What would happen if an actuary evaluated the 2011 NFL Draft? In particular, the Atlanta Falcons big move, where they traded five picks to move from #27 overall to #6 overall. Is trading up at the cost of multiple picks, in general, advisable?
As part of my wider reading around the issues of risk-management, I read “The Black Swan: The Impact of the Highly Improbable” by Nassim Nicholas Taleb, which I highly recommend. A “black swan” is an unlikely event with significant consequences. Mr. Taleb advises seeking positive exposure to such black swans (the risk-management aspect is avoiding exposure to negative black swans). Mr. Taleb also makes the point that people, particularly “experts” in their field (and particularly actuaries!), are especially prone to great overconfidence in their predictions.
It appears to me that the NFL draft is littered with examples that show how General Managers often get it very wrong when making picks, or, more accurately, that the knowledge available to General Managers at the time they make a selection in the draft is only a small amount of what will decide whether a player will be successful in the NFL. Off the top of my head, I came up with the following examples:
- Ryan Leaf – Most predicted he’d be as good as Peyton Manning.
- Tom Brady – The black swan par excellence. Who predicted he’d be a Hall-of-Famer (and one of the best QBs ever)?
- JaMarcus Russell – Picked #1 overall, released by Oakland Raiders after 3 years.
- Reggie Bush vs. Marques Colston – Marques, a 7th round pick, was as least as good as Reggie, #2 overall and predicted by many to be the #1 pick, in their first year with the Saints.
- Vince Young – #3 overall pick, off Tennessee’s roster for 2011-12 season.
- Fill in the blank here from your favorite team ____________.
And the above does not take into account careers derailed by significant injury. To date, there have only been a few players to win the Heisman Trophy and become an NFL Hall-of-Famer. So, history would suggest that General Managers don’t have lot to go on.
The Atlanta Falcons gave up five draft picks to move up from #27 overall to #6 overall. Black swan theory, and prior history, would suggest this was a mistake. Overconfidence on the part of Falcons’ management in their scouting ability has lead them to think that the #6 overall pick will come out better than any of the five other players they could have drafted.
I’ve kept the article to general terms, avoiding questions such as whether the Falcons’ biggest need was another wide receiver. Given the analysis above, in my opinion it’s rarely worth the risk to trade up the draft at the expense of multiple picks.
Do you agree? Let me know.
Michael Solomon, FCAS, MAAA, is a consulting actuary at Merlinos & Associates.