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Predicting the World Cup Winner with Monte Carlo Simulation

Soccer fans around the world are gearing up for the 2014 World Cup in Brazil, which starts tomorrow when the home team kicks off against Croatia in Sao Paulo. Many will be putting money on the various matches—basing their bets on national pride or gut feelings.

There is another option, however. If you have the data and the inclination, you could also utilize a Monte Carlo simulation to place your wager. Recently, Fernando Hernández, a trainer and consultant at risk and decision analysis software provider Palisade Corporation, did just that, utilizing this computerized decision-making method to determine a more mathematically accurate pick for the 20th FIFA World Cup champion.

To create a model, Hernández gathered data from FIFA’s records of the past four years, which ranks over 200 national teams. Armed with the historic strengths and weaknesses of each team, he classified them into ranked categories (e.g., a fifth-ranked team is more likely to beat a tenth-ranked team). More specifically, in a match-up between a high-ranked and an intermediate-ranked team, the better team has an 86% chance of winning, a 7% chance of tying and a 7% chance of losing.

Hernández then modeled the first 48 games of the tournament—these are played in the “group stage,” in which eight groups of four teams play against each other in  round robin-style matches to determine who proceeds to the final 16 games. In this stage, a win garners three points, a loss gets zero points, and a tie gives one point to teach team. Teams advance by tallying these points.

If two teams end up with the same number of points, the team with the greatest number of net goals (goals scored minus goals received) will continue. If a tie persists, then the net goals scored in the head-to-head match between the tying teams are considered. Finally, a coin toss determines the final winner if a tie still continues. All those that make it past the group-stage go on to the single-elimination tournament which determines the final World Cup winner.

Hernández combined the group-stage rules with the game and team performance records, dating from January 2011 to present, into his model. He added the crucial element of home-team advantage by including data on all points scored at home games vs. away games for each team.

By running 50,000 iterations in a Monte Carlo simulation and mapping out the likely winners in a decision tree, Hernández created a model that depicts the probabilities of different teams winning at different stages, and calculates the overall odds of each team winning the championship.

The results vary, depending on whether home-field advantage is computed.

Without considering home advantage, Germany came out the most likely winner, with a 19.9% chance, and Spain as runner up with 16.1%.

However, when home-field advantaged is considered, a very different outcome emerges. Brazil—not surprisingly–comes in as the probable champion, with an overall 17% chance. Spain is again the runner up at a 12% probability. Germany drops all the way down to a 6 % probability of raising the trophy. Other high-scoring probabilities include:

  • Switzerland and Greece 8%
  • Colombia 7%
  • Argentina 6%
  • Uruguay 5%.

The United States, by contrast, is given just 2% chance at victory.

As a Costa Rican native, Hernández had to let the numbers guide his betting choices over nationalism. “I am still not sure whether I would bet on my country in the office pool,” he said. he calculated that his home country has only a 23% chance of making it to the second round, and a one-in-440 odds of winning overall.

Safeguarding the World Cup

world cup cape town

For 10 days, the World Cup has been captivating the globe. Widely considered the greatest event in sports, fans have been riveted by the daily matches from South Africa featuring soccer legends like Lionel Messi from Argentina, Cristiano Ronaldo of Portugal and Wayne Rooney of England. But while the players make the “Beautiful Game” look effortless, the preparation to ready the country for this tournament of 32 nations was anything but.

Building stadiums, improving transportation infrastructure and ensuring security took a Herculean effort in a country that escaped Apartheid just 16 years ago and, even today, struggles to overcome societal ills including a 25% unemployment rate, some 50 murders per day and a population where 11% of South Africa’s nearly 50 million citizens live with HIV.

Munich Re, for example, was brought in to aid construction of a new high-speed rail project.

The rail link was planned and approved long before South Africa was awarded the World Cup. However, there is no doubt that the World Cup speeded up the construction project, which was started in 2006.

Munich Re was also involved in the mammoth upgrade of “Soccer City,” the Johannesburg stadium that is the nation’s crown jewel for this year’s World Cup. (See video below for more on the renovation.)

