Coin it, despite the bias.
use of coin-flipping to make better decisions
Another cherished notion destroyed: a flip of a coin is not objective, thus not “fair”. It suffers from so-called ‘same-side bias’. In fact, the coin’s bias is equivalent to 50.8%; worse than the House-odds when playing 6-pack Blackjack!
But is this revelation important, even relevant to individuals, enterprises as well as Society at large?
The answer is ‘yes’!
Such lack of randomization has enormous potential impact on one’s cognitive behaviour which drives decisions - or lack thereof - with their myriad cascading outcomes. In addition, on a related stream, the evidence suggests that using coin-tossing (aka flipism) to make one’s decision may make the individual more satisfied with the chosen outcome. Also, it may lead to better outcomes.
Coin-flipping is a crude form of game theory: where the many permeations for decisions and outcomes can be stripped-down to their binary essence – yes/no. Game theory can reveal the underlying dynamics of a decision; but cognitive behaviour and human biases shape the outcome.
Even the most rational of individuals use coin-tossing to make decisions. From the spontaneous and trivial, through personal life-changing as well as commercial ones; all with far-reaching legacy implications.
Coin-flipping has been used by law-makers, experienced business leaders and investors.
Relevance of coin-tossing
Coin-flipping is used to make a decision when seemingly objective facts do not prevail, nor consensus found. It is widely used, across a whole range of formal occasions, such as: gambling; gaming and sports; amongst others.
This coin-bias may seem trivial: but in the instance of its outcome the result has an immediate impact: initiating a course of events. In competitive sports, much can hang on this initial starting position, the ensuing outcome as well as all the ancillary activities related to it. Whether to have the right (and advantage) of starting a game, or choosing a side, etc. Statistics show that in football-soccer, the first penalty kick in a full-time shoot-out has a 38% advantage over the subsequent penalty takers. The choice of first penalty kick is determined by the flip of a coin!
Over time, when used as a randomiser, coin-flipping can equate to a sizable gain or loss. That is how the economics of gambling venues, such as Las Vegas and Macau, work; setting the odds for both the House and Punter. The outcomes of many professional sports games are tied to gambling. Sportsbooks and their related betting activities represent over 10% of all commercial gambling revenues.
Sums are vast
Not to overstate coin-flipping’s importance, but the sums involved in direct gambling, which coin-flipping is a part, are vast.
By way of reference, in the US, one in ten US dollars spent by consumers is on commercial gambling. The more prosaic figures for the US gambling industry are as follows:
The total economic impact (business sales) is USD 261 billion.
It supports 1.8 million jobs with and associate USD 74.0 billion of labour income.
It generates USD 40.8 billion of federal, state and local taxes, (including $10.7 billion of gaming taxes).
Placing the US gambling market in context, it represents less than a quarter of all global commercial gambling activity.
On a different tack, analysis suggests that 26% of the world’s population engage in some form of commercial gambling.
Coin-flipping, in its various forms, is buried in this vast pool of activity.
Same-side bias - proven
But coin-flipping is not necessarily a gamble with Lady Luck. Rather, it is based on the notion of removing subjectivity and establishing a fair and equitable means to reach a decision; when logic and rational arguments seemingly fail.
As previously mentioned, in reality it doesn’t; as coin-tossing suffers from ‘same-side bias’.
Academic studies, especially those conducted by Stanford mathematician, Persi Diaconis have confirmed that when people flip an ordinary coin, it tends to land on the same side it started: 50.8% of the time. The Diaconis data, based on 350,000 flips, has been confirmed by other researchers.
The starting side has a slight advantage. Caveat emptor!
Coin-tossing may be a means to better decision making: satisfaction and quality.
More interestingly, additional studies reveal that using a ‘random nudge’ (such as a coin toss; as behavioural scientists coin it!), may lead to better decisions – in qualitative and quantitative terms.
….Satisfaction
In research by Stephen Levitt, he conducted a study with a sample of 22,511 respondents. It revealed that more than half the group decided on the basis of coin-toss. With 13 % making their decisions based soley on the fall of the coin.
These Levitt’s findings seem to support research in the field of decision-regret. People really are more likely to regret inaction over action. Therefore they seek out a means to make a decision. The research suggests that they will be happier for having made a decision.
