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The Riskiness of Daily Fantasy Sports Contrarianism

“Because biographies of famous scientists tend to edit out their mistakes, we underestimate the degree of risk they were willing to take. And because anything a famous scientist did that wasn’t a mistake has probably now become the conventional wisdom, those choices don’t seem risky either.”
— Paul Graham, “The Risk of Discovery”

Graham is writer, programmer, and inventor. He’s a smart dude with a Ph.D. in computer science from Harvard, a painter who’s trained at the Rhode Island School of Design and the Accademia di Belle Arti in Florence, and the proprietor of PaulGraham.com.

I have these three thoughts:

  1. Graham’s fortunate he’s the first Paul Graham to think highly enough of himself to acquire the URL PaulGraham.com.
  2. F*ck you, random owner of MatthewFreedman.com. “Matthew Freedman” probably isn’t even your real name. Do you spell your surname with “ie”? What, are you too cool for MatthewFreedman.net? — or MatthewFreedman.life?
  3. Graham’s basically the non-daily fantasy sports version of the rich man’s Jonathan Bales — without the muscles, eating habits, Bachelor obsession, and NASCAR fixation (probably).

I have other thoughts too, but those three felt the most immediately pertinent when I started typing that list.

I already have some Labyrinthians that touch on risk . . .

. . . actually, those are just my six most recent pieces — one of them might contain the word “risk,” and I swear I have some risk-oriented pieces somewhere — but this piece is about risk and contrarianism (or something resembling contrarianism).

By the way, I couldn’t think of a featured image for this piece that made sense, so I randomly chose Vincent van Gogh’s Starry Night. Like Graham, he studied at RISD. Or not. It doesn’t matter.

Some @PaulG Tweets From More Than a Week Ago

Graham has been blogging on the information interwebs since almost the 1990s — back then he wrote mostly about programming — so he’s about as old school as it gets, but I haven’t read much (any?) of his work till recently.

His most famous piece is probably “Maker’s Schedule, Manager’s Schedule” from July 2009 — in it he talks about how scheduling constraints and work requirements differ for people who are ‘makers’ (creators) vs. ‘managers’ (overseers) — but he also has some other great pieces — one of which (from April 2009) is entitled “Why Twitter Is a Big Deal.” Actually, that piece isn’t that great — it’s pretty much just a blurb — but by mentioning it I am able to transition smoothly to my next point.

Graham — @PaulG — is pretty decent at Twitter for a guy in his 50s. For instance, Nate Silver (who has 2.13M followers) follows only 979 Twitter accounts. One of them is @PaulG, who had this series of tweets last week:

Here’s where I transition to DFS.

Contrarianism ≠ Cynicism

In DFS and probably in society, many people tend to equate contrarianism with cynicism, skepticism, and lots of other negative –isms . . . like negativism.

For instance, when people talk about being contrarian stock traders, they often discuss the popular companies they dislike and are looking to sell short. Or perhaps they discuss the market in general, saying that it’s overvalued. Case in point: Nassim Nicholas Taleb (former trader and current philosopher and social media aficionado) has made most of his money in Black Swan fashion — when markets have collapsed.

Similarly, contrarian bettors have a reputation for often taking the under and being off heavy favorites. (See the “Vegas” episode of The DFS Roundtable.)

In DFS, many people talk about contrarianism as it relates to any given slate by mentioning the chalky teams or players they are fading.

To many, contrarianism is basically code for a cool sip of haterade — but that’s not really what contrarianism is.

Contrarianism is actually the long night before the dawn of hope.

Contrarianism = The Optimism of Opportunity

As Graham says, “Optimism compounds better than cynicism” — and that’s what contrarianism is. It’s optimism about one option after a lot of other options have been considered and either failed at or rejected outright. Contrarianism might begin with a process of strong inference, but it ends with an affirmation.

In any market everything is always relative, which means that productive pessimism cannot exist if it’s not conjoined with optimism. People too often think about playing/fading, optimism/pessimism, bullishness/bearishness, etc., as two distinct mindsets or perspectives. That’s wrong. They’re different — but they’re the twin pillars of the same temple, just as protons and electrons are the core electromagnetic components of an atom.

Let’s say that an investor is bearish on the stock market. This doesn’t mean simply that she’s down on the market. It also means that she’s probably bullish on put options — which would give her tons of upside if the market drops (not unlike the upside one would have by leveraging a high-salaried high-owned player who tanks in a DFS slate). Additionally, her stock market bearishness would mean that she’s naturally more bullish on another asset class, such as hard commodities or bonds or currencies — maybe the United States dollar — because that’s where the bulk of her money would be invested if she’s not long on stocks.

