You can be on Entrepreneur’s cover!

This Is Why You Should (Almost) Always Go for It on Fourth Down But Seldom Do Loss aversion makes football coaches and business leaders timid when the data says they should be bold.

By Gene Marks

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Focus on Sport | Getty Images

Back in 2009, the football coach at a little known but prestigious high school in Arkansas had an unorthodox strategy. The coach, Kevin Kelley, always went for it on fourth down. Why? Because it made sense to him - and he couldn't understand why more coaches didn't do the same.

"You can have an extra down if you want it," he told the authors of the great book Scorecasting: The Hidden Influences Behind How Sports Are Played and Games are Won. "(But some coaches just say) no, I'll be nice and just use three."

Turns out Kelley was right. His winning percentage was 82 percent. His team won championships. His players loved the risks he took. The fans ate it up. But Kelley wasn't taking such a big risk. To him, it was crazy not to go for it on fourth down -- and the numbers, according to the book, certainly back him up.

Related: How to Take the Right Risks

The book's authors interviewed David Romer, a Cal-Berkeley economist. His paper, entitled "Do Firms Maximize? Evidence from Pro Football," analyzed 1,068 fourth down situations in more than 700 NFL games. He found that almost 90 percent of the time - 959 times to be exact - the coaches did not go for it on fourth down even though the right call would've been to do that.

How do you know it would've been the right call? You just have to look at the data. In the case of a football game it would be field position lost and the chances that the opposing team would, or did, score. Romer's analysis concluded that inside the opponent's 45-yard line, facing anything less than fourth and eight, teams are better off going for it than punting. He also found the same for when a team is inside the opponent's 33-yard line and it's anything less than fourth and 11. Regardless of field position, Romer concluded, a football team is always "better off" going for it when it's anything less than fourth and five.

So why don't more NFL coaches do this? The Scorecasting authors said it was due to "loss aversion." It's a fear that most of us, as business owners and leaders, also have.

Related: There Is No Success Without Risk

"Time and time again we let the fear of loss overpower rational decision-making and often make ourselves worse off just to avoid a potential loss," they wrote. "This loss aversion means we tend to prefer avoiding losses at the expense of acquiring gains." Because of loss aversion we don't make that key hire, avoid buying that piece of equipment, hold back from investing in a new venture. We're afraid to lose what we have.

Successful coaches like Kelley and even the Patriot's Bill Belichick (who was also cited in the book as a coach that tends to go for it on fourth down more often than not) know the data. In Philly, we Eagles fans see our coach Doug Pederson doing this too. Many credit his "aggressive tactics" for bringing the city its first ever Super Bowl championship last year.

But is this so "aggressive?" Not really. It's just about knowing when to take a risk. Smart leaders who do the analysis, know the data and have the right information at hand aren't afraid to do this. They don't suffer from loss aversion.

Related: Why 'Big Risk, Big Reward' Is a Myth

In football as in business, nothing is guaranteed. You could fail. Your decision may be wrong. You could incur a loss. But why aren't you going for it when the data -- your return on investment analysis, market research, feedback from customers, experience with similar investments, a person's track record, a potential customer's orders -- is telling you that the odds are well in your favor of succeeding?

Gene Marks

Entrepreneur Leadership Network® VIP

President of The Marks Group

Gene Marks is a CPA and owner of The Marks Group PC, a ten-person technology and financial consulting firm located near Philadelphia founded in 1994.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Making a Change

Expand International Communication with Lifetime Access to Rosetta Stone Language Learning

This proven and popular platform has helped millions of users learn new languages.

Collaboration

You Need a Community With Shared Values to Find Long-Term Success — Here's How to Cultivate It.

Entrepreneurs need to remember this growth strategy: nurturing a purpose-driven community of like-minded entrepreneurs around them.

Travel

Pick Either a $40 or $70 Membership and Save on a Lifetime of Flights

There's really nothing easier than letting someone else find you bargains on all your future air fare and sending them to your phone or email.

Side Hustle

I've Had a Secret Side Hustle for Decades. It Keeps Tens of Thousands of Dollars in My Pocket — and Gets Me Into Places I Wouldn't Go Otherwise.

When Cliff Smith lost his job, he picked up an under-the-radar gig that would make it possible to keep dining out — something he and his wife love to do.