You are a National Football League head coach. Your team has the ball on its own 29-yard line. It’s fourth down, and you need only one yard for a first down. It’s overtime, and the score is tied. What do you do?
The conventional wisdom suggests that in this situation, your team should punt the ball. In a November game against the New Orleans Saints, however, Atlanta Falcons head coach Mike Smith took the unconventional approach, having Michael Turner run the ball. But the Saints defence stuffed Turner, and the Falcons went on to lose the game.
Despite the loss, Smith’s call was in his team’s best interest. Economists and statisticians have repeatedly found that coaches are far too conservative in their fourth-down play-calling. In this situation, Kevin Meers of Harvard College Sports Analysis estimated that the Falcons had a 39% chance of winning the game had they punted, but a 47% chance of winning the game by trying for a first down.
So why are coaches making choices that reduce their team’s chances of success? It’s a simple matter of incentives. Smith was widely criticized for a call seen as unnecessarily risky; “Mike Smith’s fourth down call backfires on Falcons,” read a typical headline the next day. Had the Falcons punted instead and still lost, nobody would have blamed Smith for following the conventional wisdom.
But what if Smith’s gamble had paid off and the Falcons had won? Certainly he would have shared some credit with his players. But plenty of observers would have criticized his aggressiveness as a reckless gamble; after all, they’d reason, the Falcons may have won anyway by playing it safe. The numbers show Smith’s call was in the team’s best interest, but there was far more downside risk than upside benefit for Smith personally in making the move. John Maynard Keynes wasn’t off the mark when he wrote, “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”
The criticism levelled against Smith reminds us that decision makers have incentives to do things the way they’ve always been done. That’s as true outside the world of sports as in. But economic growth and business development require innovation, which by its nature involves new ways of performing tasks. Inherent to innovation is a willingness to take risks and to accept the occasional failure.
Canada’s track record here is poor; the Conference Board of Canada ranks us 14th out of 17 developed countries in innovation. If we want to see increased economic growth, managers must be unafraid to innovate, and be willing to go against the status quo when the data are on their side. They must also be unafraid to let their staff do likewise—but that means being willing to accept or even embrace good failures, so that risk-taking isn’t disincentivized. The tech world knows this, but it’s crucial that the broader business community changes its approach.
And maybe someday, football fans will, too.
Mike Moffatt is an economist at the Richard Ivey School of Business and blogger for Worthwhile Canadian Initiative