Don’t play against the odds
Some friends and I have a betting pool for the football games, every weekend.
One of us, chooses 10 games each week, writes them down, and all the others bet on the results for each weekend. It’s a very straightforward competition, which allow us to joke around and to mock at each others, bragging on our superior football knowledge. It actually reminds me of my childhood days. Back then, there was this guy in my building who did the same thing for the european competition’s games.
Back to my current betting pool: no money involved; the only thing involved is pride…
As usual, everybody actually tries to figure out the result of every game. And that, more often than not, leads to one consequence: people tend to bet according to 1) their wishes; 2) the result each team got the week before.
On one side, we (yes, I am always tempted to this option too) want our team to win; we always want our rivals to loose. But as a consequence we are betting on what we would wish to happen, not on what we think will happen. Usually, the outcome is worst when we bet this way.
On the other side, we are pretty much biased by the previous week result. Not because we develop an advanced statistical tools that will help us analyze the trends on each team’s results. But because we believe that the outcome of the game this week is somehow related with the results that happened last week. And although on the long term there might be a trend, there are better ways to establish that trend than to consider this week results will be some sort of emulation of what happened the week before.
This year I decided to play with a different strategy. I played (almost) exclusively with the odds. I didn’t care what were my expectations for the game. What were my preferences. What were the results of the previous week or weeks. I just looked at the two teams involved in each game and analyzed what would be the most common result. I said I played almost exclusively with the odds, because there were exceptions: the derbies. Those games against our arch-rivals. On those games I was not able to bet on anything but my team’s victory. Even if that was not the most common outcome.
And I won! Everyone else let their emotions ruin their rationale. And so, many times they failed their prognostics on games for which they knew the most probable outcome was not the one they were betting on.
My conclusion? It keeps happening in business. People act, manage, decide, based on the outcome they would like would happen, and not on the outcome that rationally they think will happen. And, obviously, they miserably fail. On the other hand, entrepreneurs, businessman and managers who base their actions not on impulses or hunches, but on judgement and sagacity, make the most out of their business. Let’s hope we can do it 🙂