Property Management and the Gambler’s Fallacy

Anyone that knows me knows of the love I have for Las Vegas and spending way too much time there at the tables, I consider it a hobby and as such avidly consume all available books, blogs message boards etc I can find, I am therefore am very familiar with The Gambler’s Fallacy which is one of the most basic laws any rookie gambler learns.

For the uninitiated the definition is;

… the mistaken belief that, if something happens more frequently than normal during some period, it will happen less frequently in the future, or that, if something happens less frequently than normal during some period, it will happen more frequently in the future (presumably as a means of balancing nature). In situations where what is being observed is truly random this belief, though appealing to the human mind, is false.

In basic terms the fact that you’ve flipped heads 20 times in a row does not mean that the next time is any more likely to be tails as each coin flip is a truly random event.

(this video explains it in even more and in slightly patronising ways; http://study.com/academy/lesson/gamblers-fallacy-example-definition-quiz.html)

So this, so far has nothing to do with Property Management but then a recent google alert led me to a research paper; “Decision-Making Under the Gambler’s Fallacy” which was when I was struck by how it applied to specifically our facet of emergency maintenance but with possible wider effects in Property Management in general.

The paper set out examples in decision making as far and wide as Baseball, Loan Approvals in India and American Asylum applications and found startling evidence that the sequencing of events/applications/pitches affected the decision, for example if a Loan Officer approved 3 loans in a row then they were more likely to turn down the fourth even if that application is objectively better.

One of the authors of the paper goes on to discuss a New York Immigration Court….”If the previous case was approved by the judge, then the next case is less likely to be approved by almost one percent. Where it gets really interesting is, is if the previous two cases were approved, then that drops even further to about one-and-a-half percent. And if these happen on the same day, that goes up even further, closer to 3 percent. And then obviously if it’s two cases in the same day it gets even bigger, it starts to approach about 5 percent. So those are pretty big numbers, especially for the applicants involved. Or to put it a little differently, just by the dumb luck of where you get sequenced that day could affect your probability of staying in this country by five percent, versus going back to the country that you’re fleeing.”

Given that what we do out of hours is triage call after call and make decisions on whether to instruct or not depending on the circumstances I wondered if this sequencing affected our process. On researching call histories and tickets we found the following; if a call handler took a call requiring judgement and instructed then took a similar call they were 1.3% more likely to turn down that subsequent call, this then doubled if two yes judgements took place with the third call being 2.8% more likely to be rejected, in the case of multiple calls and three instructions in a row the fourth call was almost 6.5% more likely to be refused. On review all of these issues had similar merits.

Given that we are now advising our shift managers to be aware of this and to try and randomise calls or review judgement calls from those handling multiple close call decisions.