Dan Snyder, Richard Thaler, and the End of the RGIII Error

Yesterday's blockbuster announcement that Kirk Cousins would be the Washington Redskins' starting quarterback this season brought a sudden and gloomy end to the era of "RGIII"—former starting quarterback Robert Griffin III.

In the 2012 NFL Draft, Washington wanted to obtain a "franchise quarterback" after two decades of instability at the position. The team's owner, Dan Snyder, highly coveted Griffin, who was coming off a Heisman-winning season at Baylor University. So, at Snyder's urging, the Redskins traded away a passel of high-level draft picks—the team's first-round picks in 2012, 2013, and 2014, plus the second-round pick in 2012—to the St. Louis Rams in exchange for the Rams' first-round pick in 2012.

The Rams were originally to pick second overall in the draft and the Redskins sixth, so all those lost picks (and players) netted Washington just a single improvement of four draft positions. But Snyder thought that RGIII was worth it, and that the team wouldn't be able to obtain a franchise quarterback if they waited until the sixth pick. (Noteworthy: the team took Cousins in the fourth round of that draft, and the Seattle Seahawks took quarterback Russell Wilson in the third round. Wilson, of course, has led Seattle to the playoffs in each of his three seasons, including two Superbowl appearances and one championship.)

And at first, it looked like Washington's decision was a good one. Griffin won the NFL's offensive Rookie of the Year award in 2012 and led the success-starved team to the playoffs. But as that regular season was winding down, he suffered an ugly knee injury in a game against the Baltimore Ravens. He further injured the knee in the subsequent playoff game (which the Redskins lost), requiring grueling ligament reconstruction surgery.

His career since then has been marred by injuries, regression, and benchings. (For an appraisal of Griffin's play, consider former Redskins tight end Chris Cooley's assessment, discussed in this post.) RGIII has clearly not been worth the high price the Redskins paid for him. But how could the team have known that would happen?

In fact, Snyder was told it would probably happen, according to a remarkable passage in University of Chicago economist Richard Thaler's latest book, Misbehaving (W.W. Norton, 2015). Thaler co-founded the field of "behavioral economics"—the study of why people systematically fail to make rational decisions with their resources. In the coming years, he will likely receive the Nobel Economics Prize (which is a sort of "lifetime achievement award") for his work in "B/E."

In 2006, he and one of his students, Cade Massey (now an economics professor at UPenn Wharton), released a paper on the NFL draft, examining whether teams’ management made predictable mistakes in the use of their draft choices. (You can read their working paper here). In a nutshell, their research found that teams systematically overvalue their high-round draft targets and the current year’s draft class. Other teams can take advantage of this, resulting in their gaining more quality players overall, by trading down for more picks and trading current-year picks for multiple future picks.

When they were working on the paper, Snyder visited UChicago’s Booth School of Business to speak at its entrepreneurs’ club. Thaler moderated the event and mentioned to Snyder the research he and Massey were doing on NFL draft strategy.

Thaler recounts what happened next:

I told Mr. Snyder about the project with Cade and he immediately said he was going to send "his guys" to see us right away, even though they were in the midst of the season. He said, "We want to be the best at everything." Apparently when Mr. Snyder wants something he gets it. That Monday I got a call from his chief operating officer, who wanted to talk to Cade and me ASAP. We met Friday of that week with two of his associates and had a mutually beneficial discussion. We gave them the basic lessons of our analysis, and they were able to confirm some institutional details for us.

After the season ended, we had further discussions with Snyder’s staff. Cade and I watched the draft on television that year with special interest that turned into deep disappointment. The team did exactly the opposite of what we had suggested! They moved up in the draft, and then traded away a high draft pick next year to get a lesser one this year. When we asked our contacts what happened we got a short answer. "Mr. Snyder wants to win now."

Thaler is unclear about exactly when this happened, but it wasn't immediately before the 2012 draft. We can make a pretty good guess of when it was, though. The working paper appeared in 2006, so it would have been a draft prior to that—but not too prior. During the 2005 draft, the Redskins traded away their third round pick, plus their 1^st and 4^th round picks in 2006, to acquire the Broncos’ 2005 1^st round pick (#25 overall). With the pick, the Redskins took Jason Candle Campbell. That seems to be the draft maneuvering that Thaler is describing.

Circling back to RGIII, Thaler then writes:

This was a good forecast of Snyder’s future decisions. In 2012 the Redskins had the sixth pick in the draft, meaning they had been the sixth worst team in 2011, and they were desperate for a high-quality quarterback. There were two highly rated quarterbacks available that year, Andrew Luck and Robert Griffen III [sic], who is known as RG3 for short. Indianapolis had the first pick and had announced their intention to take Luck. The Redskins wanted RG3.

