Psychology Corner: Risk Aversion

This is Psychology Corner, where Tom brings in his knowledge from his professional life to bear in analysing the psychology and behaviour of Fantasy Football (FPL) managers. This will often follow up on what we mentioned in the most recent pod.

Quite a straightforward one this week.

Imagine you’re given a choice between making a low-risk, low-payoff situation versus a high-risk, high-payoff situation.

Looking at this hypothetically, you might say “I’m a gambler, I’d always take the risk”.

But I’m not sure you would if it was something meaningful to you which could impact your life, such as where you put your savings or your pension.

In fact, numerous studies have shown that human beings naturally seek to minimise risk in everything they do. Shockingly, behavioural scientists call this risk aversion.

What’s the background?

An example of one of our ancestors

As you might expect, risk aversion is innate to human beings.

Survival and behaving in a way that minimised putting ourselves in harm’s way worked a charm for our ancestors: it’s why you’re sitting here reading this today.

However, now we’re much safer than our ancestors were, it’s more about how this instinct for self-preservation manifests in the today’s world.

Extending the logic of risk aversion, this can lead to differences in how we interpret risk and the behaviours we exhibit as a result.

FPL example

(I’m going to put what I assumed was a fairly obvious caveat here based on feedback from the last article: I am not saying this is the only thing driving the examples I use. I am using them as an instance where this phenomenon could play a role)

Elliot: my one and only
(Photo by Mark Runnacles/Getty Images)

There have been many discussions during the international break – when we naturally have more time to ponder the more existential questions in FPL – about the keeper positions and what the most effective selection is.

Broadly, the community is split in to two camps:

1) People who favour two playing goalkeepers

2) People who are fine with just the one

Many in the first camp perceive that there’s a huge risk in running with just one keeper, with my choice of bargain bucketing with Rob Elliot particularly uncomfortable for some: What if there’s an injury to him? What if Rafa decides to play Darlow instead? What if he concedes lots of goals in unfavourable fixtures?

It’s better, according to these guys, to have the rotation option – not to have a second keeper who can step in to pick up the points either in poor match-ups or in case of the first choice not playing.

For them, it’s too risky to not have back-up.

My view is obviously in camp 2, as I seek to minimise spend in the keeper positions so I can spend the cash elsewhere. My reasoning is that the keeper has the lowest ceiling of any of the positions, with the key “explosion” being penalty saves – which are completely random.

Additionally, keepers tend to accrue BPS through making saves – your Courtoises and DDGs don’t make anywhere near as many as those at the lower end.  The difference between DDG and 4.0 hero Pickford last season was 34 points (DDG 136, Pickford 102; and Pickford was injured around Xmas), which would have been more than made up for in the 1.5m I spent elsewhere on slightly better players than those I’d have had to compromise on if I had gone for the premium keeper. Of course, the man to own last season was Heaton, whose 149 points at 4.5 was anomalous: despite knowing that in hindsight, I’d still probably prefer to have the 4.0/4.0 set up.

Anyway, I’m basically happy to take the risk with just Elliot as my keeper this season, knowing I’ll need to spend an FT/-4 if it all goes pear shaped – as I had to with Pickford last season when he got injured.

It’s fair to say that neither camp has been proven to be correct. Analyses are difficult to pull off as there are a lot of factors that are tough to account for objectively, such as objectively factoring in the points gained from eschewing the expensive keepers, and vice versa: I’d never be able to say who I’d have had instead last season if I’d have gone with a premium keeper/backup combo. Most attempts to answer this question I’ve seen are very narrow in that they focus on the keeper position in a vacuum rather than the wider context.

One way of explaining what separates the two camps is an interpretation of risk: I’m happy to save 0.5 – 1.5m in this case to maximise spend elsewhere and incur the risk of having to spend an FT/-4 if it goes wrong, whereas others are fine with spend that money to guarantee they do not lose out on points between the sticks.

Those who spend more on their keepers interpret the risk more keenly, the behaviour being that they spend extra cash on goalkeepers to avert that risk, whereas I am more keen to avert the risk of missing out on an outfield player I really want by minimising spend on a keeper. This train of thought also applies to whether or not people have a 4.0 non playing defender as their 3rd sub.

There’s no real conclusion here – risk aversion is always a thing for humans – except to say I hope this was useful and gives you another way to think about some of the things you see and read in the FPL community.

(caveat: these articles condense often complex concepts into bitesize chunks – there is obviously far more depth and detail to each concept, with reams of academic and practical theory around both that can’t be fully represented here.)

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