Poker, Cognitive Bias and the Metaphysics of Luck

Amidst a poker game last night, I posited the following:

Every poker player has worse than average luck.

Call it the anti-Lake Wobegon Effect (aLWE).

This claim, at first glance, is entirely absurd.  Treating poker as a zero-sum game, one player’s good luck must be offset by another player’s bad luck, such that not all players can possibly have below average luck.  We learn this in kindergarten, and then again in advanced college mathematics.  So why am I trying to argue something that is patently absurd?  Below I will argue both why it is wise to believe aLWE, and also reasons why it may be true.

Sweeping the NFL Labor Dispute Under the Rug

Though I’m still somewhat confused as to public-sector unions in Wisconsin, I do have some strong opinions on how policy-makers should tackle the NFL labor dispute.  Step 1 is to repeal the NFL’s anti-trust exemption.  Step 2, use anti-trust law to break the NFL into 8 separate leagues, based on existing divisions.  Allow the 8 leagues to co-ordinate in developing schedules, including play-offs, but don’t allow them to collude on questions of expansion and contraction.  Step 3, use anti-trust law to prevent NFL teams from owning football stadiums.  Step 4, ban public funding of football stadiums.  Step 5, repeat steps 1-4 for the other professional sports leagues.

The result of these changes, I believe, would be thus:  The number of NFL teams would increase from 32, to somewhere between 50 and 100.  Major markets like New York,  LA and Chicago would grow from 3 to ~10 teams between them; many minor markets like Portland and Austin would grow from zero to one team; and middle market teams like Dallas, Washington and Denver would grow from 1 to 2 teams, which would share stadiums.  Individual leagues would relax ownership rules, in order to attract new owners.  Existing team values would drop.  Player salaries would drop.  Ticket prices would drop.  Employment would rise.  Quality of play would initially drop, but most fans wouldn’t notice.  Over time, innovation–both in business management and football strategy–would increase.

This is, of course, a fairly drastic policy change.  It would upset a number of powerful lobbies, including NFL owners, NFL players, the NCAA–which would face increased competitive pressure, and traditionalist sports fans–who want to compare Peyton Manning to Fran Tarkenton, even though they play highly different games.  However, the policy consequences listed above are both fiscally prudent (increasing employment, ending subsidies to sports teams) and highly progressive (transferring wealth from rich players and owners to poorer unemployed athletes and fans).  That is, these policy changes should be broadly supported by the bases of both major political parties.  And while I don’t expect any of these changes to occur soon–any serious threat of Step 1 alone would lead to a quick resolution of the current negotiation–I do expect them to happen eventually.

The Pragmatic Value of Models

Earlier I posted about my preference for simultaneously accepting multiple models that conflict with each other, and applying them to different situations.  One reason to do so is that one model may be more accurate in particular applications.  This occurs in both cosmology and social science.  A second reason to do so is that, independent of accuracy, some models have greater pragmatic value in particular applications–that is, they’re more useful even if less accurate.

Consider two theories of basketball.  Theory A says that in any basketball game, the better team–the team that has better talent, strategy, and work-ethic–will always win.  Theory B says that while talent, strategy and work-ethic are important, luck is also a factor; thus the best team usually wins, but sometimes loses, at no fault of their own.  Both theories are internally consistent, and consistent with observed phenomena, though they conflict with each other.  In deciding which model to use, I find I prefer Theory A when I’m playing basketball, and Theory B when I’m gambling on basketball, regardless of which model I believe to be more accurate.  I consider the ability to accept the viability both models, given their dissonance, and to casually switch between them, to be a fairly useful skill.  Even though I know that one theory must be wrong, Theory A makes me a better baller, and Theory B makes me a better gambler, so I benefit from applying both at different times.

I had similar thoughts when reading Why I am Not’s post on charity.  The author finds something fishy with the economics of charity auctions, and proposes they may less than perfectly altruistic.  So there are two models: first, that charity auctions are highly altruistic, and that attendees ought to celebrate themselves; second, that charity auction attendees are stuck-up self-congratulating jerks.  Regardless of the accuracy of these models, I’d recommend using the second in pithy blog posts, while begrudgingly sticking to the first while attending charity auctions.  Even if you believe charity auctions are wasteful, hiding your true feelings has social utility, and will keep you from coming across as weird.

Obscenely Rich and Obscenely Richer

As the National Football League enters lockout due to team owners’ and players’ failure to agree upon a collective bargaining agreement, millionaires and billionaires  plead their case that they each deserve a larger share of the revenue generated by the league.  Considering that 40% of American households earn less than $40k per year–less than 1/8 of the NFL’s minimum salary, and less than 1/30 of the NFL’s average salary–and that NFL owners are far wealthier than NFL players, it’s really easy to write off both sides as selfish jerks whining about how rough they have it.

Meanwhile, across the U.S., unions are battling state governments over the value of their labor.  Considering that 40% of the world population earns less that $2 per day (my rough calculation, based on here and here)–less than 1/60 of the median union wage, it’s really easy to write off both sides as selfish jerks whining about how rough they have it.