The word “socialism” has wandered into the presidential election. This seems odd, since the two leading candidates for the presidency – Barack Obama and John McCain – would be considered devotees of capitalism. At least, although both candidates are on record as supporters of the progressive income tax, neither candidate is advocating that we replace the market as our primary mechanism for allocating resources.
Of course, just because the market dominates the U.S economy, it doesn’t mean that we cannot find pockets of socialism. For example, there is one specific industry where winners are punished and losers rewarded. Where an organization can fail year after year and yet never go out of business. Which industry has such anti-capitalistic tendencies? It’s none other than professional sports.
The Case of Sterling and Ford
Consider the case of the LA Clippers. According to Wikipedia, Sterling bought the Clippers in 1981 for $12.5 million. Currently – according to Forbes magazine – this franchise is valued at $294 million. In other words, this has been a pretty good investment for Sterling.
On the court, though, Sterling’s team has been a disaster for its fans. Across the last 27 years the Clippers have
- won only 34.8% of their regular season contests (about 28 wins per season).
- never won more than 47 games.
- lost at least 50 games 19 times.
- won only one playoff series.
- only appeared in the playoffs four times.
In sum, Sterling – as the person who is primarily responsible for this team’s direction – has demonstrated a staggering level of incompetence (and for those who wish to give some blame to Elgin Baylor, I recommend what might be the best article I have ever read by Bill Simmons).
Or consider the Detroit Lions. William Clay Ford took control of this team in 1964. At that point, the Lions had existed for 34 seasons, won 53% of their regular season contests, and four NFL Championships (including three in the 1950s).
With Ford in charge, though, the story has been quite different. Across the last 44 season the Lions have
- won only 43% of their regular season contests (less than seven per season).
- won more than ten games only once (the 10-4 team in 1970 might have made this twice).
- lost at least 10 games fifteen times (it will be sixteen after this season).
- won only one playoff game.
In sum, Ford – as a person who is primarily responsible for this team’s direction – has demonstrated a staggering level of incompetence (and for those who wish to give some blame to Matt Millen, well, I am sort of okay with that).
The story of Sterling and Ford highlight the problem with American sports. Much to the disappointment of their fans, an owner can oversee a team that fails year after year. And after all this failure, the value of the franchise only increases and the team is persistently rewarded (with draft picks, revenue sharing, etc…). In sum, socialism cannot be found in the proposed policies of presidential candidates. But it can be found in American sports.
Of course, this is a problem. As a fan of the Lions, it’s difficult to see this team persistently fail. And I am sure the same story would be told by fans of the Clippers. So what can be done?
Time to Unite!!!
Here is a good first step. Read the following book by Stephen Ross and Stefan Szymanski: Fans of the World Unite! A (Capitalist) Manifesto for the Sports Consumers.
This book – published by Stanford Press (yes, the same publisher as The Wages of Wins) – offers some suggestions for how American sports could be improved.
Before I get to some of the suggestions, let me introduced the authors. Stephen Ross is the director of the Penn State Institute for Sports Law, Policy and Research. Ross is also one of the leading scholars in the field of sports law.
His co-author – Stefan Szymanski – is the Director of the MBA program at Cass Business School (City University London). Although there are no official rankings, I think Szymanski is also the most prolific writer in the field of sports and economics. At least, I don’t think anyone has published more articles in this field.
So when it comes to “leading scholars”, these two lead the leaders. And what do they recommend to fans who wish to take American sports away from the “socialists”? Ross and Szymanski recommend that we look to Europe. Yes, the continent where “socialism” is not necessarily a bad word; organizes its sports according to a very strict capitalistic philosophy.
Let’s return to the case of the Lions. This year the Lions are winless. For fans of this team, we are once again dreaming about the NFL draft. In other words, we are looking forward to the Lions acquiring one of the top talents in college football. And why will we get such a talent? Because the NFL – like the NBA, MLB, and NHL – rewards it losers by giving these teams exclusive bargaining rights (often in spite of the wishes of the players) to the very best non-professional players.
How would life be different if the Lions were part of a European sports league? These leagues have a system called “promotion and relegation”. This means that each year the worst teams in the league are demoted to the minors. And the best minor league teams get promoted to the top tier. So right now the Lions would not be looking forward to improving through the draft. No, this team would be looking forward to competing in the minors next year.
Now why is this good for the fans? After all, wouldn’t this simply mean that owners like Donald Sterling and William Ford would vanish from the league (along with their teams)? I recently asked Stefan Szymanski about this issue, and here was his explanation:
The point about our proposal is to change the incentives, not necessarily to change the owners. When the Berlin Wall fell Poland went from being a country where you could not find basic consumer goods at any price to one where consumer goods were readily available at competitive prices in the space of just a few years. This was not always because existing managers were replaced – in fact this hardly happened at all- what happened was (a) the incentives of existing managers changed from being directed at pleasing their customers rather than pleasing their bosses or themselves (if they were the boss) and (b) anyone who wanted could rent a retail space and start up a business in competition and (c) outsiders were willing to supply capital to make things happen. The dynamics of this were complex- some new big businesses emerged, but at the same time many existing businesses got much better- in cases where there were easy wins (retailing) change was dramatic; in cases where change required complex reform (electricity supply) the pace of change was slower, but even then the change in culture brought about changes. There were few big collapses, but a lot of concern that collapse could occur, and there a lot effort put into making things better.
It seems to me the consequences of our proposals would be rather similar. I think the biggest effect would be that the incumbent teams would get their act together to the point where their performance was much sharper. Big teams would generally avoid the drop (although I would expect a few high profile losers in the first few years). Some new teams would come in, but I think even more important would be the change in the sporting culture that would end resistance to new ideas and methods (evidenced in Moneyball). Thus crazy owners with zany ideas or negligent attitudes would of necessity sharpen up their acts. After all, in many cases these guys have been very successful at managing businesses in competitive environments.
To summarize, promotion and relegation would force owners and managers to be competitive every season. So Sterling and Ford could either start making better decisions, or be forced out of the league. And that means, these two owners would have to act like owners and managers in most other American industries.
I should emphasize, Fans of the World Unite! does more than just talk about promotion and relegation. The book explains in detail how the current structure of American professional sports results in exploitation of the fans. It explains how this exploitation could be reduced if MLB, NFL, NBA, and the NHL learned from European sports leagues and NASCAR (yes, NASCAR). And finally, these authors effectively knock down objections to their proposals.
In sum, I think this book kicks off an important discussion for American sports fans. Certainly, it should get fans of the Clippers and Lions thinking about how life could be different.
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