Luck & Skill in Modern Sports, Pt. 2
Knowledge is Power is a Potential Competitive Advantage
This is the 2nd part of a two-part series. Check out Part 1 below!
In part one of this series, we took a headfirst dive into an investigation about the impact of luck and skill on the outcome of matches in sports. We looked at the wide variety of underlying mechanisms that drive the expression of skill and luck ranging from scoring opportunities per game to penalty systems to environmental variation. After using these building blocks to generate a qualitative understanding of which major team sports might be more luck-oriented or skill-oriented, we used the “persistence” method to actually quantify the balance of luck and skill. This effort created the spectrum below, which places the major US sport leagues along the axis between purely luck-based to purely skill-based, with the inclusion of professional cycling, stock picking, and coin flipping as reference points. Thankfully, for every major sport league, skill plays a larger role than luck in deciding regular season games, but there are still large disparities between the sports themselves:
Now, we’ll look at why all this information is important at all! To do this, we’ll investigate how different groups interacting with sports can leverage an understanding of the balance of luck and skill in individual sports, and the underlying mechanisms that govern the effects of luck and skill. Teams (composed of players, coaches, and management), Leagues, and “Outsiders” (composed of investors, media, and most importantly fans) can all benefit from an understanding about luck and skill in sports. Of course, there is some overlap in how these groups can leverage learnings about luck and skill but each of them have unique ways to utilize the info as well.
The great part about sports, too, is that everything we’ll look at here may change, especially for specific contemporary examples. Even within five years or a decade, league rules change, new players enter the pro scene, and many unpredictable factors will change the balance of luck and skill in many or all sports. I definitely hope to be able to look back in a few years and reflect positively on some of insights and predictions below about how certain groups might utilize some newfound knowledge about luck and skill in sports. In the meantime though, it’s time to dig into the importance of this topic with a text-heavy article!
Teams (Players, Coaches, Management)
Balance
If there’s one thing that teams care about, it’s winning. Winning attracts better talent, ignites a fanbase, and ultimately increases the value of a team and everyone that works for it. To accomplish this, teams tries to optimize how they develop and play in order to maximize their chances of winning in the long run. In essence, this force has two byproducts:
Teams always seek to improve their skill level— their ability to affect winning. GMs want to hire better coaches and players, coaches want to deploy better strategy and improve the skill of the players, players want to improve their own play and cohesion with their teammates, and so on.
In every matchup one team has more skill than the other. The better team should always try to play the game in a way that maximizes skill expression, while the worse team should try to introduce greater elements of luck (chance) to affect the outcome of a match.
This pair of insights might seem a little basic, but I do think there’s value in stating them so plainly, particularly the latter point. Even though it’s a relatively crude way of singularly characterizing the many ways in which a team should try to optimize their strategy, it’s an interesting lens through which to view team strategy and tactics. Of course, the degree to which a team can or should influence luck expression and skill expression is rooted in the initial balance of luck and skill in the sports itself. Every unique professional league has an existing equilibrium of luck and skill that determines the outcomes of games, and in some cases it’s difficult to drive the amount of impact luck has on results given the structural elements of the sport and the league itself.
The GM of a basketball team should rest relatively easy knowing that if they can identify and assemble the most highly skilled team that plays well together, they should do well consistently. Their past performance should be a strong indicator of future success, and their opponents will struggle to convert an individual game into a proverbial coin flip unless the teams are evenly matched to start. The math suggests that the increased skill expression in the NBA should lead to fewer upsets in the NBA, which we see born out in practice. This effect is further amplified during the NBA’s playoff structure with a best-of-seven series that leagues like the NHL and MLB also utilize. “Best-of” series diminish the chance of a “Cinderella” run compared to a format like the NFL’s or NCAA basketball’s best-of-one playoff series.
Teams in the NHL, MLB, and even the NFL, must understand that luck plays a larger role on outcomes in their sports, especially in the regular season. In other words, the distribution of likely outcomes for a specific game is much wider than for an NBA game or an individual sport like chess/tennis, or an endurance sport like cycling or track. As a result of the increased role of luck, it’s more difficult to determine the underlying skill of a GM or a coach or a player in the short-run, making it more difficult to measure the actual skill level of an overall organization. I often believe that teams turn over their staffs and roster too often and erroneously extrapolate small data sets about overall team performance, especially for sports like football and hockey where luck plays such a large role. Yes, change can help spark excitement in a fan base and generate short-term buzz, but it might not succeed long-term.
