If you know anything about Nassim Nicholas Taleb, you know that he is an iconoclast. He has little respect for traditional ideas and the thinkers who peddle them. In general, when Taleb expresses admiration for someone, that person is some obscure scientist who has been dead for at least 100 years. For his contemporaries, Taleb usually reserves what could be termed “not-even-polite disdain.” But there is one modern thinker for whom Taleb has unequivocal admiration: psychologist Daniel Kahneman, who was awarded the 2002 Nobel Prize in Economics. When one considers the contempt that Taleb exhibits for the award, that he holds Kahneman in high regard is incredible. Indeed, in The Black Swan, Taleb refers to Kahneman once as an “überpsychologist” and once as a “father of the psychology of uncertainty.” For Taleb, no higher praise exists.
This is the 24th installment of The Labyrinthian, a series dedicated to exploring random fields of knowledge in order to give you unordinary theoretical, philosophical, strategic, and/or often rambling guidance on daily fantasy sports. Consult the introductory piece to the series for further explanation on what you are reading.
Anchoring via Taleb per Kahneman
In his aforementioned book, Taleb discusses a mental mechanism called “anchoring,” which was first theorized and researched by Kahneman and his colleague Amos Tversky. Here’s Taleb’s explanation of it:
You lower your anxiety about uncertainty by producing a number, then you “anchor” on it, like an object to hold on to in the middle of a vacuum. . . . It operates as follows. Kahneman and Tversky had their subjects spin a wheel of fortune. The subjects first looked at the number on the wheel, which they knew was random, then they were asked to estimate the number of African countries in the United Nations. Those who had a low number on the wheel estimated a low number of African nations; those with a high number produced a higher estimate.
Similarly, ask someone to provide you with the last four digit of his social security number. Then ask him to estimate the number of dentists in Manhattan. You will find that by making him aware of the four-digit number, you elicit an estimate that is correlated with it.
We use reference points in our heads . . . and start building beliefs around them. . . . We cannot work without a point of reference.
By the way, if it seems like Taleb is an authorial anchor of mine (I often refer to his work), that assessment might be accurate. That irony does not escape me. In fact, that irony is both quintessentially Talebian and Labyrinthian.
The Death of Albus Dumbledore
Recently, I was reminded of the concept of anchoring in a conversation with my wife, who is an English professor and this semester is teaching an advanced literary theory course, although students refer to the class simply as “Harry Potter,” since that series serves as the collective literary text through which they explore theory. Anyway, I was working in my office, and she walked in and said something like this:
I just finished The Half-Blood Prince. I’m always surprised by how sad I am at the end. I know it’s coming, but it doesn’t matter. It always hits me. And this is, like, I don’t know, maybe the sixth time I’ve read it?
Maybe because I was working and thus in more of a critical mindset, I wanted to say something like this:
I doubt that you’ve actually read that book six times. Maybe four. I think it’s possible that you’re saying “six” simply because you just got done reading the sixth book in the series.
You probably don’t need me to say this, but I have the emotional sensibilities of Larry David. In other words, I have almost no emotional sensibilities.
Fortunately, I didn’t say what I was thinking, because after five years of marriage I’ve learned to anchor my existence around the concept that I shouldn’t needlessly disagree with my wife. (I’m an idiot but not a moron.) Also, my wife was about to go out of town and I didn’t want her lasting memory of me for the next week to be one in which I criticized her in an emotional moment for possibly misestimating the number of times she has read a particular book.
The larger point is this: Every day, even really smart people anchor. I routinely anchor to the idea that I ought not to act like a Costanzan when talking to my wife. And, in this particular instance, my wife maybe anchored to the number six. Anchoring is something that happens all the time.
On its own, it’s neither good nor bad. It’s simply a heuristic. The real problem is when anchoring occurs and we don’t even think about it. That’s when it goes from being a time-saving tool to an evaluative hindrance.
