Like the rest of the world, we at H+D were glued to the 2022 FIFA World Cup, which began November 20 and concluded December 18 with Argentina winning over France in an absolute nailbiter. Like any good organization, we also held an office pool where we vied to predict the outcomes of each World Cup match correctly. Though the stakes in our betting pool were laughably low, the competition was fierce – dare I say almost as fierce as the Cup itself?
Well, perhaps that is an exaggeration. But what I can say is that our office pool gave us all a chance to eat humble pie – something all investors grow accustomed to, along with reflecting on bruising lessons and misjudgments.
The lessons for us were simple: First, we are pretty bad at predicting soccer match outcomes – sometimes terribly so. Second, very often, things do not turn out the way you think they should. Third, it can be very costly to think you know more than you do. Case in point: our office pool winners were all people who said they knew nothing about soccer. They absolutely wiped the floor with those of us who had been watching the international games leading up to the Cup and thought we had a handle on it all.
But let us be kind and cut ourselves some slack by saying that low scores and frequent ties make soccer games notoriously difficult to predict. The New York Times wrote in 2014 that it’s easier for underdogs to triumph in soccer than in other sports because of a higher element of chance. There are “hundreds of skillful moves and stratagems, yet each team averages only a dozen shots, and the outcome is decided by several quick and often random events. In most games, no more than three goals are scored, and the typical margin of victory is a single goal.”
A book called The Numbers Game by Chris Anderson and David Sally (professors at Cornell and Dartmouth) found that favored teams beat underdogs in soccer just half the time – far less than in baseball, football, or basketball. And in December, The Economist wrote that soccer “is one of the few sports where dominance need not translate to victory.” In other words, winning soccer matches requires not just great skill, but also great luck.
Whenever skill and luck get intertwined, predicting outcomes gets very difficult. The classic book on this is Michael Mauboussin’s The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing. In it, we learn that some activities, like chess, are mostly determined by skill, while others, like playing slot machines, are determined completely by chance. But many activities, including sports and investing, lie in between, and the more luck that’s involved, the less significance we should assign to single or short-term outcomes. The paradox is that the more skillful the participants and the stiffer the competition, the greater a role luck plays.
The Economist claimed there were more upsets in 2022 than any World Cup since 2002, which suggests that a successful entrant into our office pool needed to include a decent number of upsets. The problem is that correctly predicting which games end in upset is ridiculously hard. Many of us fell to the bottom of the pack trying. We would have been better off picking the favored team across the board – a simple strategy that would have put us in the top quartile of entrants, but not in first place.
Alas, not everyone can win a World Cup or an office pool — and thankfully, none of us took our pool very seriously. No one tried applying data science while completing his or her entry, and it likely would not have helped anyway.
Top soccer players too often ignore the data while on the pitch. Why are most corner kicks served long into the box when the stats say that playing short is more likely to end in a goal? And why, as Eric Hanson wrote in his classic 2008 and 2017 articles, do goalies facing a penalty kicker irrationally dive to the right or left 90% of the time when the stats say they’d do better if they stood in the center and did nothing? That is soccer. Delightfully unscientific and often, beautiful to watch.