He then gives a description of the Rams trade, RGIII’s initial success, his subsequent injuries and disappointments, and mentions Wilson's success.

Thaler concludes the tale:

Of course, one should not judge a trade using hindsight, and the Redskins were certainly unlucky that Griffen [sic] suffered from injuries. But that is part of the point. When you give up a bunch of picks to select one player, you are putting all your eggs in his basket, and football players, like eggs, can be fragile.

He goes on to say that he’s also consulted with other NFL teams on drafting. They applied his ideas better than Snyder did, but in many cases they still din not apply them well, often treating the additional picks as "house money" that were then used in questionable ways. On that note, consider the poor return St. Louis received from its Washington draft pick bonanza.

Value, Strategy, the MLB Shift Rule

My previous post looked at the metagame issues present in the NBA, and how a team reacts to the rules laid out for it. Tom's post then examined the political economy of the "Deflategate" scandal in the NFL. Today, I'll turn my attention to a different issue, with similar rules-based roots.

Newly-minted MLB commissioner Rob Manfred recently made waves with an idea to increase the scoring, and with it, the "action" in baseball games. The idea was to ban the growing trend shifting defenders positions when certain batters take the plate. The "shift" as it is known, makes defending batters with obvious left field-right field bias far easier, and as such, Manfred thinks that banning it would be better for the game.

Whether this decision is wise depends on where the league's priorities lie. On one hand, there is a clear incentive for the league to move toward a higher-scoring equilibrium whether die-hard fans like it or not. This gets at one of the things that fundamentally separate professional sports from recreational sports: professional sports are a product that is sold. Recreational sports, where the enjoyment of participants figures more prominently in whether a person joins in, face different incentives than a league where the goal is profit. While spectators may be present, they rarely factor in to proposed rule changes. No, rules change when they would make the game more enjoyable for those involved. Bans on various strategies have long been in place in recreational leagues of all sports and levels as long as people have played them. The particular nature of the game, league, or players dictate what rules are in place for a given game at a given game. We can say that such rule changes are endogenous to recreational sports.

Professional sports are different. They, by definition, turn the concept on its head. The value professional sports create accrues mostly to those not playing. Fans enjoy watching sports, they pay money for tickets and team memorabilia. They give their time watching ads between the action in professional games. This money flows into the pockets of team owners, who take on the financial risk of throwing the spectacles that are modern professional sports games. In contrast with recreational sports, the motivation professional sports rule changes are exogenous of the game itself. At the end of the day, it is the will of the aggregation of fans, as expressed in their dollars, that dictates the rules of professional sports.

While there will be exceptions(player safety in the NFL would be a great example), knowing this is the case helps understand the motivation for rule changes, and why they often seem unnecessary or foolish. To top it all off, because professional sports increasingly compete not with other sports, but with all entertainment for revenue, the need to stay closely in tune with their customers means that we should expect rule changes to be increasingly common.

So now back to the shift rule. The rule is clearly an attempt to move to an equilibrium with higher scoring. That seems to be what fans want, and indeed, a pitcher's duel could be less entertaining than a high-scoring affair. I can't say I'd not agree, baseball seems more fun with more scoring. The question is whether there's not a better way to increase scoring without damaging the game so that the value created isn't destroyed elsewhere. That destroyed value could come from a myriad of places, but tradition certainly is among them. History and tradition, all else equal, seem to make the game more entertaining for fans.

Yet, the shift itself is a natural response to the game's circumstances, It works. It makes individual teams that employ it better relative to each other,while destroying some degree of value in tradition. It emerged in the modern era because advanced technology and statistics have sent an exogenous shock through the league. The important insight is this: rule and strategy evolution does not necessarily create more value to the league as a while, even if it helps individual teams win. Game evolution usually does create value, but the chess metagame shows that stability of a metagame over time has allowed strategies and value to be created that never otherwise would have. So, in proposing the rule Manfred is taking a calculated risk that any destruction to tradition would be outweighed by the higher scoring in the long run.

So are there alternatives to banning the shift that would also increase scoring? Probably. Returning to a more strict strike zone would help. As could working to make ballparks more regular in size as new ones are built. I'm not even going to mention the possibility of altering baseball or bat rules to make for easier batting(because the outrage every time such changes are proposed online makes me think that the tradition value destruction would be extremely high) But if the ban is implemented subtly and is unintrusively, it could increase scoring and be value positive. It may be that Manfred's proposal is the least damaging option available. Wait, that sounds a lot like another controversial rule change recently...