For these sports where luck tends to play a larger role, it also means that when a team achieves persistent, differential win percentages, it’s more indicative of outstanding skill, but individual players still affect outcomes less than superstars in other sports. Players like Connor McDavid in the NHL or coaches like Pep Guardiola in the EPL are generational talents in their respective roles, but likely don’t generate wins in the same rate as a professional basketball star like LeBron or Jayson Tatum. That’s not to say that organizations in all sports leagues should stop constructing teams with the best talent and collective skill, but the potential impact of a lone superstar is less impactful in sports like hockey, football, soccer, or baseball unless there are specific roles that are highly leveraged in the sport itself— a critical insight for scouting, trading, and overall roster construction.
On a slightly more meta level, knowing about the balance of luck and skill in particular sports might also influence which types of sports young athletes actually decide to pursue. Endurance sports like cycling, individual sports like golf or tennis, and even basketball all rely more heavily on individual skill to determine the outcomes of matches. If I was an overly ambitious high-achieving youth athlete or a related overly ambitious parent, I might use this insight to target sports where individual skill matters far more than chance. I would likely target sports where heavy skill expression meets heavy financial incentives (if I had some predisposition for that sport to begin with. I would likely never have become an NBA star in any reality).
Mechanisms
The key question for players, coaches, and managers then becomes how to either increase or decrease the amount of luck expression in their games to maximize their chances of winning. For better or worse, the ways in which you do this, and the degree to which you can affect change, depend entirely on the sport that you play. Interestingly, teams across every league already manipulate many of the underlying mechanisms that dictate the balance of luck and skill in their games, whether they mean to or not! As a quick refresher, the table below outlines the mechanisms identified in Part One of this series that dictate the balance of luck and skill in sports:
Within the list above, some factors exist completely outside the control of the teams at any level in their organization. Even coaches and GMs have no in-season influence over the league’s rules that govern the reffing/judging mechanics, the team schedule, substitution rules, series formats, scoring values, roster size, and tie resolving mechanisms. They can still work within these firm constraints to optimize luck or skill expression, and have many other elements at their disposal, including the playing field consistency, equipment performance, influence of injury frequency, the number of scoring opportunities per game, and even the distribution of player skill on their roster (to a certain extent). Once again, better teams should influence these mechanisms towards skill-heavy embodiments, and worse teams should push for luck-heavy embodiments during an individual matchup.
To provide a concrete example, let’s look at a theoretical strong NHL team (a.k.a. not the Bruins this year) seeking to increase the impact of skill on the outcome of games:
If I was a coach looking to maximize the skill expression of my superior team, ensuring that my best players maximize their ice time throughout the entire season would be my primary focus. Effectively, this reduces the amount of players on the team while increasing the skill distribution relative to the opponents’ lines. In theory, if a top NHL line could play a 3/4 of a game like starters in the NBA, it would be a huge boost to winning chances. To actually achieve this, I’d likely prioritize conditioning for my top lines more than other teams. I’d also encourage the best players to skip specific games to minimize injury risk, especially ahead of a deep playoff run. Almost certainly I’d use the schedule itself to help dictate when and how to rest players, and likely keep key players at home during some away stints to rest more efficiently.
On a more tactical level, I’d also look to make sure that the team’s play style maximizes the number of scoring chances for both teams while reducing the likelihood of racking up penalties in scrappy games. These factors help reduce the odds that a chance event like a fluke goal during a low-scoring affair or a single penalty would affect outcomes. It might even be worth looking into some of the specific improvements that could be made to the playing surface and the team’s gear in order to avoid any bad luck associated with equipment underperformance or environmental factors. These might be slightly less relevant for a sport like hockey than something like tennis, but still relevant nonetheless, especially as it relates to injury risks!