February 2007 saw the beginning of stadium renovation, which was covered by way of a CAR policy. The stadium, renovated at a cost of 300 million pounds and ten million working hours, will host the opening ceremony, the opening game and the tournament final. Its new design takes its inspiration from traditional African pottery and resembles a calabash. The renovation work, completed in October 2009, increased Soccer City’s capacity from 80,000 to 94,000, making it the biggest stadium in Africa.

Additionally, Munich Re insured the construction of at least two other stadiums that were built from the ground up for the World Cup.

Then, of course, comes coverage for the games themselves. In all, some $9 billion in insurance was taken out before the games, most of which covered property, game cancellation, broadcast failure and liability issues.

That’s just for the games themselves. Lloyd’s turned to Chris Nash, an underwriter at Sportscover, for some additional input on the “vast range of potential coverage.” He rattled off a list that includes competitions, offers, prizes, sponsorships, and broadcast rights. “It’s impossible to know how many there are, but all companies with these financial implications need coverage,” he explained. “When you take this into account along with the number of broadcasters around the world airing the games, I’d probably estimate the whole thing at around £3 billion [$4.33 billion].”

What it all comes down to is that, for all companies involved in this year’s World Cup, there is a lot more than goals, trophies and international bragging rights on the line. They stand to make — or lose — millions depending on how the tournament plays out.

The last time the World Cup was canceled was World War II. These days, the business of sports is much bigger, and so are the potential losses.

Between the opening ceremony for the 2010 World Cup on June 11 and the presentation of the trophy a month later, almost 100 hours of live soccer is being broadcast around the world. Soccer federation FIFA earned $2.7 billion in total from the broadcast rights at the 2002 and 2006 World Cups, according to FIFA’s figures.

FIFA said it took out an insurance policy to provide coverage of $650 million in the event of the postponement or relocation of the games. This policy covered acts of terrorism, natural disaster, epidemics, war and accidents. Munich Re’s share of this policy is the largest at $350 million.

And while South Africa, the first country on the continent to host the World Cup, struggles with its reputation as a crime hot spot, crime doesn’t directly affect contingency and liability insurance for the World Cup. Instead, it would have been a concern for fans insuring their trip, according to Emily Hughes, a spokeswoman at Lloyds.
The last time the World Cup was canceled was World War II. These days, the business of sports is much bigger, and so are the potential losses.
Between the opening ceremony for the 2010 World Cup on June 11 and the presentation of the trophy a month later, almost 100 hours of live soccer is being broadcast around the world. Soccer federation FIFA earned $2.7 billion in total from the broadcast rights at the 2002 and 2006 World Cups, according to FIFA’s figures.
FIFA said it took out an insurance policy to provide coverage of $650 million in the event of the postponement or relocation of the games. This policy covered acts of terrorism, natural disaster, epidemics, war and accidents. Munich Re’s share of this policy is the largest at $350 million.

Though the worst threats have been avoided so far, the very first week did provide cause for concern, as striking employees from a private security firm hired to protect a stadium in Cape Town clashed with local law enforcement on June 17.

Police in Cape Town fired a stun grenade and rubber bullets to break up a protest Thursday of more than a hundred private guards who had been hired to provide security at a World Cup soccer stadium.

The clash was the latest incident involving employees of Stallion Security Consortium, whose employees were replaced by police officers at four stadiums around the country after the workers walked off the job in a pay dispute with their employer.

Although the labor dispute hasn’t affected the World Cup games, the incidents highlight simmering tensions in a country where many workers remain poorly paid and unemployment is about 25%. State power company Eskom is in the midst of negotiations to avoid a pay strike that could disrupt electricity supplies. A three-week strike over wages last month paralyzed the country’s ports and freight rail.

Fortunately, security has still largely been maintained throughout the country since the tournament began and the worst fears of many have not been realized, despite this first scare. Let’s hope it is also the last.

A video showing the transformation of Soccer City in Johannesburg into the largest, most iconic stadium in Africa.

