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.

Villanowhere?

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.

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

March Madness or Method? Part 1

In many parts of the country, there’s still too much snow on the ground to hear lawn mowers humming or baseball bats cracking. But trust me, spring really is here. I know because the annual NCAA men’s basketball tournament—a.k.a March Madness—is underway. Just don’t expect a highly productive month around the office.

Depending on your point of view, the three-week long hoop-fest is either the biggest office productivity killer of the year, or a fascinating window into human behavior, biases and predictive modeling. March Madness is also pretty good for building camaraderie, even if the HR wonks will complain that it’s an unsanctioned company event, that it’s male- and jock-biased and that it’s basically an illegal gambling operation conducted on company premises, using company time and computers. Again, review the previous sentence about “camaraderie.”

Level playing field

It’s also one of those rare times when Ted from sales, who’s 6-foot-6 and played power forward in college, can get schooled by 5-foot-2 Mary from accounting, who’s never set foot on the hardwood, much less played the game. How? Because she knows how to fill out her brackets.

The format is simple; 64 of the best college basketball teams are invited to play each other in a single-elimination, winner take all tournament. Win and you advance to the next round. Lose and you go home. No best of seven, no do-overs. No bonus points for giving it your best. You could be 34-0 during the regular season, like Kentucky, and have an off night against unheraled Hampton University and that’s it. Season over. See you in November.

In most office pools, you print out the entire tournament “bracket” before the games begin. You predict which team you think will win each matchup and throw a few bucks into the pot. Most folks can fill out their bracket in 10 minutes or less, whether using pencil, pen or an app. If you end up winning the pool, you can make anywhere from 20- to 1,000-times your money back. If you lose, the max downside is usually less than $20, so you don’t even need puts or stop loss orders. Either way, it’s a pretty good ROI for three weeks of fun.

So how hard can it be to win? Everyone has access to the same information--they even give you each team’s won-loss record as well as their seeding (i.e. ranking) in the tournament. Just pick the team with the better record or higher seeding and you’re good to go, You don’t even have to guess the score or the point spread. Just who will win.

So why does Warren Buffet offer a $1 billion cash prize (that’s with a “B”) to anyone who can pick a perfect bracket and guess the outcome of all 63 games correctly?
Because, it’s almost impossible to predict all the upsets. It’s like trying to pick which early stage startup company with no revenue or earning is going to go public next year. In fact the odds of winning March Madness are worse than the lottery--about 4.3 billion to 1. The odds are beyond stacked against us, but tens of millions of us can’t help ourselves from filling out at least one bracket every March—even if we don’t follow college basketball or never played the game.

Conclusion

In our next post, we’ll tell you about some of the research services, rating agencies and indices you can use to help you along. Hint: It’s pretty hard to beat the wisdom of the crowd? Any of this sounding familiar?

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

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TAGS: March Madness, wisdom of the crowd, brackets, office camaraderie

I Do My Best Thinking in a Tube

I had an MRI the other day. Not sure how the results will turn out, but it was probably the best 30 minutes of thinking I got done last week. With multiple deadline shifts, rescheduled appointments galore and several late season snow/ice storms wreaking havoc here in the Northeast, the "tube" was a welcome respite from the daily grind.

Some people get freaked out in the claustrophobic confines of an MRI machine, but I find it relaxing. There’s something about the rhythmic humming and clanging in the background, with ear plugs and decent music in the headphones that helps me relax and block out all the “real noise” in life. You can’t move. You can’t talk. You can’t even cough, sneeze or scratch your nose. But most importantly, the MRI tube is a very tight space. You wouldn’t be able to reach for your smartphone or tablet if you got bored and somehow managed to smuggle it into the exam room under your gown.

So, you lie there and think…and think some more.

I’ve never had the patience for meditation, deep breathing or yoga (it's like a 90-minute warm-up for a game that never happens). But, the MRI tube literally forces you to block out the world and all the distractions of email, cell phones, meeting reminders, unexpected calls from your spouse or kids and impromptu “pop ins” from a work colleague who’s bored.

Here’s a passage from the Focus Manifesto blog written by Leo Babauta, author of the book Focus: a simplicity manifesto in the age of distraction--“Never have the distractions been so voluminous, so overwhelming, so intense, so persistent as they are now. Ringing phones are one thing, but email notifications, Twitter and Facebook messages, an array of browser tabs open, and mobile devices that are always on and always beeping are quite another. More and more, we are connected, we are up to our necks in the stream of information, we are in the crossfire of the battle for our attention.”

What to do? Kevin Daum had some good suggestions in a recent Inc. Magazine piece: How to Clear Your Head in 15 Minutes.

Conclusion

We’re not suggesting that you schedule unnecessary medical tests just to clear your head. But, think about all the ways in which you’re distracted during the day—and how much more you could get done (in less time) if you could really find a way to focus.

Try this exercise for a month. Once a week, find a time and a place where you can really think and focus uninterrupted for 20-30 minutes…..Do it at the same time or place every week.

I know several of you have had success with this technique in the swimming pool, the steam room or the sauna. After a month, review your progress and see how many mental blocks you’ve been able to bust through. You might be surprised. We’d love to hear from you about how you did.

Let’s have a great week.
Best, HB

 

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