This is Part III of a three-part series on how cognitive biases and faulty assumptions lead us astray in draft environments. Check out Part I, on recency bias, or Part II,  on herd behavior.

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Part III: The Endowment Effect

“I give them two years before they’re turning the lights out on a very painful and expensive mistake.” 

Phrases like that one were commonly heard at the turn of the millennium, uttered by industry experts who predicted the catastrophic demise of a new retail venture from Apple. In the late nineties, then-CEO Steve Jobs was growing increasingly frustrated with how the company’s products were being displayed by third-party retailers. He charted a course to reinvent their retail strategy, which included hiring Target executive Ron Johnson to dramatically transform their direct-to-consumer business model. 

Those critics that predicted failure? They had a point. After all, Apple had a mere three percent market share at the time. Competitor Gateway had recently eliminated their retail division because their stores were attracting fewer than 200 people per week. Even Disney — the gold standard in guest experiences — had begun shuttering their retail stores at the time, due to sagging visitation and sales. 

It shouldn’t have worked. And yet, when Apple opened the doors to its first two stores in 2001, it did work. Almost eight thousand people visited those two stores in the first weekend alone, generating nearly $600,000 in sales. 

And it wasn’t just initial curiosity. Over the course of the next fifteen years, Apple would globalize their revolutionary retail experiment, operating more than 500 stores in 25 countries as of 2018. In 2017, no company made more money per square foot of retail space than Apple — and it wasn’t even close. 

So, how did they do it? As it turns out, the team at Apple understood something about human behavior that most other retailers hadn’t yet grasped in the early 2000s. An elegantly simple little insight that also happens to explain (what I believe to be) the most common mistake you’ll see fantasy football managers make on draft day. 

You see, Apple’s new retail strategy exploited a social science phenomenon, one that psychologists refer to as the endowment effect. 

We Often Underestimate How Quickly We Get Attached to Things

Initially coined by behavioral economist Richard Thaler, the endowment effect refers to our tendency to assign more value to something that we own (or even that we’ve possessed for a moment). There is no shortage of fascinating studies on this bias, but here are a few that underscore its effects.

In one study, participants were asked to value a mug and a Swiss chocolate bar; they valued the two items as more or less equal. Yet when researchers “gave” the participants the mug and then asked them if they would be interested in trading it for the chocolate, 89% of them said no. When the researchers flipped the script, and “gave” participants the chocolate, and asked them if they would be interested in trading it for the mug, 90% of them said no. 

In another study, employees worked harder to maintain ownership of a “provisional” bonus than they did if the bonus was framed as yet-to-be-earned. And in a study that emphasizes the primal nature of this phenomenon, researchers gave chimpanzees a choice between juice and peanut butter. When the researchers gave the chimpanzees the peanut butter first, 80% of them would not trade it for the juice. And when the researchers gave them juice first? You guessed it: about 80% of them wouldn’t trade it for the peanut butter. 

Once we own something, we assign (an often irrationally higher) value to it. Critics originally mocked Apple for their redesigned store layout, which did little to “maximize square footage” but instead employed an open floor plan that welcomed guests to touch and play around with their newest gadgets. In fact, Apple employees were told not to hurry store visitors along or interfere with their product discovery. To outsiders, it seemed superfluous; but it was actually a strategic decision — one grounded in science.

Because Apple understood that once we’ve experienced something and familiarized ourselves with it — once we feel like we own it, or even once we imagine owning it — we have a tough time walking away from it. It’s why car dealerships push us to take a test drive. It’s why virtually every media platform offers you a free trial. 

Once something becomes part of our lives, even for a fleeting moment, we tend to overvalue how much we need it. 

How the Endowment Effect Destroys Draft Strategies

In my short time contributing to FantasyPros, you’ve probably already picked up on how strongly I feel that social science research doesn’t get a big enough platform in the industry. We spend so much time considering how data informs judgment that we forget the ways judgment also informs data. And that judgment is often biased for any number of reasons. Pressure makes us act irrationally or revert to flawed cognitive shortcuts — and the pressure of draft day absolutely fuels the endowment effect. 

Do you have a couple (or more) players that you always seem to redraft? Does the idea of a keeper league entice you? Do you tend to overdraft players from your favorite NFL team? These are all examples of our tendency to overvalue what we’ve previously had or what we’re most familiar with. No matter how much we fight it, this psychological phenomenon tugs at our subconscious.

Last year, I drafted Lamar Jackson in the eighth round, and even the mere act of writing his name makes me smile with all the fantasy football euphoria he provided me in 2019. But I’m steadfastly against drafting quarterbacks in the early rounds — today, I can tell you with certainty that I will not go near him at (or anywhere close to) his ADP. But every time I see highlights of his MVP season, something inside me says hey, you should draft him again. And on draft night, when his name is taken off the board by one of my league opponents, a little part of me will feel pain — at that moment, I will regret not selecting him. Not because I don’t believe in my draft strategy, but because of the endowment effect. 

This season is not last season. Don’t revert back to drafting players that you’ve previously chosen just because they are available and are the most familiar option out of a group of guys with similar ADPs. 

Building a championship lineup in fantasy has exactly nothing to do with the prospects of your favorite NFL team. If you’re convinced that your favorite team’s rookie wideout is the breakout player of the year, consider how you’d feel if you studied every other team’s training camp reports as intently. 

Apple understood something that nearly every other industry expert had missed: that ownership, or even familiarity, fuels attachment. Let their lesson be a guiding principle to you on draft day. Sure, you may not be quite as comfortable with your lineup in September. 

But you will increase the chances you’ll still be playing in December. 

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