Landmark Links February 7th – Garbage In, Garbage Out


Lead Story… Like most Americans, I spent my Sunday afternoon and evening transfixed to a television as the Patriots completed the most epic single game comeback of all time.  I’m still in a bit of disbelief about what actually transpired but the shocking overtime ending certainly added to the bonafides of both Tom Brady and Bill Belichick as respectively the greatest QB and coach in the history of the game.  For a bit of personal background, I grew up in northern New Jersey and have been a die hard NY sports fan since I was about 5 (Giants and Yankees).  I later attended college in suburban Boston where nearly all of my friends were as passionate about Boston sports teams as I was about NY teams.  Needless to say I’m a Patriots hater and spent most of my afternoon doing three of my favorite things: drinking beer, eating too much unhealthy food and talking trash about the Patriots on social media.  As you can imagine, the last of these did not end well.

ESPN has a feature on their website and app called “Win Probability.”  I’m not entirely sure when they added it but I became aware of it at some point during this football season. Essentially, it’s a chart of computer generated odds that updates in real-time during a game. Over the course of the season, it became something that I check in on with curiosity during a close game.  After the Super Bowl, as I was absorbing various much-deserved barbs from Pats fans that I had been mocking just a bit earlier, a friend sent me this incredible screen shot chart from ESPN‘s app:


If you go to ESPN’s website, you can scroll over the chart but I’ll save you the time: with 9 minutes to go in the 4th quarter, ESPN’s Win Probability tool gave the Falcons a 99.6% chance to win the game. had very similar odds as well.  They still had a 75.4% chance as the Pats were in the Red Zone about to score the tying touchdown and 2-point conversion and I was searching for something to convince myself that I wasn’t going to have to eat a whole bunch of crow.  We all know how this ended.

So how was this advanced analytical tool so wildly wrong?  It’s actually quite easy.  All forecasting models, no matter how sophisticated are essentially the same: they are only as good as the data that’s put into them.  If you put garbage assumptions in the model, you will always, without exception get garbage out.

If Super Bowl LI had been played 100 times, the Falcons may very well have won 99 of them.  However that’s irrelevant since the game is only played once so only one result counts even if it’s a statistical outlier.  The model can’t take into account shitty coaching decisions (why the hell did Atlanta not run the ball on 2nd and 11 from the NE 23 yard line with a chance to put the game away by kicking a field goal) or human nature (key members of the Pats have been in this situation so many times that the moment never gets too big and they never panic – which the Falcons appeared to do).  The model didn’t account for human decision making because, despite advances in AI, there are still far too many unknowable variables to quantify.  It couldn’t account for the vast difference in experience nor the fatigue that had clearly set in with the Falcon’s defense from the middle of the 4th quarter on. It couldn’t predict the human component of how the Patriots didn’t get rattled when they were down big but the Falcons became the proverbial deer in headlights once adversity hit.  Most of all, it couldn’t predict the psychology behind the game when the tide started to turn that ultimately turned all of the great statistical analysis into a steaming pile of trash.  This model deficiency is not unique to sports.  As we know all too well, the betting odds charts of the US Presidential Election and the Brexit vote tell much the same story – there were surprise elements out there that the sophisticated models were not able to account for which rendered them virtually useless.  The 2008 financial crisis was largely a crisis borne of faulty modelling assumptions that gave cover to banks to take on ever-escalating risks.

Over reliance on predictive models is an issue in real estate development and finance as well.  Talk to any developer, builder or investor who has had a major cost or timing overrun due to faulty assumptions and they’ll tell you just how useful modelling with incomplete or incorrect information is.  This is why investors typically focus on the depth and experience of a Sponsor’s company and development team when evaluating a prospective project.  It’s not just the assumptions being made but who is making them and why.  How experienced are they and how will they react when the inevitable bump in the road comes along?  Do they have enough real-world experience to detect potential problems before they happen?  If not, the sophisticated financial model that showed a 25% IRR is completely worthless.  Now, don’t get me wrong, we use proprietary models and find extremely helpful as a tool in evaluating real estate development projects.  However, they are just that: a tool.  A tool that is far less important than the actual assumptions about revenues, costs, etc that are going in to them.

So congratulations to the Patriots and their fans for crushing the predictive models and pulling off the greatest single game comeback in NFL (if not sports) history.  I’m sure that I’ll be hearing much more from my Boston friends who I foolishly taunted for most of the game.  I guess I’ll just have to take solace in the fact that there is only one team that the Patriots, with the greatest QB and coach of all time haven’t been able to overcome in the Super Bowl: Eli Manning and my beloved NY Giants.


Tick Tock: The prospects for meaningful tax reform in 2017 are dimming by the day.

Mixed Bag: Payrolls in the US increased 227k in January, well above consensus estimates driven mostly by construction and retail.  However, wage growth slowed.  But See: Fret not, wage growth is coming – it is just taking a while to show up in the data.

Proceed with Caution: Goldman Sachs is sounding the alarm bell on the economy as the Trump administration focuses on populist measures like immigration and trade restrictions first rather than pro-growth ones like tax breaks and infrastructure spending.


Backlog: Governor Jerry Brown dissolved the state 400 redevelopment agencies in 2011 so why are hundreds of millions worth of property still on the books 6 years later?


Economics 101 – The city of San Francisco doubled their rate of housing production in 2016.  You’ll never believe what happened next! It’s almost as if there’s something to this whole supply and demand thing.

Imagine That: Vancouver home sales plunged 40% in January as the market continues to free-fall after city council approved a 15% tax on foreign buyers last year.  As with the previous story, the laws of supply and demand are alive and well.


How to Make a Miracle: The backstory of how the US Olympic Hockey Team shocked the world in 1980 by beating the seemingly invincible Soviets at Lake Placid.

On to the Scam: The Transportation Department is attempting to crack down on people flying with fake service animals.

This Ends in Tears: Hapless bettors can now outsource their wagers to something called “entity wagering funds.”

Chart of the Day

“Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.” – Lao Tzu

Look familiar?




Hell No: A Texas family discovered 24 rattlesnakes living in their basement after one slithered it’s way into their toilet.

Haterade: There is a new dating app to help people find love based on their mutual hatred of things.

You Can’t Make This Up: A Florida man (of course) arrested for a massive $7 billion bank fraud is using the defense that Jesus wanted him to do it.

Landmark Links – A candid look at the economy, real estate, and other things sometimes related.

Visit us at