August 09, 2010

The Most Likely Scenario Can Still Be Improbable

"CaseRanter" made an interesting comment regarding Justin's guest post last Friday about Lebron James' "Decision".

When giving his thoughts, he predicted that Miami would lose to the Lakers in the finals next year. Now, let's think about this. A Miami-Lakers Finals next year IS probably the most likely scenario possible for next year. And you should bet against it.

This is a good gambling lesson for how to get money out of your mathematically illiterate friends. Who's the most likely team to make the finals in the West next year? The Lakers, right? So why bet money against it happening?

Because just because something is the MOST likely scenario still doesn't mean the odds are in it's favor. Because we're not in a 2-possibility system. The most likely scenario is RARELY better than 50% odds.

Follow yet? Let's take another example.

Who do you think the Republican nominee for President in 2012 is going to be? I'll put money on you that they're not. Why am I being so crazy? Because by going against the favorite, I get the odds of every other possibility. And the odds are always in my favor.

Tiger won't win the next major. You won't win your fantasy league. Wanna bet?