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Math The Almighty Buck

World Cup Prediction Failures 312

pdcull writes "We all read on Slashdot about the investment banks using their massive computer power and clever modeling techniques to predict the FIFA World Cup outcome. Now that Goldman Sachs's, UBS's and Danske Bank's favorite, Brazil, has been eliminated, and with JP Morgan's England long gone, the question that begs to be asked is: can we really trust these guys to predict the financial markets any better than they did World Cup?"
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World Cup Prediction Failures

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  • No. (Score:3, Insightful)

    by morari ( 1080535 ) on Saturday July 03, 2010 @07:09PM (#32788764) Journal

    The answer to a question.

  • by Idimmu Xul ( 204345 ) on Saturday July 03, 2010 @07:10PM (#32788768) Homepage Journal

    Surely the last couple of years are evidence enough that the financial industry can't predict or manage the markets? We didn't need football to tell us this :D

  • Wait. (Score:5, Insightful)

    by esrobinson ( 1028500 ) on Saturday July 03, 2010 @07:12PM (#32788778)
    Your question is, "Hey, these guys who spend their entire lives predicting financial markets aren't good at predicting sports. How can we trust them to predict financial markets?"
  • Re:We have to! (Score:5, Insightful)

    by NFN_NLN ( 633283 ) on Saturday July 03, 2010 @07:19PM (#32788820)
    "Goldman has published an exhaustive list of defences against the allegations that it acted illegally when it allowed hedge fund Paulson & Co to choose some of the sub-prime backed securities to be included in a product it sold to investors even though it knew the hedge fund was betting against them."

    The financial giants don't predict the markets, they make them.

    A better analogy would be if Goldman Sachs was allowed to pick the players for each team, and put all the worst players into Brazil. Then sell all their customers bets for Brazil to win while simultaneously betting against them.
  • Re:Wait. (Score:5, Insightful)

    by martin-boundary ( 547041 ) on Saturday July 03, 2010 @07:27PM (#32788868)
    Exactly, if they don't realize the inherent limitations of their methods to finance only, how can they be trusted to be masters of that method at all?

    It's like if you think pounding screws with a hammer is a good idea, then I have to wonder if you even know how to hammer in nails properly.

  • Troll summary (Score:2, Insightful)

    by Krahar ( 1655029 ) on Saturday July 03, 2010 @07:40PM (#32788934)
    This makes no sense. They might have been completely right that some particular team was most likely to win, but then the randomness of the game made it so that the most likely winner didn't win. We have no way to tell. To evaluate their ability to predict correctly, you would need data for how well they did over the course of many world cups. Besides, they can't possibly do better than the quality of their data and the extent to which that data actually allows to predict the outcome. E.g. if they fail to predict the outcome of a game of stone-paper-scissors, that is hardly saying they aren't good at their jobs. This summary has nothing to do with science, it's a blatant troll.
  • by causality ( 777677 ) on Saturday July 03, 2010 @07:54PM (#32789014)

    What's an investiment bank?! I don't trust any large institution that can't spell worth beans.

    Slashdot "editors" are not large institutions. They are individuals ultimately responsible for failing to perform the most basic quality checks for submissions, like this mistake that an automated spell-checker would have fixed. Really, even basic proofreading would not have been necessary in this case.

    If the "editors" did their jobs in a relatively consistent manner I'd consider purchasing a paid subscription. As it stands, I don't get to be lazy at my job and therefore it would be unjust to reward the way they do theirs. Anyone remember the recent article about Plato in which an "editor" inserted a blatantly false and readily falsified statement about Aristotle? This is not exactly obscure material that would be difficult to verify.

    In this job market where multitudes are desperately seeking work, I am sure there are many who would be happy to do better than the current staff.

    For those who have no real concern for quality, my response is this: it's not that a spelling error is so terrible or offensive. It isn't. It's that it shows that they don't care. If they don't care enough to correct errors when the effort to do so approaches zero, why should I care? If I have no reason to care, why should I pay money?

    I suppose it sounds like I am picking on Slashdot specifically. Really, they are just reflecting what has become a societal norm. That norm is the abandonment of "this is my craft, the satisfaction I get out of it is proportional to what I am willing to put into it, the quality of it matters to me even when no one is looking." That norm is the embracing of "it doesn't matter if I produce substandard and shoddy work as long as someone is willing to consume it."

