Wednesday, January 19, 2011
Capturing the Black Swan
Posted by Derek Ambrosino at 5:34amThis past weekend, I started reading Nassim Taleb’s The Black Swan. I held off on reading it for a while because I heard him speak a few times and read enough about the book to figure I had the general gist, but I received a copy as a gift last year and so, I decided to dive in. Already, I can see this book being a potential gold mine for fantasy sports ruminations. In fact, one of the fields he makes reference to early in the book—when talking about the relevance of this train of thought—is gambling, which is essentially the way I choose to approach fantasy baseball and something I’ve also been reading more about recently.
Some of the core tenets of the book aren’t exactly revolutionary at face value, but they’re the type of thoughts that become increasingly consuming the more you think about them. This is because they are nearly infinitely applicable. A main premise of Taleb’s is that the impact of difficult-to-predict, outlier type events on the arc of the world’s history is extremely profound.
The real fantasy implication in the early part of the book comes from two points. First, what we don’t know is more important than what we do know. Because we have done as much possible to account for what we do know, that information—or the resulting events there from—has very little opportunity to harm us compared to that which we don’t know.
Second, due to both an excessive reliance on what we do know and an inflated perception of the completeness of our knowledge, we both lack the imagination to conceive of and tend to underestimate the likelihood and impact of the extreme outlying events that shift paradigms do so much to shape the world – Black Swans.
Jose Bautista was a Black Swan. Black Swans emerge each year to varying degrees. As Taleb states, unpredicted highly impactful events occur more often than we expect them to and their impacts are huge. We can parse the idea of how predictable the emergence of players like Ryan Braun and Francisco Liriano were (both were indeed making mockeries of their competition in the minors), but ultimately they succeeded beyond even the wildest of expectations. The main point here is that these types of events will occur and we need to consider them within the realm of possibility—even if they’re highly unlikely.
An unknown Blue Jay jacking 54 dingers, Albert Pujols getting hurt and missing 130 games, or playing a full season and hitting .287, Mark Prior recapturing something like his 2003 form—a small number of events like these happen each year, invariably. Now, it would be beyond foolish for us to try to predict what those few absolutely inexplicable things will be and it would be even more foolish to “bet” on those types of things occurring when assembling our team. The risk is just too great. Practically speaking, what we should do is keep aware that a few of these kinds of things will happen and be open to such occurrences.
As high level fantasy players, we sometimes talk ourselves out of the reality of what is occurring on the field. I talked myself out of believing in Jose Bautista for a long time; I wanted no part of him. Yet, Bautista was doing basically unprecedented things, smacking homers seemingly every night. My reaction was to retreat deeper into my shelter of “advanced knowledge,” his further defiance of the tenets of such knowledge paradoxically reinforcing my belief that he was just that much more due for that much more drastic a regression.
Instead of looking at dramatic outliers as a way to reinforce the rules they are presently defying, perhaps we should also pause and consider whether we may be passing up the truly game-changing opportunity by trying too hard to disregard such performance. Obviously, I’m not recommending one go crazy and drop proven valuable commodities to chase an obscure player who hits three homers in five games. Also, I’m certainly not advocating that we abandon the knowledge base and empirically-based decision-making processes we’ve developed. What I am saying is that perhaps we should integrate the mere fact that inexplicable cases are bound to occur more soundly into our models of thought.
Further, from an investment standpoint, there’s no way I and so many others should have passed on the opportunity to inexpensively acquire Bautista for so long in 2010. Hindsight is 20/20 and all, but quite simply, the impact catching that Black Swan lightning in a bottle is so disproportionate to what you lose by taking a few unsuccessful lost cost shots to nab it, that it’s a good bet from a simple leverage point of view.
In a sense, I think this is a skill that really separates the handicapping sharps from the square public bettors. I’ve recently been reading more and more about professional sports gamblers and thinking about what I should incorporate into my fantasy perspective. One point that seems to also jibe with my take on some of Taleb’s writing is that in addition to thinking about playing the team, sometimes you have to think about just playing the number.
Before wrapping up, I’d like to mention one more point that Taleb makes in the early part of Black Swan. Taleb cautions us about being too secure in our knowledge about things. He implies that our tendency to try to “Platonify” an incredibly complex world often, in turn, precludes us from seeing the Black Swans. It urges us to explain them away, to ignore them because doing so protects that which we know against the uncertainty of that which we don’t know and the potential implications of the unknown on the known systems – systems we build lives, careers, institutions, and societies on.
Remember, the fantasy community is going to get many, many things wrong. In fact, there’s a good chance that none of the folks you might look to for guidance about fantasy baseball will predict a single one of the three most profound influencers of the 2011 season. But that’s perfectly fine, because the flip side of knowing your capabilities is to know your limitations. We must retain a healthy skepticism, but also continually remind ourselves not to cast as false all that doesn’t adhere to our current understandings
Derek Ambrosino aspires to one day, like Dan Quisenberry, find a delivery in his flaw, you can send him questions, comments, or suggestions at digglahhh AT yahoo DOT com.
Great article. I’m in the same position—gone through about 100 pages of The Black Swan and find it to be profound and important for many things, including how we look at baseball. To take it from fantasy to real baseball, one of the implications, it seems to me, is that teams would be better served trying to develop a larger number of players in the minors and supporting them for a longer period of time—giving the team a much better likelihood of turning up the unexpected black swan. James wrote about radically expanding the minors in his blog last week, although citing a number reasons beyond this.