Innovator:  Don’t Punt!  Go For It!

What American Football Teaches About Risk-Taking

By Shlomo Maital



    This blog may be hard to understand if you are not familiar with American football.

    David Romer is a Univ. of California (Berkeley) economist, one of the most creative economists alive.  In his Journal of Political Economy article (vol. 114, no. 2, 2006, pp. 340-365), he uses the National Football League to show “overwhelmingly statistically significant departures from the decisions that would maximize teams’ chances of winning”, i.e. firms don’t maximize. 

    Here is the story.  In American football, teams have four ‘downs’ (or attempts) to make 10 offensive yards by passing or running the ball.  If they fail in the first three attempts, on fourth ‘down’ they can either kick the ball downfield, to the other team, or try again. If they fail again, the opposing team gets the ball on the spot.  The vast majority of football teams punt the ball on fourth down rather than  try again to make the 10 yards. 

    Romer analyzes actual game data to show there are “959 cases in which a team kicked [on 4th down] when the difference between the estimated values of going for it and kicking was positive” (i.e. it would have been better to go for it, rather than punt).

   Is anyone listening?  Well, yes.  Writing in today’s (Aug. 20) Global New York Times, Adam Himmelsbach notes that mostly, “coaches are hesitant to take plunge [risk going for it, instead of punting] because a string of failed fourth-down attempts could leave them vulnerable to criticism and affect their job security more than a conservative menu of punts ever could.”  

   Is this reminiscent of corporate behavior?  Remember IBM’s ad campaign: “Nobody ever lost their job buying IBM”.  Nobody ever lost their job playing it safe?   False. Nokia and Sony CEO’s, for example.  But many CEO’s THINK this is true.    Many companies think it is true.  Play it safe, nobody can blame you. Take a risk and fail – everyone will blame you. So why try it?  Panasonic, Sharp and Sony lost $20 b. last year playing it safe.

    Well, take a lesson from Kevin Kelley, head coach at Pulaski Academy, in Little Rock, Arkansas.  He was hired in 2003 as football coach of the high school team. His team never punts.  And last season, the Bruins were 14-0 and won the Class 4A state title.  Kelley’s offense thrives, notes Himmelsbach, because the possibilities are endless.  Third-and-7 is not a passing down, third-and-inches is not a running down.  And G-d help the defense on first and 10, Kelley says, because we can literally do anything.   But so far, no NFL coach has dared try it.

    So – innovators!  Think about never punting.  Don’t play it safe.  That old cliché, you can’t win the lottery if you never buy a ticket, is true.  Far too many big companies are playing it safe these days, avoiding all risk.  And, in the end, the biggest risk is avoiding all risk.