  • Re:We have to! (Score:2, Insightful)

    by Anonymous Coward on Saturday July 03, 2010 @08:05PM (#32789072)

    No, that is a terrible analogy. A better one:

    Customer A comes to GS and says we have views on these pool of players, help us implement that view. Goldman tells Customer B they are interested in structuring a bet (that by necessity, must have another side) with the same pool. Customer B picks the players it likes, based on its own analysis and expertise. Customer A accepts the new list of players. Customer B is initially very happy, but soon the players, for which no entity involved has any influence, start performing poorly. Customer A loses. Customer B wins. Goldman, having retained some of Customer A's stake for itself, loses, but recoups a portion of the loss through fees earned by structuring the deal.

  • by causality ( 777677 ) on Saturday July 03, 2010 @08:09PM (#32789092)
    I know you were saying that tongue-in-cheek but you raised a good point. I thought I'd mention that since this is Slashdot after all, where finding something worthy in a humorous post makes people feel entitled to assume you didn't understand the humor...

    The people need a safe outlet for their anger, and some remote math geeks should have been fair game.

    I thought that's what national sports were for, not math geeks. It's the good old-fashioned "bread and circus" routine, used by generation after generation of rulers since ancient times for the simple reason that it works. Sports primarily appeal to men, providing a "safe" (for whom?) outlet for male aggression specifically, the sort that might otherwise get fed up with getting lied to and shafted every day by business and politics. Thanks to sports and mass media, millions of men can shout, scream, jump up and down, and get upset about something that really doesn't matter one way or the other, like which group of strangers who are overpaid athletes can most efficiently move a ball.

    It's not The People, as in We The People, who need this outlet.

  • Re:We have to! (Score:5, Insightful)

    by NotQuiteReal ( 608241 ) on Saturday July 03, 2010 @08:23PM (#32789144) Journal
    The financial giants don't predict the markets, they make them

    Obviously reality still has some bearing on things.
  • by mortonda ( 5175 ) on Saturday July 03, 2010 @08:25PM (#32789156)

    Not to mention, how could *anyone* predict anything with as many bad calls as the refs have been making all the time??

  • by Anonymous Coward on Saturday July 03, 2010 @08:26PM (#32789164)

    It's pointless to try to predict the outcome of a soccer match. It is known as the sport with the most upsets for one simple reason: luck plays far too big a role in a match's outcome. The winner of any game in any sport is determined by some mix of skill and random occurrence. I'm not saying that skill isn't important in soccer (and I'm certainly not saying that soccer players do not have skill) but the role that skill plays in the determining the winner is much less compared with other sports. Is this possibly one of the reasons soccer is only really popular with children in the US? I think it's a factor.

  • by plopez ( 54068 ) on Saturday July 03, 2010 @09:02PM (#32789348) Journal

    Economics taking a statistical approach often assumes that in the long run you have a stationary time series. This is why economics and the quants will fail miserably. There is no understanding, or desire to understand, the fundamental foundations of the economic activity. If you take a statisticl approach you have nothing like what Newton, Gallileo and a host of others gave to physics or chemistry. All you can say is, "If the past resembles the future then there is an x probability that y will happen." As opposed to saying given the following forces, then the system will behave a certain way. Non-linearity is another question, but if you do not attempt you understand basic forces then failure is likely even without non-linearity.

    For economics to be a science there also must be a way to test hypotheses. To date I haven't seen anything like this. So at best economics is wishful thinking, IMO.

  • Re:We have to! (Score:3, Insightful)

    by moosesocks ( 264553 ) on Saturday July 03, 2010 @09:13PM (#32789370) Homepage

    We just bailed out the banks, so it's too late to start throwing in votes of no confidence!

    Uhm. No. That isn't an either/or. They got bailed out to avert a total economic collapse -- not as a vote of confidence. If anything, the bailout was a symbol that the banks fucked up -- badly.

    On the other hand, the bailout should have had a few more strings attached to it, and we desperately need for meaningful financial reform to be passed. Unfortunately, because Obama fought for it, the Republicans are against it, and it's unlikely that the currently proposed reforms will have the "teeth" necessary to prevent the banks from going crazy again.

