What Did They Know - And How Did They Know It

November is only eight days old and its already been a big one for the power of prediction.

There have been two significant storms in the northeastern US, both of which were predicted to be bad - and both of which were worse than advertised.

But the big news for data hounds was the US election. Despite the earnest endeavors of the US media to call the US Presidential election every cliche from horse race to down to the wire to too close to call, there were, in fact, quite a number of pundits and computer programs that did call it. And call it with uncanny accuracy.

The New York Times' Nate Silver was arguably the most closely followed - at one point accounting for 20% of the volume to the newspaper's website - but TPM's poll tracker also got it almost entirely right, including their call on the US Senate races and some of the online prediction markets came pretty close, despite occasional attempts to game their systems.

The prize, however, probably goes to Irish betting site Paddy Power, Europe's largest, which two days prior to the election announced it was paying out on all its Obama wagers. There were many who claimed that Power embraced what amounted to an inexpensive publicity stunt as the cost of paying bettors was less than a strong marketing campaign might have cost. But resentment aside, gambling is a business, first and foremost. Power assessed the numbers as the following article explains, evaluated the trends and made their decision.

The implication is not so much that gamblers are smarter than media prognosticators - though that may be true - but that between Big Data, The Cloud, statistical programs and our ability to combine them, this sort of predictive capability will only go stronger. There will be those who decry the loss of magic in our lives. And there is something to that. But there is also the potential for more efficient allocation of resources, better information saving lives, homes and livelihoods - and the knowledge that harnessing the interpretive power of the human brain to its technological extensions will make it less likely that people will be gulled by false promises or threats - and more likely that more effective decisions can be made about everything from public policy to private aspirations. JL

The Herald Sun reports:

Europe's largest betting company, renowned for settling its bets early, paid out to punters who backed Barack Obama to win Tuesday’s US Presidential election.
Irish bookmaker Paddy Power said that despite the polls showing voters remaining largely undecided, they believed it was a done deal and that Obama was a “nailed on certainty to win a second term”.

President Obama and Republican rival Mitt Romney blitzed the remaining toss-up states, with both sides predicting victory just two days before election day.

However Paddy Power has been caught out before with similar early calls.

In 2009 Tiger Wood’s failure to win a PGA Championship left the bookmaker about $2 million out of pocket. It paid off anyone who bet on Woods to win the title when he led by four shots through 36 holes at odds of 1-to-5.

When Tiger lost Paddy Power said in a statement: "It takes a special kind of dimwit to turn what should have been our best ever golf result into our worst,”

Obama’s odds fell to a low 2/9 and over the past months Paddy Power have seen 75 per cent of money staked go Obama’s way.

“Romney gave it a good shot and is doing well in the popular vote, but we suspect he’s had his moment in the sun and is likely to be remembered more for his legendary gaffes than Presidential potential,” a Paddy Power spokesperson said in a statement.

The overall betting trend has shown one way traffic for Obama and punters seemed to have called it 100 per cent correct. Despite Romney appealing to the large evangelical and senior vote, America‘s sticking with black and cool.”