The FIFA World Cup is finally over, and with no catastrophes to report, the only thing left to talk about is ‘Paul the Octopus’. For those who don’t know, the octopus correctly predicted the results of all eight of Germany’s matches. He chose the winners by deciding which one of two boxes to eat mussels out of; each box was marked with the national flag of one of the teams playing. Paul has been lauded as a hero, with the BBC labelling him as “psychic” and “prophetic”, while Reuters branded him the “oracle octopus”.

What does Paul have to do with risk management? On the surface, not much. But let’s do a probability (likelihood) assessment to see how exceptional Paul’s results were, and compare them to the likelihood of other seemingly random events (consequences):

Probability of Different Events

The probability of Paul correctly predicting the result of the first match is 1/2 (50%). There was no option for Paul to pick a draw, so this has been excluded from our analysis.

The probability of Paul correctly predicting the first two matches correctly is =1/2* 1/2 = 1/4 (25%).

Fast-forward our analysis, and the probability of Paul correctly predicting all eight matches =(1/2)^8 = 1/256 (.391%)

Not a bad effort for seafood!

To put in context this level of chance, compare the following statistics:

  • An Australian Institute of Criminology report published in 2005 claimed that the national average of burglaries per 100,000 people was 1,397, or about 1/170
  • The Federal Office of Road Safety reported in 1999 that the national average of road fatalities per 100,000 people was 9.3, or about 1/110,750
  • The National Lightning Safety Institute in the USA claims that the national average of being struck by lightning per 100,000 people was .357, or about 1/1,280,000
  • The chance of winning a 6-number lottery is about 1/14,000,000
  • The chance of winning Powerball is roughly 1/127,400,000

While the probability of Paul correctly guessing all eight winners was far more likely than winning Powerball, his chance of success was still 1/256 or less than half of one percent. The figures above suggest that if he were in Australia, there is a greater chance of Paul getting ’nicked’ in a burglary than picking eight winners. Given Australians' love of seafood, gambling and celebrity, perhaps this risk is even greater.

But we think the truth to this story lies not in the arithmetic of betting but in the art of fishing. Any good trout fisherman will tell you that, “the brighter the day, the brighter the lure”. Could it be possible that, under all those bright TV camera lights, Paul was just picking the boxes based on which flag was brighter?

What do you think?