Tuesday, January 30, 2007

X & Y Management 

A column in Monday's Wall Street Journal struck one of my pet peeves. Carol Hymowitz uses Tony Dungy and Lovie Smith as her main exhibits in "Two Football Coaches Have a Lot to Teach Screaming Managers" (subscription required).

The two men -- the first African-Americans to lead Super Bowl teams -- became close friends when Mr. Dungy, formerly head coach for the Tampa Bay Buccaneers, hired Mr. Smith as an assistant. Both believe they can get their teams to compete more fiercely and score more touchdowns by giving directives calmly and treating players with respect. This doesn't mean they aren't demanding or don't push hard. Mr. Dungy has a grading system that counts players' "loafs." If someone isn't running at full speed, or eases up or fails to hit an opponent when he could have, those are loafs, and it's hard to get through a game without getting at least one.

While Ms. Hymowitz makes application to "screaming-bully bosses" common in the West Coast tech companies, no profession embraces this kind of managing-by-verbal-abuse more mainstream than in athletic coaching. The interesting thing about it is how resilient the style has been in spite of wildly successful, even legendary coaches who eschewed it such as Wooden, Landry, or Walsh. In fact, if you're anything short of successful over the long haul, then lack of vocal intensity typically receives part of the blame. Dungy notes how he was passed over for a head coaching job because he was too laidback, too polite, and willing to say that his family and faith really did take precedence over coaching.

Why does something unimportant or even detrimental to performance persist? Part of the answer may be a form of indulgence of manager's personality and preference -- shirking in econ-speak. It may also be due, in part, to the difficulty of determining what really makes a mentor successful. The vocal antics of Lombardi or Knight are very visible, so it becomes easy to attribute success to such a visible trait. Finally, habit and peer effects may enter in. The coaching profession really is a lot like a fraternity. I whack your butt because somebody whacked mine. For example, WKU's current coach was a hard-working, intense but courteous, polite, and humble player. After apprenticeships under the likes of Tom Crean, he returned as a foul-mouthed, berating screamer.

Monday, January 29, 2007

Monday morning links 

1. Russ Roberts has a great interview with author Michael Lewis (Moneyball, The Blind Side) at Econtalk. It lasts over an hour, so I recommend you right-click and download, saving it for when you have plenty of time to listen and savor. One of the best moments comes near the end, when Lewis and Roberts discuss the miracle that is Michael Oher, how the NCAA is reflexively (and shamefully) repelled by it, and what the story implies about economics and the polity in general.

2. While the Michael Oher story continues towards a happy ending (3.9 GPA at Ole Miss, likely 1st round draft pick), another miracle may just now be unraveling. Sadly, Joe Drape gives us the details on Barbaro's condition.

Update: Barbaro has been put to sleep. Doctor Dean Richardson and his staff are heroes, but even their amazing efforts were not enough to save the 2006 Derby winner.

3. Anecdotal evidence that salaries are soaring for assistant coaches in college football has been accumulating for some time. Here is long-time ACC observer Dave Glenn: "In 2000, N.C. State got a lot of attention for building one of the first $1 million staffs, and remember that's spread over nine men. Now, what paid nine men six years ago is paying three to five men in 2007." The quote comes from Larry Williams' article on competing offers made to the Clemson staff this off-season. Clemson AD Terry Don Phillips' reaction: "It takes your breath away, doesn't it?"

4. Must-see TV, tonight on PBS: The Power of Choice: The Life and Ideas of Milton Friedman. Here are the local listings. Set your Tivos, and enjoy Milton Friedman Day.

Sunday, January 28, 2007

Super Bowl Ticket Futures 

They are team specific, leading to the wild swings one observes in prices of similarly volatile assets.

In September 2005, Bears fan Greg Barnes bought the right to purchase four tickets at face value to this year's Super Bowl for $18 each. The Bears were coming off a 5-11 season, and Greg looks like a genius now.** During last Sunday's AFC Championship, Pats fan Mike Robertson collected $4000 when his offer of two would-be Pats tickets was taken up by a confident buyer, whose purchase became worthless when the Colts completed their comeback. Nice hedge, Mike!

I believe that irrational exuberance is an overused concept, but this market seems tailor-made to generate the phenomenon. Ticketreserve.com runs the market, and Vincent M. Mallozzi has the story in today's New York Times.

Futures for the 2008 BCS Championship game are available. While the market is admittedly embryonic, Florida and Michigan have attracted the highest prices ($156) thus far. Opening prices for teams judged as outsiders start at $15. Fans of Alabama, Maryland, Washington, and the perennially optimistic South Carolina Gamecocks have bitten on the offer.

**Thanks to Bartman for noting errors in the initial post, now corrected.

Friday, January 26, 2007

Time for a shot 

The time it takes to shoot
If you are Clemson: ......
Measured by the dots (0.6 seconds), as determined by the referees in Cameron, after much deliberation.

The amount of time you get to shoot
If you are Duke: ...........................................................................................................
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The result: An (erroneous) extra two seconds, after considerable deliberation, for Duke to hit the game-winning, buzzer-beating shot. Duke wins 68-66. Here is the youtube video, and here is ESPN's semi-apologetic Jay Bilas.

It was an incredible finish in several ways, but one in which the officials' lack of credibility cheapened the game of college basketball.

The error was not as egregious as that of the Pac-10 officials last fall, whose mistakes literally stole a win away from Oklahoma at Oregon. This game in all probability would have gone to overtime had the correct call been made, and Duke would have been favored to pull it out. But the error very likely denied the underdog Tigers the chance to play five more minutes in a game they'd prepared for all week.

