Recently in Sports Economics Category
Sigh. People really need to do some Econ 101.
So, lately there has been a lot of stink that apparently OJ Mayo took money in the form of bribes from sports agents for the priviledge of representing him in the NBA draft. Many people are aghast. And my reaction is:
Are you people completely daft?
Seriously, I'm not sure where you guys grew up, but in the world *I* live in, when you have a talent/skill/product that other people want really badly, then you charge money for it. Economics 101, baby. There's literally nothing immoral about this. I'm reminded very much of George Lucas' distribution deals when he made Star Wars: Episode 1. Standard industry practice is for film distributors to take a percentage of the film's ticket sales in return for distributing the film. This is a deal that most directors and distributors take because they don't always know how successful there film will be, so they worry about overpaying if they pay a flat fee for distribution.
But George, however, knew quite well that the first Star Wars movie in 20 years was a guaranteed hit that would basically sell a trillion movie tickets. He told the distributors, "You can take $1 million or you can fuck off. That's the deal."
OJ Mayo is saying "I know you usually get sweet royalties from guys who are hoping they crack the lottery. But I know what I'm worth. So give me $500k or fuck off. That's the deal."
Economics ONE OH ONE, baby.
Why shouldn't athletes be allowed to charge whatever they want for the privilege of representing them? Because Sports Agents don't want them to? WHAT? I don't want to pay for my coffee at Starbucks either. I think it's an outrage that they charge money for it. Welcome to the real world. I found it very amusing that David Falk is quoted as saying:
He could go the other way and say "Well, I'm not willing to pay the usual X% agent fees, I will only pay .5X %." And you know what? Agents will line up to take the contract anyway. As much as David Falk doesn't want to compete on price (what member or an oligopoly does!?), you can't break the laws of supply and demand.
So, lately there has been a lot of stink that apparently OJ Mayo took money in the form of bribes from sports agents for the priviledge of representing him in the NBA draft. Many people are aghast. And my reaction is:
Are you people completely daft?
Seriously, I'm not sure where you guys grew up, but in the world *I* live in, when you have a talent/skill/product that other people want really badly, then you charge money for it. Economics 101, baby. There's literally nothing immoral about this. I'm reminded very much of George Lucas' distribution deals when he made Star Wars: Episode 1. Standard industry practice is for film distributors to take a percentage of the film's ticket sales in return for distributing the film. This is a deal that most directors and distributors take because they don't always know how successful there film will be, so they worry about overpaying if they pay a flat fee for distribution.
But George, however, knew quite well that the first Star Wars movie in 20 years was a guaranteed hit that would basically sell a trillion movie tickets. He told the distributors, "You can take $1 million or you can fuck off. That's the deal."
OJ Mayo is saying "I know you usually get sweet royalties from guys who are hoping they crack the lottery. But I know what I'm worth. So give me $500k or fuck off. That's the deal."
Economics ONE OH ONE, baby.
Why shouldn't athletes be allowed to charge whatever they want for the privilege of representing them? Because Sports Agents don't want them to? WHAT? I don't want to pay for my coffee at Starbucks either. I think it's an outrage that they charge money for it. Welcome to the real world. I found it very amusing that David Falk is quoted as saying:
It's not competition based on merit. It's competition based on improper inducements. I think it's an abomination.No, Dave, it's competition based on PRICE. You may think it's an abomination. Well, of course you do, just like American Airlines CEO Robert Crandall, who famously got caught trying to fix airline prices with his competitors.
He could go the other way and say "Well, I'm not willing to pay the usual X% agent fees, I will only pay .5X %." And you know what? Agents will line up to take the contract anyway. As much as David Falk doesn't want to compete on price (what member or an oligopoly does!?), you can't break the laws of supply and demand.
So it looks like Dallas has given up Desagna Diop, Jerr Stackhouse, Devin Harris, Maurice Ager and two picks for Jason Kidd, Antoine Wright and Malik Allen.
Provided that Wright and Allen never see the floor, this is a great trade for Dallas, and a decent one for New Jersey. Not only is Kidd a much better point guard than Harris (Harris is above average, but not Kidd. Seriously.) but this means that Jerry Stackhouse and his negative win score are gone. That's 24 minutes a game, or what amounts to -.2 wins over a half-season (or .2 losses, if you prefer that). Yes, Stackhouse is bad. Look beyond scoring totals.
