On June 21, 1932, after Max Schmeling lost his heavyweight boxing title to Jack Sharkey on a controversial split-decision, his manager Joe Jacobs famously intoned, “We was robbed.” It’s a conviction that hits home with every fan of a losing team and thus every sports fan a lot of the time. It’s also a point of view that has received a surprising amount of academic interest and study (note, for example, this famous 1954 paper arising out of a Dartmouth v. Princeton football game).
Traditional economic theory insists that we humans are rational actors making rational decisions amidst uncertainty in order to maximize our marginal utility. As if. We are remarkably crazy a lot of the time.
Behavioral finance examines that craziness by way of the cognitive and behavioral biases that impact the investment and economic decisions of individuals and institutions. We like to think that we’re rational actors carefully examining and weighing the available evidence in order to reach the best possible conclusions. Instead, we are much more like spin-doctors, running around looking for anything we might use to support our pre-conceived notions, irrespective of truth.
Confirmation bias is our tendency to notice and accept that which fits within our pre-existing commitments and beliefs. Optimism bias means that our subjective confidence in our judgment is reliably greater than our objective accuracy. And the self-serving bias pushes us to see the world such that the good stuff that happens is our doing while the bad stuff is not our fault. Perhaps worst of all, because of our bias blindness, it is extremely difficult for us to see that there might be something wrong with our own analyses, perspectives and processes.
If you doubt these realities, think about how fans react to wins and losses by their favorite teams. For example, it’s easy to recognize that fans of losing teams will frequently be critical of the officials and that the winners will see the very same calls as appropriate and perhaps necessary. It’s as if the fans of each team watched an entirely different game.
In an effort to provide useful analysis for the maximum number of American sports fans – those whose teams lost over the first week-end of the NCAA Tournament (and I’m one) aren’t likely eagerly to accept the proposition that their criticism of the referees might be a tad misplaced, for example – I will focus on something a bit under the radar in the USA if not elsewhere, a huge soccer (football to the rest of the world) match in Spain Sunday between two perennial powers and perhaps the two best teams in the world today, Barcelona and Real Madrid. Barca won 4-3 to pull within a point of Real and Athletico Madrid at the top of La Liga on the strength of three goals by Lionel Messi and at least as many controversial decisions by referee Alberto Undiano Mallenco. Most neutrals (see here and here, for example), including the Spanish press centered in Madrid, saw the referee as fair if perhaps imperfect.
Not surprisingly, Real partisans saw things differently. Star Cristiano Ronaldo, after the match: “It obviously bugs certain people if Madrid are successful and winning. …I’ve been here for a long time and it seems to generate a lot of envy if we are doing well. People wanted Barcelona back in the title race and now they have that. We aren’t treated equally.” Moreover, “Real Madrid is the biggest club and that creates a lot of envy around it. You can say that the treatment is the same, but it’s not.” He also told his club’s official website: “We are sad because we knew we deserved more, but the fight goes on.”
Sergio Ramos, who was given a red card ejection in the second half, ominously told reporters that “somebody” had wanted Madrid to lose. “It is clear that when you are the best team in the world there is envy in some places. We at Real Madrid suffer from that and must fight against it. Even though there are some things against which you cannot fight.” Real coach Carlo Ancelotti was more tactful but no less clear: “We played well. We did not deserve to lose.” Moreover, “[w]e have to be happy with the way we played this game, luck was not on our side….” Predictably, the protests went nowhere.
Notice the losers’ refrain. They did what they could but bad luck controlled the outcome. They saw what they wanted to see. And so did the referee community, as Spain’s referees committee (El Comité de Árbitros) “denounced” the conspiracy theories, filed an official complaint with league officials and – in an odd move – called to congratulate the game referee on a job well done.
Predictably, Barca thought the officiating was just fine. Star midfielder Xavi Hernandez: “…I believe the referee was fair. They told me later that the penalty [that Ronaldo won] by Alves is outside, and we practically did not even protest. I would have whistled what [the referee] whistled, that’s the truth. I saw clear penalties. We need to focus on the analysis that Barcelona were superior to Madrid, played better and the result is there.”
Notice the winners’ contrasting theme. They deserved to win and the result followed. They too saw what they wanted to see.
Meanwhile, Athletico Madrid president Enrique Cerezo, whose club is now tied with Real and just ahead of Barca, could afford to try to put himself above the fray. “To complain when something is immovable is not worth the effort,” Cerezo said. “You cannot change anything at that point. I saw the Madrid-Barcelona game and if in one of the penalties whistled, even after seeing the replays, we did not know exactly what happened, how can you ask something different of the referee? They get things right the majority of times.” Somehow I doubt that his response would have been so magnanimous if his club had been playing and some tough calls had gone against them.
Everybody else may be biased, but we remain convinced that we routinely come to careful and objective conclusions for ourselves, even about the officiating in a game we care passionately about. We’re certain of our own abilities and objectivity. We aren’t flawed. We was robbed. In short (and as I routinely note), we remain convinced that we routinely see things as they really are. The sad truth is that we do nothing of the sort. Instead, we see things the way we really are.