Firstly, John Maynard Keynes in Chapter 12 of The General Theory of Employment, Interest and Money says that:

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.

I found a reminder of this dictum last week, in fourth down decision-making in the NFL.

[A few years ago David Romer - an economist at UC Berkeley - posted a paper on-line examining the decisions NFL coaches made on fourth down. Romer’s paper found via an examination of expected benefits and costs that NFL coaches were not making optimal decisions. Specifically, NFL teams should be going for it more often on fourth down, rather than to punt or attempt field goals.

… So NFL coaches are told by Romer that it makes more sense to go for it more frequently on fourth down, and the response is that they go for it a bit less often. What explains this reaction?

…the reason why coaches fail to heed Romer’s wisdom is that coaches do not wish to undermine their reputation in the coaching fraternity …]

As my second point, you wrote in Education of a Speculator:

No one doubts that the public must lose at the races in order to pay for the prize money, stable care, employees, and upkeep of the land, building, and equipment … If they bet like other members of the public, they know they’ll lose.


The questions on most multiple-choice standardized tests are arranged roughly according to the number of students who answer them correctly– allowing a casebook example of contrarian thinking. The answers to earlier (easy) questions will be obvious to the crowd (most students); the answers to those later in a section will always be unexpected. In other words, the answers to earlier questions will always be attractive, and those later in each section will always be unattractive.

In the last paragraph of a blog post on Thursday, Steven Levitt noted why in a current competition his optimal strategy is to deviate from the strategy of other participants:

…Knowing the top bettors all pick lots of home underdogs, it means that this week I have no choice but to bet against home underdogs. I need to make sure my picks are as different as possible from the picks of the people in front of me. I gain a lot in dollars if I do much better than the people in front of me. If I do much worse, it doesn’t cost me much.

Similar, behavior optimizes chances of winning an NCAA office pool. In NCAA office pools most people pick the heaviest favorite to win, overlooking how most others pursue the same strategy. The compound probability is what matters, namely the odds of that team winning the tournament as well as the odds of winning the pool when that team wins. Under these conditions, a contrarian approach is often warranted.





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