Of course Wright and Allen are worse (MUCH worse) than Stackhouse, but unlikely to see the floor in Dallas, which has guys like Dirk Nowitski and Josh Howard to play forward, thank-you-very-much.
For the Nets, they get two above-average players, they get rid of two VERY below average players, they get rid of a ton of money in Kidd's contract. Seems like a good deal even if the first round picks aren't likely to be franchise players. Unless, of course, they are foolish enough to play Stack > 30 minutes a game and/or re-sign him after 2009.
I blogged a few weeks ago about that paper David Romer wrote in which he said that football teams punt too much. Well, it appears that someone was listening. As Levitt on Freakonomics and Dave Berri at the Wages of Wins have both pointed out, a high school team in Arkansas has taken the strategy to its extreme: they never punt. And, lo and behold, they're tearing up their league (see the TREND 3 section of the Greg Easterbrook story here). Easterbrook does a much better job than I did at explaining how the "no punt" strategy makes perfect sense if you are used to thinking about probabilities.
Sigh. I'll have to scratch NFL Coach off my list of dream jobs; when everyone catches on to this, the market won't quite be so inefficient.
Sigh. I'll have to scratch NFL Coach off my list of dream jobs; when everyone catches on to this, the market won't quite be so inefficient.
Haven't been blogging much because I'm working on learning Ruby. I've spent too much time writing about code lately, and not enough doing it, and the rust is getting visible. Last week in an interview I botched a question on binary trees that I used to use myself as an interviewer.
Quick word about Kevin Garnett. Maybe this relates to inefficient markets. Actually, it's about Tim Duncan, too. Classic discussion in the freshmen dorms: who do you pick first on the playground? KG, or Duncan?
The idiots always say "Well, TD of course. He's won a bajillion titles."
The smart guys say that it doesn't fucking matter if the guy going second gets to pick twice in a row and Manu Ginobli (or Tony Parker) are the only other pros left on the playground.
Seriously. I cannot tell you how often I've heard pundits babble on about how TD is a "winner". Bobby Simmons once wrote that TD never would have missed the playoffs with the same supporting cast as KG. Riiiiiiiiight. That's why Ricky Davis and Mark Blount are doing sooooo well now that they're teaming up with "winners" like Shaq, DWade and Pat Riley. Seriously, Wilt fucking Chamberlain could not have made the playoffs with that wolves team last year.
And the insinuation that any team with Kevin Garnett, Manu Ginobli, and Tony Parker would not completely destroy the competition is frankly just embarrassing. He won 60 with Sam and Latrell, and wouldn't with those two!? REALLY?!? I know all you league pundits like to overrate the ridiculously ineffective Bruce Bowen for all his "intangibles", but come on. No, really. Stop it, now.
So Kevin Garnett gets to play with Paul Pierce, Ray Allen, last year's best rookie, Rajon Rondo, and the under-rated James Posey. And the celtics are tearing up the league! WHAT A SHOCK. I WOULD NEVER HAVE GUESSED THIS. NO, REALLY, I AM VERY STUNNED.
"I can't believe it! I never thought he was this good!" gasps the surprised babble. Fans in Boston want to put his jersey in the rafters. "But I thought he wasn't a winner!" they shout. I'm sorry, but you just don't randomly lead the fucking league in rebounding if you aren't a winner. Scoring, sure. Rebounding, no. Just no.
Seriously, everyone who's watched more than 10 Timberwolves games in the last decade is listening to everyone rave about how "shockingly" good KG is and thinking, in that accent you know from Fargo:
"Um, DUH!?"
Quick word about Kevin Garnett. Maybe this relates to inefficient markets. Actually, it's about Tim Duncan, too. Classic discussion in the freshmen dorms: who do you pick first on the playground? KG, or Duncan?
The idiots always say "Well, TD of course. He's won a bajillion titles."
The smart guys say that it doesn't fucking matter if the guy going second gets to pick twice in a row and Manu Ginobli (or Tony Parker) are the only other pros left on the playground.
