Tuesday, March 24, 2015

March Method or Madness, Part 2

As we discussed in Part 1 of this post, the annual NCAA men’s basketball tournament is a great way to build office camaraderie and glean new insight into your co-workers’ risk tolerance, competitiveness, decision-making strategies and data crunching skills. Sorry HR, softball team and Christmas party planning committee—you just can’t beat the March Madness office pool for bringing everyone together to have a great time and some friendly trash talking and competition.

I should know. I’m getting my share of it right now.

As NY Times columnist, Neil Irwin
observed, the other day, “The [NCAA] tournament is a fun way to test your predictions in a system that, like financial markets and most forms of sports betting, reward you for taking an against-the-grain pick that proves accurate."

Our take? The tournament seedings—like many financial data services—have a number of “mispricings” and other aberrations you can try to exploit. Big brand names tend to be over-valued and lesser-known growth teams tend to be undervalued. Thanks to March Madness, millions of people in the Northeast will stay up till the wee hours of the night sweating out the final score of the North Dakota State vs. Gonzaga University game.

Personally, I've learned you can also turn to the Las Vegas odds for each game, use the Ratings Percentage Index (RPI), “points per possession,” or “turnover differential” or other advanced metrics. You can also go to the ratings services like
FiveThirtyEight, Jeff Sagarin and Ken Pomeroy – think Morningstar, Fitch and S&P for hoopsters. You can also throw darts at the bracket or go with the trusted brand names like my wife always does--UCLA, Indiana, Michigan State, Kansas and North Carolina. They’re the large cap stalwarts of bracket-dom. They’re perennial returnees to the tourney even if the 2015 squad is not likely to return back to campus with the trophy. My wife uses the “brand name” strategy every year and usually cleans up in our family pool and at her work. I don’t think she even knows which state Butler and Valparaiso are located (hint it’s the same one).

No analysis paralysis for my better half

According to Irwin, March Madness is a lot like investing. It is easy to invest in flashy companies that are widely known and whose products you use. But often the highest-return investments are “value stocks,” companies that are more obscure and less popular. In this metaphor, Butler, Harvard and U.C.L.A. are the Google, Facebook and Apple of the N.C.A.A. tournament. Wichita State and Oklahoma State are the obscure industrial companies that aren’t talked about on the financial pages very often but offer high potential returns.

Personally, I have a crude, but effective model that usually puts me in the top 10 or 15 percent of any pool I enter. I rarely win, but it keeps me in the game till the very end of the tourney. This year, I had a very hectic month leading up to the tourney. I didn’t stick to my discipline and went with my gut rather than my head. BIG MISTAKE.


I second guessed myself and selected Villanova to win it all. On the surface, not a bad pick. The Wildcats were one of the top four seeded teams. They boasted a 33-2 record coming into the tournament, had a 17-game winning stream and were champions of the highly competitive Big East Conference.  O.K. That’s the analytical part. But then I let my emotions get in the way of logic because I grew up near the Villanova campus. My folks and extended family still live there. Nova’s head coach, Jay Wright, was a classmate of mine at Bucknell University. All the stars were in alignment.

Unfortunately, Nova went down to a red-hot NC State team 71-68. Season is over. My brackets are “busted” and I’ll have to endure two more weeks or razzing at the office and several more days of getting dissed by my wife and kids at home.

This year, I’ll take my lumps like a man and go back to basics in 2016. No more watching games or getting emotionally attached to any of the teams. Just run the numbers, play the index, check the scores the next morning and pencil in the winners.

Our blog has more, as does the FREE Resources page of our website.

TAGS: March Madness, office camaraderie, Neil Irwin, Villanova, Jay Wright, busted bracket 

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