The evolutionary mismatch of risky games

“It’s terrible,” said Armando Bacot, a forward for the North Carolina men’s basketball team. “Even at the last game, I guess I didn’t get enough rebounds or something. I thought I played pretty good last game, but I looked at my [messages], and I got like over 100 messages from people telling me I sucked and stuff like that because I didn’t get enough rebounds.”

The U.S. Supreme Court struck down a federal ban on sports betting in 2018. Consumers could finally have a little fun risking a few bucks on a football game. State governments saw opportunities for more revenue. But it’s not all upside; one third of high-profile athletes, like Bacot, receive abusive messages from individuals with a betting interest.

And it’s not just sports betting that presents ethical questions. Since the mid 2010s, millions of consumers have discovered the thrill of stock trading with mobile apps like Robinhood and Webull. These apps are designed to keep users absorbed. A user can copy the most popular trades of others with a button click; completed trades come with confetti explosions and digital scratch tickets.

But many transactions on stock trading platforms require user payment. This model results in an inherent conflict of interest, according to Gary Gensler, the chair of the U.S. Securities and Exchange Commission. Robinhood has even been sued as a result of “aggressive tactics” and “gamification to encourage repetitive use.”

There are many other examples of consumer exploitation. State-run lotteries are sometimes called taxes on the poor because of their long-odds structure and their tendency to be played predominantly by lower-class populations. Other examples include multi-level marketing companies and speculative cryptocurrency trading. Whenever organizations promote risky games with the promise of status, respect, or money, some consumers may be vulnerable to exploitation.

So, why do people develop problematic relationships with financial risk? One answer is that we use ancient instincts to judge modern situations, including those that involve risk.

It’s an evolutionary mismatch. Example: we like ice cream more than vegetables because ice cream has a lot of calories, and calories used to be rare for our ancestors. We don’t actually need ice cream because calories aren’t rare anymore: we have grocery stores now. But as a species, we haven’t outgrown our preference for sweet, fatty, calorie-dense foods. So people overindulge in ice cream, leading to obesity and other health issues.

Likewise, people used to invest time and energy to develop skills (e.g. hunting) that gave them status. Today, people can play games to win money (and therefore status). The potential problem here is that people play games thinking they’ll win, but they usually lose. And although many consumers have self-control with risky games, some do not. It’s the repeated engagement of those consumers that makes risky games profitable for organizations.

Expected Value

The sports books and trading platforms of today specialize in making gambling as tempting as possible while also making it a bad idea for most consumers. How do they do it? One way to judge whether an action is “worth the risk” is to determine its expected value.

Expected value (EV) = probability of positive outcome X potential return

Sports books and trading platforms need to turn a profit, so they are motivated to warp our perception of probability and potential return in sneaky ways.

Probability

Sports books make winning seem more likely than it is. Only a small fraction of sports bettors make a profit in the long term; one reason for this is how sports betting companies advertise. They like to advertise long-shot parlays (combination bets that pay large amounts of money if, and only if, all bets win). The social media pages of these apps post about lucky players who defy the odds for a huge payday, but like most things on social media, big paydays are not a good approximation of real life. The challenge for consumers is understanding that most parlays offer terrible value—the payout is not high enough to make up for all of the times when at least one leg of the parlay misses. This challenge may be especially difficult for people who are poor at estimating probability and expected value.

Potential Return

Sports books and trading platforms also manipulate how consumers perceive the rewards of financial risk. Especially among men, taking risks was an essential element of finding a mate for most of history. Men experienced intense intrasexual competition over mating opportunities—meaning that men competed fiercely with other men, sometimes violently, for the opportunity to mate with women. Risk taking signals social dominance, confidence, ambition, and mental sharpness—all traits that are prized by women when choosing mates. If, in our ancestral past, taking risks ultimately had a lot to do with the desire to get laid, then we would expect to find that making people horny triggers risky behavior. And that’s what research has found: men make riskier blackjack decisions after being primed with pictures of attractive female faces, and men perform more dangerous skateboarding tricks in the presence of attractive women.

Sports books are essentially triggering the mental programming that was associated with a valuable reproductive opportunity in the past. Is it any surprise that sports betting companies advertise their products with attractive women, sometimes half naked?

Other examples of artificially inflated value include the gamification of trading platforms, which makes them addictive and inherently rewarding to engage with; promotions on sports books where a user can win “bonus bet” money that can be used for more bets, but not withdrawn; subscription costs and other fees that quietly tank a user’s profit margin; and, in poker, the rake (the portion of each pot that goes back to the casino).

Cultural shifts are another interesting factor to think about. Whereas groups have long warned against risk taking in other areas (like anti-smoking and vaping campaigns), there has been an increase in the availability (through legalization) and public endorsement of financial risk-taking. For instance, sports betting commercials now feature actors and other celebrities. Think about how bizarre it would be to see Kevin Hart vouching for Marlboro cigarettes in a commercial. That’s what’s happening with sports books now. When popular people are associated with a product, it sends an implicit message—this product is cool, and you should buy it or use it. That is social proof, and it’s a powerful persuasion technique.

A Recommendation

At the heart of many kinds of gambling are the mathematics of probability and expected value. Regulators might consider requiring sports betting sites to include expected value estimates for each potential wager, especially more complicated parlays. Regulators might require sites to prominently display users’ long-term monetary performance. Changes like these could reduce rates of problematic gambling by shifting the mindset of consumers from a “value” mindset to an “entertainment” mindset.² Consumers may be better off if they view betting as an experience, like going to the movies, instead of a financial opportunity. When people go to the movies, they don’t expect to make money—they expect to have fun for a couple of hours at a reasonable price. My intuition is that people become addicted to gambling and not movie-going partly because of the different expectations associated with each activity.

This isn’t a call for risky games like gambling or trading to be banned. There’s too much money involved for that to happen anyway. But there needs to be greater awareness of the factors that make gambling so enticing to people. 39 states have legalized sports betting, and eventually all states will probably do so. An industry that generated $120 billion in wagers in 2023 alone will reach greater heights. More scrolling in search of the perfect parlay, more harassment of players for underperformance, and more money given to corporations who have little genuine interest in protecting their users. A little fun is good, but let’s also pay attention to the bigger picture.