People have been betting on sports for decades already. From recreational punters to professional bettors, we all seek the sharpest, most accurate prediction to place a wager on. While some reach success in this field, others struggle to make an accurate prediction. How hard is it to place a good bet?
Generally speaking, a good predictive ability consists of extensive knowledge about the given event/activity & proper betting skills. Although being a great bettor is a tough challenge, in reality, we all are actually good bettors, only collectively, though. Yes, you read it right. Think about a betting market all the way through its opening to its closure. Every single sports betting market nowadays goes through market validation, which is actually nothing else but a combined influence of each bettor’s opinion about the outcomes of the given event. If you are unaware of something like this yet, try catching the market opening odds & comparing them with the ones at the market closure minutes before the start of the event. Even though bookmakers have every possible tool to assess the probability & risks connected with the event accurately, they cannot physically know everything. Thus, their predictions are not 100% accurate and have to be adjusted according to the information possessed by the market, derived from betting volumes & whatsoever. That being said, it seems quite reasonable to assume the market makes quite an accurate prediction, but how can it help you win your bets?
The theory is called a Wisdom of the Crowd or simply crowd wisdom & basically means that the opinion of a substantial group of people can generate a relatively accurate prediction. Anthropologist Sir Francis Galton originally introduced the idea in his works. Galton proposed a theory, based on personal observations, that the amount of over- & underestimation from the surveyed group will cancel each other out. That, as a result, produces quite an accurate prediction.
During one of the researches, Galton observed people estimating the weight of the piece of butchered meat while making a purchase at one of the livestock fair stands. He later found something quite interesting. While practically every single guess was incorrect, altogether, they have produced a weight prediction, which was only about 0.8% off the actual weight. The theory immediately brought the interest of numerous researchers around the globe, confirming the observation in various different scenarios.
How to use crowd wisdom in sports betting?
Top online bookmakers found the way of using the collective guess in their favour, which is nothing else but market validation. People themselves actually shape the market by betting on either of its sides after the opening odds are released. That explains why finding value or bookmakers’ mistake closer to the start of the given event make less sense. Professional sharp punters never place their bet towards the market closure. Instead, they go against the market earlier while the odds are still raw and have not been affected by the less experienced & knowledgeable recreational bettors.
As the market gets validated by more people, it becomes more liquid, meaning it gets more efficient & accurate. The same idea stands behind the collective guess. However, unlike validating the market where you are given the starting point in the form of the opening odds, collective guessing is based more on personal & common sense thinking. What is more, the factor of knowledge & skill difference also plays its part, especially during the market validation process. However, it has already been estimated when certain groups of punters place their wagers!
While such betting profile diversity is generally good for the market, that is far not always the case. Recreational punters who tend to bet more towards the start of the event (e.g. football match kickoff) base their decision almost entirely on somewhat arbitrary factors rather than mathematical calculations or proper risk assessment. The risk of betting this way & collecting guesses from such people is likely to be affected by some of the most common behavioural biases. That being said, whenever this betting style gets loose & personal feelings step ahead of the cold-headed judgment, bettors tend to stake more on favourites; thus, affecting the market & shifting it the wrong way.
Staying away from being biased is not the only threat of the Wisdom of the Crowd. The aforementioned collective poor thinking behind such bets is called the information cascade, which appears to be more impactful than you might think. A good example of that could be the 2018 World Cup Germany team, who were favoured by the majority of the top online betting operators
to lift the trophy. Such backing was quite reasonable at first sight, considering Germany were defending champions, ranked second by FIFA & had the reputation of the team that consistently makes it further into the tournament. Nevertheless, a more detailed look at the German squad was stating otherwise. The poor overall form & weak performance prior to the tournament, on top of the absence of the previous World Cup squad’s stars like Phillip Lahm, Bastian Schweinsteiger and Miroslav Klose, led Germany to a shocking group stage elimination. This example is also tightly connected with the Areola Effect phenomenon, which is better explained in one of our previous sports betting guides. It would also be worth mentioning that information cascades.
One of the most crucial features of information cascades is that it often results in feedback loops due to the nature of every consecutive decision continuously being made off the original one that drove the price down. The bottom line is, the more complex the question you are trying to guess and/or the less knowledgeable is your pool, the less reliable & accurate your collective wisdom will be. Thus, being able to avoid getting biased by information cascades will present you with the opportunity to efficiently make accurate sports betting predictions.