Goalkeepers, Don’t Just Do Something, Stand There

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With the FIFA World Cup starting on Thursday at Azteca Stadium in Mexico City, it is worth asking what lessons investors can draw from the world’s most popular sport.

Three of the last eight World Cup finals have been decided by kicks from the penalty mark.* One of those occurred twenty years ago in Berlin. Italy beat France on spot kicks. In the seventh minute of the game, Zinedine Zidane scored an audacious penalty kick that drew inspiration from thirty years prior. As Zidane planted his left foot next to the ball, Italian goalkeeper Gianluigi Buffon began diving to his right. Zidane’s right foot struck the ball softly, and it floated up the middle, hit the underside of the crossbar, and bounced on the opposite side of the goal line while Buffon watched helplessly from the ground. This form of penalty kick is known as a “Panenka.”

Antonín Panenka first used the kick to win the 1976 European Championship for Czechoslovakia. In the process, he inadvertently provided a lesson in game theory and action bias.

The sports analytics community has studied penalty kicks extensively. Although soccer is generally a fluid game, the penalty kick is unique in that it involves only one player from each of the two teams in a strictly controlled situation, like a pitcher and hitter in baseball. The optimal strategy for the kicker and keeper is a function of what the other person is likely to do, so film of prior penalty kicks is often studied, game theory is used, and a so-called mixed strategy is employed by each player to avoid becoming predictable to the opponent. However, goalkeepers almost always choose to dive preemptively.

Counterintuitively, goalkeepers seem to remain in the center less often than would be optimal. So, why do they dive early so often? Action bias.

In the face of stress or risk, it is human nature to act. Doing nothing feels wrong. However, a bias toward action does not always result in a better outcome. In the case of professional soccer goalkeepers, they are highly incentivized and encounter the penalty kick situation on a regular basis, so it is in their interest to spend time developing an optimal strategy, which would include mixing in periodically staying in the middle of the goal. Two studies of hundreds of kicks in professional leagues found that the kicker shoots down the middle 15% of the time, but goalkeepers remain in the center on only 2% of kicks.

Investors face the same temptation. During market selloffs like the ones following last year’s tariffs or this year’s events in Iran, activity often feels more productive than patience. Yet frequent trading can lead to emotional, reactive decisions and unnecessary transaction costs.

One solution to mitigate action bias is to take advantage of natural circuit breakers. In an investment setting, such circuit breakers might be tax code incentives for inaction. In other scenarios, it could include intentional friction from a process that requires written documentation or approvals before action is taken.

As the old saying goes, sometimes the best advice is: “Don’t just do something, stand there.”

This post is a lightly edited excerpt from the chapter on action bias in my forthcoming book, Running Against the Herd.

* “Kicks from the penalty mark” is the official term used by FIFA. I refuse to call them penalty kicks because no one is being penalized and the rules differ slightly from a true penalty kick.