Aon and Man U: United

As the entire planet gears up for the World Cup kick-off today, insurance broker Aon will be watching the matches unfold from an entirely new vantage point. On June 1, the company began a partnership with the world’s most iconic soccer team, Manchester United, and Aon’s corporate logo will now grace the team’s  jerseys for the next four years. Since the World Cup is a competition between countries, not club teams, Man U will not actually be participating, but many of its players, including superstar Wayne Rooney, are playing. So for a company that just became the highest-profile soccer sponsor on the globe, there is of course a new-found excitement for world-class soccer, no matter the venue.

I recently exchanged some emails with David Prosperi, Aon’s vice president of global public relations, to chat about how the sponsorship came about and how he thinks it will affect Aon’s image in the world. He also gives us his World Cup picks.

Jared: Recently valued at $1.87 billion by Forbes, Manchester United is the most valuable sports franchise in the world (much to the delight of this Red Sox fan/Yankee hater). Getting the Aon name on their jerseys is obviously huge exposure. How did this opportunity come about?

David Prosperi: The opportunity came about in 2009 when Manchester United was searching for a new global partner and shirt sponsor. Greg Case, Aon’s president and CEO, received a framed Manchester United team shirt with an invitation to be considered as the new sponsor. The team invited just a few global firms to tender for its key sponsorship. We thoroughly researched the opportunity, did our due diligence on the team, and we are very pleased that Aon was selected because we feel it is the perfect way to communicate the value we bring to people and businesses.

Jared: What was Aon’s main motivation for aligning with the soccer powerhouse?

Prosperi: We wanted a global platform that would unite our firm, help us generate new business and maximize the efficiency of our global marketing investment. Manchester United has a truly global reach, and they share our values of leadership, teamwork and a passion for excellence. Manchester United is an organization with a proven return on investment in a sponsorship relationship, and it creates the ability to directly support sales and revenue-generating efforts for our firm on a global basis — particularly in emerging markets such as China, Korea, Singapore and Brazil where the club has extremely strong brand awareness. With the #1 brand in the world’s #1 sport, Manchester United’s 333 million fans equal the total population of the U.S., Canada and Australia, and they sell more team shirts than the 32 teams in the National Football League combined.

Jared: Besides just the corporate marketing benefits, I know there is a large charity side to all of this. What types of initiatives will we see in the months and years ahead from this Aon/Man U partnership?

Prosperi: We hope everyone will see some ongoing charitable initiatives that unite our global colleagues and generate some impact in the communities in which Aon does business. On June 1, we kicked off our partnership with Manchester United by doing a charity event in Old Trafford (the team’s stadium) with a Penalty Kick Challenge that generated over ,000 (about for every global Aon colleague) to The Christie, a U.K. cancer treatment facility in Manchester that our office in Manchester has supported in the past. Around the world, Aon colleagues participated in “Aon United REDy Day” to raise money for their local charities by wearing Manchester United shirts or red clothes for the day. And on July 15, we will have “Aon United Day,” which will have our colleagues in over 120 countries participating in fundraising and volunteer activities in concert with the unveiling of the new Manchester United shirt with the Aon logo.

Jared: How does it feel to know that kids around the world – even some without TVs in developing world villages – will now see their heroes like Wayne Rooney wearing your company’s name on their chest?

Prosperi: We feel very fortunate and honored to be only the fourth shirt sponsor for Manchester United. Football is dynamic and competitive. It appeals to a global audience. It transcends cultures and people, and it brings communities together like no other sport. For example, in Asia you will see that in many countries in the region fans have taken Manchester United to their hearts in as passionate a way as the club’s domestic fans. That passion is what really attracted us to this opportunity. It also speaks to the power of the Manchester United brand. Most football fans, whether they support Manchester United or not, would agree that the club has helped spread interest in the sport around the world, particularly the English Premier League, which in turn has benefited all teams in terms of more lucrative television rights and sponsorship deals.

Jared: OK. Last question … two-parter. Who are you rooting for in the World Cup? And who do you think will win?

Prosperi: Personally, I am hoping that the U.S. team performs well. I think that Brazil is the favorite to win, with England being the sentimental favorite.