Billionaire? Moi?

February 4, 2019
Posted by Jay Livingston

Tevye in Fiddler on the Roof had no problems with the word rich. He did not sing, “If I were a person of wealth, Ya da deedle deedle. . .” He laid it on the line.

Howard Schultz is more squeamish, especially about people saying how much money he actually has — i.e., at least a billion dollars.

The moniker “billionaire” now has become the catchphrase. I would rephrase that and say that “people of means” have been able to leverage their wealth and their interest in ways that are unfair, and I think that speaks to the inequality but it also speaks to the special interests that are paid for people of wealth and corporations who are looking for influence. [from an interview yesterday with Andrew Ross Sorkin of the New York Times, emphasis added]

“People of means” sounds dated to my ear, especially for a guy running for president in 2020. Ditto “person of wealth.” So I went to Google nGrams to see how the frequencies of these terms had changed over the years, at least in published books. I threw in another term that could also be used to indicate someone with large amounts of money.

Schultz’s preferred terms are indeed a throwback. They were at their peak back when Sophie Tucker said, “I’ve been rich, and I’ve been poor, and believe me, rich is better.” Or as Mr. Schultz might say, “I’ve been rich and I’ve been a person of wealth, and believe me, being a person of wealth is better. Rich makes me sound so greedy.”

These were also the years when you could still get a cup of coffee for a dime. Since then the popularity of “person of means” and “person of wealth” has been on the skids. As for the cost of that cup of coffee, maybe you should ask Mr. Schultz.

Today’s Big Match-Up

February 3, 2019
Posted by Jay Livingston

It’s Superbowl Sunday, and this year we’re about to see a contest between two rivals that have met several times previously on this blog. No, not the Rams and the Patriots, not exactly. It’s The Wisdom of Crowds versus The Smart Money.

The theory of the wisdom of crowds says that the average guess of all the interested participants is better than the guesses of the experts. The full title of James Surowiecki’s 2004 book on the topic is The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations. He begins with the famous anecdote of Galton at the fair. Here’s a summary from an earlier blog post on the topic.

Plymouth, England, 1906. On display is an ox, slaughtered and dressed. How much does it weigh? Fairgoers submitted their guesses. A statistician, Francis Galton, happened to be there and recorded the data. Galton was also a eugenicist, so he was certain that the guesses of the masses would be less accurate than those of the experts. But it turned out that the crowd, as a group, was far more accurate. The average of all the guesses (n=787) was within one pound of the actual weight (1,198 lbs). No individual guess came that close.

Surowiecki doesn’t say much about sports betting, unless you consider ox-weight estimation to be a sport. But my immediate reaction was that if Surowiecki is right, then bookmakers should be an endangered species, constantly paying out on many bets and collecting few. Not a good business model.

Sports books are experts. They set a line that they think will bring in an equal amount on both sides.* They often assume that the public will share their views on the abilities of the teams, and often they are right. But sometimes, the public thinks that the bookmakers are wrong and bet so much on one team that the books have to adjust the point spread to bring in more action on the other side.

This year, bookmakers judged the Rams and Patriots as evenly matched. The opening line on the Superbowl was pick-’em. Neither team was favored. (A small number of books had the Rams as a 1-point favorite, a few others had the Patriots by one.) The crowd roared in on the Patriots, and the books quickly raised the line to New England minus 2½. Bet the Rams, and you start the game ahead by that many points. Or bet them without points and get $120 for a $100.

Even that couldn’t attract enough money on LA.  Bookies are holding three times as much money on the Pats as on the Rams. On Thursday, a high roller bet $2 million on the Rams at the MGM, and that still didn’t offset the New England money. If the Rams win and MGM has to pay out that $2M, it will still finish well in the black from all the losing bets from Patriots backers.

It’s not just the oddsmakers who think the crowd is wrong. The “sharps,” professional gamblers who make a living from sports betting,** are also hitting the Rams — just not in large enough amounts to balance the millions of dollars coming in on the Pats.

I am posting this four hours before kickoff, and perhaps the crowd will move in with lots of money on the Rams, but I doubt it. If things stay as they are, today’s game is a good example of The Wisdom of Crowds vs. The Smart Money. (Of course, it is only  a single data point and by itself will prove nothing.)
 
UPDATE: The crowd was wise. The Patriots won 13 - 3. The crowd was also wise on the over/under which started at about 58, but the crowd, betting heavily on the under, brought it down a couple of points.




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* Most point-spread bets are 11-10 — the bettor wagers $110 to win $100. If the action is evenly divided, the book makes money no matter who wins, paying out $100 to each winner and collecting $110 from each loser.

** The guy who made the $2M bet is not considered a sharp, even though he won a very large bet last year when he took the Eagles over the Patriots in last year’s Superbowl.

