Don't Ask, Don't Tell

Malt Liquidity 132

In yesterday’s admittedly off-the-wall rambling, I did make one comprehensible statement:

If you asked me what I wanted to do when I grew up, as a child, I would have instantly answered “sports journalist”

My sports memory is rooted in endless narratives, rather than statistics, nowadays — I became the Larry Bird “you had to see it” old man rather than falling for the red herring of advanced stats, usage statistics, and more. You can read my writing on how fourth-downs behave like options to invalidate analytics

What exactly is the game state of a football match? You have the score, the placement of the ball on the field, and the possession and timing of the game state. What if we combine these elements and think of them as a European (no early exercise) binary option expiring at the end of the game? Proper management of this position would not just be “maximize the odds it expires in the money”, but would also require taking into account how to manage the position should those odds shift very rapidly. Think back to the blackjack example from earlier — intuitively this should lead us to some sort of Kelly Criterion-esque thinking. It’s not “do I win if I convert this play”, but rather “how much am I affecting my ability going forward to still end up winning the game?”…

You simply cannot use an all-encompassing expected value model to make individual decisions, because anything can happen in an n=1 circumstance; that’s the entire appeal of watching a game. I can predict with a 90% certainty what band Aaron Judge’s season stats will fall into, but I have no idea what he will do game to game.

or how I prefer the waxing poetic and endless bar-room arguments of the BCS ranking systems to the soulless corporate drudgery of the “college football playoff” here:

It’s harder and harder to see what “college” means in college football other than an indication of the colors a player might wear for one year before he breaks out and goes to LA or the SEC to grab a bag. Maybe we’ll see something like franchise tagging for scholarship offers — wouldn’t that be hilarious? All I know for certain is that expanding the playoffs won’t do anything other than further trivialize bowls and cause more blowouts. Sometimes, you gotta just accept that a game for kids played between them is precisely that, and nothing more. Long live the BCS.

Something I’ve stayed away from discussing the greater meaning of (in favor of the utility the live quantification brings relative to my options purview) is sports gambling. Especially having 2000s ESPN imbued into my brain, post-Donaghy, any mention of gambling on a sports broadcast was avoided like the plague. Hell, they avoided putting teams in Vegas because of even the slightest implication that betting could influence the outcome of games. Fantasy sports were ignored on-broadcast because of the implication that people could care about individual’s performances over the team’s result. Certainly, everyone knew someone who had something on the game — usually, they were the person you didn’t want to watch too many games with. Under the table, of course, there were dollar prize pools for fantasy football leagues and the perennial March Madness brackets (I still haven’t won one since UNC took out Illinois in 2005, god bless.) As I get older, I realize that slippery slopes are a very real thing. Here’s the funny part about 2008 and the NBA betting scandal — in both cases, only one person went to jail over it all, and everyone knows it was much bigger than implied.

The most notable change happened in that god-awful summer where FanDuel and DraftKings owned every single ounce of ad space. When it was decided that fantasy driving viewership was a good thing, all of a sudden, the skill-based game logic enabled daily fantasy sports to shove more ads down our throat than beer giants telling us to “drink responsibly” while at the bar watching games. This, of course, resulted in a lot of “edge play” that looked quite similar to insider trading (from 2016):

For years, the two companies' leaders had been warned by investors, lobbyists, consultants and even some players about a coming day of reckoning. Yet they relentlessly promoted their games as a means to get rich quick when they knew only a tiny percentage of their customers were winning more often than losing. They failed to aggressively move against big-bankrolled players who dominated newer players, sometimes with predatory behavior or technological advantages. And they allowed their own employees to play -- and win millions -- on their rivals' sites, despite their having access to odds-improving proprietary data.

Recall what I wrote about venue selection:

Poker has a deep lore in the trading world, and it’s a pretty good simplification of the mindset we’ll want to have as we start to look for opportunities. Poker has an alpha problem. To consistently win, you need to out-skill other players over the long run. At first, you can do this by upping your knowledge and cleaning your execution of game theory optimal strategy. Over time, though, your ability to improve hits a hard cap — there is only so much optimization around chance that you can do — and the median ability of the overall playerbase starts to catch up. The players around you are getting better and better, and your edge is fading. This happens to any game where an optimal theory develops and spreads in the information age — in Magic the Gathering, the best players barely break 60% win-rates as the skill level goes up, as there is a cap on how efficiently one can play and they’re all hitting it. The only way for MtG players to increase their win-rate would be to play worse players. Now, they probably don’t do that because it kills the fun — like how playing chess with 99% of you guys is no fun at all for me — but poker has a profit incentive that its alpha comes with. The edge is much slimmer in pushing your skill further than in selecting the proper game with whales instead of sharks.

Playing on a similarly constructed (if not identical) venue with proprietary data seems like a pretty significant venue edge, doesn’t it? Of course, this issue is largely moot, as Wikipedia tells us, after sports betting was essentially legalized:

…these issues became largely moot in 2018, when the Professional and Amateur Sports Protection Act of 1992 was struck down in the Supreme Court lawsuit Murphy v. National Collegiate Athletic Association. With states free to legalize sports betting, DraftKings and FanDuel subsequently expanded into bookmakers to leverage their existing customer base and legal expertise, while FanDuel agreed to be acquired by Irish company Paddy Power Betfair to become its main U.S. subsidiary.

