World Cup Prediction Failures

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?"

Comments

We have to!

[DWMorse]

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

Re:We have to!

[NFN_NLN]

"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:We have to!

[SimonTheSoundMan]

I much prefer the Institute of Engineering and Technology "The science of predicting football results".

Re:We have to!

[NotQuiteReal]

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

Obviously reality still has some bearing on things.

Re:We have to!

[JackieBrown]

(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)

And not all of the banks wanted the loans but the government pushed it on more banks than were necessary so that the consumers would not know which banks were in need of a "bail-out." The government was worried that if we knew which banks were in need of help, we would all leave those badly run banks in favor of the banks that handled our money responsibly.

In Texas, that is actually a selling point in a number of local bank commercials "And you can rest assured that we did not accepted any government bail out money. Our customer's investments were always secure."

Re:We have to!

[malkir]

The owner of BP is part of GS.

Re:We have to!

[ObsessiveMathsFreak]

Too complicated. The best analogy is simply to say that GS, etc al are filled with shallow crooks who can and will trick and con everyone they meet out of every cent they have.

Re:We have to!

[ducomputergeek]

My best friend in college came from a family of bankers. They own 2 banks. The bigger of the two is still family run, but he owns more of the smaller bank, which is more of a rural community bank. Well apparently, both banks were called by the local fed branch and told to take Tarp money. The bigger bank did. The smaller bank said, "No thank you, we didn't make bad loans." Well the smaller bank has been dragged through the mud with 5 separate investigations in the last 18 months by the government. They'll hold local press conferences saying, "This bank is under investigation for violation of the Equal housing laws, or this or that". Each time, the investigations have come up empty or they've been cleared of wrong doing. But is there any press conferences about that from the feds? Nope. They didn't do anything wrong other than refuse to take the government's money and ran their bank wisely.

Apparently, if you didn't need Tarp money, the government look at your bank as though you MUST have been doing something "wrong".

Re:We have to!

[jordan_robot]

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!

[aBaldrich]

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.

Re:We have to!

[HungryHobo]

Some people have this idea that bankers and investors have an almost godlike knowledge of the world and the future.
On forums which attract financial types I'll see people dismissing stocks on the basis that "of course if they were really more valuable the traders would have snapped then up".
It's as if they don't realize that the traders are operating on almost no information in some cases. living across the street from a company and being able to count the trucks going in and out will often put you ahead of the traders in terms of real information.

Re:We have to!

[Yvanhoe]

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!

[ultranova]

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.

This rises a question of whether banks should be simply nationalized? They aren't acting as private companies anyway, since the risk is public, and we already paid for them. Taking them under direct and permanent governmental control would allow us the people to exert some control over them and prevent this from reoccurring.

No private company should be allowed to be so large that its owner can blackmail the rest of the nation. I, for one, do not think that billionaires have any more divine right to rule than kings.

Don't call me shirley ..

[Idimmu Xul]

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

Re:Don't call me shirley ..

[Anonymous Coward]

It's easy. You just have to pay off the refs.

Wait.

[esrobinson]

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:Wait.

[SpeedyDX]

All-star baseball player struggles at figure skating - clearly shows all-star game votes don't reflect players' abilities!
Grammy award winning singer can't perform simple clown juggling routine - they hand out Grammys to anyone these days!
Nobel prize winning chemist's sculpture harshly criticized by art critics - all previous research papers under scrutiny!

Re:Wait.

[martin-boundary]

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.

Look at the numbers first

[Flavio]

Goldman Sachs gave Brazil (the "favorite") only a 13% chance of winning the world cup.

The fact that Brazil was eliminated is not at odds with the reports.

Re:Look at the numbers first

[Anonymous Coward]

Goldman Sachs gave Brazil (the "favorite") only a 13% chance of winning the world cup.

The fact that Brazil was eliminated is not at odds with the reports.

