Why did the Houston Rockets draft Yao Ming?
Yao Ming is (was?) a very good player and of course he looked great on paper. He’s now injured for the third season in a row and out for the year. He has never been past the first round of the playoffs and it is not clear he will ever be healthy. It is clear that players over 7’4" almost always have persistent injury problems; human beings with that frame were not meant to play professional sports, least of all contact basketball. There are plenty of people that tall, but who has had the most successful basketball career? I believe the answer has to be the not totally impressive Rik Smits.
So why did the Houston Rockets draft Yao Ming? They couldn’t not draft him. The lessons for financial markets are obvious. Drafting Yao Ming is like writing the disguised naked put. You see the money in front of you, you see the return in front of you, you see the potential in front of you, none of the alternatives are so glamorous, and so you can’t not do it. Besides, other players get injured too.
Yao Ming, the naked put. Think about it.