I love Boris. Don’t assume from that I’m a Tory. I love Boris because I warm to politicians with personality and who don’t take themselves too seriously.
Three days ago Boris wrote a piece in the Telegraph in which he took a swipe at an article in the Sunday Times titled “Gordon Brown on course to win election”. This possibly bold assertion was based on the results of a YouGov survey which placed the Blues on 37%, as against 35% for the Reds – the closest gap between the parties in more than two years.
Boris playfully suggested an alternative equally implausible headline could have been “One-legged man on course to win arse-kicking contest” before suggesting that we’d be better off forgetting the polls and keep an eye on the bookies instead. “The reason I trust the punters of Betfair more than I trust a poll in a Sunday paper is that the punters have thought it through with the care of those investing their own money” barked Boris.
This got me thinking about the reason why prediction markets appear to outperform polls. Is an opinion any more valuable when it is expressed through a financial interest in the outcome? I’m not convinced because as all Betfair punters know the margin between a good bet and a bad bet is very slender indeed.
I and many fellow Betfairians often put money on the drop dead favourite not winning the race (or game) as the odds can be very attractive. This is commonly known as laying the leader. It does not mean I believe the favourite won’t win by the end of the race, it simply means fluctuating fortunes (and therefore odds) are likely to present me with opportunities to trade my position profitably before the race finishes.
By the same token, it can therefore often pay to back the one-legged man to win the arse-kicking contest at very long odds because we have seen time after time that the implausible has an alarming albeit occasional propensity to take us by surprise.
Poker is an interesting game. Anyone who plays Texas Hold ‘Em seriously will know that fun money or friendly games just don’t work. In order for poker to work properly the element of risk is required. Without risk it is simply a game of luck and the person with the best cards will win any given hand. I guess this in a way supports the notion that predictions based on a financial stake are more accurate than simply asking someone for an opinion or voting intention.
Anyway, regardless of the merits of prediction markets versus polls, I doubt one can argue against a combination of data from both providing the ‘belt and braces’ solution to predicting the outcome of the forthcoming UK General Election.
And that is exactly what Betfair has done in partnership with leading research agency ComRes when it’s excellent new Election Predict 2010 website launched yesterday.