Why the Betting Markets are better than Opinion Polls for telling you who will win the Scottish Independence Referendum


I’m not someone with strong political opinions. So you won’t find a whole lot of political stuff on this blog.

But I live in Scotland. And tomorrow (I’m writing this on the evening of Wednesday the 17th September 2014, about 8 hours before the polls open) I’ll be voting No to Scottish Independence in our Referendum.

And I’ll be on the winning side.

How do I know? The opinion polls have had the race neck and neck for weeks.

Well, I know because the betting markets tell me it’s likely to be a clear majority for the No camp.

And betting markets are a better guide than opinion polls.

Opinion polls are ‘raw data’. Making smart deductions and decisions needs more than raw data. A good sample size of relevant data is a great place to start. But it needs to be passed through a filter before you can hang your hat, or make betting decisions based on it.

In a sport like football it’s easy to get raw data on the past results of two teams who are due to face each other. Look at the data, and see which one has the better record. That’s the team that’s going to win. Simples. Except it’s not.

There are loads of reasons why each team might be stronger or weaker on the day than its recent raw data suggests. Their recent games might have been against disproportionately strong or weak team. They might have key players injured or suspended. They could have changed manager, or tactics. Training might have gone particularly well that week. They might just have been really lucky the last few weeks. And that’s before you start factoring in home field advantage, weather, pitch conditions, motivation, fitness etc…

The most successful football bettors now all use quantitative models that crunch raw data. It gives you an edge. But it doesn’t give you ‘the answer’. The evidence the raw data provides always needs to be filtered with common sense, and all the ‘soft’ factors that can influence a football match.

In the case of the referendum the opinion polls have provided eye-catching headlines by allowing the media to report a split of 51% to 49% or thereabouts, in the No camp’s favour. That’s the ‘raw data’. But that’s not the full story, or even what the raw data actually says.

In every poll there will be Yes and No but there will also be a decent chunk of ‘Don’t Know’. If you also include those who told pollsters Yes or No but will actually change their mind come polling day, there are probably about 10% of voters who are genuine ‘floating voters’. To make the output of their polls more accessible (and more attention grabbing) the pollsters and the media have simply allocated the ‘Don’t Knows’ evenly between the two camps. But this is bad filtering. And the betting market is smart enough to realise it.

The reality is that it’s much easier to get fervently behind the ‘Yes’ vote. People are always going to be more vocal and vociferous when supporting a change to something, rather than simply the keeping of a status quo. That’s why you see Yes supporters shouting at politicians and TV cameras far more often and loudly than the Nos. And some voters get swept up in that tide of emotion as the campaign goes on, which is why there has been an apparent shift in momentum towards Yes.

But it’s an illusion. Come the day, and come the moment when people actually have to put a cross on the ballot, a majority of the Don’t Knows and a fair chunk of the Yes poll guys will end up voting for the devil they know, not the devil they don’t.

The majority of human beings are possessed of the instinct not to try to fix something that’s not broken. This is basic common sense too. And it is this instinct that will ensure there is a No vote tomorrow. Scotland, for all its faults, is a fine country. We already have our own education system, legal system and our own football team. We don’t ‘really’ need anything else. We don’t really ‘need’ to be independent.

So while the opinion pollsters might try to convince us the race is close, the truth is that No always was comfortably ahead. The wisdom of the crowd that has bet on the referendum outcome reflects this.

As of 11pm on the night before polling day, the Betfair ‘Majority Winner’ market (below) suggest an 81.5% chance of No winning a majority. If anything I think that number is too low.

Professional gamblers don’t generally deal in predictions, but just for the hell of it I’ll say it’ll be 56% to 44% when the dust has settled.

Screen Shot 2014-09-17 at 23.25.23

Why am I voting No? I’ve lived most of my life in Scotland, and I’m an occasional (these days) foot soldier in the Tartan Army. But I was born in England. My ancestry is all Irish. And my name is Welsh. I’m unusual amongst my friends for considering myself British first and Scottish second. ‘Better Together’ pretty much sums it up for me.

Although actually ‘Safer Together’ is probably a more apt phrase.

The reality is that nobody actually knows if Scotland will be better off in ten years’ time as an independent country. Despite all the hot air and promises of the politicians, they can’t really say for sure any more than the man in the pub. The fortune of a nation, like everything else, is subject to randomness. This includes economic and geo-political forces outwith the control of whoever is governing the country.

So the real picture is probably something like a 49% chance that we’ll be a little bit better off in ten years with Independence. And a 49% chance that we’ll be a little bit worse off.

But there’s a 2% chance that something really big will happen in those ten years. Another financial crisis. A volcano or an earthquake. An act of terror. A war. A terrible pandemic disease. Something major and unforeseeable that will shake us to our core, and test our reserves and resilience. And that’s when you need strength in numbers.

We will be far better equipped to deal with a big calamity as part of a larger country. That’s just logical and common sense.

It’s like any form of insurance. You might not really want it, but deep down you know you really should have it.

Having the Bank of England as a lender of last resort might not sound like much. And you might never need it. You hope that you won’t. But boy will you miss it if you really, really need it and it isn’t there. Same for a big army. A shared UK pension pot. And yes, even Trident submarines.

One thought on “The Scottish Referendum

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