Again, quoting from 8/24/16:

But as quickly as it boomed, the industry bottomed. One year after their headiest moments, FanDuel and DraftKings are still not profitable. Both privately held companies' valuations have been sliced -- by more than half, according to some estimates. The companies have hemorrhaged tens of millions of dollars in legal and lobbying expenses. (DraftKings' attorneys fees once ran as high as $1 million per week.) And the fog bank of the industry's uncertain future has made it nearly impossible for either company to raise new money. (FanDuel's auditors have raised "significant doubts" about the company's future if more states do not declare daily fantasy sports legal.) Three federal grand juries -- in Boston, New York and Tampa, Florida -- have alerted one or both companies that they are under criminal investigation. A merger -- once unthinkable to many -- is on the table.

It has been, by any measure, a spectacular fall.

Maybe don’t go to “Outside the Lines” for stock picks.

I’ve talked a lot about the evolution of hardware, notably that

The smartphone is the most powerful hardware ever invented in human history

and why I don’t really agree on “monk mode”. But under that same purview, clearly humans are not capable of self-regulating when

using it properly requires going against every impulse you have to do the “ordinary” thing and hitting the juice button in the Skinner box over and over again.

At this point, the dead horse is so beaten that I need not even show the latest piece of doom that we’re 25 years ahead of 2049 dystopia, but here goes:

Yes, that’s the official NBA league pass app design. Despite all my rage, yada yada.

In the latest sign that all of sports is a race-to-the-bottom to suck the blood out of any enthusiasm one could have left by mechanizing addiction, it’s not enough to require that odds, lines, and parlays saturate every bit of coverage. Every single pass and attempt and action must be processed through the same financialization of the attention and emotional volatility complex that everything else depends on. I once wrote that

In finance, good ideas are like good restaurants. They come around once in a while, and are enjoyable as long as the people you dine with keep mum, and then all of a sudden, it turns out the entire yuppie population of Manhattan saw it on some blog or video due to some writer/creator who couldn’t keep their mouth shut to not ruin a great thing for the sake of engagement, and suddenly there’s an 8 month long wait to get in.

Well, when there’s a million “restaurants” vying for the same dollar wagered in the same stupid fashion as everything else, everything just gets annoying and dumb. Sure, it’s rich of someone who endlessly writes to say this, but “don’t ask, don’t tell” is a pretty good way to preserve the sanctity of something, if not the quality itself. It’s like the first two rules of Fight Club — obviously Fight Club would not grow if nobody actually broke the rules. We used to trust that other people would preserve the coolness of being in the in-group even if the in-group wasn’t particularly cool in and of itself. We did not talk about fight club, or our underground poker game, or our illegal bookie who gambled more than he made odds. We didn’t ask and they didn’t tell. No longer did you have to hear about every sucker’s parlay missing by just that one leg if Ben Simmons had his shit together like he usually does (he never did), or someone’s special algorithm that totally does better than Vegas (it doesn’t) at every single bar when you’re just trying to drink some beer and eat some wings. With this much money at stake, it simply will not get better.

The College Football Playoff and ESPN have agreed to a new six-year, $7.8 billion contract that ensures the network will remain the sole media rights holder of the event through the 2031-32 season, it was jointly announced Tuesday.

Don’t take just my word for it,

but take Nick Saban’s (3/6/24):

Not only was Saban upset about the way his team played, he was especially disheartened about some of the things that happened afterward -- in the Rose Bowl locker room and back on campus, when he met with some of the players.

"I want to be clear that wasn't the reason, but some of those events certainly contributed," Saban said of his decision to retire. "I was really disappointed in the way that the players acted after the game. You gotta win with class. You gotta lose with class. We had our opportunities to win the game and we didn't do it, and then showing your ass and being frustrated and throwing helmets and doing that stuff ... that's not who we are and what we've promoted in our program."

Once back in Tuscaloosa, as Saban began meeting with players, it became even more apparent to him that his message wasn't resonating like it once did.

"I thought we could have a hell of a team next year, and then maybe 70 or 80 percent of the players you talk to, all they want to know is two things: What assurances do I have that I'm going to play because they're thinking about transferring, and how much are you going to pay me?" Saban recounted. "Our program here was always built on how much value can we create for your future and your personal development, academic success in graduating and developing an NFL career on the field.

Reading between the lines, it’s obvious that Saban wants the best for kids. Obviously he’s not about not paying them and the “sanctity of the game”. But here’s how I read his (pretty openly honest) comments:

Interest in the sport gets killed when star players can swap teams at will or star coaches can leave and take an entire team with them. I don’t see conference realignment as a positive either how it was done. To keep the pie growing for the future and to not suck the blood dry for the current crop of players, I do think some limitations on some form of payment or transfer cooldown (maybe coaches can’t take players for 1 year each time they take a new job) has to be implemented. Saban saw this won’t happen anytime soon, so he left.

He can’t say what I just did without causing a huge ruckus as he’s an ambassador for the sport and he’s not going to tank the revenue deal for future players. But, yeah, it’s over. It was obvious as soon as Alabama went in over FSU.

But we can remember the titans — shoutout to Tony Reali, my favorite ESPN host of all time (who apparently still keeps Around the Horn going.)

Of course, subscribe and share this post, and feel free to forward it to your friends. No hypocrisy at all here!