On hockey, NHL and randomness

I don’t know if it’s reading too much of Nassim Nicholas Taleb lately or the fact I really love hockey. I came across this WSJ article earlier today and it struck a nerve with me. So I thought I may as well have some fun with it.

This article is a prime example of when an outsider makes a case that sounds completely logical and reasonable on the surface, but falls apart like a house of cards the moment someone with a bit of insider knowledge looks at the justifications presented. You see it often among Linkedin and Twitter “experts”. I didn’t expect to see something like this on the WSJ website.

Since not everyone has a WSJ subscription, let me provide a quick summary. The author claims that the states with no personal income tax have advantage in attracting better players and, therefore, have been more successful in building winning hockey teams than the states with a personal income tax. He provides examples of Tampa, Florida, Dallas and Vegas reaching the Stanley Cup finals in the past 5 years as his justification.

Seems logical, right? Except that it’s not true. None of this has anything to do with building a competitive hockey team. Now, let’s dive into the reasons.

Sample size flaw:

A classic "Fooled by Randomness" error. If we stretch our timeline to, say, the last 15 years or expand the selection to include divisional and President’s Trophy winners (which are hard to win), we will see that the teams from some of the most expensive cities in the US and Canada have done remarkably well: Rangers were the best team of this year’s regular season, Boston won that award twice in the past 5 years. Chicago, Washington, LA had been very successful in the previous decade. Something is already not checking with the logic of the article, but why?

The competitive nature of the NHL and a little bit about the realities of life:

“That has conferred a small but significant advantage on teams from places with little to no personal income tax, who can stretch their dollars farther for top-line stars and have more left over to court fourth-line grinders.” - the division the author makes between the “stars” and the “grinders” already indicates a significant lack of understanding of how hockey works.

It’s not uncommon. This misunderstanding of what makes star NHL players, well, stars exists even among a large % of hockey followers. In the absolute majority of cases it’s two simple things: personal brand and the amount of opportunity. Star players, outside of having their faces plastered all over the arena walls, also get the best partners, the most ice time and the most advantageous on-ice situations (offensive zone faceoffs, PPs, penalty shots, etc). You’d think that Vegas, which was composed mainly of 3rd and 4th liners from other teams in 2018 and reached the Cup final, would end the disrespect of the bottom-line players once and for all, but alas…

A good reality check may be attending a training camp for one of the NHL teams. You most likely would not be able to tell the difference between a star player, a 4th line grinder, and a prospect on his way to AHL as they skate in front of you in blank jerseys. The difference is marginal and can only be observed in the very particular on-ice situations by someone who knows exactly what they are looking for.

I am saying this to say that the NHL is an uber competitive league and playing in this league is a once-in-a-lifetime opportunity for many. These players are not going to care if they play in Manitoba or in Missouri or in Tennessee to show their best hockey.

As for the “star players”, many of them perfectly understand that they are the products of their environment. They were lucky to get to the place where they have good partners they have been playing with for years, they have support from the coaching staff, and fans love them. NHL careers are short. Why risk a good thing to save a few hundred thousand dollars?

Lastly, if you happen to be one of those few (star) players who can choose where to play, chances are you will choose to play and live in a great (expensive) city that has much entertainment and access. I think a good example here is when Bob and Panarin left the Blue Jackets at the same time. There were many articles written about how Bob would earn more money in the end, despite signing a lighter contract. But who cares? “You are not going to earn all the money in the world,” Panarin said when he signed with the Rangers. New York is New York for a reason; many people from all over the world dream of living there, but a few can afford to do so comfortably. Same goes for LA, Boston, Seattle… For some reason, LeBron James didn’t stay in Cleveland, did he? But he could’ve earned so much more money compared to living in LA! Life is not a Chicago school of economics and it is short.

The “fourth-line grinders” and the randomness of Stanley Cup playoffs:

There is a popular saying in hockey that “the third and fourth lines win the cups (medals)”. This is true for many reasons, but mainly because playoff hockey is an entirely different game compared to the regular season: the productivity of star players diminishes dramatically, the game gets a lot more physical, and there is often just a day of rest in-between games, making it challenging for individual players to consistently stay in top form. Someone has to pick up the slack.

The teams whose 3rd and 4th lines (and goalies, but that’s a conversation for another time) step up to the plate go further in the playoffs. But as I already mentioned (I think it’s worth repeating), ironically, it’s the players from the bottom lines who have the least say in where they get to play. They get traded often. They jump at every opportunity they get because they know many of them are one bad game away from being sent to AHL or put on waivers. Let’s just say, those guys rarely get to choose. And regardless of where they land, income tax state or no income tax state, they will work their butts off.

Basically, the lines which win the most important games of the season are the most random and hardest to predict.

It’s not just about the money:

So many questions… Is the team located in your hometown? Is the team a contender? What is your expected role on the team? What is your rapport with the head coach and GM? Does your wife like the city?… There are so many aspects of choosing where to play which have nothing to do with how many dollars you are not going to pay in taxes that are often a lot more important than the latter.

The timeline to success:

From the moment they lay their foundation (aka draft their top players and make necessary roster adjustments), the timeline to success is different for every team. Looking at the Stanley Cup contenders of the past 20 years. For Vegas, the success came overnight (let’s ignore the flawed nature of the expansion draft that made them so competitive out of the gate). For Penguins and Chicago, it took 3 years. For Florida and Tampa, about 6-8 years each. For the Capitals, it took over 12. Dallas, Tampa, Vegas and Florida have all started their rebuild at different times, and it’s nothing but coincidence that they all happened to be competitive around the same time. And justifying this coincidence with any macro-economic reasons is nothing short of silly.