Gambler’s fallacy: It’s the same old faces for nothing

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Reylito A.H. Elbo

Reylito A.H. Elbo

THIS one is a slightly edited story from nuts: A stingy millionaire walks into a bank in London and asks to see the manager. “I’m going to Moscow on business for two weeks and need to borrow 5,000 euros,” says the millionaire. The manager replies, “We know you can pay it back, but still we’ll require you to put up some kind of security for the loan as a matter of policy.”

“No problem,” says the stingy millionaire and hands over the keys to his brand-new Bentley. The bank agrees to accept the car as collateral for the loan. As soon as the stingy millionaire went out of the door, the manager and the tellers all enjoyed a good laugh at the client’s expense for using a luxury car worth 300,000 euros as collateral against a 5,000 loan.

An employee of the bank then proceeds to drive the Bentley into the bank’s basement garage and parks it there. Two weeks later, the stingy millionaire returns, repays the loan and interest, which comes at 18 euros.

The manager says: “We are happy to have had your business. This transaction has worked out very nicely, but we are little puzzled. Why would a rich man like you bother to borrow that little money when you’re one of the richest men in the world?”

The millionaire replies: “Where else in London can I park my car for two weeks for only 18 euros and expect it to be there when I return?”

In this week’s barangay election, I can’t help but to tell you this story and ask the same question: “Where else in this world can I pay my taxes and expect it to be spent properly for the common good?” Your answer is as good as mine that could only boil down to one thing—greed. In politics, insatiability is bad but not necessarily in business.

In the movie Wall Street, Michael Douglas’s character Gordan Gekko told viewers “greed, for lack of a better word is good.” This is true; because corporations, here and everywhere follow the same mantra, of “believing that the pursuit of profits leads to efficient markets and substantial consumer benefits,” according to Scott Anthony in his 2012 book The Little Black Book of Innovation.

Anthony says “greed has its advantage, but innovators need to make sure they are greedy for the right thing.” Now, can we expect the same thing from our local politicians? Before you give me the obvious answer, allow me to explain to you the principle of “gambler’s fallacy.”

Also known as the Monte Carlo Fallacy, the “gambler’s fallacy” is a wrongful assumption that if something happens more frequently in the past, then the probability of its occurrence will be less frequent in the future. Probably, this mistaken belief is one way for nature to balance itself.

In other words, the fallacy is founded on the idea that previous failures indicate an increased probability of success on subsequent attempts. That’s why gamblers continue to bet in the hope that they will finally regain their losses until it’s too late.

The Internet has many good examples about the “gambler’s fallacy” but one that stands out is the practical tossing of a fair coin. A similar example can also be found in John Irving’s The World According to Garp (1978) when a fictional character decides to buy a house destroyed by a small plane that crashed into it. His reasoning was plain and simple: If rebuilt, hitting the same house by another plane has just dropped to zero probability.

Applying the “gambler’s fallacy” to what happened in Bohol that was destroyed by a 7.2-magnitude earthquake, the answer is clear—it will take hundreds of years again before this could happen, except that you and I know that it is still . . . a fallacy.

This year’s election is like another exercise in futility for us Filipino voters. It’s like gambling—one sure way to get nothing for something. We get the same old faces and surnames for nothing. But still, expect me to exercise my right, in the hope that if these nincompoops fail miserably in the past, they will strive hard to make good this time.

Rey Elbo is a business consultant specializing in human resources and total quality management as a fused interest. Send feedback to elbonomics@gmail.com or follow him on Facebook, LinkedIn, or Twitter for his random management thoughts.

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