I heard the title phrase once on ESPN’s Behind the Bets podcast and it really stuck with me. I can certainly relate! Any given Sunday I am quick to move on from a good win and will agonize for days over a key loss. It is a fun phase to throw around after a weeks’ action. But after years and many research hours later, that phrase now carries a new understanding for me. And for a phrase originally used as a simple punchline, it has profound wisdom.

It turns out that as humans we weigh losses twice as much as equal gains. That is, the psychological value of a win is only worth half as much as a loss…shallow highs and really deep lows. This is loss aversion and it creeps into our decision-making all the time.

For example, picture your current rank in your contest standings. If you’re satisfied with your current standing, this would be your reference point, the point at which your response to a loss will be stronger than your response to a corresponding gain. If you’re near the top of the leaderboard, the influence of loss aversion is a real threat to your ability to think clearly and make solid picks. With the prospect of losing looming large, two potential, albeit erroneous, courses of action are possible:

You press and try to make something happen, needlessly risking your current advantaged position.
Through the fog of uncertainty you avoid ripe opportunities that your level-headed competitors may exploit to your detriment.

I have fallen victim to these mistakes many times. Unfortunately, mere awareness of decision-making traps like loss aversion is not enough. This is where an algorithm can help. When in doubt, let the algorithm guide you.

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Allow me to transition to a different topic: the difference between winners and losers.

Armed with data, victory seems inevitable, my entitlement for having it. I lose perspective about the probabilistic nature of picking winners. In many cases, the difference between being on the podium and just missing out on a prize is outside the ability to forecast—that is, luck.

You can’t go for a winner all the time; sometimes you just gotta stay in the rally until you get a short ball then you can put it away.

Like life’s ebbs and flows, picking winners will have hot streaks and cool streaks. The strategy to win a season-long picking contest is to stay in the game. Be patient. Let the process work. Leverage the small edge you’ve created for yourself over time. Contests with many samples (256 games in an NFL season) with a continuity of outcomes provide greater opportunity to capitalize on your edge. Alternatively, contests like the SuperContest, with relatively few samples (85 games) and highly discrete outcomes (10% increments between 0 and 1) allow more room for luck to enter the equation.

To illustrate this, I’ve plotted a histogram of the SuperContest standings through Week 12 of the 2019 season in the figure below:

With 5 NFL weeks remaining, only 4.1% of the contestants in the SuperContest are picking at or better than 60% (which is the dark blue-shaded area)! N.B. The SuperContest will pay out the top-100 finishers (~3%). What’s the real difference between those contestants with 36-37-38 points and the leaders with 40+? In reality it’s only 1-2 single game outcomes, largely a result of luck, differentiating those “great” contestants from the leaders.

In an earlier post I casually mentioned that if you can get 60% of your ATS picks correct for an entire season, you’ll likely win your contest. This plot is evidence towards making that point.

In closing, using an algorithm and picking games systematically will put you consistently near the top of the leaderboards. Loss aversion is a real threat to sound decision-making. Be patient and use the time left in the season to leverage your edge. Don’t be discouraged by merely “great” results if you’ve just missed the podium. Losing a game doesn’t mean you were necessarily on the wrong side of the probability curve. Remember, picking NFL games is a VUCA endeavor—outcomes are variable.

Shallow Highs and Really Deep Lows