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June 12, 2014

538 makes a phone call from New York to Los Angeles

By Seth Burn

Before I discuss 538’s soccer acumen, I’d like to make a recommendation:

It’s one of the best books I’ve read in terms of probability and management of resources (hint, hint). Now, let’s talk futbol:

I will give Nate Silver and the team at 538 $100,000 to invest in the World Cup on a game-by-game basis. They will be “Kelly-wagering” it, which provides the best expected return on investment. In general, I’ll be locking in the size and the price of each wager when the previous game is decided, but in the case of game one, I locked it in a bit early. That worked out well for Nate, as the price has moved a few basis points his way in the meantime.

For game one of the World Cup 538 gives Brazil an 88% of winning. Ergo, in the 3-ball wagering, 538 will be risking $52,600 to win $17,884 on a Brazil victory. Good luck!

Right now it looks like 538 will risk 1.83% of their bankroll on Cameroon in game two. Whether or not that is $2,157 or $867 is up to Brazil. 🙂

Game 1: Brazil, 52.6%. Net gain: 17.884%

Game 2: Cameroon, 1.83%: Risking $2,157 to win $6,255.

Article by Seth Burn