When bettors in Vegas avoid the over or go against the favorites, that means they are bullish perhaps on the defenses in a matchup or the prospects of the underdogs. It’s not as if their pessimism exists in a vacuum. It’s redirected toward the other side of a bet in the form of positivity.

In DFS, one can’t be contrarian simply by pissing on the teacher’s chalkboard. A capital quota must be filled. Even if the salary cap is not hit, a minimum amount of salary must be spent because all the roster spots in a lineup must be occupied. An active investment in athletic assets must be made, and that requires affirmative analysis. Even if one chooses not to spend all the salary — ‘investing’ in cash, as it were — one would do so in the belief that excess cash provides a leveraged strategic edge.

Anyone could be a contrarian if all that meant were saying no. What makes true contrarians successful is that, even though their default is no, they still know when to say yes. DFS contrarianism is more than just fading popular players Pete Manzinelli-style. It’s knowing what long positions to hold with capital that otherwise would’ve been invested in chalk.

In DFS, you can’t be a clever cynic if you’re also not a foolish-seeming optimist. Otherwise, you’re unlikely ever to roster the low-owned high-upside athlete who randomly goes off in a slate with a tournament-winning performance. It takes cynicism not to invest in the ‘optimal’ options. It takes optimism to invest in the correct choices.

The Riskiness of Contrarianism

Let’s revisit the keystone quotation:

Because biographies of famous scientists tend to edit out their mistakes, we underestimate the degree of risk they were willing to take. And because anything a famous scientist did that wasn’t a mistake has probably now become the conventional wisdom, those choices don’t seem risky either.

What’s conventional today very well could’ve been contrarian and risky in the past. And what’s contrarian and risky today could be conventional tomorrow. The people who benefit from that shift in the mental market will be those who are optimistic enough to invest in contrarianism.

Like any investment, contrarianism is not without risk. Of course, it’s possible (probable?) that the riskiness of contrarianism is not as great as most people think. While many DFS players default to chalk, assuming that the risk of not rostering popular players is too high, they fail to see that almost always contrarianism is the +EV strategy in a context of chaos. It’s easy not to see the risk in being chalky — but that’s why contrarianism is actually less risky.

Contrarianism seems risky, and in any given slate the optimal tactic is probably not to fade the chalk. However, because of the top-heavy prize scale in guaranteed prize pools and the antifragile nature of event-based performances, being contrarian over the long term likely minimizes risk, in part because there’s always an optimistic side to the negativity of fading DFS chalk.

Of course, all of this is theory. What matters most is how chalkiness and contrarianism actually compare in reality . . . and this is where a FantasyLabs subscription comes in handy.

The merits of chalkiness and contrarianism can be researched using our Tools. Strategies and angles can be backtested via Player Models and Trends, and the practices of roster construction can be experimented with via our Lineup Builder. The triumphs and tribulations of DFS studs and FantasyLabs Co-Founders Jonathan Bales and Peter Jennings (CSURAM88) can be studied in their lineup reviews. (Pete’s 2017 DraftKings FBBWC lineups review — just posted as I’m writing this — is the balls. By the way, lineup reviews are accessible via our Premium Content Portal. While those and our podcasts are available to anyone, the rest of the content on the portal is for Pro subscribers.)

Because we’re talking about contrarianism, we’re thinking primarily about GPPs. In gauging DFS performance for GPPs, there are at least three core Labs metrics to consider:

  1. Plus/Minus: Our signature salary-adjusted production metric
  2. Upside Rating: The percentage of games in which a player has finished at least one-half standard deviation above his salary-based implied total
  3. GPP Grade (via our DFS Ownership Dashboard): A numerical grade showing the quality of a tournament play based on ownership levels across stakes

While doing research, if you find that contrarianism (or chalkiness) leads to higher Plus/Minus values, Upside Ratings, and GPP Grades, then that’s probably the preferred GPP approach for you. Of course, if you don’t do the research and dig through the data to discover the facts, you’ll never know.

Is there a risk to being underweight on chalk? Yes — but the bigger risk might be not being overweight on the low-ownership guys with upside.

The Labyrinthian: 2017.28, 123

This is the 123rd installment of The Labyrinthian, a series dedicated to exploring random fields of knowledge in order to give you unordinary theoretical, philosophical, strategic, and/or often rambling guidance on daily fantasy sports. Consult the introductory piece to the series for further explanation. Previous installments of The Labyrinthian can be accessed via my author page.

