The Loser’s Curse: Could It Apply in Health Care?
Suppose we rank all the players at a given position — running back, linebacker, etc. — in the order they were picked in the draft, then compare any two in consecutive order on the list. What do you think is the chance that the player picked higher will turn out to be better — as judged, say, by number of games started in his first five years in the league? … The answer is 52 percent — an outcome that is barely better than that of a coin flip…
The first pick in the draft is, on average, the least valuable in the entire first round. That surprising result has implications not only for football, but also for any domain where organizations try to select talent, whether C.E.O.’s or their own “rookies” — newly minted graduates.
Richard H. Thaler on “The Loser’s Curse” in The New York Times.
Fascinating. These teams are wasting a lot of money.
I’ve read that’s it’s particularly difficult to interview job candidates because your first impression is often wrong. And even if you happen to pick the smartest kid out of the bunch, it’s usually a bad hire because the smart ones get bored too quickly.
Apparently this problem extends to all fields. but it is unclear to me how it affects health care.
I assume virtually all pro sports teams have developed logistical models to identify the variables that lead to long term success. It’s hard to imagine that this hasn’t improved the odds beyond that of a coin toss. Maybe the heavy bidding process for first round draft picks is really marketing hype. The teams throw money at players because the fans are enthralled with the process.