The NFL Draft is one of the great dramas in sports — a primetime event, like Sunday night football, with the added excitement that fans from every team stand to gain something that night. A first-round pick means landing one of the top American college prospects, perhaps a much-needed new linebacker, a marquee quarterback, or a big name that gets you excited about the coming fall.
Excited, that is, unless you’re a fan of the New England Patriots. Just days ago, Pats fans waited eagerly on draft night only to watch, deflated, as head coach Bill Belichick traded away the team’s first-round draft pick in exchange for a raft of lesser picks from later rounds. There would be no big name for the Patriots this year, no star prospect conjuring up dreams of another Super Bowl run. Instead, just like they’ve done in past years, the Pats traded down, leaving many fans grousing on talk radio.
Belichick’s strategy, however, has a strong endorsement from at least one surprising place: the world of high-level economics. A research paper published in March by two university economists suggests he may be taking exactly the right approach.
The economists are Cade Massey, currently at the Wharton School of the University of Pennsylvania, and Richard H. Thaler, at the University of Chicago’s Booth School of Business. They spent years analyzing the NFL Draft and the decisions teams make, and asking one direct question: Are first-round picks really worth it?
Given the high salary that a first-round pick is able to command and the inherent—even wild—uncertainty about what he will really accomplish on the field, Massey and Thaler suspected from the start that first-round picks were overvalued. When they ran the numbers, the problem was even more extreme than they realized. “We had no idea of the magnitude,” Thaler said. “In fact, the magnitude of it is still kind of shocking.”
According to their research, published in March in the journal Management Science, teams significantly overvalue first-round picks, paying too much to draft one player over another. They found that second-round NFL Draft picks are, on average, 15 percent more valuable, on the dollar, than first-round selections. And while Massey and Thaler hesitate to assign exact values to exact draft slots — there are simply too many variables in any given draft, they say — some picks early in the second round offer nearly 25 percent more value.
Massey and Thaler analyzed more than a decade of draft results to make these conclusions, examining the value of thousands of players. And still, Thaler notes, many NFL executives are skeptical. “Teams don’t seem to listen to the data,” Thaler noted. “Except Belichick.”
What’s at work when teams overvalue players, they say, isn’t just a football mistake, but an error all of us make. The problem, they explain, is that people, NFL executives included, have a tendency to become infatuated with a certain product—a job candidate, an investment, or a school for their children—and convince themselves that this object is somehow unique and therefore worthy of desire, pursuit, and, at times, big money.
“Once you’ve identified a favorite, once you’ve fallen in love with whatever that option is—whether it’s a movie, or a theater, or a house, or a partner, or whatever—you don’t want to think about it as a statistic,” Massey said. “Some people think it feels wrong to reason about it statistically. We want to think about it as a unique thing.”
As a behavioral economist, Thaler takes a special interest in the psychology that can lead otherwise reasonable people to make irrational decisions. And in 1999, he realized he might have a perfect case study on his hands.
That year, Mike Ditka, the great player and coach who was then head coach of the New Orleans Saints, sent a whopping eight draft picks to the Washington Redskins in order to get an early first-round pick and select running back Ricky Williams.
Ditka was unapologetic about the move. “We will see who gets the last laugh,” he said not long after the draft. If anyone knew football, it was Ditka. But Thaler disagreed with the move from the start, believing that even a great running back couldn’t be worth the steep price that Ditka paid. “I felt it was idiotic,” he said. “Obviously, he had fallen in love with Ricky Williams.”
Massey and Thaler, with their hypothesis in mind, set out to examine whether Ditka, and other NFL executives, were making the right call when they gambled big on top draft picks. They also saw the draft as a petri dish for a study on human decision-making. Here were deeply knowledgeable experts, making high-stakes decisions with large financial ramifications. “We know all the different players that a team is choosing from. So we know their option set,” Massey said. “And then—and this is really unusual—we can observe what these guys do down the road. We know how they perform long-term.”
Massey and Thaler began by assigning a performance value to players drafted between 1991 and 2001 who remained in the league six to eight years later. They used the salaries of these veteran players to document how much the league valued the performance of, say, a starting quarterback or a second-string defensive lineman. They then applied these performance values to players drafted between 1994 and 2008, looked at how much the players were paid, and then calculated each player’s “surplus”—basically, a kind of value for money. The results showed that players even as late as the third round had more “surplus,” on average, than the number one draft pick. The top picks often performed well, but teams simply paid them too much for what they did. As the paper puts it: “In paying a steep price to trade up, teams are paying a lot to acquire a pick that is worth less than the ones they are giving up.”
When Massey and Thaler look at young football players, they see a landscape of uncertainty: There’s the risk of injury, a young man’s unknown ability to handle fame and money, and questions about how he’ll adapt to the far greater challenges of the professional game. “They add up,” Massey said. “They make it really hard to forecast what is going to happen.”
When they look at football executives, though, they see unwarranted certainty. “Decision makers often know less than they think they know,” they wrote in the paper, swayed by falling in love with one player or valuing their own perceptions over the data.
Peter Klibanoff, an associate professor of managerial economics and decision sciences at the Kellogg School of Management at Northwestern University, said that conclusion reveals something almost fundamentally human. “We attach too much importance to a small number of observations,” Klibanoff said, over-emphasizing our own personal experience relative to the wealth of information before us. “The human tendency,” he explained, “is to think your intuition is adding more than it really does.”
That tendency can lead to what economists call “non-regressive predictions”—predictions that ignore probabilities, evidence, and statistical realities and instead put too much faith in limited data or observations. Once people are aware of that tendency, Klibanoff said, they can try to compensate for it, tempering their optimism—and tendency to overvalue—whether they’re making an investment or hiring a job candidate. At any rate, he says, “that’s the hope.”
Thaler and Massey say that since their findings first circulated in a working paper back in 2005, about five teams have reached out to them, at times paying for their insight and analysis. (The pair won’t disclose which teams have contacted them.) But the advice comes too late for Mike Ditka. He was fired one season after trading up for Ricky Williams back in 1999—a move that Massey says he would never have made.
If Massey had a top pick in the draft, he knows exactly what he’d do with it. “I’d be having a sale,” he said.