How bookies nudge punters into silly bets

Nudging has had a lot of good press. If benevolent powers know a little about how your mind works, they can gently push you towards what you’d (probably) want to do if you had more time to think through your actions.

Put a picture of a fly on a urinal and men wee on the floor less. Re-order the options for pension contributions (making opting-in the default) and workers contribute more and avoid penury when they’re older. Tell hotel guests that others re-use their towels and they’ll do the decent thing for the environment.

But if you know a little about minds, you also know that not all of them are benevolent. And for all the corporate social responsibility that advisers can dream up, the companies that grow are those that are good at making money rather than those that are necessarily good.

An enlightened bookie might decide the right thing to do is discourage his punters: to nudge the gamblers with their fistfuls of cash to the bank next door; encourage them to open long-term savings accounts or take a flutter on a well-diversified pool of companies on the stock market. But such a bookie would soon be an unemployed bookie.

So what could a psychologically-sophisticated gambling house do if their objective were to make money rather than earn a sainthood?

Scientists have long known that the average punter isn’t much good at probability, and gets worse and, perversely, more confident the more complicated the wager. Bets on whether Brazil will beat Sweden don’t earn much.

But ask the punter whether Brazil will beat Sweden 5-1, or whether Neymar will score first, and there’s money to be made. Because these seem plausible outcomes, and because it's hard to mentally list all the other ways in which Brazil might thrash Sweden (4-0, 6-1, 3-0 etc) gamblers overestimate the likelihood.

So what do you think gambling houses spend more money promoting: simple bets such as who will win the next match, the phone number for Gamblers Anonymous or mind-confusingly complicated spreads? You bet.

If you think it strange that people spend more time watching football than finding out how their own minds work, then read Chris Paley's Unthink.