I'll thank Aaron Moyer for getting me thinking about the issues that became this post.

'Deflategate': Is "The Rule" Really the Rule?

For more than a week now, the sports commentariat has been hyperventilating over "Deflategate," the discovery that the New England Patriots used underinflated footballs in their 45–7 shellacking of the Indianapolis Colts in this year's AFC Championship Game.

Several sports commentators have called for severely punishing the Patriots for cheating, including suspending head coach Bill Belichick and quarterback Tom Brady for the Superbowl and into next season. Pats fans, of course, disagree. And Belichick and Brady have held news conferences professing innocence.

I think the Pats deliberately used soft footballs for the game. I also think they didn't intend to cheat. Rather, what happened in Foxborough probably is similar to what happens in government regulation: the rules on the books are sometimes different than the rules everyone (including the regulators) recognize and play by, and when someone suddenly demands that things be done "by the book," it causes a bewildering mess.

To explain this, we first need a little background.

In 2007 the NFL decided to allow teams to supply the footballs that their offenses use during games. Within some parameters, this rule change allows teams to "doctor" the balls to their quarterbacks' preferences: roughing up the surface, oiling it, and inflating it to a desired level. Playing Rule 2 Section 1 requires only that the balls be inflated to between 12.5 and 13.5 pounds of air per square inch. The footballs are then inspected by game officials prior to the game to determine if they are acceptable for play.

James Harden and the Evolution of the NBA Metagame

Over at Grantland, professor Kirk Goldsberry has a great breakdown of how James Harden and, broadly, the Houston Rockets are succeeding with what looks to be an unorthodox style of play. Put simply, they shun mid-range shots in favor of a disproportionately inside-outside offense that emphasizes drawing free throws and 3-pointers over all else.

While this is all interesting, the last couple paragraphs raise a few ideas that deserve more attention. Here's the excerpt:

For those of us who grew up watching Bird, Magic, and Jordan, there’s an increasing dissonance between what we perceive to be dominant basketball and what actually is dominant basketball. Sometimes the two are aligned, but they seem to be increasingly divergent — and perhaps the most tragic analytical realization is that the league’s rapidly growing 3-point economy has inherently downgraded some of the sport’s most aesthetically beautiful skill sets. You can’t be Bernard King or Alex English, bobbing and weaving into space on the elbow or along the baseline, anymore. Hell, it’s hard to even be LaMarcus Aldridge or Al Jefferson. The Chris Boshes and Serge Ibakas of the world, once forever camped out in the post, now stray beyond the arc. That unassuming curved line has forever changed the NBA. For every graying Garnett, Duncan, or Kobe, lugging their 2-point jumpers toward the exit, there’s an upstart Harden or Love hanging out behind the 3-point line.

Houston thrives on the perceptual dissonance that separates traditionally great basketball from contemporarily smart basketball. While the rest of the league gradually meanders from the old way to the new way, the Rockets seem happy to exploit margins to extremes that no other team does — yet.

Cutting through the names and basketball jargon, we can summarize his point as, "Metagames matter far more than we thought." The concept of the metagame as described by Wikipedia:

In simple terms, it is the use of out-of-game information or resources to affect one's in-game decisions.

 It elaborates:

Another game-related use of Metagaming refers to operating on knowledge of the current strategic trends within a game.

While previously relegated to easily measurable and more centrally controlled games like those played with cards or various video games, metagame concepts capture the broad trend toward ever more refined world sports analytics. Any world(from touch football to the NBA) where games are repeated regularly, with a well-understood set of rules, can develop a metagame. Metagamesmanship involves finding opportunities in the set of rules in place and exploiting the conventional way the game is played to win. It is, to some extent, entrepreneurship in the Kirznerian sense. Innovative individuals see wins and points available that others either do not see, or undervalue.

Harden and the Rockets management see this. They exploit discontinuities in the game that others undervalue. 3-point shots, free throws, and shots in the paint are undervalued relative to mid-range jumpers. Moreover, their benefit is exacerbated by the fact that other teams do not play this way. Because of this, the average NBA team is more prepared than it should be to defend such midrange shots, and build their defensive schemes to do so. As such, the average NBA team will naturally be under-prepared to face an innovative team like the Rockets. 

We are staring at a brave new world of sports gamesmanship, where metagame trends matter more relative to raw player talents than ever before. The more information about players and the game is available, the value common sense, conventional wisdom and intuitive feelings have in evaluating talent. Cameras track every player movement. Strategy, rather than pure player talent, matter far more now than they did in the past. The more we know about the game, the easier it is to find entrepreneurial opportunities.

