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Avoiding the Most Likely Outcome

February 8, 2022

There is nothing normal about formula 1. As a sport, formula 1 is unusually strategic, more so because it has a high degree of uncertainty. External events that are out of any team's control have a huge impact. It might start raining. It might not, even though everyone thought it would. Or a car in the back might crash into the wall and change everything.

In this environment, the teams need to make certain choices, which make a huge difference in the car's performance. It's never entirely clear which decision is the best one because that depends on factors that they cannot know or control. This environment makes for elements of strategy that aren't easily found in other sports.

One strategy that they constantly follow is simply this: When behind, do what those ahead aren't doing, even if it in some sense might be the poorer decision. The reason is that when you do what the leader isn't doing, external circumstances might work to your advantage. Conversely, if you mirror all the choices the leader is making, you will almost certainly remain behind. Basically, you are introducing variance into your outcome, even though it might be a slightly worse "expected" strategy. But that doesn't matter, because the expected outcome is you end up behind.

In some scenarios, deviation can be valuable in and by itself, even if the decision seems ludicrous by other standards. If you are competing with someone who is performing the same as you or better, deviation is the only way to win. In most markets, the startup is the underdog and it needs a bit of help from external circumstances to come out ahead.

Because of this, a startup might place certain intrinsic merit on ideas that are new and different. If you only do what those ahead are doing, external factors will hit all players the same. All things equal, deviation is a good thing. You can set the sails in a different direction than the competition and hope that the winds will suddenly turn.

Let's face it, the most likely outcome for a startup is bankruptcy. So avoid the most likely outcome by creating as much variance as possible.