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Editorial - Not everything that counts can be counted

Editorial Not everything that counts can be counted

What is the relationship between the performance of professional golfers, watch auction sales and marketing?

This heading could fit any number of subjects, but for the purposes of this editorial I will be looking into the sport of golf. One of the fundamental principles of golf is that you don’t play against the course, you play against your fellow golfers. But recent research has shown that some inherent force kicks in to urge professional golfers not to lose par when they are playing the US Open, one of the world’s top strokeplay tournaments, even though this has absolutely no impact on whether they win or lose.

For those unfamiliar with golf, par is simply the number of strokes that are required to complete a hole. A hole can be par 3, par 4 or par 5 depending on its length. But the par value of a hole can also be changed, as has happened at two courses that have held the US Open, Pebble Beach and Oakmont. Par 5 holes on these courses were reduced to par 4 without changing the design of the hole. The aim was to make the holes seem more difficult. But it also gave researchers the opportunity to see whether professional golfers displayed what is known as loss-aversion bias, in other words whether they worked harder to hold on to par when it was lower, even though it is their score relative to their competitors that determines who wins. 

Surprisingly, they do. Over the four rounds of all the US Open Tournaments considered in the study, in which the two holes had different par values over the years, golfers’ average scores over a tournament were better when the par value of the hole had been reduced. The key learning here is that this is not a rational response. Golfers will practice endlessly on their swing and on putting, adopt all the latest technological advances as far as their equipment is concerned and even use psychologists to improve their “mental game”. Yet something hard-wired in their brains ignores all this to concentrate on keeping par, when they just need to finish the tournament with the fewest shots.

You might rightly be wondering what this has to do with watches and timekeeping. Well, apart from the fact that some of the biggest brands are heavily involved in golf and that TAG Heuer’s latest Carrera Connected watch has a bespoke application with all the data that a golfer could ever need to help their game, the research into loss aversion and the so-called “endowment effect” that underpins it have a number of uses in marketing that I may well come back to in a future editorial. But in light of the spring auctions in Geneva last week, I couldn’t help but wonder whether this very specific marketplace for watches also involves some loss aversion. The endowment effect explains the discrepancy between the prices people are prepared to pay for something depending on whether they are buying it or selling it and has already been tested and proved for things as varied as baseball tickets, orange juice, wine and even pizza toppings. People place more value on giving up an item that they already have than they do on acquiring the same item. Maybe that’s why it’s the buyer, not the seller, who is saddled with the premium at these auctions.