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Speaker 1: Welcome to Ask Fear and Greed, where we take your

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Speaker 1: questions and do our best to answer them. I'm Michael Thompson,

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Speaker 1: and good afternoon, Sean Aylmer.

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Speaker 2: Good afternoon, Michael.

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Speaker 1: Now, Sean, today's question has come from Michael, not me,

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Speaker 1: another Michael. There is more than one of us in

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Speaker 1: the world, and he sent it via LinkedIn. Yeah, and

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Speaker 1: it's a good one, he says. Hello, Sean and Michael.

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Speaker 1: I hope you're having a good day. Thank you, Michael.

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Speaker 1: We are, He says. Is there a difference in the

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Speaker 1: sort of metrics or data that betting markets and polsters

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Speaker 1: use in arriving at their prediction? The question is premised

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Speaker 1: on the US elections, where betting markets were confidently pointing

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Speaker 1: towards one direction and the polls seem to indicate a

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Speaker 1: close race. It's a good question, isn't it.

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Speaker 2: Oh? It is. I mean, think about how each side,

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Speaker 2: the polsters, and the bookmakers set the odds. So we

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Speaker 2: take the bookmakers first, whether it's a on track book here,

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Speaker 2: the tab sports spread, whoever. They calculate the odds of

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Speaker 2: something happening, let's say one in three chance. They then

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Speaker 2: have to add a profit margin for themselves, so they

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Speaker 2: don't want to always end up square. So maybe it's

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Speaker 2: one in two and a half is the odds they

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Speaker 2: give when it's actually one in three. One in two

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Speaker 2: and a half is actually five to two in betting parlance.

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Speaker 2: The second So that's the first part. The second part

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Speaker 2: is weight of money. If a stack of money comes

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Speaker 2: for one side, as it did in the US presidential election,

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Speaker 2: where there were some really big early bets on Donald Trump,

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Speaker 2: then the bookies or the market makers change the odds

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Speaker 2: because they actually don't want to lose too much money.

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Speaker 2: So if book it go from offering one in three

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Speaker 2: chance to one in two and a half chance and

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Speaker 2: then all this money comes in for one, you know,

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Speaker 2: whatever's being bet on, maybe they go down to from

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Speaker 2: one and two and a half chance to one and

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Speaker 2: two chances and as results, the payout for accordingly. Now,

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Speaker 2: the idea is that the bookie or the market maker

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Speaker 2: wants to dissuade some people from making the bet, and

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Speaker 2: it's sort of a protection protection mechanism for them. Okay, Now,

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Speaker 2: bookies don't always win in the short term though, you know,

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Speaker 2: you accina sometimes when they talk about high payout ratios,

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Speaker 2: like sometimes yes, yes, the cnos over six month period,

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Speaker 2: they just you know, they end up paying out more

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Speaker 2: than normal. That hurts earnings, but in the long term

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Speaker 2: they win because the odds are on their side. The

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Speaker 2: fact that different bookmakers or market makers offer different ad

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Speaker 2: odds demonstrates that it's not a perfect market. So, you know,

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Speaker 2: lots of data, but there's a human element in this

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Speaker 2: and what they perceive, what they know, what they feel.

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Speaker 2: So that's kind of how bookmakers do it. So I

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Speaker 2: mean a lot of fear. I mean there's a method,

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Speaker 2: but there's a lot of feel for it. Polsters, however,

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Speaker 2: it's a bit the same. So Gallup remember any about

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Speaker 2: Gallup and its goal is to find and all pulses

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Speaker 2: goal is to find a subset of people who best

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Speaker 2: represent the likely voter electorate. So Gold goes out ask people,

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Speaker 2: I mean thousands of people, a bunch of questions. They

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Speaker 2: give a score to the answers, and so the questions

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Speaker 2: are things like, have you given much thought to the election?

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Speaker 2: So let's use the US elections as an example. Six

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Speaker 2: months ago, they would have gotten people that have given

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Speaker 2: much thought to the election. Do you know where people

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Speaker 2: in your neighborhood aregain to vote? How do you vote previously?

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Speaker 2: What do your plan to vote? Stuff like that, and

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Speaker 2: it's a bit of a dark art, but they kind

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Speaker 2: of put scores on all that and they work out

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Speaker 2: what the likely voter electorate is going to vote for,

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Speaker 2: and that normally the best ones like Gallup put years

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Speaker 2: of experience into that. I means, certainly it's a dark art,

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Speaker 2: and demographic exchange and voting tensions change. But in many ways,

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Speaker 2: polls are kind of more data driven, so it's qualitative responses,

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Speaker 2: and I think betting is more I mean, there's a

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Speaker 2: way to money, but there's also how the book maker

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Speaker 2: perceives things and stuff like that.

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Speaker 1: So I was doing some reading as well, and it

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Speaker 1: does feel like there is not a definitive answer to

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Speaker 1: this one that that from what I could see. What

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Speaker 1: I was seeing was that the poles are largely based

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Speaker 1: pretty much on sentiment in terms of whereas betting markets

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Speaker 1: take into account all available information everywhere. Essentially because there

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Speaker 1: is there are fewer restrictions on there are no questions

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Speaker 1: being asked that that kind of require you to kind

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Speaker 1: of narrow down your answer into a very specific kind

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Speaker 1: of am I going to vote this? Way or this way,

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Speaker 1: kind of based on what has been said, blah blah

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Speaker 1: blah blah blah. It is just basically, based on all

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Speaker 1: the available information, which one do you think is most

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Speaker 1: likely to win? Put your money behind that one. And

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Speaker 1: so again it's Michael. I don't know whether he's going

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Speaker 1: to be kind of satisfied with this, because he's probably

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Speaker 1: come to us looking for a definitive, non waffle answer,

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Speaker 1: and I don't think we've delivered on either of those.

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Speaker 2: Now, n I mean, the funny thing was, I mean,

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Speaker 2: the polls were mostly wrong. Trump went easily in the

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Speaker 2: US election. The betting markets were right, but by the

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Speaker 2: time the election was running, they were very close. Carmla

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Speaker 2: Harrison Donald Trump in terms of the market. Yeah, so

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Speaker 2: the betting markets were kind of wrong in the last

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Speaker 2: few days. They were right to begin with, but then

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Speaker 2: wrong in the last few days.

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Speaker 1: I don't know whether that proves or disproves anything that

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Speaker 1: we've just did actually just basically just says that, you

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Speaker 1: know what, I don't know whether anyone really knows the

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Speaker 1: answer to this one.

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Speaker 2: I'm not really sure.

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Speaker 1: So look, you know what, Michael, We've done our best.

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Speaker 1: Will give us a B plus for this effort.

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Speaker 2: Yeah, absolutely, yeah.

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Speaker 1: I think, well, I'm sure I think, Michael, we've got

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Speaker 1: that B plus. And thank you very much Michael for

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Speaker 1: the question. If you have your own question that you

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Speaker 1: would like us to answer, and it can be as

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Speaker 1: loose or as kind of non definitive as this one,

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Speaker 1: send it on through via the website Fear and Greed

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Speaker 1: dot com dot au or LinkedIn or Instagram, Facebook, basically

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Speaker 1: anyway get it through to us. Will cop it on

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Speaker 1: the list. I'm Michael Thompson and that and ask Fear

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Speaker 1: and Greed