On the flip side, let’s look at ways a bad NFL team might try to maximize the amount of luck that influences a game. The most effective way (in my mind) is to slow down the game— to effectively reduce the number of scoring chances that each team has during the course of a game. This means taking the full play clock on every down, and in essence trying to play for a tie or single-score game where the outcome becomes more driven by chance than skill , especially with the current overtime rules. I would also try to make the game incredibly chippy— not to the point of injuring players, but certainly to the point that both teams are starting to rack up significant penalties. In the modern NFL, I would also be constantly calling high-risk, high-reward plays that are likely to draw major penalties, like the periodic long-bomb throw with the current pass interference rules and lack of review.
If some of these these tactics for good and bad teams seem familiar, that’s because teams already employ many of them today, even in other sports outside the NFL and NHL! NBA teams and professional soccer teams have already started taking a much more strategic approach to resting players (to the general chagrin of fans and media), and NBA teams in particular have realized they can increase their odds of winning with high-pace, high-scoring basketball with a lot of 3-pointers (also to the chagrin of fans and media). In more heavily luck-driven leagues like the NFL, teams are investing far more heavily into the few positions that really dominate the expression of overall capability for a team— namely the quarterback position in the current era of the sport.
You also see EPL teams, and soccer teams more broadly, “parking the bus” by crowding their team into the defensive half of the field, making it much harder for more skilled teams to score. This increases the impact of chance on the outcome of a game, and helps drive towards tied games, which are still rewarded in soccer and hockey even if they don’t provide value in basketball or baseball. More broadly, I find it fun to look at the different tactics and overall team-building strategies that teams employ and thinking through their effect on the balance of luck and skill expression during their games. Oftentimes, teams make decisions within this value structure that don’t align with their own incentives!
This disconnect between incentives and actions might be the result of more traditional thinking about how to structure a team or play the game. It might also result from the fact that teams just don’t fully utilize the bandwidth that their parent leagues provide them to play with different styles and tactics! Professional team sports leagues, to their credit, have very few set rules restricting how teams can play, at least in the grand scheme of things. However, they do carry far more weight in regards to helping maintain an overall strong balance of luck and skill!
Leagues
Balance
I think it’s critical that a league has a constant pulse on how much luck and skill factor into match outcomes. A league is, at the end of the day, in charge of creating a set of rules, scoring system, and team management structure that enables the owners of teams to profit from the entertainment they provide. In turn, this inherently requires some mix of skill and chance to influence the outcomes of games. A game of complete chance is not entertaining to watch (or play) because the contestants don’t matter, while a game of complete skill can be equally boring because the outcomes can feel pre-determined.
It’s quite fascinating that leagues with very different balances of luck and skill can all be extremely popular. Among the big leagues in the US, the NBA is by far the most skill-centric, but that doesn’t stop it from being nearly as popular as the MLB and more popular than the NHL, both of which are more luck-based. I think this fact speaks to the idea that the balance of luck and skill isn’t everything— the actual entertainment value of the sport and the way it’s delivered to an audience matters as much or more than how skill-based a sport is, even if it has a “good” balance! Of course, it’s important for teams to be able to compete with one another in the long-run, but pure parity within a league shouldn’t be the goal either since that creates a league of pure chance.
I also think that scrutiny about how much luck plays into the outcomes of matches should be heightened specifically for playoff formats. In theory, leagues want to ensure that the “best” team becomes their champion, and how post-season structuring plays a major role in accomplishing this goal. The luck-skill charts included in this article only account for the existing best-of-one structure that the leagues employ in the regular season. However, leagues often shift the balance for the post-season specifically, usually to the end result of enhancing the amount of skill expression. Whether or not it’s an intentional decision by all leagues is a separate question, but this topic serves as a great jumping-off point to look at the actual mechanisms that leagues can use to tweak the expression of luck and skill in their game.
Mechanisms
I think it’s critical for leagues to understand what types of cards they hold in regards to tweaking the balance of luck and skill, both from a more tactical in-game level, and from an overall league structure perspective. Despite leagues typically avoiding major renovations to their rules and regulations on an annual basis, they truly wield an extreme amount of power to affect how much of a part chance plays during a season. Of course, the MLB is not going to completely overhaul its own version of baseball, but if you look at the explosive popularity of new sport formats like Pickleball or T20 Cricket, it makes you question how static a leagues’ rules should actually be.
