Business April 2014

The Savior Fallacy: Over-Betting on Star Players in Sports and Business

Team managers and corporate boards tear their rosters apart to land a top pick, who they assume will lead them to salvation. The psychology of a strategy that seldom works.
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Edmon de Haro

“Blessed are the meek: for they shall inherit the earth” is the third and most famous Beatitude in the Sermon on the Mount. Although the prophecy has a dubious track record throughout world history, its counsel has been inspirational lately in the arena of America’s secular religion: professional sports.

In the National Basketball Association, in particular, an astonishing number of teams this year—the Boston Celtics, the Philadelphia 76ers, the Utah Jazz, and more—stand accused of deliberately making their clubs as meek as possible. This strategy is called tanking, and its logic—to the extent that there is any—comes from the mysterious allure of the NBA draft.

In most professional sports leagues, including the NBA, the worst teams are first in line to snag the most-promising amateur players in the next draft. When the ripening crop of amateurs looks especially tantalizing (this year’s is projected to be historically good), multiple teams will suddenly compete to be so uncompetitive that, through sheer awfulness, they will be blessed to inherit the top pick. One anonymous general manager told ESPN the Magazine earlier this season, “Our team isn’t good enough to win,” so the best thing is “to lose a lot.”

In a way, there is a dark genius behind the tanking epidemic. In what other industry could you persuade your customers to root for the worst possible product? But tanking puzzles academics like David Berri, the author of the 2006 book The Wages of Wins and a widely read commentator on sports economics. “Tanking simply does not work,” he told me. Nearly 30 years of data tell a crystal-clear story: a truly awful team has never once metamorphosed into a championship squad through the draft. The last team to draft No. 1 and then win a championship (at any point thereafter) was the San Antonio Spurs, which lucked into the pick (Tim Duncan) back in 1997 when the team’s star center, David Robinson, missed all but six games the previous season because of injuries. The teams with the top three picks in any given draft are almost twice as likely to never make the playoffs within four years—the term of an NBA rookie contract, before the player reaches free agency—as they are to make it past the second round.

Why are teams and their fans drawn to a strategy that reliably leads to even deeper failure? The gospel of tanking is born from three big assumptions: that mediocrity is a trap; that scouting is a science; and that bad organizations are one savior away from being great. All three assumptions are common, not only to sports, but also to business and to life. And all three assumptions are typically wrong.

At the MIT Sloan Sports Analytics Conference in 2011, Kevin Pritchard, now the general manager of the Indiana Pacers, introduced the term treadmill of mediocrity. It captured the widespread feeling that average teams are doomed to walk in place for eternity with no hope of advancement: they lack the talent to contend, yet never get the acclaimed top-of-the-draft picks that could meaningfully improve their rosters. Fear of this purgatory has spooked teams so much that Mark Cuban, the owner of the Dallas Mavericks, has publicly said he would rather his team be a bottom-feeder—blowing up a merely average team to get there—than try to make do with a middling roster.

Fans, too, seem particularly contemptuous of teams that lose half their games. “From the fan’s perspective, nothing is more frustrating than being average,” Berri says, “because being mediocre gives fans the greatest sense of uncertainty: one day they’re great, and another day they stink.” Yet, as Berri’s analysis shows, the treadmill metaphor turns out to be wrong: Mediocre teams don’t necessarily stay mediocre. Within two years, they’re three times more likely to become elite (winning at least two-thirds of their games) than the lousy squads that locked up the top picks. Developing and effectively deploying current players, making smart trades and judiciously signing free agents, finding good players later in the draft—these patient, sometimes incremental moves appear to work better than tearing things down to try to land a hyped-up superhero in the draft.

Although the NBA has seen its share of can’t-miss stars who badly missed, the allure of the draft is that it offers a fresh start. It promises to deliver fans a savior—even when the odds of salvation are vanishingly small. Just the remote possibility of success after a string of losses “turns people into wild gamblers,” says Megan McArdle, the author of a new book about failure, The Up Side of Down (and my former editor). Mired in mediocrity, fans thirst for a story that promises a small chance of success (we’ll draft a superstar and win a championship!) while ignoring the overwhelmingly probable outcome (actually, no, we won’t).

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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