Hot Streaks Are Hot Air

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There is no such thing as a “hot streak” in basketball (or any sport), even though 91% of fans believe in “hot streaks”.

Someone with entirely too much time on their hands did a gruelling and all inclusive statistical analysis, which revealed that after making several shots in a row players are actually slightly LESS likely to make the next shot.

The reason for this is a phenomenon known as “reversion to the mean” where performance after a particularly good run (or bad run) reverts toward the average. This effect of probability explains the “Sports Illustrated jinx” where players featured on the cover perform more poorly the next season.

Your favorite football team had an unusually good season? Sorry to say, but reversion to the mean dictates that they’re likely to perform closer to the average next season. On the other hand, you can actually make large sums of money by betting on the fact that 91% of sports fans falsely believe in hot streaks. It leads to overconfidence, and a willingness to make larger bets when the laws of probability are against them.

It’s also the reasoning behind Warren Buffet’s motto to buy stocks when everyone is fearful, and sell when everyone is exuberant. Partly by using the law of reversion to the mean Warren Buffett has become the 4th wealthiest person in the world.

Coaches used to believe that praising excellent performance lead to poor performance, and scolding bad performance improved results. They were accurately assessing what was happening, but wrong about what caused the change in performance.

What they didn’t realize was that they were merely experiencing regression to the mean. Excellent performance would lead to poor performance regardless of praise or punishment. Humans are keen at noticing patterns, and we naturally assume some agent is creating those patterns, but in many instances simple laws of probability are the root cause.

 

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