Many of you have read The Wisdom of Crowds, published in 2004. In the first place, the book is completely misnamed. But more about that later.
Let me sum up the books message like this: a variety of people who have some bits of knowledge, operating independently, can, in the aggregate, come up with exceedingly accurate assessments of a variety of problems.
The outcome of the Super Bowl is one of these kinds of problems. Most of us are somewhat familiar with “the odds.” In football, one team is usually favored by a certain number of points. For the Super Bowl, the Indianapolis Colts are at present favored over the Chicago Bears by 7 points. The oddsmakers are basically reflecting how the public (the semi-experts) is betting ie most of the public favors the Colts, but if they have to give up 7 points, then the betting is about evenly divided. In general, if the team you chose wins, after adjusting the score by 7 points, you win a 100% return.
Trade Sports is a site that aggregates the wisdom of these sorts of semi-expert people, on a variety of subjects that might be amenable to “wagering.” They express the odds a little differently; they sell and buy options. When the event is over, the options expire, and they are either worth 100 or nothing, depending on whether the option was on the winning team. At present, options on the Colts are worth 68. If you buy them, and the Colts win, you get back 100, for a gain of 32. If they lose, you get nothing back. If you sell options, for 68, and the Colts lose, you net 68. But if they win, you have to buy the options for 100, for a net loss of 32.
So which is the better bet: the Las Vegas odds of 7 points, or the TradeSports options?
Here’s my thinking: anything to get away from those damn points. Beating the point spreads on a consistent basis is almost impossible. I don’t know the math but it seems to me that the semi-experts here are not making a quantitative assessment. They are, rather, expressing how strongly they hold their opinions. I think this is more likely to be in error than the margin of victory projection, as expressed in the odds.
Sell the Colts options at TradeSports.
Good luck !!
oh, yes….the book is misnamed, because crowds of people do not express independent opinions, and thus are prone to make huge errors.