McCoy: “Mr. Spock, remind me to tell you that I’m sick and tired of your logic.

Spock: “That is a most illogical attitude.”

 

What is Utility?

IF you believe that this article might improve your understanding of sports, OR IF you believe you might enjoy this article, THEN you will continue to read this article.

IF you do not believe this article will help you think about your approach to sports, AND IF you do not think you will enjoy this article, THEN goodbye.

By continuing to read this article, you have made a prediction about your expected utility, which can be thought of as the value that this article will give you. The theory of utility maximization simply states that if you are sane, then you are acting in order to maximize utility.

I’ll start with simple examples of how utility maximization functions as the backbone of strategy in sports and I’ll work my way up to Moneyball.

Consider fantasy football. You are probably aware of the fact that drafting a quarterback is more important than drafting a kicker (unless you’re Taco from The League). This is another way of stating that a fantasy quarterback’s utility is greater than a fantasy kicker’s utility. Simple.

From an NFL team’s perspective, the same utility evaluation is true: every NFL team agrees that the quarterback has more utility than a kicker. The evidence is clear: team’s are paying their starting kickers less than one tenth of the money that they pay their starting quarterbacks.

So, from a sports team’s perspective, a contract represents the expected utility that a player will provide. Capeesh?

If you answered capeesh, then you understand the logic of Moneyball.

According to the moneyball approach, a player can be assigned a numerical “value”, or utility, based on their past statistics. Take a free agent in baseball, whose statistics from last year are being used to structure this coming year’s contract. Each home run he hit counts for X point of utility, his on base percentage counts for Y points of utility, and so on. The greater the expected utility, the more money that player is worth to a team.

So IF you add up all of a player’s value based on a mathematical model, (say: 30 homeruns = 2 units of utility, .350 O.B.P counts for three units of utility, and so forth), then you can arrive at the overall utility evaluation of a player.

The next step is factoring in the limits of your budget. In both economics and sports management, the amount of money you have (your budget) is your constraint. THE PRIMARY GOAL of a general manager in sports is to maximize your roster’s utility. THIS IS THE FOUNDATION OF DAILY FANTASY GAMES: how do you maximize your expected utility given your budget.

The hard part is predicting which variables have the most influence on utility. For instance, investment firms are continuously creating new metrics to measure the value of stock prices. They evolved from the days of simple PE ratios. Creating new equations that assess the value of stock prices is the section of economic theory that truly sparks creativity. The same is true for creating new equations that assess utility in sports.

“Even if it the theory of utility maximization helps some rich pricks predict economic events, it can’t help people predict sports” says the skeptic. Here’s why this skeptic, for lack of a better euphemism, is illogical and why paralleling economics and sports is logical.

When you invest in the stock market, you have a clear goal: to make money. In economics, the common goal of economic players is profit. To be considered rational in an economic sense, means that you want to increase your profit.

This is the foundation of utility maximization. It’s pretty straightforward and directly parallels sports.

When you invest your time or money into a sports team, whether you are watching the Packers or your players on your fantasy team, you want your team to win. In sports, the common goal of economic players is winning championships (just as profit was the goal in economics). To be considered rational in a sports sense, means that you want your team to win the game.

Imagine that you can invest in only one stock. Stock A has expected annual returns of 50%, and stock B has expected annual returns of 55%. If we were impatient and only had researched stock A, we might automatically seek to capture the seemingly immense utility. YET, stock A is not a good investment relative to the market.

When we consider a player’s value, or their utility, we should always think of their value relative to the utility of other players. Even though Aaron Rodgers is the reigning MVP of the NFL, and has consistently been one of the five best quarterbacks in the league for the past half dozen seasons, he WILL NOT be the first pick in many fantasy football drafts. This is because results have shown that running backs are relatively more important.

Capturing relative value arises when you can identify a hidden trend.

At heart of making a quality prediction is to use a measure that other people are overlooking. During the original Moneyball years for instance, statisticians in the Oakland A’s organization found that on base percentage is more indicative of success compared to batting average.

The key to identifying successful variables that have predictive validity (maybe running backs have the most fantasy football utility when their quarterback is awful) is to look at past results. Were the best running backs from last year paired with quarterbacks with low total QBR’s or was your hypothesis incorrect? Though many people see hypothesis testing as a mundane affair, it is the only tangible evidence to help ourselves identify our own patterns of bias.

