Fantasy Football & Stock-Picking: Games of Skill or Games of Chance?

Every fall, an illness sweeps through America. Like many epidemics, it affects many people — if not you, then most likely someone you know. Its symptoms are nausea, anxiety, anger, and despair. Last season it was primarily caused by Le’Veon Bell. This fall, it's being triggered by such factors as Andrew Luck and Melvin Gordon (with the Ezekiel Elliott strand recently being cured). I am not certain of the scientific name, but I believe it is called Ohnomytopfantasypick Isn’tgoingtoplay.

WHAT IS FANTASY FOOTBALL?

For those unfamiliar with Fantasy Football (or “fantasy sports” in general), it’s when fans (and not-fans) choose real professional players to be on their “teams”… with those fantasy “teams” being matched up against each other each week, with the results based on the performance of the real players in the games they actually play that week.

For example, if Steelers’ receiver JuJu Smith-Schuster catches 3 touchdown passes in the actual Week 1 game this Sunday against the Patriots, then, other than making me happy as a Steelers fan, it will also make me happy because JuJu is on my “fantasy” team — and his actual touchdowns will translate to points for my fantasy team in my Week 1 matchup against someone who it turns out doesn’t have any Patriots’ players on his/her fantasy team.

It may sound confusing (and weird) to anyone who’s never played fantasy sports — especially since fans of a particular team will often have the odd emotional dichotomy of rooting for their favorite team in real life, while simultaneously rooting for opposing real players whom they have on their fantasy teams.

But fantasy sports are extremely popular — not only because they allow ordinary people to compete vicariously through the talents of actual professional athletes, but because of the social aspect of fantasy leagues, comprised of friends, family, colleagues, and perhaps strangers.

GAMES OF SKILL VS. GAMES OF CHANCE

Let’s start with an easy one — Roger Federer is a better tennis player than LeBron James, and LeBron is a better basketball player than Roger. Put them both out on their respective courts right now, and Roger would win 10 out 10 tennis matches, and LeBron would win 10 out of 10 games of 1 on 1 basketball. No doubt about it.

Maybe if Roger or LeBron had spent their entire lives practicing the other sport, they could give more of a challenge, but as is, they are both too skilled in their selected sport, and not in the other. There is some luck as far as who their opponents are in particular matches/games (and in as far as teammates, in LeBron’s case), but it’s pretty clear that tennis and basketball are both objectively games of skill.. as are chess, gymnastics (scoring discretion aside), MMA, competitive hot dog eating, and many others.

On the flip side, if Roger and LeBron were to play a game of, say, rock-paper-scissors (RPS), 1 on 1 roulette, or Candyland — one would expect the results to be 50/50 no matter how much one of them practiced. And if they had practiced RPS their whole lives, you or I could still go out there and take them on in RPS and have a 50% shot of winning. That is, RPS, roulette, and Candyland are purely games of chance (I’m ignoring things such as RPS “tells”, weighted roulette wheels, and Candyland deck-stacking — a kid favorite).

GAMES OF SKILL AND CHANCE

But then there are the games that fall somewhere in the middle. With poker, you draw random cards, as does every other player. Obviously, what you do with those cards is based primarily on skill (including ability to intuit probabilities at high speed), but the cards you’re dealt (and draw) are not under your control. That’s different than the the idea of opponents and teammates affecting the chances of winning — in the case of poker, an actual component of the game (e.g. the cards drawn) is a subject of chance. It’s as if, before a match, Federer and his opponent have to draw straws to determine what size racket each will use.

Other card games and dice games often fall into this category as well… the luck of the draw/roll, combined with the skill to know what to do with the randomly resulting circumstances. For many, the combination of the adrenaline rush of getting a good hand or a good roll, and bluffing when a hand may not be so great, is what feeds the enjoyment (and occasional despair) of these games… and sometimes allows novices to defeat experienced players, at least in small doses. You may never beat LeBron in a game of 1 on 1 on a basketball court, but you could probably win a few hands of poker against Daniel Negreanu, if great cards fall in your lap.