Leagues can significantly influence many, if not all, of the factors that influence luck and skill expression in the table above. In particular, they can alter penalty systems, the duration of games (i.e. the number of scoring chances), the overtime rules, the playoff series structure, the substitution rules, the schedule, and perhaps most importantly dictate the distribution of skill equality across teams. They accomplish this final feat by employing salary caps or similar talent-balancing mechanisms, though interestingly many European soccer leagues don’t have such restrictions, which helps keep the leagues more skill-heavy at the extreme ends of the league’s standings. Regardless, it’s kind of funny to think about a salary cap as a means of increasing the amount of luck in a league!
Leagues like the NFL and NBA have increased the frequency and impact of penalties in recent years through more strict refereeing, which has increased the role luck plays in their games. Every major sports league indirectly controls the number of scoring opportunities per game by setting the duration of each match. Of course, there are some physical- and entertainment-related restrictions on the length of a game, so increasing the length of games in an existing league might be difficult. However, it’s not surprising to see the NBA considering shortening its games by 8 minutes, which might help make the league less skill-heavy and make the viewing experience better for fans. However, this approach may carry some interesting secondary effects, like teams not requiring players to take as much rest, which could in turn help maintain a high level of skill expression. Again, though, duration of match is not the only lever leagues can pull— perhaps the NBA could explore a new set of substitution rules or a new overtime format to increase the amount of luck expression!
In a vacuum, I think the NBA, MLB, and even EPL approaches to overtime where the game simply continues help express skill more completely. Conversely, the effective sudden-death mechanics of the NFL and NHL both increases the amount of chance-based outcomes, which might be part of why the NHL changes the rules for the playoffs. The fact that the NFL still uses a coin flip to heavily skew winning odds for an overtime game, even in the playoffs, baffles me. I believe the NFL will eventually change its overtime rules (hopefully by adopting the college rules), and perhaps leagues more broadly will begin to consider some more extreme rule changes to help drive increased fan engagement in the modern attention landscape that inadvertently move the needle more skill-based or more luck-based!
Overall, I really want to emphasize just how much control leagues have over the balance of luck and skill in the outcomes of games. I’ve mentioned in other articles like the “Meta” article that I think leagues should feel comfortable making larger changes to their rules and structures to keep fans engaged. At the end of the day, that’s their main goal, and manifesting the right balance of chance and skill is a critical piece of that that puzzle. Even though there are some inherent features of all sports that seem less malleable (like the need for a basketball hoop or penalties in hockey or fouls in soccer), every single facet of a sport is modifiable and should be treated as such to produce an ideal balance of skill and luck.
Investigating Meta, but Not in a Meta Way
The 2024 League of Legends (“League”) World Championship wrapped up in November as one of the most watched esports events of all time, peaking at 50 million concurrent viewers globally. In response, Riot Games, the creator of League, did what any professional sports governance body would obviously do, and made sweeping changes to the game itself. Not on…
Outsiders (Fans, Media, Investors)
Balance
Last and certainly not least, I think it’s fun to consider what insights about the balance of luck and skill for particular sports means for people outside the sports themselves, namely the fans, the media, and any investors looking to enter the space.
For fans, and particularly for fans that also gamble on sports, it’s quite useful to understand the amount of luck that plays into outcomes in certain sports. For run-of-the-mill fans like me it helps calm the emotion I feel when my teams lose an errant game here or there (especially in the NHL or NFL), and I expect crazier outcomes in soccer and baseball than I do in a sport like basketball or cycling. Conversely, it also adds a bit of frustration for me when a sport league actively makes decisions that increase luck expression, like the NFL with its single elimination playoff structure and highly subjective and impactful penalty system.