Yet, this is by no means a be-all end-all. As Billy Beane's "Moneyball" advantage faded as other teams adopted his tactics, we saw the advent of the modern stat-driven era of baseball. When talking of "eras" in sports, we are generally speaking of periods where the metagame was defined by a particular trend, where an entrepreneurial player or coach or manager finds a new strategy that changes the paradigm of the game.

Especially in sports where games are zero-sum (for every winner there is a loser), teams can do better than they otherwise would when they are entrepreneurial and exploit metagame trends, building a team that beats the most common strategy that they expect to face in a season. This is how Harden and the Rockets are succeeding this year, in the mold of innumerable metagame innovators in the past. The game is evolving, and this is the bleeding edge of the evolution.

DC: America's Great Sports Boondoggle

A great way to understand how to provide good government is to understand how certain cities fail at providing good governance in particular areas. This post will be the first in a series highlighting such examples. Today, we will dive into Washington DC’s failing relationship with professional sports.
I wish I could come up with a fitting name for the multifaceted and interconnecting series of sports-related policy nightmares that has dominated DC local politics since election day. In the last few weeks, we’ve seen multiple very important issues arise relating to sports stadiums, practice facilities, and DC’s bid for the 2024 Summer Olympics. So, what’s happening?

First, immediately after the election, the DC City Council released a 400-plus page cost-benefit analysis of a complex deal to build a new stadium for DC United (the city’s Major League Soccer franchise) and adjoining hotel. The deal, originally based around swapping city-owned land elsewhere for land in the proposed stadium footprint, has been panned by politicians, community leaders, and the press for its cost and complexity. The stadium, if built, will be the most expensive in Major League Soccer history.

At its simplest, the deal is as follows. Another  District-owned parcel of land at 1st and K streets will be traded to local electricity company PEPCO for land it owns in the stadium footprint. DC would also purchase parcels of land owned by two private parties, Mark Ein and Super Salvage. While not directly part of the deal, it is expected that DC will contract l with a to-be-determined developer to replace the Reeves Center at a site in Anacostia, leasing the space to the city. Originally, the deal included a land swap in which the DC government would trade the Franklin D. Reeves Municipal Center to real estate developer Akridge for land it owns in the stadium footprint, but this aspect has since been removed.

Confused yet? This is just to get the stadium built, saying nothing of the team that will lease it. The team is proposed to receive about $50 million in tax breaks, along with the benefits of partial public financing of the stadium in the above deal — and it gets worse. Since the report was released, public discord has grown and the troubled Reeves-Akridge land swap has been removed from the bill, with the city opting instead to offer the Reeves Center on the open market, and planning to seize the Akridge parcel via eminent domain.

Two days after the DC United report was released, rumors leaked of a possible new Washington Wizards training facility in the trendy Shaw neighborhood of Northwest DC. The facility, proposed as part of a redevelopment of a site that currently includes a school, skate park, and garden nursery. The facility would be built with funds from a new tax on Wizards tickets and concessions, so the team is effectively proposing to tax itself to pay for a new practice venue. Not content to simply sell the facility as a economic development tool or community amenity like most sports facilities, the site was sold as a means of drawing region native Kevin Durant to play for the Washington basketball team.
Outrage ensued almost immediately, largely around re-purposing what is now community space for a stadium in an area where property values are soaring and land available for redevelopment and community amenities is scarce. In response to the criticisms, Wizards owner Ted Leonsis attempted to explain the reason for building a centrally-located practice venue, complaining of lack of space and dangling a possible NBA Development League team to call the venue its home court. Leonsis doesn’t stop there, claiming that it could be used for community and charitable events. None of this placated the community, and opposition remains both widespread and nearly powerless to stop any deal that might take place.

The final cog is encompasses two inter-related parts. First is the city’s pending bid for the 2024 Summer Olympics. The other is a proposed new stadium for the Washington Redskins on the site of the current Robert F. Kennedy Memorial Stadium on the eastern edge of Capitol Hill. Since September, Redskins owner Dan Snyder has been pushing local officials hard for a new stadium in the District. He has found a friendly ear in outgoing mayor Vince Gray, who has long supported building a stadium to return the team to the city from its current home at FedEx Field in Prince George’s County.

