Is it Luck or Undefined Skill?

On my daily surf through various sports trading websites I noticed a number of articles related to luck. I believe the author was attempting to answer accusations of being lucky. As a poker playing friend would say after the umpteenth bad beat handed to me, "I'd rather be lucky than good." The truth is that my friend is a very good poker player, as his $1,000,000 plus winnings during his 14 year career testifies to. His statement was just his way of brushing off inferiors.

As far as our sports trading friend is concerned, he is doing himself an injustice. He is not lucky. If he is lucky then he can expect to regress to the mean. That is the point of being lucky, it swings both ways. A fair coin tossed ten times might show nine tails and one head. If someone is gambling with a fair coin and putting their money on tails then they are lucky because in the long run they are going to break-even, the more they play the game.

A player at a roulette wheel might get lucky in the short-term but we know that in the long-run they are going to lose because the house has the edge. If our sports trader is a consistent winner over many years then it is safe to say they have a positive edge. Calling it luck means they are not able to define their skill. Something they need to address or they can fob people off like my poker playing friend with "I'd rather be lucky than good."

3 comments:

  1. I'm not sure I agree with your coin tossing logic. What mechanism adjusts results to break-even after a long series of tosses? You can be 9/1 behind after ten and still 9/1 behind after 10000. The absolute loss is the same but the percentage loss looks very close to break even.
    What if you're behind betting tails after ten but someone started before you betting the same series and they're ahead. You need more tails to break even and they need more heads to break even. Patently impossible for both to happen.
    The only difference of the long run over a short run is to make the percentage difference smaller. The absolute (winning or losing) difference can remain the same or even increase.

    ReplyDelete
    Replies
    1. What I am saying is that in a fair coin toss there is no edge. In the short term it might look as though there is a positive or negative edge if you do not know whether the coin is fair or not.

      The same with a trading system. You might test it as having a positive edge but that might be down to luck.

      I recommend that you read Buchdahl's S&S, S&S.

      http://www.betfairprotrader.co.uk/2016/09/squares-sharps-suckers-sharks.html

      Delete
  2. I've just read Buchdahl's S&S, S&S. Thanks for the link, it's a very interesting read.
    I agree entirely with him that forecasting future events is entirely a matter of what we call luck.
    However, I know from my own experience, it's possible to intelligently position oneself to enjoy a greater share of luck than average!
    Regards,

    ReplyDelete