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April 24, 2014 posted by Patrick DiCaprio

Fantasy Baseball Tips From a Nobel Prize Winner

Fantasy Baseball Tips From a Nobel Prize Winner
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As part of my “real” job I gave a seminar a few years ago on negotiating, using some of the ideas developed in “prospect theory,” for which Daniel Kahneman won the Nobel Prize. Prospect theory is an economic theory that describes the way people make judgments when the outcomes are known. Unlike traditional microeconomic theory, one of the bedrock principles of prospect theory is that people make decisions not based on the actual final outcome but based on the potential value of losses and gains.

An easy way to see this in practice is to try to trade for a young up-and-comer in fantasy baseball. Though his expected value might be $5 good luck trading a $5 player for him—the price will be higher because of the potential value. And the same is true of losses.

Another unexpected outcome of prospect theory is that people value losses and gains relatively, that is to say, as compared to their peers. This is another deviation from traditional economic theory. We do not value $1,000 absolutely. A lot of how we value it comes from other people and the method by which we got that $1,000.

There is a lot more to it that is well beyond the purposes of this article. I encourage anyone interested to read up on it.

Earlier this year my company sent me to a negotiation seminar run by Kahneman with only 80 attendees. It was mostly other attorneys and we engaged in negotiating exercises. I can say without question that most fantasy baseball players I know are far better negotiators than the attorneys I dealt with, some of whom were Vice Presidents or higher. I could write a paper on that, but most of it can be explained by a lack of ego on the part of fantasy players.

It was a fantastic experience, and I cannot resist applying the lessons learned to fantasy baseball trading. So, here are some of the ideas developed as applied to fantasy baseball.

Make fair opening offers- The worst tactic anyone in a negotiation of any kind is to make lowball opening offers. This was clearly demonstrated in an exercise in game theory called the Ultimatum Game, which I have written about before and conducted myself. Many fantasy players are good at this, but many are not. Just yesterday I inquired about Trevor Plouffe and was met with a demand of Carlos Beltran.

If your intent is to get a deal done then making a lowball starting offer is easily the biggest mistake, and you will incur damage to your reputation. This was one area where the attorneys I met did a terrible job, but fantasy players as a whole do not.

Negotiate on the facts – This is another area that fantasy players beat my attorney colleagues. After you get to the starting offer a negotiation should not become a “dance” to see just how much extra value you can eke out. People who do this “dance” fail to put themselves in their opponents’ shoes, the kiss of death in a negotiation. Saying “I think I am giving up too much and so do not want to deal Joe Blow” is bad negotiation. Why would your opponent care that you are giving up too much?

A far better way to continue the negotiation is to come up with some actual facts to support your argument. Look at the standings, or your team stats or any other data and use facts. Instead of saying “I don’t think the player you want is worth that much” say “I cannot deal him because I will lose x points in a category and John Doe will catch me in that category.”

I once had a boss who told a colleague that was leaving the firm for more money that the new firm was “overvaluing him.” To paraphrase Chief Wiggum, that was some nice negotiating there, Lou.

Don’t make too many offers- This is one area where fantasy owners can greatly improve. If you are negotiating on facts then it should be clear that you cannot keep changing your offers and demands. If you follow the two precepts above you are already a) making a fair offer and b) using a factual basis for the offer as opposed to “this is the cheapest I can get away with.” So, if those two items are true then your offer should be stuck to and you should hold firm. That is not to say you make or accept no counter offers of course, but only that if your proposed deal is fair then there should not be that much to discuss.

So what do you do if you get no traction? Next step ….

Always have a BATNA – What is a BATNA? It is a Best Alternative To a Negotiated Agreement. It is your fall back position. Many people I deal with in fantasy get this wrong also but again they do better than most attorneys I know. Your BATNA should not be “I will do nothing.” For example instead of sending out trade offers to everyone in your league (which will be ignored), put in a FAAB bid on an alternative to the player you are seeking, such as Plouffe in my case. And then reach out to another owner and so you now have two BATNAs.

Lastly, do not keep many secrets- This was a point driven home to me in one of the exercises I did with Kahneman that I failed. We tend to think of information in terms of advantage; “the more information I have the more my advantage is over my opponent and the better deal I will negotiate” is what we think.

And for the most part this is wrong.

There may be very good reason to not disclose the faults or negatives in your position, but in fantasy keep in mind that they will be known to your opponents since the standings and rosters are there for all to see. Instead, be up front about your goals and what you want. You are not trying to swindle your opponent, you are trying to come to a deal that helps both of you, and in the process are asking for his help. That requires some trust and the easiest way to build trust is to give trust.

Con men are called confidence men not because they inspire and take your confidence; it is that they give you theirs, as stated in the great movie House of Games. Here we have a corollary to that-you want trust you have to give it.

These are ideas that scratch the surface but every single one of us can benefit from them and none of us should be so egotistical that we think we have nothing to learn.

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