What Pete Carroll’s Goal-Line Decision Says About Auto Finance Strategy

Not 10 seconds after Malcolm Butler of the New England Patriots intercepted Russell Wilson’s pass and sealed a Super Bowl win for the team, my 14-year-old daughter, who is no rabid sports fan, texted me this:

Why didn’t they just run the ball?

She was not alone. More than a few of the 114.4 million people who watched Super Bowl XLIX thought the same thing. I know I did.

But a fascinating article published in The New York Times presents an alternative view: that Pete Carroll, the Seattle Seahawks coach, was simply playing practical game theory, and playing it well.

Game theory is the tool for understanding strategic interactions — or what opposing parties should do when competing with one another. The Times article argues that game theory requires a “mixed strategy,” in other words, choices in competition “should be somewhat random.”

We will get to why this is relevant to auto finance in a moment. Meanwhile, here’s how the article described Carroll’s predicament:

The logic is that if you always choose to run in this situation, then you make the opposing coach’s job too easy, as he will set a defensive formation aimed at stopping your running back. Forget guarding the receivers, [Patriots Coach Bill] Belichick would respond by piling players between Marshawn Lynch [the Seahawks running back] and the end zone. As great as Lynch is, even he would find it difficult to run over a stacked defense that was waiting for him. Likewise, if the Seahawks would always decide to pass in this situation, there would be little need for the Patriots to guard against the run, and so their defense could double-team the eligible receivers.

Instead, you need to keep your opponents guessing, and the only way to do this is to be unpredictable. The only way to be unpredictable is to be a little bit random.

Carroll essentially needed to be random. If my 14-year-old daughter expected Lynch to run the ball, you can sure as heck bet that Belichick expected it, too. Passing when no one was expecting a pass offers the benefit of a “mixed strategy.”

In the football context, your running back may be a better weapon than your quarterback, and so an optimal strategy does not dictate that you use them both with the same probability. Rather, you choose the probabilities in an optimal mixed strategy so that the payoff from a running play will be the same as that from a pass. This means that even with a great running back, an optimal strategy sometimes involves passing. Otherwise, your star running back, always facing a run defense, may end up less effective than a less great passer.

Really? Should this random decision making be put in place all the time? The article argues that, yes, it should. Here’s why:

[R]ealize that if this were an optimal choice, Belichick would probably figure it out, and he would instruct his players to guard against the run. When most of the defenders focus only on stopping one running back, they usually succeed.

Or perhaps you believe that Lynch’s statistics show that he is so successful at bulldozing through opponents that he would succeed even against a defense set up only to stop the run. I disagree. A key reason that Lynch has been so successful is that his coach has been playing a mixed strategy all season. Lynch has accumulated impressive numbers in part because opposing defenses have had to be concerned about Russell Wilson’s passing. And so Lynch’s history of success when playing as part of a mixed strategy says nothing about how successful he would be if his opponents knew for sure his coach would call a running play.

I think this makes a lot of sense. The best competitor is able to present a non-linear competitive strategy, meaning that the strategy varies to such a degree that a competitor cannot preempt it. There are plenty of opportunities for a “mixed strategy” in auto finance, just as there are plenty of examples. Consumer Portfolio Services comes to mind. CPS is a nonprime lender that spends a lot of time figuring out where other lenders are not lending, and then moves on those micro-market opportunities. And then CPS pivots away from the micro-market when competition in those hard-to-find micro-niches materializes. Not every lender does this.

Yes, a “mixed strategy” does not always result in a touchdown. But when determining a long-range approach to decision making, keeping in mind the need for randomness is beneficial. Which is why, the next time there are 20 seconds left in a Super Bowl between the Seattle Seahawks and the New England Patriots and the Seahawks have the ball on the one year line, down by four, Pete Carroll just might call for a run.