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The Yale Alumni Magazine is owned and operated by Yale Alumni Publications, Inc., a nonprofit corporation independent of Yale University. The content of the magazine and its website is the responsibility of the editors and does not necessarily reflect the views of Yale or its officers. |
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Nineteen eighty-three was a great year for quarterbacks. In the NFL draft that year, teams had the choice of John Elway (pick 1), Jim Kelly (pick 14), and Dan Marino (pick 27), all promising professional rookies who went on to be Hall of Famers. But if you think the lesson of that draft is that NFL teams excel at predicting who will perform at the sport’s highest level, you’d be wrong, says Cade Massey, an assistant professor of organizational behavior at SOM. He points to draft picks 7 and 15—also quarterbacks—who had unexceptional careers despite being picked over Marino. “Everyone names that draft as a great quarterback draft, but they aren’t getting the big message—which is, it’s hard to predict,” Massey says. He and a coauthor analyzed years of performance data on draft picks and determined that, across the board, teams are lousy at predicting which players will be stars and which will be also-rans. But NFL teams don’t seem to realize how bad their own forecasts are. According to the study data, teams vastly overpay for the privilege of picking earlier; they will trade away multiple low picks to get their favored player—even though the odds of benefitting on an early pick are only slightly better than a coin toss. The research underlines a much-studied phenomenon in psychology and behavioral economics: overconfidence. Research shows that people consistently overrate their own abilities. The same behavior that leads football scouts to overpay for this year’s college star can lead stock traders to bet everything on an attractive deal, or companies to pay a high salary to their preferred CEO when a cheaper one might do just as good a job. As Massey points out, no couple ever admits that their impending marriage has only a 50 percent chance of success. Massey
has been advising football teams to trade away their first-round picks for lots
of lower ones, thereby increasing the number of coin tosses they get. He says
the few teams that already employ that strategy win more games than their
peers. But not many others have shown interest in his findings. One team
employee told Massey that the team’s owner “believes you—he just doesn’t think
it applies to him.” |
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©1992–2012, Yale Alumni Publications, Inc. All rights reserved. Yale Alumni Magazine, P.O. Box 1905, New Haven, CT 06509-1905, USA. yam@yale.edu |
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