"The waiting is killing me."


Photo by Buaidh via Wikimedia Commons, Creative commons license

I think that pretty much summarizes how many Oilers fans feel. There is a serious disconnect between the way the fans feel and the team’s management stated intentions and strategies. I became curious enough about this disconnect to start asking myself why it exists. That lead me to a view of the Oilers that Charles Dickens would have understood all too well. "It was the best of times. It was the worst of times." In a nutshell, even Oilers management is overly optimistic about how long the rebuild will take. On the other hand they are finally practicing a strategy that will take us back to the top.

I am going to begin with the Dustin Penner trade. For those of you who hate the long form essay I am going to explain why fans hate trades. Then I am going to reveal why our GM made this trade. Next up I will reinforce that the math says we are right to hate this trade in particular. Then, when all seems lost I am going to share one of my favorite papers on complexity theory (its about luck in sports and other settings by a likely future Nobel prize winner). I use it to argue that the Oilers may finally be about to get the breaks. I also offer up some posts on the NHL draft you may not have read in defence of my contention that piling up draft choices can lead to success in the NHL. My analysis won’t please most of you, at all. I think we are just now at the beginning of the "rebuild" and that lets me make a prediction about how far from the promised land we really are.

My position is that when the Oilers traded Penner they opened Pandora’s Box and visited evil upon their fandom. All I am can do is point out that we still have the scraps from the bottom of the box. We need to focus on the hope. But first let’s talk a bit about the evil.

Why fans hate the Penner trade:

I get why people are up in arms about this trade. At a surface level the trade said, "We are blowing the Oilers up, the true rebuild is just beginning." As upsetting as that was it was reinforced by the way our brains work. Sociological, economical, and psychological research has shown that we humans tend to fear loss more than we value gain. This comes from work by the brilliant Danile Kahneman and Amos Tversky.[PDF Warning] Our brains appear to be wired to be risk averse. Even leading critics of loss aversion like David Gal admit something is going on. In his research he has stumbled on another key piece of the puzzle. We like the status quo and may fear loss less than we fear change. Who knew?

So there we are, the Oilers loyal fans, hating change and fearing loss. It sure doesn’t pre-dispose us to like the Penner trade. But don’t feel bad, Tiger Woods has the very same approach.[PDF Warning]

Why the Oilers management made such a stupid move:

The question is really, why didn’t Oilers management agree with us? Especially since their prior history would tend to suggest they will screw this specific type of trade up rather badly. Science says they should have run screaming in the other direction when LA called.

So why didn’t they? The answer rests with some older research and a robust finding known as Allias’ Paradox.

I am not going to bother you with a lot of details but in essence what Maurice Allais demonstrated (a Nobel Prize winning economist who actually did experiments) was that we prefer, when planning a holiday, the 1 week trip that is certain, over the three week trip we only have a 50% chance of winning. It is actually on that insight that Tvesky, Kahneman and others built the theory of loss aversion. We humans, we like the sure thing.

However, the Allais Paradox also says that if you change the parameters so you have a 10% chance of winning the 1 week trip and a 5% chance of winning the three week trip most people will pick the 3 week trip. The statistical relationship in both situations is the same, a 50% reduction in the chances of winning, yet the change in behavior from one situation to the other is dramatic. In general, the minute a sure thing is off the table we will gamble on the more attractive option.

Let us assume Steve Tambellini was unsure if he could re-sign Dustin Penner. I have no first-hand knowledge but it wouldn’t have been prudent for him to bet the farm on that outcome. At some level, implicit or explicit Tambellini had to assign a probability to the possibility Penner wouldn’t re-sign. It was no longer a sure thing.

The Allias Paradox says that uncertainty changes how we make decisions, even though rationally it shouldn’t. Humans have a well demonstrated hatred, see Gal’s paper above, to hate even bets. This leads to us demand a premium for taking an even bet. Uncertainty effectively prevents us from calculating if something is an even or possibly losing bet and thus assigning an appropriate premium to it.

The Penner trade removed uncertainty (the probability (p) of Penner leaving). It eased Tambellini’s fevered brain. It resolved his cognitive dissonance. He no longer had to worry about his best player leaving for nothing. Plus he got those draft choices. Each is exactly like a lottery pick. They each bring a chance at the grand prize; a great player. The combination was enough to overcome his natural commitment to the status quo. It probably contributed that the boss has made it clear he wants no part of the status quo.

Are we all over-reacting?

Just because Steve Tambellini was behaving irrationally doesn’t mean he made a bad decision. So why are so many people frothing at the mouth?