“Because biographies of famous scientists tend to edit out their mistakes, we underestimate the degree of risk they were willing to take. And because anything a famous scientist did that wasn’t a mistake has probably now become the conventional wisdom, those choices don’t seem risky either.”
— Paul Graham, “The Risk of Discovery”

Graham is writer, programmer, and inventor. He’s a smart dude with a Ph.D. in computer science from Harvard, a painter who’s trained at the Rhode Island School of Design and the Accademia di Belle Arti in Florence, and the proprietor of PaulGraham.com.

I have these three thoughts:

  1. Graham’s fortunate he’s the first Paul Graham to think highly enough of himself to acquire the URL PaulGraham.com.
  2. F*ck you, random owner of MatthewFreedman.com. “Matthew Freedman” probably isn’t even your real name. Do you spell your surname with “ie”? What, are you too cool for MatthewFreedman.net? — or MatthewFreedman.life?
  3. Graham’s basically the non-daily fantasy sports version of the rich man’s Jonathan Bales — without the muscles, eating habits, Bachelor obsession, and NASCAR fixation (probably).

I have other thoughts too, but those three felt the most immediately pertinent when I started typing that list.

I already have some Labyrinthians that touch on risk . . .

. . . actually, those are just my six most recent pieces — one of them might contain the word “risk,” and I swear I have some risk-oriented pieces somewhere — but this piece is about risk and contrarianism (or something resembling contrarianism).

By the way, I couldn’t think of a featured image for this piece that made sense, so I randomly chose Vincent van Gogh’s Starry Night. Like Graham, he studied at RISD. Or not. It doesn’t matter.

Some @PaulG Tweets From More Than a Week Ago

Graham has been blogging on the information interwebs since almost the 1990s — back then he wrote mostly about programming — so he’s about as old school as it gets, but I haven’t read much (any?) of his work till recently.

His most famous piece is probably “Maker’s Schedule, Manager’s Schedule” from July 2009 — in it he talks about how scheduling constraints and work requirements differ for people who are ‘makers’ (creators) vs. ‘managers’ (overseers) — but he also has some other great pieces — one of which (from April 2009) is entitled “Why Twitter Is a Big Deal.” Actually, that piece isn’t that great — it’s pretty much just a blurb — but by mentioning it I am able to transition smoothly to my next point.

Graham — @PaulG — is pretty decent at Twitter for a guy in his 50s. For instance, Nate Silver (who has 2.13M followers) follows only 979 Twitter accounts. One of them is @PaulG, who had this series of tweets last week:

Here’s where I transition to DFS.

Contrarianism ≠ Cynicism

In DFS and probably in society, many people tend to equate contrarianism with cynicism, skepticism, and lots of other negative –isms . . . like negativism.

For instance, when people talk about being contrarian stock traders, they often discuss the popular companies they dislike and are looking to sell short. Or perhaps they discuss the market in general, saying that it’s overvalued. Case in point: Nassim Nicholas Taleb (former trader and current philosopher and social media aficionado) has made most of his money in Black Swan fashion — when markets have collapsed.

Similarly, contrarian bettors have a reputation for often taking the under and being off heavy favorites. (See the “Vegas” episode of The DFS Roundtable.)

In DFS, many people talk about contrarianism as it relates to any given slate by mentioning the chalky teams or players they are fading.

To many, contrarianism is basically code for a cool sip of haterade — but that’s not really what contrarianism is.

Contrarianism is actually the long night before the dawn of hope.

Contrarianism = The Optimism of Opportunity

As Graham says, “Optimism compounds better than cynicism” — and that’s what contrarianism is. It’s optimism about one option after a lot of other options have been considered and either failed at or rejected outright. Contrarianism might begin with a process of strong inference, but it ends with an affirmation.

In any market everything is always relative, which means that productive pessimism cannot exist if it’s not conjoined with optimism. People too often think about playing/fading, optimism/pessimism, bullishness/bearishness, etc., as two distinct mindsets or perspectives. That’s wrong. They’re different — but they’re the twin pillars of the same temple, just as protons and electrons are the core electromagnetic components of an atom.

Let’s say that an investor is bearish on the stock market. This doesn’t mean simply that she’s down on the market. It also means that she’s probably bullish on put options — which would give her tons of upside if the market drops (not unlike the upside one would have by leveraging a high-salaried high-owned player who tanks in a DFS slate). Additionally, her stock market bearishness would mean that she’s naturally more bullish on another asset class, such as hard commodities or bonds or currencies — maybe the United States dollar — because that’s where the bulk of her money would be invested if she’s not long on stocks.

