Nick, Peter and Fraser discuss why Leicester City winning the Premier League was perhaps not all that surprising.

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So first of all I think we should caveat to say that none of us know very much about football at all. So apologies to any football fans, particularly Leicester City fans out there because we don't want to offend. But I think what...

That's correct.

But there could be other things as well but I mean I'll come on to that in a moment but so maybe so hold on so perhaps if us three got together and said right we're going to be um we're going to be Aleph Tell Me Studios football team and we somehow get into the premiership just us three on the team then we should have been at 5,000 to 1 or something

like that right or I mean yeah but that that wouldn't happen I mean that's the point you wouldn't exactly the three of us would not but that isn't the position Leicester were in they

weren't three people who just started their own football that's the point I'm trying to make that five thousands one would be as appropriate for us that would be right if by some freak you

know uh because if because all the other team because all the other teams somehow died yeah something and we ended up being then yeah that would be but but I don't what what made Leicester so much worse sure than all those other sort of three let's say 300 teams who've ever been promoted

yeah I mean I think you could still sort of um um lengthen the odds a bit by I mean I I think it's and I think you'd accept as well it's a sort of reasonably it's a good start to say okay look there's a five in 300 chance okay and then you can do a little bit more qualitative analysis and see where you are and sort of lengthen it a bit further but even so you would never get five thousand to one so which leads to the reason to the question that um yeah so I think we're talking about two things actual odds or chances of something happening and um the price or the odds that um a professional a commercial organization puts on on something happening now it's my guess I think there's an element of there's more kind of as you say intuition about it than we might imagine but also it could just be about driving business okay that it just seems so unlikely you know hey let's put a million to one on this that is to attract um it's just to it's a marketing ploy essentially and makes people go yeah I'll put a pound on that

that Nick suggests okay I mean the the question of because you raised an interesting question there about should the should the the odds that bookies offer differ dramatically from the the probability of something happening and I just want to also explain that I don't we're not saying here that the probability is some objective thing we can measure right we can't it's not a feature of the world probability is a feature of the information you have so so what reasons do you have to think that Leicester is you know more or less likely to win than some other team in that reference class of newly promoted teams um but but let's assume so let's assume that you know given some set of information there's there's an appropriate probability to put on it now bookies odds that they offer will diverge from that for a good reason which is they have to make money so bookies odds are all slightly worse um than they should be uh as a punter yeah because the bookies typically if you add up the probabilities that are implied by the odds you'll find that they're you know between five and ten percent uh they add up to 110 percent essentially is it all offering slightly worse odds but but the the take that aside from it let's assume that bookies are non-profit for a minute and they want to they want to make sure that they are um pricing uh bets sort of appropriately if the non the non-profit the kind of uh budget neutral odds are the correct odds that they so because if they diverged you could make arbitrage profit you could you could you know if you're offering me 20 to 1 on something that i happen to know is 10 likely then i will bankrupt you if you keep doing that i'm going to bankrupt you eventually now it might going back to something peter said is you know well they kind of got away with it well you might right you might get away with it nine times out of 10 but that one time you're going to be sunk right so you might take you might take my million pounds nine times out of 10 but that one time out of 10 you're going to have to pay up 20 million pounds that so so the odds ought to converge on the the probability that something will happen and if if if bookies are not doing that then eventually they will go out of business but as peter says you you can get away you can get away with some deviations in the short term and you know especially when it comes to things that are fairly unlikely you know if what we're saying is that this thing has an odd has a sort of true odds of 60 to 1 then you might go 50 years without the bookies having to be called out on it but that one time

is when they'll end up losing i'm not sure i when you kept pointing emphatically at me when you were talking about this as if i'm running around chucking my money and my million pounds at least i've got better things to spend my million pounds on to be frank but um but there is a tip here if

anyone offers you odds of more than about 100 to 1 on any take it take it yeah yeah okay well look

on that note um do any of you gamblers do you do you do you do you do you actually i've got a friend who who gambles and he doesn't like the word gamble he bets um so are any of you betting men no i yeah well we should put our money where our mouth is we are all gamblers no no no no no no no

we are all making decisions under uncertainty all the time if you're if you go and get a fixed rate mortgage rather than rather than a flexible rate mortgage you're gambling right if you if you decide to get the train because you think that you know you're going to get there quicker but you know there's a slightly higher probability of delay vis-a-vis the tube you're gambling people gamble all the time now but but in in uh i i used to play poker yeah quite a lot but um were you good most poker players will tell you it will be even more emphatic that that isn't gambling um but but i mean it is it but if you're if you're playing properly then you will be pricing your behavior appropriately and being a good poker player is about pricing the action that you're being asked to take correctly and saying well is are the odds uh good you know are they better or worse than than um uh than what i'm actually being offered um that so so good uh poker player playing involves making lots and lots of uh judicious um actions of of effectively comparing the odds that that you are effectively offering when you when you put your bet in um to the so that to what you think the actual the chances of of winning are so yeah and and also there's sort of behavior

sort of stuff and showing people sort of and what's the word i'm looking for bluffing and all that kind of stuff as well but we won't go into that but actually all of that is there's not so

often people talk about that as though it's psychological but but bluffing is but purely

is a is a part of good poker well no it is i'm talking about you know i'm talking about you know how you come across when you're doing that as well um but it's not that it's not just probability and pricing and modifying your behavior and yes i accept that bluffing is a is exactly derived from that but there's how good you are acting and things like that i'm talking about i'm sorry i've got all confrontational so on it so suddenly sorry but and actually i was wrong when you when you was going well we gamble all the time we bet all the time and i was going no no no no no no no but actually that's really what we want to talk about because we really we're having a wider we want this to be a wider discussion so um let's just sort of pick up on that a little bit so but two things one i think we should have um a trip sometime us three and go off to new market or something and go and go betting for the day and just see i don't know just see where we go with that we actually we could record it as well that'd be quite good fun that's the first thing um are we all up for that yeah yeah good yeah yeah that's good and the second thing is look so i probably should have devoted more time to this but let's talk about these wider things so what's the what are the practical applications of what we've been talking about here because we've been talking about lester and actually none of us really bet on this kind of stuff but how can we apply what we've talked about there with lester to our everyday lives um does anyone want to pick

up on that is that a good question does anyone use yep i think um when when uh you should bear in mind making financial decisions like mortgages whether they go to fixed rate or variable rate or whether you uh take on the the fixed rate for your energy bills bear in mind that all of these things are profit making products provided to you by the banks and the insurance companies and the energy companies they are there to make a profit as much as they are to provide a service so and the these these new this new range is sort of multiplying of different possible products is just a way of them carving up the market into different more intelligent slices so they can target different people so bury that in mind when you're when you're uh making your decisions um that um the company will be that's giving you this service will be making a profit but that's not to say that there won't be a package that's more right for you and your appetite for risk and your understanding of the market so if you're if you happen to trade uh in energy and you know that the energy prices are going to be fixed uh or gonna go down then you can use that knowledge to to uh to select your your tariff i've got a slightly more general piece of advice that i

ever that uncertain um got it okay no that's good there's a good moral um okay so that being the case just to wrap up when british gas british gas comes to me and said right praise i'm going to give you five five thousand to one on on dobbins doors winning the grand national i should take it why would british gas be offering you that i'm just trying to make a joke just yeah let's wrap up i don't get it this is like all my jokes unfortunately yeah so let's wrap up there that was odds and what do they mean thanks chaps that's uh me fraser and nick hare and peter coghill thank you very much from the cognitive engineering podcast until next time thanks bye