Daily Fantasy Sports Math: Value

There is always someone out there working harder and getting better. While you sleep, they are in the library, the gym, or in this case, staring at a highly sophisticated spreadsheet with stuff that doesn’t even make sense. As the daily fantasy sports industry grows, it is easy to assume that the level of play diminishes. There are more noobs, more ESPN Sportscenter players, and less fantasyholics that live for 7PM. After all, with daily fantasy sports, every day is a new day. Daily fantasy sports is an easy sell. Who wouldn’t want that new season feeling day after day? Who wouldn’t want to brush off Anderson Varejao ‘s season ending injury by replacing him the very next day with Dwight Howard? Who doesn’t enjoy spending a few bucks on a Friday night and having the opportunity to actually get that money back… and then some! Daily fantasy sports is like crack; it sells itself. Every single participant is a genius. Everyone thinks they could do a better job general managing their favorite team (or any team) than whomever is currently calling the shots. Everyone wins their season leagues. Everyone thinks they have the best team, each and every night! No one has ever lost while playing fantasy sports…Growth is good.

This past NFL season, and into the NBA season, growth has been evident, almost nightly, on Draftstreet. Day after day, week after week, more and more find the site through freerolls and affiliate recruiting. There is a rather lengthy learning curve with daily fantasy sports, so obviously, growth is welcome. What is interesting to note, however, is the role of knowledge on this influx of players. Within two days, almost every single NBA grinder learns about rotoworld, or some equivalent injury news site; certainly within one week of signing-up to play. Sleepers are predictable, and it’s safe to say, only the strong survive. You have to be ahead of the field, and take advantage of misconceptions and capitalize on opportunities. This is important because, as the industry grows, so does the competence of it’s consumers. Until there is an ESPN like phenomena, daily fantasy sports will continue to get tougher as more join, and more learn to capitalize. How can you beat the influx of players? Easy: through simple math that the average consumer fails to acknowledge, or doesn’t care to spend the time in analyzing.

I suck at math. Honestly, I was always quick with math in school. I used to think it was my best subject. My math score on the SAT was solid. I aced Calculus in college and proceeded to forget every irrelevant formula I had ever been exposed to. A week ago, this forgetfulness was never more evident. I suck at math. I took the GMAT, and the GMAT Quantitative section won. I assumed things would be similar to the SAT. I bought a book, looked over it the night before, and went into the exam thinking it was high school all over again. As I clicked submit and saw my score, I was convinced I’m perhaps the dumbest person on the planet. Math sucks. I suck at math.

But math with daily fantasy sports? I guess I could get behind that. Especially if we can tie this into finance in some way…

To this point there are two things that should be understood:

1) You don’t have to be some insanely gifted mathematician to enhance your daily fantasy game by using simple formulas.

2) You might want to stop reading, because I may, or may not, know how to add 2 and 2.

With all of that fluff of an introduction, it’s past time to get into the nitty gritty. Today, I’m going to play the roll of a daily fantasy scholar and propose a formula that is incredibly simple, but often gets overlooked. As is obvious by now, the formula pertains to value. (It was hammered into my head all four years of school, where we assessed value as V=I/R, where V was value, I was an interest rate and R was your required rate of returned. You can easily replace I with fantasy points per game, and R with a price component however, and determine value for that player. Because this is daily however, and all we care about today, I choose to look at projected points per game as my “I”. My formula is as follows:

Value = Projected Fantasy Points Per Game / (Price/$1000)

BAMMM!! That’s it. End of story.

If you’ve done any spreadsheet work with daily fantasy sports, or you’re a member of Grinders Incentives, you’ve seen something very similar. Everyone on DraftStreet turns the fantasy point per game production into 2.5x. It’s on of the most overrated aspect of daily fantasy sports. If you’ve never analyzed games with stats or numbers, and you haven’t actually determined an individuals value on a given night, then this is a great starting point to enhancing your daily fantasy experience. Odds are, 80% of people naturally do this when figuring out who to pick every day, but of those 80%, probably only 20% actually take the time to find “V” for a pool of players. It’s so simple, yet an important foundation to beginning your daily fantasy adventure.

In the formula above, we see that Value is defined by a projected point total as it relates to a proportion of the given price. This price is divided by $1000 for simplicity sake, as to create a single dollar return on the $100,000 salary cap given on draftstreet. The hardest part in this formula, as is the hardest part in any financial formula, is accurately predicting the projected points per game. Speculation thrives on Wall Street, and daily fantasy sports are no different. So how do we define our projected points per game?

On a daily basis, I create a list of players and proceed to make personal projections for how many points they will score that night. I look at sites like Rotogrinders, Draftstreet (for recent fantasy production), ESPN (box scores), and Rotoworld/Rotoinfo/Rotowire/Rotoinsertnamehere to gather my thoughts and match up my personal points per game, with the given player. I convert player stats from real life into Draftstreet’s scoring stats, as that is all I truly care about.

I then look at that players salaries. Excel makes this rather easy. You have Column A with Player name, Column B with your individual projected points, Column C with Salary, and Column D with the Sprizouse Sports Formula for determining value (yes I just coined the most basic formula ever to be mine). Essentially I look for a value of $2 to be a considerable play. I immediately eliminate all players that do not fit this bill, or $2 bill I should say. Now most people say you have to have 2.5x. I say, no one can predict 2.5x. No need in trying. If you can get 2x from every single player, it’s inevitable that someone goes for 3x, or 2.8x or even 4x. Worry about getting $200,000 worth of production out of you’re $100,000 salary first. Markness, the CPO or some sort of officer over at DraftStreet, wrote a killer article on 2x+y (that you should obv check if you haven’t), which explains the idea behind pace and managing expectations. Essentially, it all revolves around 2x. 2x is hard enough, let’s not set unrealistic expectations. PS: 2x+y is so much cooler than V=PFPPG/(P/$1K). Baby steps.

By utilizing the simple, but effective value formula, an extremely solid foundation is established when building a team daily. Once you have all of your 2x guys, you can look for guys with big ceilings, or guys that mold your line-up. It all starts with value though; a term that is too easy to throw around, and incredibly speculative. On a nightly basis, you would be surprised at how many guys you can eliminate from the total player pool. Most people fall victim of selecting a poorly valued player because it fits the salary cap for their team. By creating your own player pool of your value guys, you usually avoid falling victim of trying to make things fit.

In conclusion, what is value to one is not to another. People will disagree on player picks nightly, but that is what makes this such a novel concept. The whole idea revolving around fantasy sports players is the idea of always being right, and always being cocky. As my homie Kanye West would say: “I, I got a big ego.” Sports fan bases are often filled with incomprehensible arrogance. That is why this industry has a bright future. It’s why it is a genius concept. And it’s why you have none other than Spriz himself sat down to write you a gazillion word article on a simple topic that I learned on the very first day of my intro finance class freshman year. A concept that is habitual to us all. Value is everywhere in life. Profit is found by capitalizing on inefficiencies and taking advantage of the weak. Only the strong survive.

-Spriz