. Let’s say you bet 37 times and win once – a theoretically perfect series of games. Over the course of playing, you will spend $1 per round, so $37 in total. With your win, you made $36, which means you are $1 short of breaking even. This is because the house has an edge of 2.7%, which they take out from your potential winnings.

Purpose of House Edge

All casino games have house edge. It is there to ensure that ultimately, the casino will make a profit over the course of thousands of bets. What it means for you, is that instead of winning 1 in every 37 spins, you will need to win a little more if you want to turn a profit.

Casinos, online or land-based, never rig their games. They have to meet the safety and integrity standards of the industry. All licensed platforms have to supply their games to auditors who will test them thoroughly for fair play.

If they get the green light from the auditors, they can release the games to the public. Each game needs to be tested independently, there are no exceptions. You will know if a casino’s games are tested, as they must display a certified mark from a reliable game auditor.

Signs of Problem Gambling

It is alright to zone out while gaming or to play for larger stakes if you can afford to lose them. However, you must always bear in mind that there is a possibility of losing your money. The problem gambling starts when you play with money that you cannot lose, experience loss aversion, and chase your losses.

The UK banned players from using credit cards to fund their gaming in 2020, and a lot of gaming regulators have followed their example. It is extremely concerning when players start borrowing money, especially credit from banks, to fund their gaming.

Control Your Spending, Gaming Time, and Expectations

Another area for concern is how much time you spend playing these games. The adrenaline and dopamine rushes are beneficial in the short run, but it can also lead to your body producing cortisol, the stress hormone. After longer periods of time, it is easier to slip into cognitive biases and continue gameplay long after they feel fun anymore. This is the sunk cost fallacy – a phenomenon when gamers feel obliged to keep playing because they have sunk so much time and money into a specific game.

Loss aversion refers to when losses do more harm than wins feel good. At this point, a player is under a lot of stress and they don’t get those dopamine rewards for winning, but instead become obsessed with their losses. This type of pressure compels a player to keep playing. Even if the objective is to cut their losses, they may suddenly find themselves in the green and then repeat the pattern, feeling that their luck has finally turned.

How to Gamble Responsibly

Casino games are not designed to steal your money or trap you. Tested games, provided by licensed online casinos, are intended for entertainment purposes only. They have customer support agents who can help suspected vulnerable players and give advice to anyone who wants to learn more about safer gambling practices.

These online casinos work closely with organizations that prevent gambling harm and raise awareness for gambling addiction. They are fully equipped with tools to give customers control over their spending and gaming habits. You must set deposit limits, reality checks, and loss trackers to ensure that they are on top of their spending.

And the most important thing is to play these games for entertainment purposes only. Online casinos are not financial institutions that can settle your debts or bring you huge fortunes. Some games have tremendous jackpots, but you have to accept the fact that the chance of winning is extremely small.