An Age-Old Scam An age-old scam starts out when you receive a phone call from an anonymous stranger, who tells you that he works for the XYZ company and has inside information that can make you rich on the stock market. It would be strictly illegal for him to trade the stock because of his high position in the company, but if you, a complete stranger, make money on his information and provide him a share of your earnings in unmarked bills, it will be untraceable. He doesn’t expect you to believe him until he proves that he has the information, but he tells you that XYZ stock will go up the following day and that he will call back after the markets close. Sure enough, XYZ goes up the next day, but you figure there was a 50 percent probability that it happened by chance. The stranger calls back at the appointed time and tells you that XYZ will drop the following day, and it does. In fact, he calls for five straight days with correct predications, which you now take as a strong confirmation of his insider status. You reason that there is only one chance in 32 (0.5 raised to the fifth power) that he could have been right five days in a row by chance. He now advises you to start investing your money in stock options based on his information, and after five more days you have made a tidy profit. Your mysterious contact reminds you that he has been right ten days in a row and says that if you want to keep the information coming, you must take 75 percent of what you have earned in unmarked bills, place it in a plain paper bag, and leave it at a specified park bench, which you do. That’s the last you hear from him. How did the stranger do it? Easy. He started with thousands of people and told half of them that XYZ would go up and half that XYZ would go down. The next day, half of the original group still believed him, so he again divided them in half. You were the lucky one for whom all his random predictions were correct. This illegal practice is even easier to carry out using email. No doubt some of you have received unsolicited predictions of stock movements or outcomes of sporting events based on this idea. Don’t fall for it, and above all don’t engage in it or you might go to jail. From The Flaw of average. A wonderful book about statistics.
I've seen variations of that scam with sports betting. Not so hard to detect. Interesting book by the way.
I agree, with Sports Betting can be easier depends on the event, the result is more simple (example: Win, Draw, Loss)