AAII Home AAII Blog

Coping with Randomness

image_pdfimage_print

Investor-Update

I found myself struggling with my NCAA Basketball Tournament picks more this year than in the past. Partially it’s because of the parity that has evolved in men’s college basketball. Partially it’s because there are teams whose chances are tough to assess (e.g. North Carolina, Michigan State, my Kansas Jayhawks, etc.). Then there is the sheer randomness of the event that wrecks bracket picks.

The statistical odds of the tournament favor going with the top-ranked seeds, but upsets can and do happen. Fourth-seeded teams have lost during the first full round of play (now technically the second round of the tournament) more than 20% of the time since 1985. Seventh-seeded teams face nearly a 40% chance of not making it to the round of 32. Top-seeded teams may look invincible with a perfect record during the round of 64, but it’s only a matter of time one is beaten by a 16th seed. (For those of you who don’t follow college basketball, the NCAA tournament has seven single-elimination rounds, whittling a field of 68 teams to just two.)

As the tournament goes on, unexpected teams gain momentum and win more games than anyone predicted. Wichita State, Butler, VCU and George Mason all surprised expectations and busted tournament brackets by making it to the Final Four in past years. I don’t recall any of the major college basketball commentators advising to take a chance on any of those teams. (This year, Wichita State is a #1 seed and is certainly not an underdog. The Las Vegas Sun listed the school’s odds of winning the national championship as 4-to-1.)

No amount of analysis can help you pick the correct outcome of every game. This is why Quicken Loans is able to run a contest with a $1 billion prize; the chances of picking a perfect bracket are astronomical. USA Today cited DePaul University mathematician Jeff Bergen as calculating the odds to be one in 9,223,372,036,854,775,808. Yet many have scrutinized their picks this week, including myself, in hopes of getting them right. It’s a reflection of our inability to cope with random events.

Read more »

 

Leave a Reply

Your email address will not be published. Required fields are marked *