First published: Business Life Magazine, June 2008
Any corporate mission statement will praise “teamwork” to the heavens. But teams packed with brilliant individuals can be staggeringly dysfunctional; that is something many of us suspect, and economists think they can measure.
Most team performance is hard to quantify, but professional sports teams are a different matter. Games are standardised and results are obvious. That may be why a curious little literature has sprung up on the economics of optimal play in sporting contests.
Economists have discovered that individual sportsmen and women play very well – not just the mechanics of executing a cover drive, but the strategic choices of serving to the forehand or backhand, striking a penalty to the left, right or straight on. Because these choices require a player to be unpredictable, while reckoning on his own strengths and the strengths of his opponent, the optimal strategy is surprisingly hard to calculate.
Nevertheless, economists Mark Walker and John Wooders studied the serve at Wimbledon, showing that Roger Federer, Maria Sharapova, and other top professionals are intuitive economists. More surprisingly, Ignacio-Palacios Huerta of the London School of Economics showed that the same was true of David Beckham and his peers at the penalty spot.
But teams do not seem to be able to tap into the same intuitive wisdom. V. Bhaskar, another economist, studied the declarations of cricket teams and concluded that they did not behave optimally. For example, both teams often agreed as to who should bat first; they couldn’t both have been right.
Meanwhile, Professor David Romer examined the decisions of American Football teams using an exhaustive analysis of play from three years’ worth of top-flight games. He found that teams were dramatically overcautious in a “fourth down” situation. At “fourth down” the team with the ball will usually kick it and win territory or points, while conceding possession. Romer showed that the riskier ploy of trying to retain possession was often a much better bet.
It is not clear why teams make bad decisions, but my guess is that the choice is muddied by wishing to avoid criticism, and trying to appease team-mates. Individual sportsmen focus only on winning.
Perhaps the current “teams are dumb, individuals are smart” consensus will be punctured by new research. Christopher Adams from – of all places – the US Federal Trade Commission, has published research arguing that NFL teams are smarter than Romer thinks. A group of management scientists based in Israel have argued that top goalkeepers would save more goals if they stood up rather than trying to guess which corner the striker would choose.
Nevertheless, for now, the economists’ view is that if you want a brilliant individual to do something stupid, you should simply put him in a team.