A new downtown stadium at the RFK site would be key to any Olympic bid. Realistically, there is simply no other site in the district large enough to build a venue big enough to placate the International Olympic Committee’s demands. It seems as though the two projects are mutually-reinforcing, as the popularity of the Olympics are used to mitigate public opinion soured by the DC United deal. What’s more, the Games are being pitched as a panacea to many unrelated problems with similarly controversial solutions. For example, the proposed Olympic Village site sits atop the downtrodden DC General homeless shelter, a site whose redevelopment has languished as replacement proposals are repeatedly shot down. A new tennis facility has also been proposed in the one of the more poverty-stricken areas of southeast or northeast DC as well as an aquatics center in Arlington, Virginia. While cheap and seemingly easy compared to what must be built in some other US city to host the games, history shows that things are unlikely to go as planned, with delays, over-budget construction, and political graft. Economic benefits will be overstated, costs understated, and still more of the city’s 58-square-mile footprint will be eaten up by venues that are only used a handful of days a year.

What ties these projects together goes beyond stadiums and the teams that call them home. It is the fundamental problem of local government: trying to solve many problems with one single, large-scale project. Be it new office space for bureaucrats, a  better minor league basketball team, or  better homeless shelters, the above deals demonstrate  that attempting to achieve  social goals through sports facilities and events makes little sense. Sports provide excellent cover for increasing spending and redeveloping areas of cities that would see opposition in their absence.

The goal of sports should be providing an entertaining and valuable experience for those who participate and spectate. By politicizing the games further than absolutely necessary, we make both sports and politics worse. Examples like these show why the combination is so dangerous.

This post has been updated and adapted from a post at Unbreaking Cities.

"My Guy Stinks, Like Your Guy"

I write a monthly column for my hometown newspaper, and this month I offered my take on the 2014 election. The abridged version: Voters were frustrated enough with lying, incompetent, corrupt Democrats that they're willing to see if Republicans are no longer incompetent, irresponsible warmongers.

Responding to my column, Tom Kerner—my college roommate and now a North Carolina lawyer—sent along this comment:

It's like the old saying about how the backup quarterback is the most popular guy in town. The GOP has been named the starter, and when the offense falls apart once again, the people will clamor for the backup. The backup will go in, the offense will stall once more, and on we go. I expect this cycle to remain constant for the remainder of our lifetimes.

"Unitas as a Pittsburgh Steeler"
by Jeffrey Smith

His words should sober still-celebrating members of Team Elephant—which is a good thing. But they can lead to a jaded, cynical view of government: that one group of politicians, or one quarterback, is no better than the next, and we shouldn't expect otherwise. (To be clear, I'm not ascribing this to Tom, but rather saying that his comment can lead some people to think this way.)

This view may be comforting for someone who has grown disillusioned with a once-favored politician or quarterback ("OK, my guy does stink, but so does your guy."), but I think it's both incorrect and dangerous.

To see my point, consider not politicians, but quarterbacks. Specifically, consider a couple of recent media analyses of struggling Washington Redskins starting quarterback Robert Griffin III:

Silver calls for legalized sports betting

Betting and sports have always been related. Since the the dawn of organized sports and the advent of money, wagers have been made. Indeed, sports betting in America dates to the advent of the colonies themselves, if not earlier. I'm not going to wax poetic on the history of sports gambling, but it has a long history, and, like other activities deemed unsavory and banned, cannot be abolished by simply making it illegal. Despite this, sports betting in the US is only available in a few select locales. The relationship between professional sports and gambling, with the long history of scandals, has always been tenuous in the modern era. Indeed, the fact that a city as large as Las Vegas lacks any major professional sports teams(for now) says a great deal about the uneasy relationship. Sports leagues have long fought the expansion of sports betting outside of Nevada, fearing systemic risk widespread availability could bring.

Yet this relationship is slowly thawing, as NBA Commissioner Adam Silver's op-ed in the New York Times shows. There, Silver makes a call that sounds far more familiar coming from a drug policy reform activist than a sports figure, "legalize and regulate". Indeed, Silver seems to be channeling his inner Ethan Nadelman more than David Stern. He argues that the broad ban on sports betting outside of Nevada has only driven the gambling underground. He then goes on to argue that sports betting is not only allowed, but ubiquitous abroad, including in the UK, and that safeguards could be put in place to alleviate many of the common objections to wider availability of gambling.

Silver seems to be far more in touch with the reality of gambling's relationship with sports than any other US sports commissioner in decades. He has acknowledged that simply wishing gambling out of the world is not only impractical but dangerous. I'll end this short post with the great quote from Silver to end his, "But I believe that sports betting should be brought out of the underground and into the sunlight where it can be appropriately monitored and regulated." Indeed commissioner, indeed.