    (Also, very few of the banks were actually "bailed out." Most were provided with a government-backed high-interest loan that they had to pay back, which many already have)

  • by straponego ( 521991 ) on Saturday July 03, 2010 @10:30PM (#32789618)
    Exactly. A large fraction of the games have been decided by clearly bad calls. Furthermore, in a tournament, especially with a small sample size of games (single elimination being the smallest), chance plays a huge role. The best team is more likely than the others to win, but unless there's a huge disparity in skill (for example, pro vs. high school), the best team is not likely to win the majority of times. For example, if Team A will win against teams B, C and D 2/3 of the time, and they have to beat each of those teams to win the tournament, they've got about a 29.6% chance of winning it all. If they only have to beat two, it's 44.4%.

    And then there are the ways you match up vs. the teams you happen to play, injuries, etc. It's still fun. In fact, you might say those things make it more interesting. If you had a perfect way of predicting the games, because they perfectly reflected some ideal of skill, there would be no point in playing them.

    But a single tournament doesn't really tell you who is "best."
  • by Maxo-Texas ( 864189 ) on Saturday July 03, 2010 @10:32PM (#32789628)

    By having superfast computers on the floor and looking at the orders coming in, they buy and sell just before the orders execute.

    This would be like observing a goal was clearly going to occur (or not occur) and then betting a goal would occur (or not occur) in the milliseconds before the goal actually occured.

  • stupid premise. (Score:1, Insightful)

    by Anonymous Coward on Saturday July 03, 2010 @10:34PM (#32789632)
    This article has a stupid premise, the author should be ashamed.
  • Re:We have to! (Score:3, Insightful)

    by iluvcapra ( 782887 ) on Saturday July 03, 2010 @11:49PM (#32789874)

    There's this unfortunate bias in the language here, which I've seen other places, where a failure on the part of human beings to behave predictably and rationally is framed as a "fuck-up" or a mistake or as undesirable and destructive.

    IMHO, unpredictability and unreliability is merely an aspect of being human, and is probably a long-term desirable trait. All of the analytical economic models and "efficent market" theorizing that people indulge in is really just a way for powerful, influential, and ideologically-motivated people to obliterate the individual and free will, and is just a new kind of determinism.

    Generally speaking when an investment banker says "I lost money to a fuckup," what they're really saying is "I bet that people would do the same goddamn stupid thing today that they did yesterday, and goddamn it they didn't." Who's the fool?

  • Re:No. (Score:4, Insightful)

    by ranton ( 36917 ) on Sunday July 04, 2010 @12:37AM (#32790076)

    Who would ever assume that it is possible to predict any game of Association Football? When two teams have even slightly comparable skill levels, luck is the largest determining factor of any one game. The better team will probably win best out of 7, but the results of any one game are meaningless when determining who is the superior team.

    Any game with such low scoring is the same way. In professional basketball it is possible to have 10-1 favorites because being superior is a far better indicator of who will win. But even in a game like baseball (with far more scoring than assoc. football on average) you usually only see odds of 4-1 at the extreme. And because of the lack of salary caps there is a far bigger discrepency between the skill levels of the best and worse teams in baseball.

  • Not Fair (Score:1, Insightful)

    by Anonymous Coward on Sunday July 04, 2010 @12:44AM (#32790102)

    It's terribly hard to predict those results, you can't blame them.
    Puppies Husky []

  • by PietjeJantje ( 917584 ) on Sunday July 04, 2010 @12:54AM (#32790126)
    I think I'll make some wildly uninformed statements about American sports I know nothing about, because I'm bored. Your "random winner" bigot analysis must explain the vast number of different winners of the World Cup and in major football leagues. Either that or you're talking complete nonsense. Personally I think people should shut up about subjects they clearly know nothing about. Too bad that didn't stop you to present your "clear" insights.
  • by wish bot ( 265150 ) on Sunday July 04, 2010 @01:03AM (#32790152)

    This tells me more about the American attitude than it tells me about football (soccer).

    You can:
    - Buy the best players;
    - Give them the best equipment;
    - Be lavish with money however you desire;
    - But you can still be whipped 2-0 by some upstart team from a 3rd world nation with none of your access to wealth and resources.

    No wonder so many American's can't understand football!

  • Re:No. (Score:4, Insightful)

    by mwvdlee ( 775178 ) on Sunday July 04, 2010 @01:09AM (#32790166) Homepage

    Have they become very wealthy by investing of by tricking others into paying them to invest their money?

    With stocks, the wealthiest people are generally the middle men.

