Jun 20, 2010

History, Predictions, World Cup & Taleb

I read an amusing argument in a World Cup news section of some paper - "Since 1962, European teams & Latin American teams have won the world cup alternately. Going by that logic, it'll be Brazil or Argentina this time" .. About 2 - 3 years, I might have been swayed by these kind of arguments, however, after reading Nassim Nicholas Taleb's Fooled by Randomness, I tend to be amused by these kind of predictions..
   There are different kind of predictions. One type of predictors just give out their bets / premonitions..Second one, you just do a set of data analysis, find some pattern and make your bet based on that..If you win, you tend to develop a self-belief in your logic, which might not have any rational basis.. You never tend to realize that you have made a correct bet just out of randomness, rather than any strength in the underlying logic.. A lot of stock market bets are again like that..You tend to observe a set of past events , make some generalizations and place a bet..If you win, your tend to feel a high...Very rarely do such people realize that they are indeed 'fooled by randomness' 

    You tend to see such illogical statements or predictions everywhere..FIFA site now screams this just ahead of match between Brazil & Ivory Coast - "Brazil have never conceded a goal against an African team in the history of the World Cup. " Now, what logical connection do past WC matches of Brazil have with today's match ? I wonder how many ppl would have bet in Ladbrokes based on such comparisons..

    In 1996 World Cup Cricket final between SriLanka & Australia , Arjuna Ranatunga, the Srilankan captain won the toss and decided to chase. Back then it was unthinkable..Why ? Because from 1975 - 1992 ( 5 world cups ) , no team had won a World cup final by chasing..Everyone won while batting first. When Ranatunga won the toss & decided to field, I remember many commentators criticizing that decision..
Srilanka won that final . In the post match conference, I still remember a journalist questioning Ranatunga on his decision to field first. To that , Ranatunga answered like this - " I don't believe in history. I believe in ability" ..Srilanka in that tournament had perfected the art of chasing..And to that basis, Ranatunga's decision was correct. However, had Srilanka lost that final , the first criticism that Ranatunga would have faced would have been over his decision to field first.. Very few people will recognize this randomness bias in such situations..And even if you recognize that, it would take a lot of guts to "go against history"..  Back then, I didn't understand the significance of Ranatunga's statement. But after reading Taleb, all such things make more and more sense to me.

Now back to World Cup Soccer..Seeing the way European powerhouses are playing , I don't think anyone amongst them is going to win ( PS:- I'm a hard core fan of Netherlands Soccer team ) .. And based on the current form, I would any day bet on Latin American teams..And when this tournament ends and say Brazil/ Argentina wins, people should realize that its not because of this 'alternate winners between Europe & Latin America phenomenon' , but it is because of the way they have played.