Most popular posts
- What makes great boards great
- The fate of control
- March Madness and the availability heuristic
- When business promotes honesty
- Due diligence: mine, yours, and ours
- Alligator Alley and the Flagler (?!) Dolphins
- Untangling skill and luck in sports
- The Southeastern Growth Corridors
- Dead cats and iterative collaboration
- Empirical evidence: power corrupts?
- A startup culture poses unique ethical challenges
- Warren Buffett and after-tax returns
- Is the secret to national prosperity large corporations or start-ups?
- This is the disclosure gap worrying the SEC?
- "We challenged the dogma, and it was incorrect"
- Our column in the Tampa Bay Business Journal
- Our letter in the Wall Street Journal
Other sites we recommend
March Madness and the availability heuristic
Decision making is a common theme here at NVSE. We’ve written about good board decisions, compared regulators’ decisions to a frisbee-catching dog, printed the suggestion that Mona Lisa was more lucky than good, and included books in The Library in St.Pete on how the design of the decision-making process affects the decision.
We’ve also covered common forms of cognitive bias that can undermine decision making. Managers may over-rely on common sense, find it easier to rationalize than to be rational, and aren’t always conscious of how they’re making decisions. And now, in honor of the season, we add the “availability heuristic” to that list.
In this particular instance, however, it sounds as though it might actually be more of a reliable bellwether than a problematic bias.
In Method to the Madness Peter Keating in ESPN the Magazine explains “why NBA GMs should go mad for the breakout stars of March.”
NBA teams scout hundreds of players across the country, tracking their every move for months on end, and put dozens of prospects through extensive workouts. Yet when it comes to draft night, clubs routinely rely on the same measure the rest of the country uses: NBA GMs, it turns out, favor players who had surprising success in the postseason. And the even bigger shocker? They’re right to do so.
Economists Casey Ichniowski of Columbia and Anne Preston of Haverford studied March Madness because they wanted to investigate whether employers often overweigh recent and vivid information when making decisions. Earlier research had shown that when we make judgments, we rely on data that’s accessible — the quickest and easiest stuff to gather — even when we know it’s important to be objective. Social scientists call this the “availability heuristic,” and it explains why Americans wrongly believe tornadoes kill more people than asthma: A spectacular catastrophe is easier to recall, so we overestimate its likelihood…
On average, a player who scores four points per game above expectations on a team that wins one more game than projected in the tournament will boost his draft position by 4.7 slots, according to Ichniowski and Preston. Now, here’s the thing: Players who get March Madness bumps deserve them. Ichniowski and Preston also examined what happened to players after their draft days… In every case, the group that got draft boosts from the NCAA tournament played better than those who didn’t. If anything, teams undervalue March Madness as a predictor of future success and stardom.
I usually repeat “sample size, sample size, sample size” about as often as and in the same tone that Jan Brady wailed “Marcia, Marcia, Marcia,” so I was shocked by these results. For most players, March Madness lasts only a game or two, yet it sends a signal powerful enough to last entire careers.
“I’m thinking of showing my sports class a clip of Michael Jordan beating the Cavaliers and asking if you could have ever predicted this, so that maybe you take MJ at No. 1 instead of No. 3,” Ichniowski says. “Then I’d like to show his NCAA shot [winning the national championship for North Carolina] and move to the question of how much to weight March Madness performance.” The answer: At least as much as NBA GMs do now. The NCAA tournament, with its pressure-packed contests featuring the best college players in the country in front of gigantic audiences, is truly a meaningful simulation of NBA conditions.