Season Record: 71-54
Season Money Winnings: $153 (approximately)
From Clay this week,
We went 4-9 last week to run our season record to 54-71, a disastrous first two months of the college football season by any measure. But to be fair, we are just a 17-0 week from being back dead even on the season. And the only way to ever get out of a hole is to keep digging.
What a perfect lead in to the psychology of losses.
Before we dive any further into this discussion if you are gambling and you have the thought above in any kind of serious fashion please go talk to somebody because it is a major red flag for gambling addiction.
Substantively, researchers call this phenomenon “loss chasing” which describes the tendency of a gambler to amplify their betting in an effort to make up prior losses. In the DSM-5, loss chasing is one of the primary warning signs of disordered gambling behavior (what we might commonly refer to as gambling addiction). Of gamblers who met at least three of the 10 criteria, over 80% identified loss chasing as one of their symptoms. The scientific literature is mixed on the causes of loss chasing. Disordered gambling has been associated with altered executive functions, chiefly impaired inhibition. This is one of the reasons given for why elder gamblers tend to be less likely to develop problem or disordered gambling than younger peoples. Alternatively, loss chasing may be a sign of compulsion by which the negative effect of gambling losses fuel escalation in gambling behavior. The need here is not to win money but to win back the money already lost, a change in the objective function of the gambler. Chasing is perhaps then a function of re-referencing between successive gambles. Alex Imas in “The Realization Effect: Risk-Taking after Realized versus Paper Losses” published in the American Economic Review finds via several experiments that participants in conditions that display losses as an account balance increased their bet size in response to losses. In a specific treatment designed to mirror a casino like environment, individuals whose investments were unsuccessful were reluctant to realize their losses and were more likely to take on riskier bets which was a deviation from the participants’ initial plan. Unsurprisingly, such behavior can spiral out of control and lead to significant losses. It is not a coincidence that online gambling apps very explicitly encourage making deposits of large sizes into the application prior to beginning bets, along with providing other gamified interfaces to make it less likely that participants will want to pull their money. If we believe the results of Imas’s work, one reason why is to keep losses as “paper” as long as possible.
Picks for the week
As a reminder, the purpose of these picks is not that we have any personal skill or views, but simply to take the opposite side of every one of Clay’s picks.
Arkansas vs Ole Miss. Ole Miss -7.5 and the under 53.5
Ohio State and Penn State. Ohio State -3.5
Duke at Miami. Miami -21.5
Oregon at Michigan. Oregon -15.5 and the over 45.5
Vanderbilt at Auburn. Auburn -7
North Carolina at FSU. FSU +2.5
UCLA at Nebraska. The over 40.5
Florida vs Georgia. Georgia -16.5 and the under 52.5
Texas A&M at South Carolina. Texas A&M -2.5
Kentucky at Tennessee. Kentucky +16.5 and the over 45.5