From a fantasy perspective, the most significant take away is this: search for a variable that predicts utility THAT IS BEING OVERLOOKED by your competitors. Relative to their competition, the Oakland Athletics (pioneers of moneyball) realized that O.B.P wasn’t being weighted correctly by other MLB teams. The A’s identified a variable that RELATIVELY increased their utility. Perhaps other players in your fantasy are RELATIVELY undervaluing tight ends. The only way to know for sure is to look to the past, or are relatively overvaluing players on the Packers.

The point is that to become the best competitive sports fan, or to make the most accurate projections, utilizing the scientific method is crucial. This means not only hypothesis building, but hypothesis testing.

The point of this article is not to tell you exactly how to predict, but rather, is a guidebook for understanding how to make scientific and comprehensive predictions about your fantasy sports team, daily fantasy sports bets, and such. I want you to realize that we often learn the most from unsuccessful predictions, and can often learn the most from looking at historical data.

IF you play any fantasy sports, or fill out March Madness brackets, or bet on sports, THEN you engage in activities called fan sports. This just means that your utility as a fan fluctuates based on how successful your predictions are. When your team wins, or when your predictions are successful, it’s more enjoyable than the alternative.

Engaging in fan sports simply means that YOU THE INDIVIDUAL CAN WIN something, whether it be pride that you won a fantasy football league or a fifty-dollar sum from winning a daily fantasy league. I want to increase your utility. I want to help you win more often.

So IF you engage in fan sports, THEN increasing your knowledge is the key to winning more often, which is the same as increasing utility.

In fact, we can begin by realizing that most decisions that you make in your life attempt to answer the question “which option will maximize my utility,” whether it is the decision to eat or forego breakfast, or the decision to spend or invest money, your assessment is based on what you expect to gain in the future. Your current decision is inherently tied to the predictions you make, which in turn determines your utility.

Summary of how to enjoy sports to the fullest: Make many predictions about which variables are relevant (ex. Rookies are undervalued by people in my fantasy league), test your predictions by assessing past information (look at how top rated rookies performed in past years), and study the results of your experiments (is there objective proof that supports my hypothesis?). That’s a rational and scientific approach to winning.

For the Fan who Enjoys using their Mind

 

Some people despise thinking.

For instance, Buzzfeed’s sports writing team specifically tailors its content to people who believe that they derive utility by reading mindless articles about a string of facts that are thrown together and happen to land on the same page. My guess is that most people read buzzfeed articles in the same way that they daydream: purely as a means to distract themselves.

21 Reasons Steph And Ayesha Curry Should Be Your Relationship Goals

What if you happen to derive utility from thinking though, and actually find it more enjoyable to read about well thought out opinions rather than celebrity gossip or copy and pasted Wikipedia facts?

If you enjoy articles about Wisconsin sports for instance, then if you are a rational person who wants to maximize your utility, you should find a website that dedicates all of its resources to producing daily content tailored to your unique interests as a Wisconsinite sports fan. That’s a rational decision that will fulfill your goal. That’s sconniesportstalk.com.

Other than the irrelevant fact that I write for this website, this is the reason that I check sconniesports.com several times each day: it’s content that is taiolored to my “utility equation”. It’s op-eds from people who share my passion for sports journalism and who differ in their areas of expertise. It’s specialization. By keeping sconniesportstalk.com as a tab that I check daily, I am investing in my knowledge of sports rather than spending (wasting) time distracting myself. Shameless promotion? Perhaps. Logical extension of this article? Most definitely.

We’ve only laid the Foundation: Bias and Beyond

 

Here’s where it gets really interesting from a betting and fantasy sports perspective: when people aren’t behaving and predicting rationally, you can systematically exploit their bias. Is there a way to tell when someone is biased, meaning that their utility equation is not in line with a normal utility equation? My next article will explain how to beat your competition by understanding their biased, and thus irrational thought patterns.

The point of this string of articles is to explain three extremely important concepts of Economics, each of which help you become a more intelligible fan. I showed of how utility maximization relates to participating in fan sports. In the next article, I’ll explain how understanding the foundation of behavioral economics can improve your success with sports betting, and how Nash equilibrium and game theory can improve coaching strategy.