I bet you’ve wondered at some point if the bookies can be beaten. And can you consistently make money from gambling? How about basing predictions on the outcomes of crowdsourcing?
As a lot of other companies, Capgemini has been running an internal competition for the 2016 UEFA European Championships in France. Colleagues around the world have been asked to predict who will win the tournament, including their expected 2nd, 3rd and 4th positions and the quarter finalists. Over 7,000 people have taken part and this has provided some great crowdsourcing data. We’ve investigated how the crowdsourcing tournament winners’ predictions compare to the bookmakers odds and how we, collectively, expect the group table standings to turn out.
Our ‘odds’ of each team winning the tournament can be generated using the crowdsourcing data from the Euro 2016 competition and compared to the bookmakers’ odds. For an easier comparison, all fractional odds have been converted to implied probabilities using a simple formula:
Implied probability = denominator / (denominator + numerator)
For example, with Germany’s odds of 9/2, the implied probability is calculated as follows:
9/2 = 2/(9+2) = 2/11 = 0.182 = 18.2%
The bookmakers have included a house edge of 4% here, which is charged for taking a bet or commission. As a result, the implied probability of the set of all possible outcomes sums up to 104%, compared to 100% for the crowd sourcing probabilities. These probabilities have been multiplied by 1.04 so that they also sum to 104% and a fair comparison can be made between the bookies and crowdsourcing implied probabilities.
It’s interesting to see that there is a considerable variation in the odds. Notably, Germany is a clear favourite from our perspective with an implied probability of 48.5% but the bookmakers made France a favourite. This high probability is driven by the fact that 26.2% of competitors are supporting Germany in the Euros and the German fans are very confident of their team winning the competition; 87.5% backed their own team compared to 24.2% for English fans. In fact, England’s implied probability of winning the tournament is less than half of the bookies’ odds. This could relate to England fans’ low level of optimism in winning major football competitions (please see George and Iain’s article to prove this).
Basing predictions purely on the calculated crowdsourcing odds, if these probabilities were to hold, then as Germany and Spain are favourable to the bookies, a net benefit will be made when betting on them. In a more simplified example, if we assume Germany to have a 50% chance of winning the tournament (and all tournaments going forward for that matter) then we would expect them to win every other tournament. If the odds are 3/1 for both tournaments then they are worth betting on, as in the 2 tournaments, you will lose £1 and win £3 – a net benefit of £2 – with a £1 bet made on them for every tournament.
When analysing the lesser fancied teams, it can be observed that not a single person in the Capgemini competition predicted Albania, Turkey or the Republic of Ireland to win the competition. This gives them an implied probability of 0% from the crowdsourcing data!
Overall, the crowdsourcing predictions are a lot more extreme, in that the more favoured teams like Germany have a much greater probability and the 17 teams at the bottom of the list have been given very little chance by Capgemini colleagues but the bookies have spread their bets to ensure realistic probabilities are allocated to these teams. Following Leicester’s unprecedented Premier League win just over 6 weeks ago and Greece’s Euro 2004 heroics by winning the competition as 150/1 outsiders, the bookmakers will not want another massive payout through under-estimating an underdog story in this year’s competition.
So time will tell if crowdsourcing can beat the bookies when it comes to predicting the Euros. Capgemini colleagues have backed Germany and Spain more than the bookies have and ruled out the so-called minnows. If Germany goes on to win its second successive major tournament, then you’ll be kicking yourself that you didn’t put a bet on it at the start.