Side-bet theory

Explanations > Theories > Side-bet theory

Description | Research | Example | So What? | See also | References 

Description

We make choices based on assumptions about the world around us and previous decisions we have made. In this we make 'side bets' that are based on a main bet or activity succeeding.

If we fail at the main bet then we also lose the side bet. The side bets thus increase commitment to the main bet.

As Becker said:

"Commitments come into being when a person, by making a side-bet, links extraneous interests with a consistent line of activity."

In the same vein a reverse effect occurs in hedging activity. If we make a side bet on which we win if the main bet fails, then our commitment to the main bet fails.

Research

Aranya and Jacobson, in a study of systems analysts, found a direct correlation between age, marital status, number of children and salary, showing that older people with higher salaries make side bets in additional commitments around marriage and having children that effectively increases their commitment to their jobs.

Example

A person refuses to change to a job with a higher salary because the new job is higher risk in terms of potential failure and the person has made a side-bet of buying a new house based on the assumption of a continued and stable income.

So What?

Using it

Increase commitment by getting people to make side-bets on which they gain more if the target commitment is completed.

Defending

Be cautious about getting too deep into things, particularly when people who want you to do things encourage you to do related things. In such cases it may be wise to hedge your bets, finding ways to be able to extricate yourself with minimum damage should things go wrong.

See also

Gambler's Fallacy

References

Becker (1960), Aranya and Jacobson (1975)