DFS Anchoring
This week, FantasyLabs launched our new PGA product (free while it’s in beta), and to support the Trends and Models we have also released a lot of content intended to help you learn about the PGA. In these recent podcasts and articles, what really stands out to me is the importance that people ascribe to making the cut. For instance:
- FantasyLabs Podcast with Colin Davy, 3/9/2016: In the words of Colin, our new Director of FantasyLabs PGA, “the cut introduces a lot of variance. Half the field gets cut every week, and if you’re not playing you don’t accumulate points. It’s ill-behaved variance. It’s like dealing with a potential Anthony Davis injury every single week. Welcome to PGA. That’s every week.” (Excerpted)
- The Daily Fantasy Sport Roundtable: #7 – Intro to PGA: Near the beginning of the episode, guest David Fraye touched on the importance of making the cut (without explicitly mentioning that phrase) by saying that “when you’re looking at your six golfers for the week you want to look at the six who will get you the most points, and to do so the path to those points are 24 rounds of golf, or four rounds per golfer.”
- PGA: Finding Low-Cost Cut Makers: In his article on value cut-makers, FantasyLabs contributor Graham Barfield implies that finding guys who make the cut “is not the be all end all when it comes to bargain golfers,” but in general the entire point of his article is that finding “golfers that are low priced but are relatively less risky” is a good thing.
Clearly, in PGA itself, making the cut is beyond important. It’s compulsory. A golfer can’t win a tournament if he isn’t swinging his clubs in the final two rounds of play.
But what about in PGA DFS, in which we have to take into account not only the realities of the underlying sport but also the valuations attributed to players through their salaries? How important is the cut in PGA DFS?
The DFS Overvaluation of Making the Cut
The subtitle kind of gives away my position. I believe that making the cut is important but also potentially overvalued by DFS players (or at least by DraftKings). I believe that it might serve as a DFS anchor for those who weigh it heavily in their lineup construction. And my belief seems to be supported by the trends.
Since recent form is important, let’s say that a DFS player (focused primarily on rostering golfers likely to make the cut), wants to create a trend that matches for golfers who have missed the cut zero percent of their tournaments within the previous six weeks. And then let’s say that this player also wants to make sure that the golfers have reliable long-term form and so adds a screen for players who have missed the cut no more than 20 percent of the time during the previous 75 weeks. Here’s what that trend looks like:
This isn’t a horrible trend. The matched golfers don’t underperform or exhibit inconsistency to a high degree — but it’s evident that explicitly targeting golfers based on their cut-making history hasn’t historically helped one find a cohort that outperforms its salary-adjusted expectations.
Additionally, if one attempts to narrow the field (by having a long-term form cut percentage of no higher than 15 percent), the results get worse:
And if one narrows the field even further the results are worse still:
And worse still:
This trend is very clear: If you want to roster golfers likely to make the cut, you will have to pay a premium for them. And the likelier they are to make the cut, the steeper the premium will be on a relative basis.
And, in general, the likelier they are to make the cut, the more expensive they are in actuality. For the Arnold Palmer Invitational, the two golfers who matched this final “Making the Cut” trend were Matt Kuchar ($9,400) and Henrik Stenson ($11,100), two of the slate’s most expensive golfers.
Making the cut is important, but if you make that the driving force of your PGA process, it will function as not only a psychological anchor. It will also be an anchor on your lineups, dragging them below the cash line. In any given slate, paying up for players likely to make the cut isn’t necessarily a bad thing. But if you do that over a large number of slates, history suggests that you aren’t getting your money’s worth.
Colin Knows Best
I am sure that one day Colin will write the definitive evidence-driven, statistic-adjusted, all-encompassing piece on the cut’s importance (or lack thereof) to PGA DFS. When he does, just pay attention to what he says and forget that I wrote this. He knows best. He will be the one to guide all of us through the labyrinth.
Till then, I have these two takeaways regarding the cut:
- Any given golfer’s chances of making the cut are often (more than) properly accounted for in his salary. There seems to be little exploitable edge in targeting a golfer simply because history suggests that he will make the cut.
- If there is an exploitable edge, it probably cuts in the other direction. Especially in tournaments, one could possibly gain an advantage by fading golfers highly likely to make the cut. Not only are such golfers historically overpriced (and thus poor tournament plays) but they will also potentially have high ownership percentages (as too many people anchor on the idea of “making the cut”).
Again, in a week Colin could write an article that entirely negates what I just said. Barring that piece, though, this is my assertion: In PGA, making the cut may in fact be everything. In DFS, it’s not just nothing. It’s the anti-thing.
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The Labyrinthian: 2016, 24
Previous installments of The Labyrinthian can be accessed via my author page. If you have suggestions on material I should know about or even write about in a future Labyrinthian, please contact me via email, [email protected], or Twitter @MattFtheOracle.