The First Derivative of the Wisdom of Crowds

February 2, 2019
Posted by Jay Livingston

If this is Superbowl weekend, then the Socioblog’s fancy must be turning to thoughts of the wisdom of crowds vs. the smart money.  It’s a question I have returned to several times since the first year this blog was on the field. (See. for example, this post about the 2010 Superbowl.)

The “wisdom of crowds” is like the Ask-the-Audience option in “Who Wants to Be a Millionaire.” The “smart money” is like Phone-a-Friend — a friend who knows a lot about the subject.

The trouble with the wisdom of crowds is that sometimes the crowd is wrong, as it was in the 2007 NFC championship game between the Bears and the Saints that I blogged about at the time (here.)

Now, a trio of academics — John McCoy (marketing), Dražen Prelec (management), and  H. Sebastian Seung (neuroscience) — has a variation that allows you to derive the right answer from the crowd even when the crowd is wrong. You might call it the first derivative of crowd wisdom.

Is Philadelphia the capital of Pennsylvania? 

Suppose you don’t know, and you ask the crowd.

The correct answer is no. The capital is Harrisburg. But many people think it is, because Philadelphia is a large, populous city. Most people know about Philadelphia. When you ask that question to a crowd of people, as we did with MIT students, only about a third of the crowd gets the correct answer.*

Yes is the popular answer. The crowd, by two-to-one, says Yes, Philadelphia is the capital. The crowd is wrong. The capital of Pennsylvania is Harrisburg. So much for the wisdom of crowds.

Wait, not so fast, say McCoy and his colleagues. Let’s also ask another question: “What percent of people do you think will answer No to this question?” The average estimate is 23%. But in fact, 33% answer No. This makes No a “surprisingly popular” answer, surprising in that more people than expected say No. It’s as though you are taking the first derivative of crowd wisdom rather than the wisdom function itself.

If you went with the popular answer, you’d say Yes and be wrong. But if you go with the derivative — the “surprisingly popular” answer —  you’ll get it right.

McCoy sees applications of this to all kinds of forecasts — the market for some product, the price of gold, voting, He doesn’t mention the Superbowl. Right now, about 25% of bettors think that the Rams will win or that they will lose by 2 points or less. But suppose we asked all bettors, “What fraction of people do you think are betting the Rams?” If they guessed that only 10% of them are backing the Rams, then the Rams would be the “surprisingly popular” choice, and you would be a fool not to put down a grand to win $1250. Alas, I know of no such surveys. Besides, I don’t trust Belichick.

Two other thoughts:
First, McCoy’s makes the concept harder to understand by choosing an example where No is right. “Is No the correct answer?” “Yes, No is right.”

Second, I was stunned that two-thirds of MIT students did not know the capital of fifth most populous state in the country. Look, people, we’re not asking about Pierre or Carson City. This is not rocket science. And now I get the feeling that at MIT a question about rocket science might have gotten a higher proportion of correct answers.

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*From an interview with McCoy on a Wharton School podcast. An article by Prelec, Seung, and McCoy in Nature is here behind a paywall.

Michel Legrand — 1932 - 2019

January 28, 2019
Posted by Jay Livingston

As a callow youth, I dismissed Michel Legrand as a guy who wrote pretty tunes and scores. In fact, he did write 200 or more scores for movies and TV. Then I heard Legrand Jazz (1958) with his arrangements for three different groups — 1. a big band, 2. a group centered on Ben Webster and four trombones, and 3. the core of Miles Davis’s 1958 sextet (Miles, Coltrane, Bill Evans, Paul Chambers), Phil Woods instead of Cannonball, plus a few other instruments including flute and harp.

The tunes were  eleven jazz classics, from Dixieland (Louis Armstrong’s “Wild Man Blues” ) through swing (Benny Goodman, “Stompin’ at the Savoy”) to bebop (Dizzy’s “Night in Tunisia”). The arrangements were “far out” for the time, and even 60 years later, they hold up well.

Legrand later described the recording session with the Miles.

Everyone said to me: “Miles will come to the meeting and stand near the door, keeping his trumpet in his closed case. He will listen for five minutes, and if he likes music, he will sit down, open his case, and play. If he does not like, he will leave and he will never again contact you.” I was so afraid that I had flare-ups of sweat! I started rehearsing with the orchestra. The door opened, and Miles listened by the door for five minutes. Then he sat down, opened his case and began to play. After the first catch, he asked me, “Michel, is my game [playing] suitable?” That is how it all began.

Here is that group playing Fats Waller’s “Jitterbug Waltz.”

The record went out of print and out of sight. I rarely met anyone, jazzers included, who knew of it. It was something of a collector’s item. Somewhere along the line, I lost my copy and wound up paying the equivalent today of about $75 for a used copy. Eventually, the album was re-issued as a CD, and now you can stream it anytime, anywhere.