How Bad Is This MLB Perfect Game Market, Really? | Presented by Kalshi

0:00Two good and co-coffee creamers are made with farm fresh cream, real milk, and contain three grams of sugar per serving. That's 40% less than the five grams per serving in leading traditional coffee creamers for a rich, delicious experience. Whether you enjoy your coffee hot, cold, bold, or frothy, two good coffee creamers make every sip a good one. Two good coffee creamers, real goodness in every sip. Find them at your local croaker in the creamer aisle. GraphKings posted a very interesting market this week that had people outraged. Will we see a perfect game in the MLB this regular season? Yes, is plus 2.25, and the comments are going exactly where you'd expect. A whole lot of, well, there's only been 24 perfect games ever. So this number is a really terrible price. Here's the problem with that logic. If you're using perfect games from the early 1900s to predict what happens today, you're pretending that baseball hasn't changed at all.

1:00I don't know about you, but I don't think that games that were played when the Titanic was operational should have any bearing on how we predict baseball games today. Think about it. Back then, starters used to finish games all the time. Bullpen's weren't modern weapons, pitch counts weren't managed as much as they are nowadays. The entire run scoring environment was completely different. So the point isn't that history doesn't matter. The point is that you can't price today's environment using yesterday's conditions. What I want to do here is not pretend like there's one correct answer to pricing this. I just want to show you a process, a framework that you can use for any weird, rare event type of market. And quick favor, before we get into it, if you like these types of videos, price the market type of videos, hit like, hit subscribe. If this one does well, we'll keep doing them going forward. All right. Let's price it. Here we go.

2:00All right. We're back here. Step one is always the same. Translate things into odds plus 225 implies about a 30.8% probability, roughly one in three. So that's our starting point, plus 225.30.8%. Simple. Simple. Just so we're clear, this is not, does a perfect game happen in a random MLB game. This is a season long question that we're answering. So over the entire regular season, do we get at least one perfect game anywhere? So we're going to need a season level probability. Now here's the process. This could be different for different people. But for me, when you price rare events across the season, you can usually break it down into two parts. I'm going to break this one down into those two parts. Part one, how many real chances does the sport even give you? And part two, give in a real chance how often does the outcome actually happen?

3:02That's it. Chances times conversion rate. Simple. Just remember that. So our percentage for the season equals chances times conversion with the worst penmanship imaginable. All right. I don't want to define chances as complete games because that's a starter's only lens. A perfect game is a team event. It's 27 up, 27 down. You have your starter, bullpen, whatever. So the clean way to define a chance is a game where a perfect game is genuinely in play. And here's a simple practical definition that I'm going to use. A chance is a game where a team is perfect through six innings. Because if you're perfect through six, it feels real. It's on the broadcast. You might get a push alert. It's on everyone's head. And one tiny thing ends it. So chances equals perfect through six.

4:03All right. Now, this is where we can make the script more grounded. Over the last decade, there's data on how often teams are perfect through six. And what happens after that? On average, across the season, the league produces about five to six perfect through six types of bits. All right. It's roughly 5.8 per season that we're going to use as our rough estimate here. Then it drops off a cliff, perfect through seven. That happens around two times per season. Perfect through eight is around one time per season. So through seven equals 2.0 through eight equals roughly 0.9. All right. So now we've got our first input, chances. That's the first half of our equation. The second conversion, given that a team is perfect through six, what percentage of the

5:04time do they actually finish it off? And this number is shockingly very small. Historically, it's about 1.7%. In other words, if you hear perfect game mentioned in the six inning, statistically, it usually doesn't end well. All right. So 1.7% for our conversion here, roughly. And again, we'll get into this a little bit deeper as we go on. Now we just combine those two inputs. And perfect games per season is what statisticians would call lambda. Lambda is just chances times conversion. So if chances are about 5.8, and conversion is about 1.7%, then we have lambda, and that's equal to 5.8 times 0.017, and that is approximately 0.10, okay?