When bettors in Vegas avoid the over or go against the favorites, that means they are bullish perhaps on the defenses in a matchup or the prospects of the underdogs. It’s not as if their pessimism exists in a vacuum. It’s redirected toward the other side of a bet in the form of positivity.

In DFS, one can’t be contrarian simply by pissing on the teacher’s chalkboard. A capital quota must be filled. Even if the salary cap is not hit, a minimum amount of salary must be spent because all the roster spots in a lineup must be occupied. An active investment in athletic assets must be made, and that requires affirmative analysis. Even if one chooses not to spend all the salary — ‘investing’ in cash, as it were — one would do so in the belief that excess cash provides a leveraged strategic edge.

Anyone could be a contrarian if all that meant were saying no. What makes true contrarians successful is that, even though their default is no, they still know when to say yes. DFS contrarianism is more than just fading popular players Pete Manzinelli-style. It’s knowing what long positions to hold with capital that otherwise would’ve been invested in chalk.

In DFS, you can’t be a clever cynic if you’re also not a foolish-seeming optimist. Otherwise, you’re unlikely ever to roster the low-owned high-upside athlete who randomly goes off in a slate with a tournament-winning performance. It takes cynicism not to invest in the ‘optimal’ options. It takes optimism to invest in the correct choices.

The Riskiness of Contrarianism

Let’s revisit the keystone quotation:

Because biographies of famous scientists tend to edit out their mistakes, we underestimate the degree of risk they were willing to take. And because anything a famous scientist did that wasn’t a mistake has probably now become the conventional wisdom, those choices don’t seem risky either.

What’s conventional today very well could’ve been contrarian and risky in the past. And what’s contrarian and risky today could be conventional tomorrow. The people who benefit from that shift in the mental market will be those who are optimistic enough to invest in contrarianism.

Like any investment, contrarianism is not without risk. Of course, it’s possible (probable?) that the riskiness of contrarianism is not as great as most people think. While many DFS players default to chalk, assuming that the risk of not rostering popular players is too high, they fail to see that almost always contrarianism is the +EV strategy in a context of chaos. It’s easy not to see the risk in being chalky — but that’s why contrarianism is actually less risky.

Contrarianism seems risky, and in any given slate the optimal tactic is probably not to fade the chalk. However, because of the top-heavy prize scale in guaranteed prize pools and the antifragile nature of event-based performances, being contrarian over the long term likely minimizes risk, in part because there’s always an optimistic side to the negativity of fading DFS chalk.

Of course, all of this is theory. What matters most is how chalkiness and contrarianism actually compare in reality . . . and this is where a FantasyLabs subscription comes in handy.

The merits of chalkiness and contrarianism can be researched using our Tools. Strategies and angles can be backtested via Player Models and Trends, and the practices of roster construction can be experimented with via our Lineup Builder. The triumphs and tribulations of DFS studs and FantasyLabs Co-Founders Jonathan Bales and Peter Jennings (CSURAM88) can be studied in their lineup reviews. (Pete’s 2017 DraftKings FBBWC lineups review — just posted as I’m writing this — is the balls. By the way, lineup reviews are accessible via our Premium Content Portal. While those and our podcasts are available to anyone, the rest of the content on the portal is for Pro subscribers.)

Because we’re talking about contrarianism, we’re thinking primarily about GPPs. In gauging DFS performance for GPPs, there are at least three core Labs metrics to consider:

  1. Plus/Minus: Our signature salary-adjusted production metric
  2. Upside Rating: The percentage of games in which a player has finished at least one-half standard deviation above his salary-based implied total
  3. GPP Grade (via our DFS Ownership Dashboard): A numerical grade showing the quality of a tournament play based on ownership levels across stakes

While doing research, if you find that contrarianism (or chalkiness) leads to higher Plus/Minus values, Upside Ratings, and GPP Grades, then that’s probably the preferred GPP approach for you. Of course, if you don’t do the research and dig through the data to discover the facts, you’ll never know.

Is there a risk to being underweight on chalk? Yes — but the bigger risk might be not being overweight on the low-ownership guys with upside.

The Labyrinthian: 2017.28, 123

This is the 123rd installment of The Labyrinthian, a series dedicated to exploring random fields of knowledge in order to give you unordinary theoretical, philosophical, strategic, and/or often rambling guidance on daily fantasy sports. Consult the introductory piece to the series for further explanation. Previous installments of The Labyrinthian can be accessed via my author page.

About the Author

Matthew Freedman is the Editor-in-Chief of FantasyLabs. The only edge he has in anything is his knowledge of '90s music.