My bracket is a disaster: I seem to have an uncanny talent for picking all the wrong upsets. But perhaps I should find solace in the fact that the NCAA tournament is inherently unpredictable. That, at least, was the conclusion of a 2001 paper by the economists Edward Kaplan and Stanley Garstka. They mined every statistical tool they could think of in an attempt to crack the office pool. They searched for secret algorithms in past NCAA tournaments, and used Markov models to see if regular season performance affected post-season performance. They ran endless computer simulations, and plugged in a vast trove of player data.
The end result? They achieved “overall prediction accuracies of about 58 percent, but did not surpass the simple strategy of picking the seeds when the goal is to pick as many game winners as possible.” In other words, all the fancy mathematical equations were utterly useless: the tournament remained a mystery, a stochastic process of indeterminate outcome. So don’t waste too much time and money trying to be an expert, or pretending like you know if UNC is going to beat WSU or if Villanova has a chance against Kansas. (At this point, I’m just rooting for Davidson.) The NCAA tournament isn’t a science; it’s a sport.
Of course, the larger moral of the unpredictable basketball bracket is that, as Nassim Taleb always reminds us, reality is more random than we can even imagine. Consider the economy, which is an infinitely more complex system than a 65 team sports tournament. We’ve all been subject to lots of financial pundits and analysts over the last few months, confidently proclaiming that they know what’s going to happen on Wall Street, or that they know why the Dow went down that day, or that this recession will last for a certain amount of time. History would suggest that these experts should be ignored.
In 1984, The Economist asked four finance ministers, four CEO’s of international corporations, four Oxford students and four garbage collectors to predict the rates of inflation and economic growth over the next decade. When The Economist tallied up the scores a decade later, they found that the garbage collectors were tied for first with the CEO’s. The finance ministers finished last.
In March 2001 – the very month that the American economy began sliding into its last recession – The Economist reported that 95 percent of surveyed economists believed that there would not be a recession. The state-of-the-art models used by the Federal Reserve didn’t do any better. In February 2001, they collectively predicted that the American economy would steadily grow at a rate of 2.2 percent in the second quarter of and 3.3 percent in the third quarter. The actual figures were 0.3 percent and negative 0.4 percent. In other words, trying to predict the economy is like trying to predict that Davidson would upset Georgetown.*
*I actually stopped watching the game when Davidson was down by 12 points in the second half.