There is a nasty, long standing problem in decision making theory, complexity theory, and even game theory. We don’t make rational decisions regarding the distribution of assets over time. John Rae in the 1830s was probably the first person to realize that humans give different values to outcomes based on their time horizon. I can have one ice cream cone now or two tomorrow, which should I choose? Most people will go for instant gratification. I think we can all recognize that there is some point where we will choose the delayed gratification over the instant win but it is impossible to predict where people will make that conversion. One thing is known, we never pick the future option if it has no fixed date. This is important because of how fans rate trades (not to mention why we don’t want to go through years and years of rebuilding unless we have a date when the cup returns to Edmonton).

From a fan standpoint any trade can only be evaluated two ways. The first is by perceived value now, today. The other is to do the evaluation once all the results can be seen. We can’t name a date for when the result will be available. Thus, most fans, the vast majority, are from the "what does it look like today" school.

In fact, most fans will argue that what it looks like today is the only fair test of your GM’s ability since luck will determine the result. Maybe Penner tears up his knee next week and never plays again, in which case we made a heck of a trade but Tambellini is still an idiot. Maybe Stu’s carefully scouted pick, Mark McNeill, isn’t available with the Kings' pick. So he goes for Oscar Klefbom and hits the kid who really deserved to be compared to Nicklas Lidstrom. Even a blind pig finds an acorn now and then.

The let’s wait and see people would offer up the following counter-argument in some version. Say your superstar had a wife who couldn’t see spending the next four years of her life in the frozen north so hubby demanded a trade. The return was a promising sniper, a defensive prospect, and two draft choices. For one of the 3 best D-men in hockey that’s pathetic. So that is how most fans saw it at the time, hate, hate, hate.

It grew more pathetic as the promising sniper choked, the first draft choice made it clear he would never sign with Edmonton, and the prospect stalled out. Definitely a loss, most fans would say. See we were right. The Oilers can’t ever get this kind of thing right.

Not so fast say the people who are waiting for results, too early to tell. Idiots, I believe most of us would have called the second camp, maybe even apologists. Then a series of strange events happened. The draft pick who wouldn’t sign became a tall lanky defenceman who has way more offensive upside than anybody had any right to expect. The prospect began to show signs of sticking as a 5-6 D in the NHL. All of which was topped by the miracle – a new scout looked past an organizational need for size and used the last piece of the trade to draft an opportunistic kid with magic hands. For the results oriented people it is still early days but the momentum seems to have shifted to an assessment of the Pronger trade as good asset management.

Now their argument can be summed up this way:

Eric Brewer, Jeff Woywitka, and Doug Lynch became Ladi Smid, Martin Marincin, and Jordon Eberle plus we got to watch one of the games’ greatest players take us within a game of the Stanley Cup. Wow, what brilliant asset management. Chris Pronger was just a tool, simply an effective asset value transfer vehicle.

Since some of the animosity towards the Penner trade is a result of how badly most fans felt that Brian Burke abused Kevin Lowe in the Pronger trade and it is slowly becoming defensible perhaps we need to look for other vulnerabilities in the opposition to the Penner trade.

The lets evaluate the trade right f***ing now and get on with tarring and feathering our management have, don’t get me wrong, a great argument! One that is even better than they think it is.

"We got a broken prospect, a 25% chance at a real NHL player, and a conditional pick that is an utter waste of space. This is exactly like the Pronger and Smyth deals except this time Dean Lombardi is the one who bent Steve Tambellini over…."

The situation is actually a lot worse than the trade-bashing naysayers think. Only an idiot would trade a roster player for any draft choice. Let me repeat that, no draft choice is worth even a 4th-line winger.

I could waste pages on the subject, instead just read the accompanying link, a brilliant article by Jeff Little.

So we aren’t over-reacting. Also doesn’t mean we are right. Just that we have logic on our side.

Are we f***ed?

What real fans want to know is, "did Oilers management just doom us to years more of wandering in the wilderness, turn us into a frozen Atlanta?" Waiting and seeing is frustrating the crap out of us and we are getting dangerously angry. Most of the more knowledgeable bloggers have already decided our management is incompetent and must go. It was when I read all the recent posts I started thinking about how I might be able to use a different approach to add something to the debate. It led me to conclude our management haven’t taken us into the desert but rather into the land of exciting, not ready for prime time, need to learn to win - champions in the making. But we are going to be there for at least six more years.

The Oilers may, and here is a spacey concept especially given the link I gave above and my own feelings about the value of individual draft choices, have won the Penner trade simply by getting draft choices. Washington, Chicago and Pittsburgh have all stockpiled draft picks, as has LA and are reaping the benefits. It isn’t the only way to build a winning team but is does seem to be a promising strategy that we have adopted with a passion.