6:05Now we translate lambda into a seasonal probability. So lambda is one of our variables here. Here's the standard shortcut for rare events, okay? You don't have to remember this. I'll write it down. But the probability of at least 1 equals 1 minus e to the negative lambda, okay? Again, sounds confusing, but probability of greater than 1 is equal to 1 minus e to the negative lambda. So if lambda is about 0.1, 1 minus e to the 0.1 is about 9 to 10%, all right? So for using this, and we're plugging it in, we get approximately 9.5%. All right? Now pause right here, because this is the whole point of doing this process first. If you anchor your chances and your conversion in actual data, your baseline here comes out closer to 10%, not the 30.8 that we got earlier.

7:08So how does anyone get to a bigger number? And this is where you do the honest part. You test what assumptions would need to be true to change that number, because the league isn't static. Maybe you believe that modern pitching quality makes perfect through six happen way more often than I projected, or maybe you believe that bullpen's nowadays relievers throwing 104 miles an hour make finishing slightly easier once a perfect game bit is alive. So we can do some scenario checks, scenario one, maybe we get seven serious bits instead of our 5.8. Maybe conversion is higher, it's not 1.7%, maybe we bump it to 2%. Then we do lambda, seven times 0.02, it's 0.14. That's still only around 13 to 14% for the entire season, right? You can have an even more bullish world than that. Let's say you have eight serious bits instead of roughly six this year.

8:13And conversion is even higher, it's 2.5%, eight times 0.025 is 0.20. Now you're in the neighborhood of 20% of that happening this year. That's the argument for the around 20% case. You basically need your lambda value to be higher. And there are different ways to get there, right? Six bits with a conversion around three and a half percent. So if you took the original number and you just made your conversion double, well, that's going to get it higher. The eight bits with the same conversion percentage, that'll get it higher as well. So you can experiment with this process, and that's it, that's the process. We didn't start with the vibe, we started with real bid frequencies. These are real numbers, chances in conversion, we're looking at the past decade or so, and then we're adjusting our assumptions based off of how the game is changing.

9:16We used a conversion rate that reflects how brutally hard it is to finish these off. Then we stressed tested what assumptions you need to make to justify something higher. Now you just compare that to the draft king slide. Draft kings at plus 2.25 implies about 30.8%. Right? We wrote that down earlier, to justify that number, your lambda value needs to be much higher. If you've done the math, it needs to be around 0.37. That means you need either a lot more chances, serious bids than normal, or you need a much higher conversion rate, that jumps way above what history suggests, or both, or a combination of both. That's why, process wise, plus 2.25 feels aggressive. Not because there's only been 24 ever, but because when you break down the problem into chances and conversion, you can see what has to be true for that number to make sense.

10:21Now could we be wrong? Of course, baseball is weird. We're guessing on a lot of this stuff. That's why this is fun. But this is exactly why I can't stand the 24 ever argument, because it pretends that there's certainty when there is uncertainty. The better way is to find chances, estimate conversion, bracket your assumptions, and then translate that into a probability. Now I want to hear your number. The exact market for this is now up on our show sponsor, Caljee. Volume is still pretty low right now, the market is in its infancy, but I'm interested in tracking it as we get closer to opening day, because these markets can move fast when people start paying attention. In the comments, tell me what you think a fair price should be in this market. If you had to hang odds on, yes, there will be a perfect game this regular season. What would you make it? And better than that, don't just give me a number, give me what assumptions you would make. Maybe I'm just wrong on the number of chances that'll come up this year, or the conversion

11:24rate, or something like that. How many perfect through six bids do you think we see per year? And what conversion rate do you think is reasonable? That's one of those bids is alive. If you enjoyed this, hit like, hit that subscribe button, send me the next viral book tweet that you want me to price out as well. Close your eyes, exhale, fill your body relax, let go of whatever you're carrying today. Well, I'm letting go of the worry that I wouldn't get my new contacts in time for this class. I got them delivered free from 1-800 contacts. Oh my gosh, they're so fast. And breathe. Oh, sorry. I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry. Namaste. Visit 1-800-contacts.com today to save on your first order. 1-800-contacts.