Like Gambling with Covid19, betting markets can demonstrate probabilistic thinking. In that post we considered an idea from Matt (+EV) about Tom Brady’s potential passing yards.
In April Brady’s over-under yardage was 4,256, nicely inline with previous years of 4057, 4355, 4577, and 3554. However, Matt noted, there’s a lot more room under 4,256 than over it. Brady could get injured, retire mid-year, have a worse system, lose teammates and so on.
On Wharton Moneyball Cade Massey noted that the same idea can apply to modeling voting and prediction markets. In the FiveThirtyEight simulation (40,000 runs), Joe Biden wins eighty-seven times out of one hundred.
What’s the gap between 87 and 66?
- Potential polling errors. 538 is an aggregation. Put another way, the level of awareness while driving one hour twelve times is not the same as driving twelve hours one time.
- The Brady effect. There’s just more room for ‘something to happen‘ in one direction instead of another.
- Matt’s Twitter handle +EV gives an idea too. It could be that Donald Trump’s odds to wins are less than a coin flip just not as bad as a single number on a roll of the dice. That middle area is the market.
- People like betting favorites, public teams, and for the safety.
A neighbor invited me to a watch party on November third. Another challenges himself to go as long as possible without finding out the news (in 2016 he made it three days). I follow things loosely but thinking about it this way does feel sharp.
As Howard Marks says, it’s not so much what you buy as what you pay. Brady, for those interested, is on pace to go over.
The Waiter's Pad 
[…] mental model is the same mindset we used “Tracking Tom“. The idea there was that there’s more downward variance than upward variance. The same […]
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