We are learning now that some of our great business leaders may fail to reach their true potential because of a fear of taking risks, although it is hard to imagine Bill Gates and Warren Buffett having more than they already have. The same may be said for our outstanding golf players.
But we are beginning to learn that Tiger Woods might possibly have accomplished more than he already has or may in the future if he could only overcome one issue.
Even the greatest golfers, including Tiger Woods, systematically miss the opportunity to score a birdie out of fear of making a bogey, a study by two University of Pennsylvania professors has shown.
However, playing it safe carries its own risks in both golf and business, professors Devin Pope and Maurice Schweitzer said in their paper entitled: “Is Tiger Woods Loss Averse? Persistent Bias in the Face of Experience, Competition, and High Stakes.”
The academics studied putts during pro golf tournaments and their research suggested the “agony of a bogey seems to outweigh the thrill of a birdie.”
They calculated that type of decision-making bias costs the average golfer about one stroke during a 72-hole tournament, translating to a combined loss of about US$1.2mil in prize money per year for the top 20 golfers.
The researchers found golfers avoid the possibility of loss by playing conservatively when they could do better than par, but will try harder if they are at risk of coming in above par. Pope said “loss aversion” is part of a growing field of behavioural economics, which explores how human psychology impacts markets and business.
In a business context, the professors said par might be equated to quarterly earnings or investors’ approach to selling or holding on to stocks depending on what they initially paid for the shares.
The professors said their work challenges theories that suggest bias in decision making does not persist in markets.
They used data from 230 PGA Tour golf tournaments between 2004 and 2009, concentrating on 2.5mil putts attempted by 412 golfers who each made at least 1,000 putts.
Pope, who does not play golf, and Schweitzer, who only occasionally plays, said the study showed even experts in a subject suffer from bias in high-stakes settings. And it may well be asked, if Tiger Woods is biased when he plays golf, what hope do the rest of us have?”