In that vein, flipping a coin may strengthen “affective reactions”. Research by Mariela Jaffé suggests that it may make the choice quasi-factual (or less hypothetical), reducing psychological distance and engendering a more vivid representation of the chosen option. This enhanced emotion can result in stronger affective reactions.
This feeling then holds information in itself, as individuals follow the coin’s suggestion, when they like it, but go for another option, when they don’t. One might suggest this is a ‘have one’s cake/eat it’ outcome; but it reveals a commitment to the process. The mental simulation of the flip results in a more vivid representation of the choice.
It is accepted that these associated feelings can be used as information to make decisions, as discussed in Michel Pham’s research : a heuristic. The mere action of coin-flipping confirms one’s own bias. Furthermore, one’s own preferences are shaped by observing one’s emotional responses to the choices made as “emotional anticipation” kicks-in.
…and Quality
A fundamental aspect of coin-flipping is the constraint that forces one’s indecision into a binary choice. This simplification carries with it epistemic benefit as well as reducing the so-called cognitive load. It has been found that coin-tossing is particularly productive in situations where the marginal cost of verified information is much higher than the expected value. Also, it removes any emotional baggage of guilt – which has cognitive value.
The benefit is that flipping engages one’s empathetic nature and provides a basis for accelerated learning. Such a heuristic on its own does not make a decision better, nor worse. However, the interesting aspect is that by taking feelings into account, with other factors, it may lead to decide better or at least more advantageously.
Thus coin-tossing to make decisions has myriad net benefits
Yet, reservations exist
There is an ingrained reluctance to use randomiser or mechanical means to effect decision; especially if the outcome is of greater import or a high perceived value. It is interesting to note that draws in football matches were settled by the toss of a coin; until during a contentious semi-final of 1968 European football championship. Italy beat the USSR on the basis of a referees coin-toss. The fact that such an important game was randomly determined was so aversive that it was decided from then on to replace the coin toss by penalty kicks.
Coin-flipping is fiercely repudiated in the legal system as it challenges the whole framework of rationality. Yet Julius Caesar, as well as King Solomon, were happy to decide legal matters on the effective flip of a coin. The basis of disdain has several underpinning reasons. It implies a loss of control; the association with gambling; tacit acknowledgement that rational arguments are inadequate and finally; as well as a lack of accountability.
Ultimately, the coin toss is less about fate and more about the situations that we construct around it. The coin-flip is a cultural object that is fundamentally imbued with notions of fairness and fate. A coin is the only object that statistically models probability without the complexity of a game.
Thus, the evidence suggests that there is merit in using the toss of a coin to make a decision.
Coin-flipping in legal and business settings
Several examples have been cited already that reveal coin-flipping’s widespread use, some suprising.
In a legal setting, coin-flipping is prevalent. For example, in the US political arena, the Democratic Party caucuses use coin-flipping as an established mechanism of the to make decisions in situations of a “tie” or “to close to call”. In fact, ‘games of chance’ have a long history in deciding close electoral contests in the US. The most recent was the 2018 Iowa Democratic Caucus, where Hillary Clinton was awarded the state’s electoral College votes, over Bernie Sanders. Clinton went on to win the Democratic Presidential nomination and then lost the 2018 election to Donald Trump. The rest is ongoing history…
Most interestingly, are examples drawn from a world ruled by commercial logical with the twist of emotion. Family-owned business. In this case, the division of asset of an inherited business was decided by a process of flipping a coin. The three Elghanayan brothers (second generation) decided how to divide their inherited Rockrose and Cornerstone assets. These assets were value at USD 3 billion at the time and consisted of over 8,000 residential properties as well as 9 development sites and a further 9 office blocks in New York City.
The division of the assets provided the basis to allow the brothers to pursue differing paths going forwards, clarifying the choice of nextgen patriarch as well as set the basis for the future generations. The choice of a coin-toss was decided as being the best to avoid unnecessary and potentially lengthy, costly as well as acrimonious discussions.
Post-decision, the companies have prospered. A fitting legacy and testimony to the power of a coin-flip.
Summary
Is coin-flipping for everyone, or every occasion? No, but it is worth considering – flip a coin and decide!
[This article is ChatGPT free.]