Here’s an article I decided to write after YET ANOTHER YEAR of seeing my beloved NFL draft executed in a sub-optimal way. I’ve enjoyed seeing Dr. Richard Thaler (author of “Nudge” and winner of the Nobel prize in Economics) weighing in on this strange market and felt like this might be the time to put something in the blog explaining the issue…
Every spring, NFL front offices gather in war rooms and make decisions worth hundreds of millions of dollars based, at least in part, on a laminated chart that Jimmy Johnson reportedly sketched on a cocktail napkin. That chart — formally known as the Draft Value Chart — has governed how teams trade picks for over three decades. It is also, according to Nobel Prize-winning economist Richard Thaler, badly wrong.
Understanding how it’s wrong, and why teams keep using it anyway, is one of the more fascinating stories at the intersection of behavioral economics and professional sports. And of course, this is an area I have enjoyed writing about for years.
The Jimmy Johnson Chart: How It Works
When Jimmy Johnson became head coach of the Dallas Cowboys in 1989, he inherited a franchise in chaos. One of his early challenges was figuring out how to value picks when trading up or down in the draft. This makes great sense, because Johnson realized that there was a missing pricing mechanism.
The chart he developed assigned a point value to every pick in the seven-round draft, with the first overall pick valued at 3,000 points, the second at 2,600, and so on, declining steeply through the first round before flattening out through the later rounds.
The chart’s appeal is its simplicity. When a GM wants to trade the 4th pick (1,800 points) for the 12th pick (1,200 points) plus a second-rounder (400 points), the math is clean: 1,800 for 1,600 — close enough to shake hands. It gives both sides a common language and a face-saving mechanism for complex negotiations. (Note the “face-saving” aspect… this is where behavioral econ comes in!)
The chart spread rapidly through the league, and for decades it was essentially the industry standard. Some teams developed proprietary variants, but the underlying logic — a steep exponential curve weighted heavily toward early picks — remained the dominant framework.
What Richard Thaler Found
In 2005, economist Richard Thaler (later awarded the Nobel Prize in Economics in 2017 for his work in behavioral economics) co-authored a paper with one of my favorite sports analytics gurus, Dr. Cade Massey, titled “The Loser’s Curse: Decision Making & Market Efficiency in the NFL Draft.” The findings were seriously actionable (but the NFL did not, actually, take action).
Thaler and Massey did what the Jimmy Johnson chart never attempted: they measured the actual performance of drafted players relative to their draft position and their compensation. By tracking performance metrics and rookie salary costs over many years, they constructed what amounts to a surplus value chart. In plain English, this means not just asking “how good is this player likely to be?” but “how good is this player likely to be relative to what we’re paying him?” An important distinction!
The results revealed a profound market inefficiency. Early first-round picks are dramatically overvalued by the Johnson chart relative to the surplus value they actually produce. The reason is twofold:
First, top picks are simply harder to predict. The gap in projected talent between pick #1 and pick #10 is rarely as large as teams assume, but the difference in compensation is enormous. Rookie contracts are slotted to draft position, so the first pick commands a far larger salary than the tenth — a cost premium that often exceeds the actual performance premium.
Second, the certainty bias (a cognitive bias where people value a smaller, SURE gain over a higher-risk, greater-reward opportunity) runs deep. Teams systematically overweight the “sure thing” at the top of the board, even when the historical data shows those players bust at surprising rates. Thaler identified this as a classic behavioral economics failure — the same overconfidence and loss aversion that distort decisions in financial markets showing up in draft rooms.
The Thaler/Massey surplus value model suggested that picks in the late first round and the second round offer the best value in the NFL draft — the sweet spot where players are talented enough to contribute meaningfully but cheap enough that their rookie contracts represent genuine organizational leverage. I feel like this is what I have observed over the years as well. Many more high first round picks are busts than we tend to recall.
The Arbitrage Opportunity
The part that interests me is how a team should respond to this erroneous pricing.
In the “real world” when a pricing mechanism is wrong in a systematic and predictable direction, it creates arbitrage opportunities for anyone willing to exploit the gap between perceived value and actual value. Some notable billionaires have made their fortune off of arbitrage in currency markets (this is why George Soros is known as the ‘Man who Broke the Bank of England’).
In draft terms, the arbitrage looks like this: if the Johnson chart says Pick #5 is worth Pick #18 plus Pick #52, but Thaler’s surplus value analysis says Pick #18 and Pick #52 together are actually more valuable than Pick #5, then the team trading down from #5 is winning the deal — even though the Johnson chart says it’s a roughly fair exchange.
Teams that internalize this insight should, in theory, be eager to trade down from premium picks. They receive more total surplus value while the team trading up feels satisfied because the Johnson chart validates the exchange from their perspective.
Bill Belichick and the New England Patriots were widely cited as the most aggressive exploiters of this arbitrage over two decades, consistently moving down in the first round and accumulating picks rather than chasing the top of the board. The Kansas City Chiefs have shown similar tendencies in recent years. These teams weren’t just being clever about roster depth — they were, consciously or not, taking the other side of a mispriced trade from teams anchored to the Johnson chart.
There is a limit to this arbitrage, of course. A quarterback who goes #1 overall has a value that no surplus model fully captures — the organizational lift, the marketing revenue, the franchise identity. And as more teams develop sophisticated internal valuation models, the gap between “chart price” and “true price” gradually compresses. The market corrects, slowly.
Why the Johnson Chart Persists
Here’s the really interesting question.
If the Thaler model has been public knowledge since 2005, why does the Johnson chart still circulate in NFL draft rooms?
Several reasons.
First, coordination: both sides of a trade need a common reference point, and the Johnson chart provides that even when both parties know it’s imperfect.
Second, organizational politics: a GM who trades down from the second pick and then watches the player drafted there win a Super Bowl will face questions no surplus value spreadsheet can answer. The Johnson chart provides cover.
Third, the chart’s inaccuracies are not uniformly distributed — for mid-round trades, it’s reasonably well-calibrated. The distortions concentrate at the extremes, particularly at the top of the first round.
And of course, there’s also the simple conservatism of an industry where decision-makers are judged against peers rather than against theoretical optima. Using the same chart as everyone else is safe. Departing from it requires explaining yourself.
The Takeaway for Analytically-Minded Fans
The next time you watch your team trade up to grab a receiver at pick #9, ask yourself: who won that deal? The Johnson chart will tell you it was roughly fair. The Thaler surplus model will tell you that there’s a high probability that the team trading down got the better end of the bargain.
The NFL draft is one of a remaining handful of markets where a publicly-known, empirically-validated mispricing persists year after year. Teams that understand the difference between perceived draft value and actual surplus value have a structural advantage over those that don’t — and they’ve had it for twenty years.
Want to dig deeper? The original Massey-Thaler paper titled “Overconfidence vs. Market Efficiency in the National Football League” is available HERE. For a more recent treatment, The Ringer and For The Numbers have both published updated surplus value analyses incorporating the new CBA rookie wage scale, which has changed some of the specific numbers while leaving the core insight intact. Also, check out the NFL Operations joint project with Carnegie Mellon.