WHAT ABOUT FANTASY FOOTBALL?

In fantasy football, each “player” gets to choose his/her team at the beginning of the season — deciding which players he/she thinks will perform the best in the coming season, at least as far as those translate to fantasy “points”. So, picking those fantasy “players” seems to take some skill.

But then, once the season starts, while the fantasy “players” can trade the real players on their fantasy teams to different fantasy “players” for their real players (are you following that?), the actual performance of the real players in real games is completely out of their control — and thus, once the fantasy “lineups” are set for that week, the number of points to which those lineups translate are more akin to a dice roll.

Moreover, the drafting of teams themselves has certain elements of “luck”. One of those, is exemplified by an actual Luck… Andrew Luck. The superstar quarterback was also a fantasy superstar last year, and for those fantasy leagues that had their drafts a little early (or allow fantasy “players” to carry over real players from year to year), the hope that Luck might return from an ankle injury in time to generate meaningful fantasy points this year would cause people to draft (or keep) him as their starting fantasy quarterback. But as Luck announced a week ago that his body had finally taken too much damage, and that he’s retiring, that left fantasy players to have to quickly replace him. That is, real world Luck represented an element of luck in the fantasy analog.

In addition, there are pre-season “rankings” of the projection of fantasy-point “performance” for real players, and many people (including non-fans) set their draft to “auto-pick” the highest-ranked available player… which is analogous to picking an NCAA tournament bracket based only on choosing higher seeds in each game, or a blackjack player playing by a strict rule of always holding/hitting anything above/atorbelow X. Often, those auto-picked teams end up out-performing teams drafted by “skilled” fantasy players who sweat over their choices in the fantasy draft.

AND WHAT ABOUT STOCK PICKING?

When people pick what stocks to buy, absent insider information, they’re basing their choices on historical (price and/or fundamental) information and an instinct about how they expect those stocks to perform in the future. Occasionally, people use indexes (similar to auto-draft) or other rules-based approaches (e.g. always buy/sell when P/E is above/below a certain level). But generally, how a stock actually performs is outside the control of the stock-owner, and thus the subject of chance.

In some cases, there could be the analog of a player retiring / sitting out the season — I mean, is the revelation of accounting frauds at Enron any different than Le’Veon Bell sitting out the 2018 season? In both cases, those who “acquired” Enron/Le’Veon though they had a blue-chip, solid pick, only to see the value of that pick decline due to circumstances completely out of the control of those who had “picked” them.

Even in regular weekly performance, the gyrations of stock price and players’ on-field performance are completely out of the control of the stock-holder / fantasy player.

A MIX OF CHANCE AND SKILL

All that said, there is indeed skill involved in fantasy football… and in stock-picking. Even those who use the “top-rated” auto-pick method for fantasy football need to track players week-to-week, not only for performance, but for injury, off-weeks, etc., to have the best chance at success. Those mid-season decisions require skill… even if not the same level of skill required by the real players to play the real games.

And if I just “buy and hold” a stock portfolio, and don’t track the stock’s performance (and any “injuries” in the real company), then I’m not setting myself up best for success. I can defer those decisions to someone who manages my fantasy team (or stock portfolio), but someone needs to be paying attention. And let's hope that person has the skill and experience to make some good decisions.

IN CONCLUSION

So, if you’re trying to decide whether to draft/keep or pass on Melvin Gordon, I feel for you. Right now, he’s holding out for a new contract, and you have absolutely no control over whether he and the Chargers can come to terms, or if he’ll be traded… or if he’ll sit out the season. You also don’t know how Tesla’s next quarter earnings will be. From your perspective, those are elements of chance. But if you do pick right, your fantasy team and stock earnings will likely help you get over your case of Ohnomytopfantasypick Isn’tgoingtoplay.

Thanks for reading! Feel free to email me your thoughts.