Seriously. I cannot tell you how often I've heard pundits babble on about how TD is a "winner". Bobby Simmons once wrote that TD never would have missed the playoffs with the same supporting cast as KG. Riiiiiiiiight. That's why Ricky Davis and Mark Blount are doing sooooo well now that they're teaming up with "winners" like Shaq, DWade and Pat Riley. Seriously, Wilt fucking Chamberlain could not have made the playoffs with that wolves team last year.
And the insinuation that any team with Kevin Garnett, Manu Ginobli, and Tony Parker would not completely destroy the competition is frankly just embarrassing. He won 60 with Sam and Latrell, and wouldn't with those two!? REALLY?!? I know all you league pundits like to overrate the ridiculously ineffective Bruce Bowen for all his "intangibles", but come on. No, really. Stop it, now.
So Kevin Garnett gets to play with Paul Pierce, Ray Allen, last year's best rookie, Rajon Rondo, and the under-rated James Posey. And the celtics are tearing up the league! WHAT A SHOCK. I WOULD NEVER HAVE GUESSED THIS. NO, REALLY, I AM VERY STUNNED.
"I can't believe it! I never thought he was this good!" gasps the surprised babble. Fans in Boston want to put his jersey in the rafters. "But I thought he wasn't a winner!" they shout. I'm sorry, but you just don't randomly lead the fucking league in rebounding if you aren't a winner. Scoring, sure. Rebounding, no. Just no.
Seriously, everyone who's watched more than 10 Timberwolves games in the last decade is listening to everyone rave about how "shockingly" good KG is and thinking, in that accent you know from Fargo:
"Um, DUH!?"
I hope Tyler Cowen will forgive me for using a variation on the title that he often uses for posts on Marginal Revolution.
I've said it before, the markets in professional sports are very inefficient. Even in some cases where some smart guys have figured stuff out, most of the pundits refuse to believe it. This can be because they don't want to accept that some academic who never played the sport might know more about strategy than players and coaches who have lived and breathe it their whole lives. Or it might be as simple as the human tendency to believe one's own eyes and ears rather than abstract data about what the best course of action is.
Take David Romer's conclusions about when to go for it on fourth down. Basically, he's figured out you go for it a lot, and even in your own half of the field. The data back him up, and even Bill Belichick believes him. Yet the vast majority of coaches, players, pundits and fans ignore him and continue to believe that the right thing to do is to "play it safe". This situation reminds me of poker.
Say you're an NFL coach, your team is on the opponents 35, its 4th and 1, and you estimate that you have a 50% chance of success if you go for 1st down. If you kick a field goal, your chance of success is 80%. Should you go for it?
Going for the field goal is worth 3*.8 = 2.4 points. What's a first down worth? Well, you have three possibilities:
1) You go one to score a touchdown (7 pts; most teams have an extra-point success rate sufficiently high to disregard the chance of a missed PAT)
2) You go on to kick a field goal (3 pts)
3) You go on to lose the ball (0 pts)
So going for a first down is worth p(1)*6 + p(2)*3 + p(3)*0. Of course, this simplifies to p(1)*6 + p(2)*3. Now, let's remember that IF we determine that going for the first down is higher higher expected value than kicking a fiield goal right now, p(2) isn't going to be possible unless it is at least 4th and 2 (because we'd go for it again on 4th and 1). So p(2) is a relatively tricky number to figure out, and of course p(1) and p(2) are NOT mutually exclusive, because both really depend on how efficient you are at picking up first downs, and whether your strategy accounts for your risk tolerance (you might run more often on 3rd and 4 because you know you are going to go for it on 4th and 1, for example). Let's assume that p(3) is 5%, and that it includes missed field goals. This is a high field goal success rate, but obviously chances are you will be more successful from closer in.
And of course, I'm negating the opponent's expected-value for all our actions. That is, our expected value is a combination of how many points each action scores for us (on average) and how many each action scores for the opponent (on average). To illustrate, going for it on 4th and 1 and throwing an interception that the defense runs back is effectively worth -7 points, from your team's perspective, so this probability must also be accounted for somewhere (even if it's small).
But let's make the thought exercise simple. After all, David P did all this analysis, and this isn't the point I am trying to make. Let's pretend the only factors are how often do you go on to score a touchdown/field goal if you make a first down. Let's say you'd score a TD 50% of the time. So, 50% of the time you'd get a field goal. Well, going for it has a value of 50%*((50%*7) + (45%*3)) = 50%*(3.5+1.35) = 2.425. In other words, going for it has a higher expected value than kicking a field goal (2.4).
