One of the most common betting mistakes is to confuse specialist knowledge in sports with a specialty in sports betting. This error is illustrated by the proliferation of ex-professional sports stars that become betting tipsters or self-proclaimed experts, and is neatly described by the “Green Lumber Fallacy”.
One of the most successful traders to ever buy and sell green lumber – which is freshly cut wood – actually had no idea what he was trading. He spent his entire green lumber career believing the product was just wood painted green, and not newly cut trees.
The term “Green Lumber Fallacy” was coined by Nassim Nicholas Taleb in his recent book ‘Antifragile’, where he outlined a second similar situation: a star Swiss Franc trader who’s inability to locate Switzerland on the map didn’t hinder his ability to make money trading its currency.
So how do people ignorant of what they are trading succeed? And how does this apply to betting?
These two – and many more – simply understand risk, something that other people, even those with an intimate knowledge of green lumber or the central European country, do not.
While knowing about the market and risk is obviously the ideal situation, it’s vital to remember that understanding risk is as important, if not more so, than knowledge of the sport itself.
This contrasts with the images presented on the back pages of any national newspaper, where you are likely to find retired sports personalities heading tipping columns. It’s understandable that bettors might give weight to the opinion of say an ex-soccer player with regard to betting on soccer, but remember: soccer and betting on soccer are two completely separate domains.
Acknowledging and applying risk
Taleb may have given the Green Lumber Fallacy its name, but the theory appears elsewhere. For example, in Michael Lewis’ highly influential Moneyball centers on the idea that over a century’s collective wisdom of MLB insiders was based on flawed subjective analysis, and in its place a more analytical approach focused on a few fundamental key metrics would prove more effective.
The Moneyball approach has been adopted by several English Premier League managers, challenging the old-school, heavily subjective approach, which is very difficult to quantify and often clouded by confirmation bias.
For any bettors reading this, the following points are important for successful sports betting:
- Just because someone has detailed knowledge or experience of a sport doesn’t mean they have the required knowledge to bet successfully on that sport.
- Talking heads/journalists/tipsters love a narrative, a story that neatly explains for example a teams loss of form, and they love even more to back-fit narratives to explain when the story moves in a totally unexpected direction (as is often the case).
- You should ask this question of yourself – do you think that knowing about golf means you should jump into betting on golf with confidence?
Of course, no one is suggesting sports knowledge is totally irrelevant or valueless for betting on sport, but the narrative in mainstream media is to refer to talking heads as predictive experts, but their domain specialisation, just like with Green Lumber, generally means they are rarely appropriately placed to be judging risk or make predictions that you should follow with your hard-earned money.