On Monday I wrote a strategy and weather review story for the start of the third leg of this year’s Volvo Ocean Race, called Into the Storm Track. A massive storm was forecast to develop and slam into the fleet, a forecast that’s becoming all too real as we can see in the image from the race website.
The big purple patch on the left is an area of storm force winds in excess of 60 knots, and it will overtake the fleet (represented by the little coloured boats) sometime this evening. I don’t want to get deep into the weeds of the weather and race strategy here as that’s not what this blog is about; let’s just say that all through the last couple of days there have been opportunities to get north where conditions are expected to be less intense.
The downside of going north was that it was a detour – more miles, and losses to anyone that stayed south. It was a balance of risk management – that’s a big, dangerous storm – versus speed and performance. Only two of the boats in the fleet took the opportunity to get north, you can just pick them out in the image, the light blue and orange boats. The rest have all stayed south... why?
I introduced the idea of cognitive bias in my last blog and I think this is another example of powerful biases at work in the human mind. The first and probably the most important is a thing called Loss Aversion. People hate losses — psychologists have shown that the dislike of losing something is about twice as strong as the love of gaining it.
Loss aversion is often demonstrated with a simple bet — I’ll toss a coin, if it’s ‘tails’ you pay me £10. The question is, how much would I have to offer you for a ‘heads’, to get you to take the bet? When it’s tested on large groups the answer is usually around £20. People need to have a chance to win double what they could lose to take a 50/50 bet like a coin toss. I think we’re pretty safe in concluding that not taking the loss has been a powerful motivator for those boats that have stuck to the southerly route.
The second cognitive bias at work here is overconfidence; it’s all pervasive in human society in general and sport in particular. Despite divorce rates averaging 50% in modern western societies, no one walking up the aisle believes they have at best a two to one chance of making it ‘till death do us part’.
It’s well known that small businesses, particularly restaurants and cafes have similar failure rates, but no one who stakes their life savings and a massive loan to open a cafe seems to really believe that they are betting everything on the toss of a coin.
Overconfidence is responsible for so many foul-ups in sport it’s hard to know where to start; everything from playing the long debunked long-ball game in football, to snap-shooting from 35 yards out and even trying to score from a corner (very low probability despite what the match commentary team will tell you).
It could be that those teams that have hung on in the south to avoid making losses are also overconfident about their ability to ride out the storm and take what’s coming. Maybe they will, maybe they won't - only time will tell, but what we can be sure of is that the route choices are unlikely to have been completely rational. Kind of scary when you look at the size and violence of that monster.