Scott Boras, Donald Trump, and the Hot Hand Fallacy

The hot hand fallacy is a phenomenon generally applied to investing, sports, and gambling. It is the misconception that a string of successes is indicative of an overall trend and will thus continue. With gambling, most people actually recognize that hot streaks will inevitably come to an end because rolls of the dice or spins of the roulette wheel are, in the absence of dishonest human intervention, mere chance. When the streak is created by direct human action, however, a surprising number of people, including those involved, think chance has been superseded by talent.

They are not totally wrong. In basketball, for example, Steph Curry will surely shoot a higher percentage of three-pointers than, well, just about anyone. But that does not mean either that if he hits five in a row, he will hit the sixth or, conversely, if he has missed five in row, he is more likely to make the sixth. Or miss it. (There is the cold hand phenomenon as well.)

In investing, the effect is more pernicious. The media is flooded with claims by financial advisors boasting that they have had, say, an unbroken run of double-digit returns on investment, without noting also that the market had been going in one direction during the streak or they might have been just plain lucky. As such, investment commercials usually contain a tiny disclaimer at the end to the effect that “past successes do not guarantee future results.”

The hot hand phenomenon works both ways. It applies to both the initiator of the action and the observer. An excellent case in point is the current contract impasse experienced by the immensely popular New York Mets slugger, first baseman Pete Alonso.

Alonso, who has spent his entire five-year career with the Mets, has hit more home runs during that span than all but a few previous major leaguers. This includes a season-saving three-run blast in the top of the ninth in last year’s National League playoffs that sent the entire city into a frenzy. Few players in the team’s history have been more beloved by the notoriously demanding New York fan base than the “Polar Bear.”

Still, as players will either crow or lament, baseball is a business, and one in which stars get paid A LOT of money. And so, with his first shot at free agency due at the end of last season, Alonso turned down an offer from the team that would have paid him $157 million over seven years.

Instead, he fired his then-agent and switched to the mega-successful Scott Boras, who had a glowing history—to players anyway—of squeezing every last available dollar, and then some, out of overmatched general managers and team owners. Although nothing was made public, it seems clear that Boras promised Alonso at least $200 million, likely for a shorter term than seven years, and Alonso was confident that with Boras’s almost unmatched record of success, he would get it.

He did not.

What Boras and Alonso failed to consider was that, for each of them, circumstances had changed and that their hot hands had cooled considerably. For Alonso, although his 226 home runs were stratospheric, his production, particularly using the advanced metrics currently employed by baseball executives, has declined during the past three years, and last year’s were his worst yet.

In addition, Alonso will be thirty during the upcoming season and the standard profile for similar first basemen, especially when, like Alonso, they are thought to be “unathletic” and not particularly good fielders, is maybe two or three more good years and then steady decline.

Boras seemed oblivious to both Alonso’s shortcomings and his own increasingly spotty record. Last year, wedded to his all-or-nothing approach, Boras instructed some of his clients to hold out for better deals, and some, like pitcher Jordan Montgomery, left on the table more money than they will ever see in the future. As of this writing, it seems certain that Alonso will get a good deal less than half of the $157 million he rejected a year ago. (Montgomery fired Boras after last year’s disastrous negotiations and Alonso might do so this year as well.)

To be sure, Boras still makes mega-deals, but only for mega-players, such as Juan Soto, and Alonso, by current standards, is apparently not one of them. The lesson is that it is the player, not the agent, who is driving the process.

In other words, both Boras and Alonso failed to appreciate that “past successes do not guarantee future results.” And, as with Pete Alonso, there is a tendency for the hot hand to end right after you’ve pushed all your chips into the center of the table.

Which, as most of you have already guessed, brings us to Donald Trump.

To say that Trump is riding a hot streak is a vast understatement. Even with his ego, he must at times marvel at how a convicted felon, a sex offender with multiple failed business and marriages, a man who insisted in front of tens of millions of Americans that Haitian migrant workers were eating cats and dogs, could have been elected president of anything but an insane asylum.

And he is certainly playing his hand for all it is worth. Steamrolling over the advice of some of his less fanatical acolytes, Trump has signed a series of executive orders and made a number of policy statements that has left Washington and the country gasping. In addition, he seems determined to keep his promise and slap tariffs on everything but Big Macs and skew the nation’s resources to rounding up those in the country illegally, promoting white supremacy, and exacting revenge on anyone who has crossed him. And that leaves out the heartlessness and gratuitous cruelty that he has made national policy and seems to personally revel in.

Some have likened Trump’s ascension to Hitler’s and there are certainly similarities. But there are also differences. Hitler walked into a disastrous economy with massive unemployment and record deflation, so anything he accomplished looked terrific to the general populace. Trump is inheriting a vibrant economy with low unemployment and low inflation—which he convinced the fools who voted for him was actually disastrous. Where Hitler improved conditions for ordinary Germans, at least in the short term, Trump promises to make conditions worse. The tariffs, for example, may well cause a lot of small business owners to go bust, and they were among his core supporters. Without migrants willing to work for slave wages, food prices will go up, not down.

However that plays out, it seems clear that Trump has totally convinced himself that his hot hand is based solely on his brilliance and skill, not at all on luck or circumstance. If he is wrong, both he and the country will pay the price, and, since we did elect him, deservedly so. But maybe, just maybe, what has become a tragically ignorant nation will learn something from it.

There is no guarantee Trump will fall on his face, of course, but history has shown that most victims of the hot hand phenomenon are those who deny its existence.