However, when there is no data, everything comes down to a qualitative analysis, that is, the formation of convincing arguments as to what can happen. This method seems no more accurate than checking the direction of the wind on the wetted finger, but this time science helps us through the Fermi method.
Enrico Fermi was a famous physicist, who was considered the mastermind of the nuclear age. He received the Nobel Prize in Physics in 1938 and created the world’s first atomic reactor. He is also remembered for approaching the formation of quick estimates to determine the amount of what is considered impossible to surely calculate due to limited available information.Teaching his approach to students, he usually asked them questions, such as the following:
How many piano tuners are there in Chicago?
This is not a question asked to put the student in a difficult situation. Take a few minutes to think about this issue and (without using Google), write down a clear argument based on several supporting questions with assumptions, answering which you can get an intelligible answer to the main issue. First, do this, and then read on.
If you asked yourself the following questions (or followed a similar logic, but using a few other questions), you would come to a good idea of an answer:
- How many pianos are there in Chicago?
- How often do I need to tune the piano in a year?
- How long does it take to tune the piano?
- How many hours a year does the piano tuner work on average?
Using the guesswork for the first three questions, you can calculate how many working hours can be spent in Chicago to tune the piano per year, and by dividing this number by the number of tuner hours per year, come to a plausible guess about the number of pianos that he can serve. Of course, to answer the first, second and third questions, it is necessary to break them into auxiliary questions.
1. So, for the first question, you would need to guess the population of Chicago based on knowledge of the population of other US cities. Let’s say your assumption is about 2-2.5 million (in fact, according to 2016 statistics, 2.7 million).
Then you need to calculate which percentage of people have a piano, which according to empirical regularity could be one piano for every 100 people (that is, about 25,000 if you take into account the early assumption of the population size). Then take into account the number of pianos in bars, clubs, schools, etc. – you will have to double the amount, that is, we will get two instruments for 100 people or 50,000 tools.
2. The second and third questions are just for intuition, unless, of course, you do not have knowledge in this area. The pianos are tuned about once a year for about two hours. The answer to the fourth question could be based on personal experience or knowledge of five standard working days a week and usual days off and holidays (at full employment).
So, according to the assumptions, 50,000 pianos are tuned once a year for two hours, which is equivalent to 100,000 hours spent tuning. Divide this number by 1600 hours, an average yearly produced by the tuner, and get the result in a 62.5 piano tuner in Chicago.
There is no definite answer to this question, however, as a result of the analysis of the telephone directory (courtesy of Daniel Levitin), 83 tuners were found, taking into account duplicated contacts. Thus, if you come to a value of 55 to 70 tuners – this is a decent result.
It is not so much the accuracy of the answer that is important, but the approach taken. This kind of thinking is suitable for accurate forecasting in the absence of data, such as when placing bets on the Mayweather and McGregor fight.
9 commandments of the correct forecast
The tasks faced by the participants in the “Sound judgment” project are no different from the tasks that players and bookmakers face when leaving the markets for traditional sports in the field of exotic bets – here we again return to the Mayweather and McGregor fight. We have a bright idea of trying to predict the outcome of boxing fights and MMA battles, but the contest between a boxer and a martial arts fighter is mostly a problem described by Fermi (punters can try to solve it using odds in Live mode and a graph of odds change).
According to the findings of the “Sound judgment” project, there is good news: there are some practical tips with experimentally proven effectiveness for raising the level of reliability of betting predictions of nonprofessional forecasters.
In fact, Tetlock deduced the ten commandments of the correct forecast, based on the experience gained during the “Sound judgment” project. With the help of randomised tests, Tetlock found that Brier’s figure of those who had read the manual containing these provisions increased by 10%.
This can be enough to provide you as a punter with a profit in the long run:
1. Focus on solving problems, investing in which is more likely to pay off; ignore both the obvious and the things that can not be controlled.
2. Break up the big complex problems into small parts.
3. Find a balance between the views of both sides.
4. Find a balance between overreacting to new information and underestimation of it.
5. Challenge personal prejudice.
6. Assign your guesses to the degree of probability.
7. Find a balance between lack of confidence and excessive confidence. It is necessary to find a middle ground between procrastination and the moment of inactivity, so as not to miss the opportunity and not to risk without a weighted assessment.
8. Equally and impartially analyse both failures and successes. Worse than making a mistake, can only be the failure to take responsibility for this error. Similarly, you can make the right decisions and still get the wrong result, and vice versa.
9. Remember that you can achieve perfection only by putting your good intentions into practice. It is acceptable to perceive bets as a way of having fun, just do not expect that you will win in the long run. If you are not happy with this forecast, accept the fact that you will have to invest time and effort in placing bets on a systematic basis and with a structured approach.
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