For many, breaking away from the herd is not an easy thing to do. Human beings possess an innate instinct to think and behave in similar fashion to those around them. Renowned economist John Maynard Keynes said it best when he noted, “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” Being contrary, even when right, often feels both risky and wrong.
Fans of the television game show Jeopardy were recently exposed to this over the course of contestant James Holzhauer’s 32-game winning streak. While his approach seemed entirely unorthodox to those in the audience, James had taken the time to quantify the optimal way to play the game. He methodically executed on his way to $2.4 million in prize money while becoming one of the most memorable and successful Jeopardy contestants in the 35 years that Alex Trebek has been hosting the show.
For as long as we can remember, contestants on Jeopardy have selected “answers” from a particular category from top to bottom – starting with the “low dollar” clues and working their way toward the “high dollar” clues. Everyone assumed that’s just the way you play the game. Holzhauer saw this as an inferior method. He knew it was to his advantage to start with the higher dollar answers from those categories he was most comfortable with – then continue to bounce around among the remaining high dollar answers before working his way to easier clues. It’s no secret that the “daily doubles” almost always lie within the lower half of the board. Holzhauer, recognizing this, made it a point to seek them out as quickly as possible. Before his opponents knew what had hit them, he had typically snatched up the ever-important daily doubles.
James’ ability to correctly answer over 97% of the clues he buzzed in on was no doubt a big part of his success. Understanding this, Holzhauer wasn’t afraid to bet big on daily doubles or in final Jeopardy. In the 33 games he played, he would answer 94.7% of the daily double clues correctly, and an astounding 97% of final Jeopardy clues (that’s 32 out of a possible 33). Based on probabilities and statistics, Holzhauer knew that betting upwards of 80% of his bankroll whenever possible gave him the best chance at success.
James Holzhauer took everything that Jeopardy fans thought they knew about playing the game and flipped it upside down. There’s no question that there are similarities between game theory and successfully navigating the ups and downs of the stock market. Just as James demonstrated, those who are the most successful at their craft are able quantify their method to success – even if that means breaking away from the herd and facing the risk of being called foolish.