  • Re:We have to! (Score:5, Insightful)

    by jordan_robot ( 1830144 ) on Sunday July 04, 2010 @01:18AM (#32790194)
    Ha! Or they had some accounting practices that they didn't want the government looking at with a fine tooth comb. The truth is, none of us will really know for certain what the real story is. Just because the guy's a friend from college doesn't mean you know the whole story. Could be true, could be 20% hedging, could be 100% pack of lies. Don't know, and neither do you.
  • Re:We have to! (Score:3, Insightful)

    by servognome ( 738846 ) on Sunday July 04, 2010 @01:30AM (#32790216)

    There's this unfortunate bias in the language here, which I've seen other places, where a failure on the part of human beings to behave predictably and rationally is framed as a "fuck-up" or a mistake or as undesirable and destructive.
    IMHO, unpredictability and unreliability is merely an aspect of being human, and is probably a long-term desirable trait.

    IMHO the reason unpredictability and unreliability of people is a shortcoming in the modesl, and not an actual trait. If computer models predict it's going to rain and the day is just overcast, we don't say the weather "fucked up" or claim it is behaving irrationally.
    The problem is trying to distill extremely complex systems into something computable isn't an easy task.

  • Re:Wait. (Score:4, Insightful)

    by mwvdlee ( 775178 ) on Sunday July 04, 2010 @01:33AM (#32790238) Homepage

    Yes, two Brazilian mistakes were Brazil's downfall. And one Dutch mistake gave Brazil a lucky shot.

    If you want to win, don't make mistakes. And don't complain if the opposing team is able to profit from your mistakes.

    Personally I think Brazil did indeed dominate for the first 20-30 minutes. After that it went downhill fast and the last 30 minutes of the second half Brazil was playing at a level they should be ashamed of. It could have been 3-0 by half time, it could have been 1-7 by the end of the game.

  • by F34nor ( 321515 ) on Sunday July 04, 2010 @01:42AM (#32790270)

    SciAm had an article I have referenced before showing the the equations for economics we incorrectly generalized from physic equations and those and been invalidated since. Economics is not a science at all.

  • Re:Wait. (Score:4, Insightful)

    by servognome ( 738846 ) on Sunday July 04, 2010 @02:08AM (#32790358)

    Well, actually the current state of the economy is proof enough that "these guys who spend their entire lives predicting financial markets" aren't god at predicting financial markets.

    You mean the guys who made millions in bonuses selling risky investments, then made their friends' firms billions when the risky loans they made went bad.
    The reason they can't predict soccer games is because they don't control everybody involved. The financial markets are more like professional wrestling than an actual sport.

  • Re:We have to! (Score:5, Insightful)

    by aBaldrich ( 1692238 ) on Sunday July 04, 2010 @02:10AM (#32790370)
    The 'science' can not predict the next Hand of God. Besides, football is football, even the best team can be easily defeated. And there is no set of absolute data for each player and formation. If you play Winning Eleven you see it classifies and gives a quantity to each "ability" such as speed, stamina, aim, strength, etc. But in the real world the player can be shocked by some event (like missing a penalty kick), he can be under pressure, he could have partied all night long and be really tired. All of that has happened in world cups and is almost random. There's no mathematical model to predict the next Hand of God. You can't calculate the rivalries among the team's players, the "will" to play, the distraction of the vuvuzelas, and pure luck.
    The model you link placed France third. But they are less than 16th. Chile is 34th but they are between 9th and 16th. It also relies heavily in FIFA's ranking, which everyone knows to be bullshit since it takes into account games up to 4 years old.
    Other models take players as individuals and take the team for granted. If that was true, then you don't even have to think about it, Argentina has the best surnames (and we got owned 0-4). As we use to say: football statistics are like miniskirts, they give you a nice picture, but you don't know what it's hiding.
  • Uh...hello McFly! (Score:5, Insightful)

    by yoshi_mon ( 172895 ) on Sunday July 04, 2010 @04:51AM (#32790824)

    Is /. not seeing that this is just a huge statistical game?

    I've looked at a fair amount of the financial models and they are either a) statistical models that do try to gauge the market, or b) purposeful obfuscation bullshit trying to make things seem very complicated while it hides the true intent of enriching those who make them.

