Whatever Happened to that Apple iPhone Recall?
“If the current betting trends are to be believed, it now seems certain that a recall is in the cards”
-Paddy Power, Irelands Biggest Bookmaker
July 14, 2010 press release
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Speaking of dumb bets: Its time to revisit a recent prediction market “winner,” and review the strengths and weaknesses of these markets:
Recall this Bloomberg article:
Apple IPhone 4 Recall Odds Increasing, Irish Bookmaker Says
Apple Inc. is increasingly likely to recall its iPhone 4 after complaints about poor reception and a critical review from Consumer Reports, according to a betting company that tracks odds for such events.
Paddy Power Plc, Ireland’s biggest bookmaker, said the chances that Apple will ultimately recall the phone have increased following what it described a “betting frenzy” after the Consumer Reports review. The consumer organization said on July 12 it wouldn’t recommend the phone because of its tendency to lose signal strength when held in a certain way.
Only, not so much.
We have a long history of criticizing so-called prediction markets. There is no “wisdom of the crowd” unless the prediction markets has a similar demographic profile to whatever group is being forecast (or polled). When their community of voters are similar to an electorate, they act as a deeper polling mechanism. When they try to forecast the decision making processes of dissimilar bodies — Juries, Boards of Directors, or in this instance, corporate management — they stink the joint up.
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Source:
Apple IPhone 4 Recall Odds Increasing, Irish Bookmaker Says
Arik Hesseldahl
Bloomberg, July 14 2010
http://noir.bloomberg.com/apps/news?pid=20601087&sid=a0GOFk3C_q3k&
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September 17th, 2010 at 9:28 am
Honestly I would rather ask someone in tech or tech retail about the market movements and corporate decisions for or against Apple rather than any analyst or let alone a bookmaker…
September 17th, 2010 at 9:54 am
Is the problem that people are ultimately saying not what they think will happen but what they think should happen? And when I read a poll that says 20% of Americans believe Obama is a Muslim, is that really what the poll is saying or is it saying that 20% of Americans hate the guy so much they’ll say whatever they think will damage him?
September 17th, 2010 at 10:15 am
My disagreement with you on this remains the same.
The longshot bet is supposed to pay off sometimes. The unlikey occurrence occurs more often than you think.
IF a non-recall was only priced at 10 cents (with a $1 payout if no recall occurs), then 10% of the time that could be expected to happen.
Just like some of the “upsets” in the primaries of 2008.
IF a recall was truly pre-ordained, the price would have fallen on that contract to a cent or less.
As an aside, Paddy Power is notoriously poor at setting odds. Their general scheme is to do outrageous things (ie: pay off sports pennant bets way before the season is over if someone has a slim lead taking the chance that they get egg on their face) and other stunts in exchange for generally terrible prices. Umm, not that I would know anything about that…
September 17th, 2010 at 10:59 am
They might wish they had done that recall though – the phone has been a relative dud and a persistent blemish on Apple’s reputation. A recall would have at least salvaged their reputation for customer service.
September 17th, 2010 at 11:25 am
@endorendil
i must be living on mars and they just turned off the oxygen, after reading your comment.
September 17th, 2010 at 3:50 pm
I looked at them during the presidential election & found them useless. Much better forecasts were available as simple aggregates of polls, a sort of “wisdom of crowds of pollsters.”
September 17th, 2010 at 10:38 pm
Guys… shhhhhh!
I make all sorts of money (theoretically as I guess its illegal or something) off of suckers trying to bet their “feelings” on these markets.
If you keep making sense, the marks might go away.