But, of course, even in our fantasy world where the factors are that simple (and in which I fudged the numbers to make going for it +EV), most people wouldn't agree that you should always go for it. Most humans aren't wired to think of average probabilistic outcomes. You keep going for it on 4th down, you fall short half of the time, and the angry mob will be lining up with pitchforks and torches to drive you out of town! "You keep going for it on 4th down even though we lose the ball half the time, coach! What the HELL?"
Just like poker. Just because you are not likely to win the pot doesn't mean that you shouldn't call the bet. It's not how often you win the pot (erm...score), it's how much money you win (erm...points you score).
I've said it before, the markets in professional sports are very inefficient. Even in some cases where some smart guys have figured stuff out, most of the pundits refuse to believe it. This can be because they don't want to accept that some academic who never played the sport might know more about strategy than players and coaches who have lived and breathe it their whole lives. Or it might be as simple as the human tendency to believe one's own eyes and ears rather than abstract data about what the best course of action is.
Take David Romer's conclusions about when to go for it on fourth down. Basically, he's figured out you go for it a lot, and even in your own half of the field. The data back him up, and even Bill Belichick believes him. Yet the vast majority of coaches, players, pundits and fans ignore him and continue to believe that the right thing to do is to "play it safe". This situation reminds me of poker.
Say you're an NFL coach, your team is on the opponents 35, its 4th and 1, and you estimate that you have a 50% chance of success if you go for 1st down. If you kick a field goal, your chance of success is 80%. Should you go for it?
Going for the field goal is worth 3*.8 = 2.4 points. What's a first down worth? Well, you have three possibilities:
1) You go one to score a touchdown (7 pts; most teams have an extra-point success rate sufficiently high to disregard the chance of a missed PAT)
2) You go on to kick a field goal (3 pts)
3) You go on to lose the ball (0 pts)
So going for a first down is worth p(1)*6 + p(2)*3 + p(3)*0. Of course, this simplifies to p(1)*6 + p(2)*3. Now, let's remember that IF we determine that going for the first down is higher higher expected value than kicking a fiield goal right now, p(2) isn't going to be possible unless it is at least 4th and 2 (because we'd go for it again on 4th and 1). So p(2) is a relatively tricky number to figure out, and of course p(1) and p(2) are NOT mutually exclusive, because both really depend on how efficient you are at picking up first downs, and whether your strategy accounts for your risk tolerance (you might run more often on 3rd and 4 because you know you are going to go for it on 4th and 1, for example). Let's assume that p(3) is 5%, and that it includes missed field goals. This is a high field goal success rate, but obviously chances are you will be more successful from closer in.
And of course, I'm negating the opponent's expected-value for all our actions. That is, our expected value is a combination of how many points each action scores for us (on average) and how many each action scores for the opponent (on average). To illustrate, going for it on 4th and 1 and throwing an interception that the defense runs back is effectively worth -7 points, from your team's perspective, so this probability must also be accounted for somewhere (even if it's small).
But let's make the thought exercise simple. After all, David P did all this analysis, and this isn't the point I am trying to make. Let's pretend the only factors are how often do you go on to score a touchdown/field goal if you make a first down. Let's say you'd score a TD 50% of the time. So, 50% of the time you'd get a field goal. Well, going for it has a value of 50%*((50%*7) + (45%*3)) = 50%*(3.5+1.35) = 2.425. In other words, going for it has a higher expected value than kicking a field goal (2.4).
But, of course, even in our fantasy world where the factors are that simple (and in which I fudged the numbers to make going for it +EV), most people wouldn't agree that you should always go for it. Most humans aren't wired to think of average probabilistic outcomes. You keep going for it on 4th down, you fall short half of the time, and the angry mob will be lining up with pitchforks and torches to drive you out of town! "You keep going for it on 4th down even though we lose the ball half the time, coach! What the HELL?"
Just like poker. Just because you are not likely to win the pot doesn't mean that you shouldn't call the bet. It's not how often you win the pot (erm...score), it's how much money you win (erm...points you score).