    I have no doubt that they used A in their model for doing whatever they were trying to do by predicting the World Cup. Just in the same way all of the people in Vegas, and all over the world, have been doing for years. But when you only have a limited number of 'flips of the coin' it's never going to be perfect. Never mind the human error factor in crafting said models.

  • Re:prediction? (Score:3, Insightful)

    by Tom ( 822 ) on Sunday July 04, 2010 @04:52AM (#32790830) Homepage Journal

    I thought the point of the stock market was that people with money can buy shares into companies they think will be profitable.

    That was 50 years ago. Today, actual investment is about 1% of the trading activity, the rest is speculation. While speculation does have its place at the stock market (it provides for liquidity), the fact that it has drowned out actual investment is doing damage that can't be measured. Among other things, it is the speculators who lobbied against the transaction tax that would've a) made the stock market pay their fair share in the financial crisis and b) done at least a bit to prevent it from repeating. If you buy or sell in a month or year cycle, you don't really care much about a 0.01% or so tax. If you buy and sell in minute or second (or even shorter - margin trading) cycles, it quickly adds up.

  • Re:I don't get it. (Score:5, Insightful)

    by dna_(c)(tm)(r) ( 618003 ) on Sunday July 04, 2010 @05:23AM (#32790924)
    You forgot that in the end they crash the car into A, B and the rest of the alphabet. And that the alphabet then buys them a new car - despite the fact that quite a few car makers were killed in that crash too.
  • Re:We have to! (Score:5, Insightful)

    by Yvanhoe ( 564877 ) on Sunday July 04, 2010 @08:42AM (#32791442) Journal
    The problem is that every bank was saying that they did no bad loans in order to evacuate theirs quickly and throw the hot potato to someone else. Investigating such claims seems only fair. You also claim that the way media reporting is made is not fair. Well, yes, that's true and that's another problem entirely.
  • Re:We have to! (Score:2, Insightful)

    by aliquis ( 678370 ) <> on Sunday July 04, 2010 @10:46AM (#32791834) Homepage

    Over here in Sweden the leaders of Swedbank which lend people in Latvia money stayed in the company, eventually at other positions, because they are still looked upon like the people which should be best in handling the situation.

    Even though they failed ..

    Weird how it works.

    "I wrote IE6 so I've got experience in web browser programming!", not that it's even close .. Should most likely say "I wrote the driver which gave Bill Gates an BSOD during his presentation when connecting his scanner."

  • by Anonymous Coward on Sunday July 04, 2010 @11:52AM (#32792078)

    Sure the German team is not the Hitler Jugend. Not everyone has an arian heritage. But all of them were raised in Germany. It is quite hard to believe they bought a 2 year old pole to play football in the national team about 20 years later.

  • by zarzu ( 1581721 ) on Sunday July 04, 2010 @03:21PM (#32793150)
    it's not like germany is buying footballers from all over the world for their team, that's what wealthy football clubs are for. all of those players of polish/turkish/nigerian/tunisian descent were either born in germany or immigrated at a very early age. they have been living their whole lives in germany, they learned to play football there and were cultivated by german teams. of course wealthy first world countries have a lot of players from other poorer countries, there simply aren't many people migrating from rich countries to poorer ones. the french team has a lot of players of north african descent, our swiss team has lots of different descents as well (but we still suck at football).
  • wrong wrong wrong (Score:3, Insightful)

    by ericbg05 ( 808406 ) on Sunday July 04, 2010 @04:24PM (#32793600)

    But with results like 2-1 it's pretty much down to $random circumstance of the day.

    My god. What are the moderators thinking?

    I've been playing the game for 23 years, was trained by world-class coaches, and I'm here to tell you that you don't know what you're talking about.

    Because in 80% of the matches it makes fans go "If only..."

    It's part of the joy of the game, part of the culture of the game to wish and hope for your team to win. But just because a fan thinks something doesn't make it so.

    this is mostly luck

    If that were true, a group of randomly-chosen people would have a similar chance of winning the world cup as e.g. Germany. Which is, of course, ridiculous.

    Obviously the game has a lot of problems, and some of those topics are hot today. The game arguably needs to be refined in a couple ways.

    But it is absolutely *not true* soccer "isn't about making the best team win" or that it's "mostly luck". The overwhelming majority of the time, the best team *does* win. It's just that when that happens, it isn't big news.

"my terminal is a lethal teaspoon." -- Patricia O Tuama