Way to ruin my self-righteous rage with your little 'facts' It makes me feel better to lay other people low when times are tough. The people need a safe outlet for their anger, and some remote math geeks should have been fair game. Then you come along and tell me their predictions were soundly made..? So, now I must recollect all that anger and direct it at my wife and children. I am the victim here. Why aren't you defending me?

Re:Look at the numbers first

[Kjella]

Goldman Sachs gave Brazil (the "favorite") only a 13% chance of winning the world cup.

It's been clear to me now for some time that soccer isn't about making the best team win. If a typical match result was like 9-4 it's very unlikely the weaker team would beat the stronger, and we could have done that by making scoring easier. But with results like 2-1 it's pretty much down to $random circumstance of the day. Why? Because in 80% of the matches it makes fans go "If only..." then our team would have won. You look at the one missed chance and ignore that the opponent had three. At 13% you realize this is mostly luck, it means there's at least ten countries that could win.

Personally I think Germany will pull it off though, impressive play and all their hardest competitors eliminated. Spain has Barcelona which is possibly the world's best team but their national team never quite made it, Netherlands and Uruguay have always been good nations but haven't made it to the top in ages. Because when you look at the list of winners, it's shorter than you might think and Germany is the only one left that has won in recent history (Uruguay won in 1930 and 1950).

Upgrade

[therealobsideus]

Guess it's time to upgrade their magic ball software. This time maybe they shouldn't outsource the project to Mattel.

prediction?

[chichilalescu]

I thought the point of the stock market was that people with money can buy shares into companies they think will be profitable. i pitty these idiots who try all their best to get as rich as possible as fast as possible. and I pitty the rest of the world, who see clearly that these guys treat everything like a lottery, and still trust them.

The world is still interesting

[RichMan]

The predictions by various teams would have had a chance of happening.
Like Argentina will beat Germany 67% of the time. There is still the possibility that Germany will win a game.
One thing that makes the world cup very unpredictable is that only a single game decides winner/loser. Anything can happen in a single game. Someone can be a little off. The ball can bounce just so. A ref can blow a call. If they played best of 5 or 7 games the predictions would have a better chance of happening.

Still we can't predict the future 100% and the world is still interesting.

To the stock market. There are to many outside influences.
Could anyone have predicted the well blow out in the Gulf and its affect on the Gulf fishing industry or 911 ? Sure they would have been outside possibilities but no one could have predicted exactly when based on just looking at the stock market.
As much as the economists like to assume that economics is a measurable science the ideas of perfect knowledge and perfect actors are laughable given the way we know people operate. The basic foundation of the economic theory is very broken.

Re:The world is still interesting

[plopez]

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:No.

[causality]

So stop. And stop voting for the people that do as well.

There is no chance of that happening in the USA as long as the two major parties are the gatekeepers of federal elections. The "lesser of two evils" is still evil, and election after election of some kind of evil adds up to a lot of institutionalized evil.

Re:No.

[mobby_6kl]

"No" is not the answer, Paul is. He correctly predicted the outcome of all of Germany's games so far, whichi is pretty impressive, considering Germany's loss to Serbia.

Of course, Paul is an octopus who picks the winning side by choosing the box with the winning side's flag on it.

Hmm

[Quiet_Desperation]

How good are they at climate prediction. I'm just wonderin'...

They cheat- not predict

[Maxo-Texas]

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.

Re:I don't get it.

[md65536]

Can you put this in car terms?

GS steals a car from Customer A, picks up Customer B and pays for sex, but then beats up B and takes the money back, sells a sex tape it made with B to A, then runs down A with their own car.

Re:Soccer is just unpredictable

[wish bot]

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!

It's so easy, chaps

[DollyTheSheep]

"Football is a simple game; 22 men chase a ball for 90 minutes and at the end, the Germans always win."

Gary Lineker

Re:We can't trust them becasue econ isn't science.

[RyuuzakiTetsuya]

Economics is applied sociology. Like political science. It's just a science where the variables are largely unknown. Which males models and predictability difficult.

Uh...hello McFly!

[yoshi_mon]

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:I don't get it.

[dna_(c)(tm)(r)]

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.