Here's Paul in action:
Paul did far better than the best new paper 'expert' punters ...he did even better than this bunch analysts from UBS, Goldman and JP Morgan [World Cup Prediction A Meta Analysis]who used sophisticated models and got everything wrong - they applied the same models as those they use to come up stock market predictions sent to clients so think twice before you follow their recommendations. If you think I'm asking you to gamble your hard earned money on Paul the Octopus, ..hack no. I told this story to show you how futile it is to predict the outcome of events that are random and how analysis can actually prove a waste of time. As for Paul being psychic...I don't think so...I think he got lucky and those who made money off his predictions are also lucky. It is only on hindsight we know for sure he will be perfectly right. Paul might get it all wrong at the next tournament and those who punted heavily on his predictions will be asking for him to be cooked alive.
Gambling is bad. I'm not here to encourage gambling but the next part intends to show how groupthink and biasness in judgement can lead to errors and opportunities for some people. It is hard to win at soccer betting and you shouldn't do it even for fun. The Singapore Pools set the odds that ensures that it wins. As more people put their bets on various outcomes, they adjust the odds based on how many bets are put on an outcome. Suppose the Singapore Pools offer odds at 1 to 5 Brazil will beat a weak team. If there are many fans of Brazil who think it is 'impossible' for them to lose and these fans go all the way to bet that Brazil will win. Singapore Pools will lower the payout to '1 to 6' and if more bets for Brazil comes in they lower the payout further to '1 to 7', '1 to 8' and so on. As the odds shift because people become fixated by the idea that 'Brazil cannot lose' egged on by expert opinion in The New Paper and so on, it is possible that they become so bias that it becomes favorable to bet against them. While the probability of Brazil winning is still higher, the high payout from Brazil losing more than compensate for the low probability of such an outcome. This approach is similar to the notion of contrarian investing. While it is hard to predict where financial markets are headed, it may be less hard to figure out whether other investors are very biased to a certain outcome i.e. either too bearish or bullish relative to the underlying reality.