By DAVID MOON, Moon Capital
December 2, 2007
Every fall, a friend of mine
wanders outside his normal area of considerable expertise and suggests that
football coaches are missing an obvious opportunity to significantly increase
their odds of winning games. It is easy to dismiss his rants since, as a New
York Giants fan, he obviously couldn't know much about the
His thesis is built on a study by University of California at Berkeley economist David Romer. The paper,
published in the Journal of Political Economy, concluded that NFL teams' choices
on fourth down significantly decrease their chances of winning. He goes into
great detail about down, distance and field position, but Dr. Romer's general
finding is that teams kick field goals and punt way too often.
In preparation for the SEC Championship game yesterday, I finally
sat down and read the study.
An academic statistical study on football, complete with
T-statistics, confidence intervals and all sorts of other professorial numbers
is a unique read. I won't go into the details, but I do have a confession to
It makes an awful lot of sense.
Here is one anecdotal situation from the paper.
Assume a team faces fourth-and-two on its opponent's two-yard line
early in the game. If they kick a field goal, the odds are almost 100 percent
that they will score three points. If they try for a touchdown, they have about
a three-sevenths chance of scoring seven points. Therefore, each decision has
the same expected value in terms of the number of points it will produce.
Yet if the team goes for it on fourth down and fails, its opponent
will receive the ball on its own two- or one-yard line, as opposed to receiving
a kickoff following a successful field goal attempt. If the odds are that you
are going to score the same number of points (3) over the course of a season
regardless of which decision you choose, why doesn't every coach choose the
course of action that, in the event of failure, would leave the opponent in
worse field position?
Because they're afraid it would make them look
Here's a different and obviously much less important question: Why
don't investors buy attractive stocks after significant, irrational price
declines? For the same reason: They're afraid it might make them look
It happens all the time. Analysts make positive comments about a
stock's valuation, then finish with, 'But we don't recommend purchase until the
price begins to show some strength.' In other words, they're afraid of looking
Professional fund managers proclaim that their goal is to make
money. But their actions don't always support that claim. Like sheep,
institutions regularly buy the same stocks or industry groups simply because
those stocks are in a particular index or because everyone else is ' even if
those stocks are grossly overvalued.
And they regularly ignore attractive stocks simply because they
are out of favor. But being out of favor is often what makes the price
attractive in the first place.
They don't mind being wrong, as long as everyone else is wrong.
That's the safety-in-numbers fallacy. They aren't as concerned with being right
as they are with not being alone.
Especially on fourth down.
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).