The Cost of Letting Matt Flynn Go: The Endowment Effect
So who thinks Matt Flynn should have been franchised now? I will be the first to admit that in my heart, I desperately wanted Flynn to be tagged and traded, and maybe while I’m dreaming some idiot team like the Raiders would offer a first rounder. My head of course said otherwise, sure the potential reward is high, but so was the risk; what would happen if the Packers were stuck with a $14 million guaranteed check?
In the end, general manager Ted Thompson was right in letting Flynn go without a fight and Flynn signed a very conservative 3-year $26 million deal with $10 million guaranteed with the Seattle Seahawks. More money that you or I will probably make in a lifetime, but loose change in comparison to the 5-year $90 million contract Peyton Manning just signed, or even the 5-year $60 million contract that Kevin Kolb signed last year.
My question is why fan perception of a player so different from a NFL GM? Even the media, which presumably has a better idea of what NFL GMs are thinking are still more like fans when it comes to predicting player value (although this might have to do with the fact that the media caters to fans and not to NFL GMs, so they could be deliberately doing this). Answer, the endowment effect.
Simply put, the endowment effect is the theory that there is a difference between the price of buying and selling a good when you own that good. A more academic explanation would be that: “This effect is a manifestation of “loss aversion”, the generalization that losses are weighted substantially more than objectively commensurate gains in the evaluation of prospects and trades (Kahneman and Tversky 1979; Tversky and Kahneman, in press). An implication of this asymmetry is that if a good is evaluated as a loss when it is given up and as a gain when it is acquired, loss aversion will, on average, induce a higher dollar value for owners than for potential buyers, reducing the set of mutually acceptable trades” – Experimental Tests of the Endowment Effect and the Coase Theorem, Kahneman et al. 1990
Confused? Packers fans, in this case represent the owners (while some of us are lucky enough to actually own Packers stock this really means emotional ownership of the team, like when we say “my team” or “we should bench AJ Hawk”) put more value in a good, this case a player such as Matt Flynn, when we “own” him than if we were to “buy” him. The biggest factor in this theory is that ownership inflates the price of a good, especially when the owner has grown attached to the good (which was definitely the case between Packers fans and Matt Flynn)
For a more personal perspective, imagine you have your favorite couch: your wife hates it, you dog has peed all over it countless times and it’s ripped all over the place, but hey you’ve had that couch since college and you love it. Now let’s assume the couch is worth $100 and someone offers you $110, you might still turn them down since your attachment to the couch overrules your “economic common sense”. But if you were offered $200, then you might be inclined to part with it, as the value now becomes more attractive than its sentimental value.
Kahneman et al proved that owners valued their goods at nearly twice the actual value that buyers were willing to pay. Reapplying this back to Matt Flynn, fans thought that a reasonable contract for Flynn would be a 5-year $60 million dollar contract much like the one Kevin Kolb signed last year; after all Kolb and Flynn had the same story as backups who showed promise and were “young rising stars”. But low and behold Flynn signs a contract just about half the amount that fans were willing to part with him at. Again, had Thompson franchised Flynn at $14 million, he would be paying around double what his actual yearly salary ended up being, and Thompson’s contract would have been fully guaranteed.
I think the main point that I want to get across is that as fans, we see the game in a very different light than people who actually work for the NFL. As fans, we want our team to be good, damn “extenuating circumstances” like cost, scheme, or team chemistry. If you want an example, just look at the Washington Redskins, who essentially cater to their fan’s wishes by making splashy free agent signings every year in order to raise excitement. So while their fans are happy during the offseason, they rarely are happy during the post-season. Matt Flynn made us very happy during his career with the Packers (especially for beating the Lions), but Ted Thompson was probably happiest when he let Flynn walk away.——————
Thomas Hobbes is a staff writer for Jersey Al’s AllGreenBayPackers.com.