Snooker and Rent Seeking

A fellow economist, Rob Taylor, challenged me on my risk aversion interpretation of Ronnie O’Sullivan’s refusal to take a black for a maximum break (which would have got £10000+£2000 for highest break) and instead opt for a pink and a 146 (getting £2000 for highest break).

It stretches credulity a little to think about Ronnie O’Sullivan, one of the most talented snooker players that has ever played the game, as in any way risk averse on the table.

A better argument, and one that covers a concept we covered earlier on term, is to think about rent seeking. If you recall, rent seeking is where some agents rather than creating value, seek to apportion the value created by others for themselves. Music piracy is one example – the value is created by the artist, and rather than the artist getting any money, if we obtain a pirated copy of their music for some cheap price, we have paid someone other than the artist who has made available the artist’s work at a fraction of the true value of it – at the same time depriving the artist of any return for their value added.

In snooker, big breaks are a huge part of the game – anyone who watches the games loves to see a big break being built. Sure, safety exchanges can be fascinating, but the reality is that great pots followed by great positional play are what draw in the crowds. Nothing more than a 147, the maximum break which requires a player to keep position on one colour after each of 15 reds potted – the black, a colour that is usually mired in amongst the 15 reds due to its position on the table. To see a 147 is very rare also, if increasingly common.

However, the prize for a 147 is not particularly large. In 2010 at the World Championships, O’Sullivan needed persuading to pot the final black on being informed the prize was £4000. In the case the day before yesterday, the prize was £10,000, five times that for the highest break, yet it is hard to argue that a 147 is worth that little relative to any other high break.

The suggestion thus is that snooker authorities are pocketing (pun intended) the revenues from crowds flocking to watch the game, rather than rewarding the players, who are the reason fans watch the game. They have extracted rents from the process over and above what is due to them for their role in ensuring snooker is a game we can all watch around the world.

Risk and Return: Snookers

Snooker players have to be very good at maths. When building breaks, it helps them if they can determine how many points remain on the table when making a choice of next shot (and subsequent ones). When in deficit, maths is all important in terms of how many snookers a player needs.

What is perhaps less well appreciated is the strategy involved, and the attitude towards risk. Every decision has some risk attached to it, but also some potential return (with some probability). Each pot could be missed, each positional shot could turn out badly. The more difficult the pot, the less likely that the next position the player finds themselves in is a good one.

Ronnie O’Sullivan, one of the most successful, controversial and flamboyant players of our generation, is being criticised for a sensible decision when faced with risky options. Having built a large break (putting the frame beyond doubt) of solely reds and blacks, Ronnie had the choice between a tricky black and an easier pink. Taking the black would keep him on course for a maximum break of 147, a highly prized outcome. Taking the pink would remove the 147 as an option, but leave him on for a 146, still overwhelmingly likely to be the highest break of the tournament (thus gaining him a prize – financial reward).

Hence this decision was one about relative risks and returns. Wisely, O’Sullivan asked about the reward for a 147 relative to a 146. He found it to be £10,000, with £2,000 for the highest break. Either pink or black potted would almost certainly get the £2,000, so it was the £10,000 that was at stake. Take a riskier black, risk getting nothing with a higher probability than taking an easier pink which yielded a higher probability of £2,000.

The moral of the story is: if we want to reward risky behaviour (which the fans and viewers love), it has to be rewarded adequately to reflect the risks involved. Rather than criticising Ronnie, we should be applauding his decision not to be recklessly risky for small rewards, something we criticised the bankers for in 2008.