For sports gamblers, understanding the influence of luck can also be used to help direct efforts towards sports with more or less deterministic outcomes depending on how you want to lay bets for favorites and underdogs. Moneylines and point spreads likely receive the most influence from luck-heavy or skill-heavy sports, but the balance of luck and skill likely affect all types of bets. It might be best to stay away from multi-game parlays in the NHL or NFL and to lean into multi-game bets in the NBA instead. (Disclaimer: not financial advice, I don’t know enough to provide sound gambling advice)
I also think that the sports media could improve its communication about different sports by integrating some talking points about the balance of luck and skill, particularly for different playoff format. As fans, we love to imagine that everything is completely based on skill when it comes to our teams bagging victories, but I think it’s quite useful to learn about the (often large) impact of luck in sports. That starts with the coverage of the sports themselves, and I think there might even be standalone value in a site or media outlet that actively explores and studies the topic regularly. Maybe that could become The Geek Locker in the future!
For those who look at the wide world of sports and see an investment portfolio waiting to be constructed, I think understanding the balance of luck and skill in different leagues is crucial. In particular I think two areas stand out where investors should consider the balance of luck and skill. First, when investing in a specific team, and second, when investing in, or launching, a new sports league.
As a basic tenet, I generally assume that the performance of a professional sports team correlates with its value, at least in the long run. If this is true, then as an investor I’d be looking to fund teams from popular leagues that have the ability to persist in their success over time— i.e. I want them to be able to exert higher skill expression. Beyond the NBA, this gravitation towards skill-heavy sports might drive investors (and sponsors!) to flock towards slightly more niche sports like cycling, chess, tennis, or golf! If you want to be more certain that your own investment will materially increase the likelihood of a team winning, then these low-luck sports would be an ideal target. With that said though, every single major sports league has far higher skill expression than picking stocks (represented in the spectrum above), so perhaps the flood of investment into all sports right now is justified in that regard.
As opposed to investing in teams where you may want to angle towards higher skill expression (assuming a league overall has a strong trajectory), I think the world of investing in leagues is slightly more complicated. As noted previously, the overall goal for a league is to maximize entertainment and engagement with consumers. This does not explicitly mean investing in highly-skill-based or luck-based sports, but likely ones that strike some relative balance. It’s important to identify and/or construct systems that actively manage luck and skill in the outcomes of individual games, and chose playoff structures that make champions feel well-earned but leave the door open for upsets. Ironically, this might mean you favor different sports and formats as a league owner compared to a team owner!
Mechanisms
Somewhat anti-climactically, as opposed to leagues and teams, I think outsiders derive less utility from trying to understand and leverage the underlying mechanisms that dictate the balance of luck and skill in sports. As a fan, I personally love trying to understand why teams and leagues do what they do through the lens of skill expression and luck expression. It’s a slightly different frame of reference to look at the effects of structural league-determined elements of sport like scoring systems, penalty systems, salary caps, match structure, and even playing fields. It also casts the strategies of teams in both positive and negative light depending on how well they execute a strategy to maximize their winning chances.
Beyond the additional insights that it can provide fans and media, I do think investors that understand the underlying mechanics that drive luck and skill expression in sport maintain an advantage in the market. It helps you understand the overall risk posture of a team or league investment, and provides knowledge about how to help them improve, particularly when it comes to thinking through tactical ways to improve a team or league, or to create a new twist on an older sport format. Thinking through the qualitative mechanisms that drive increased luck and skill can also serve as an underlying framework assessing ways to improve entertainment value, for example by increasing parity. This skill comes particularly in handy when startups seek to launch completely new leagues like a new volleyball league or a 3v3 basketball league.
Investors in the world of sports have so much to think about already, so I’m sure layering in a completely new architecture for decision making will be very welcome…
Something that stands out to me in this overall investigation about manipulating the amount of skill expression in sports the fact that it can be done at all, and relatively easily at that! I think it’s a critical facet of creating a competitive and exciting sport or league that often goes unconsidered when changes are, or more often aren’t, being made. At the end of the day, most professional sports exist because they entertain, which means that there can’t be pure skill expression or luck expression that dictates the outcomes of matches. There must be both to keep the sport engaging for both the athletes and the fans. What the exact balance should be requires some further study, and honestly might be a topic that I cover in a potential Pt. 3 of this series!
In the meantime, I hope this peek behind the curtain into the influence of luck and skill has sparked some of your own excitement and thoughts about how sports actually function. Please let me know if you’d like to see some more similar, slightly more technical, deep dives on topics in the future!