Plus, hockey is a sport where luck plays a real role. Over time the performance of teams in lucky sports reverts to the mean. In hockey you’d expect that to hold true and we’ve been far below the mean for quite a while now. Some good luck is likely coming our way. Good luck and large #s of draft choices could combine in a perfect storm. It did for Pittsburgh and Chicago. We can see that in the link above. However, my authority for luck and skill assessments is this great article by Michael Mauboussin.[PDF Warning]

So here comes the unique part, my own contribution. However, first you need to know about Dynamic Value Based Drafting. This is a system developed for the legions of fans who take part in NFL Fantasy Drafts. I am developing a version for the NHL (with some wrinkles of my own). Mainly it is a tool to allow me to test various metrics to see if they have predictive value in my ongoing attempt to figure out what makes a hockey team a good hockey team. What dVBD does is say that after you have ranked the players, and I am leaning towards using PPI for the NHL, you then need to change everything following each pick by each team and that you can gain an advantage by predicting the next 5-15 picks coming from your competitors.

I’ll say this before continuing. I have consistently outperformed this software in several different fantasy leagues and I am by no manner of means alone. I am not totally sold on the idea that it works optimally.

What it does do is allow you to try a very large number of trials of various draft strategies in a very short period of time. All I am going to discuss here is specifically adding an extra first round draft choice. I will be publishing the entire series of experiments with commentary in the Journal of Quantitative Analysis in Sports.

In a nutshell, no matter how many times you run the experiment adding a second first round draft choice improves the total value of all players you draft by a greater amount than you would predict from the relative value the pick should have. A late first round pick should add between 20 and 30% of the value of the first overall pick and second picks in the first round. In my experiment that second shot in the first round actually tended to slightly underperform relative to predicted value in relationship to #1 overall (12-18% of value of 1 OV).

That 20-30%, by the way, is an amazingly robust number that seems to apply in at least football and basketball as well as possibly hockey if we use PPI. Wouldn’t it be interesting to have something like the following link for hockey?

Yet despite tending to waste that second pick the dVBD software consistently ends up picking

more total value if you have that extra first rounder than the simple addition of the value of the pick, a lot more. The total effect tends to be like picking in the top five a second time, or 85% of the total value of a #1 OV. More interestingly, that value comes entirely from one to two players. It is as if having a second pick in the first round disproportionately increases your odds of picking one great player or a couple of good ones later in the draft at the same time it encourages a tendency to guess with your second first rounder.

Looking at the 47 year history of the modern NHL draft does show some of the same trend. Poor use of that second pick in the first round is common but so is overall draft success amongst teams that at one time or another had two firsts. I am still working on the analysis and will post it here when I am done. I am using PPI and looking at total PPI produced by each team in each draft which you can understand is a long slow process.

All I am suggesting here, for now, is everything is aligning for this to be a draft where we can massively outperform other teams. We have a good scouting staff that is gaining confidence daily, extra picks, now an extra first rounder, are likely to be the beneficiary of some good luck in a sport where it is important and tends to even out over time, and a draft that was considered piss poor is now being predicted to go very deep. This is the Oilers moment.

Marisa Faginni, one of the leading researchers in complexity theory has proposed, [PDF Warning] and sorry I can’t find an English version to link to, that you may be able to goose your luck. Or rather that complexity theory says you can use Floquet’s Theorem to bring stability to an unstable complex system.

In other words, if you think you have a slight edge, leverage the absolute crap out of it. That is what I’d be doing, perhaps Tambellini is smart than he looks, if so he’ll be trading more players for picks. It is time to go all in.

If I am right that this is the moment, the dark before the dawn, the moment luck becomes a lady we can reasonably predict how far we are from winning a Stanley Cup. Six to seven years would seem the likely time horizon. That is the time from picking Denis Potvin to the Islanders winning the Cup, Mark Messier to the Cup, Marc-Andre Fleury to the Cup, Brent Seabrook to the Cup, etc. The time from the first drafted player who played on the Cup winner to the first cup win seems actually quite stable for teams that started out in the land of horrible.

In light of that, who will still be here, performing usefully? Everybody else needs to go and they need to go for as many draft choices as possible, as high as possible, as quickly as possible. Forget the vets, unless they can teach character, and some can (keep those), then they are useless in a long term rebuild. In six years these kids will all be vets.

As for we fans, well I am not as sanguine about the prospects of us retaining our sanity as I am about the Oilers winning the cup.

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