Technology is changing our ability to document and monitor the decisions of officials during the game. Improved monitoring should improve performance. As we've discussed before, the NFL is clearly doing a great job of using video technology to monitor referee decisions. In my view, the results show up on the field - NFL refs are the best in sports. But in the ACC, it remains business as usual. Yesterday's error was sloppy at best, quite possibly home cooking of the standard variety, certainly consistent with the "Duke gets the calls" theory that has been rampant around the ACC for years. Technology and transparency should put an end to that practice, if it exists, and hopefully its perception, whether it exists or not. But perhaps it takes a long time to deprogram officials.

Thursday, January 25, 2007

Steroids vs. Gambling: Why Absolute and Relative Quality Matter 

The demand for a sports event depends on the usual suspects: the price of watching the event (ticket prices, pay-per-view charges, etc), the average income of fans, the number of fans, the price of related froms of entertainment, etc. The quality of competition that fans expect to watch also matters. In sports economics we refer to two types of quality: absolute and relative quality

Absolute quality refers to the overall level of talent on display in the event. The average NFL game has more talent on display than the average Division 1A college football game. The average NFL game thus has more absolute quality. The average Wimbledon match has a higher absolute quality than the average high school tennis match and so on. Since fans would rather watch more talent on display, higher absolute quality translates to higher willingness to pay (all else equal). That's one reason why attendance levels and/or prices are generally higher at events with more talent on display.

Relative quality refers to the comparative talent of the opponents in the event - competitive balance. A Duke-Murray State basketball game has a lower level of relative competition than a Duke-North Carolina basketball game. Non-conference Division 1A football games are loaded with low relative quality competitions while the conference games generally are more interesting because team playing strengths are more equal. All else equal, people have a higher willingness to pay for more-balanced competition: this translates into higher ticket prices and more people following the game.

Simon Rottenberg's Uncertainty of Outcome Hypothesis (which, among other things important to us Sports Economists, is found in this seminal work) is related to the relative quality of competition. Rottenberg hypothesized that fans would be more willing to pay to watch events where the outcome is in doubt, all else equal. This explains why the average live event is watched more than the same event shown on tape delay. Indeed, sporting events are the grandaddy of all reality shows, and just knowing an event has concluded takes some of its luster away even if the outcome is unknown. It also explains the old axiom that might be expressed by George Steinbrenner, owner of the New York Yankees: "Oh, Lord. Let us be good but not that good!"

Understanding that there are two types of quality in sports explains why sports team owners etc. look the other way when it comes to steroid use and the use of other "banned" performance-enhancing substances while these same people go whole-hog after gamblers and point shavers. If all players used steroids, then they would become bigger, stronger, faster - increasing the overall level of talent on display. But if each participant's talent improved by the same proportion, the relative quality of competition would remain unchanged. The absolute quality increases without hurting competitive balance. When this happens, the demand for the event increases and the bottom line is improved.

Gambling, on the other hand, not only hurts the relative quality of competition, but it also hurts the absolute quality of competition b ecause players aren't giving "full effort." This necessarily lowers the amount of talent on display.

Leagues are collections of those who run the teams in the league - the team owners. To understand why leagues do the things that "they" do, one needs to understand the motives that the individuals who run the league face. The reason why steroids are tolerated in sports while gambling is fought tenaciously is because steroids help the bottom line of team owners while gambling hurts it.

Wednesday, January 24, 2007

Creativity -- The X Factor 

A Soccernet piece by Andrea Canales draws attention to the importance of creativity in performance. Her specific target is Justin Mapp and his nearly single-handed contribution to opening up the Denmark-U.S. friendly. Going beyond the specific game, she writes

What isn't evident is if the U.S. has yet been able to figure out a way to integrate players with such an unorthodox approach to the game -- those who don't always follow the expected norm of hardworking and blue-collar play that has often characterized U.S. soccer. There are always those few who simply don't plug away industrially, who don't take the standardized route, who become more dangerous on the field precisely because they are so unpredictable. Mathis was one. Mapp is another.

I was a big fan of Mathis for exactly this reason. Such creativity may not be very apparent or matter much in games where steady play can dominate the other side, but when facing equal or better talent, it becomes all important.

At the player level, creativity may be more critical in some sports than others. Soccer, hockey, or basketball where the run of play is continuous and set plays more limited may require more than in football, where creativity at the coaching level may matter more. Even in football, the ability to improvise and create distinguishes some QBs from others. Football does illustrate when creativity matters most -- if you can dominate the other team, little creativity from coaches is required. When teams are very equal, it begins to matter a lot as the Xs and Os don't work the way the do on the chalkboard.

Creativity is one of the most under-studied and under-measured contributors to performance -- mainly because it is hard to study or measure. Many (if not most) college basketball coaches pay no attention to it or its development. In contrast, Bill Walton praises John Wooden for actively encouraging and developing it. Duke's Coach K receives similar praise from others.

Beyond the sports world, creativity may be the most under-appreciated talent required for achievement in a variety of areas including scholarly achievement or impact. As in sports, other talents or elements matter to a point. For example, in disciplines like economics, a quantitative threshold probably exists separating those who can tackle the subject matter from those who cannot. Above that threshold creativity matters a lot more than 50 more points on the GRE Quantitative section. What separates Gary Becker, Kevin Murphy, or Steven Levitt from many of their graduate school colleagues is not their GRE-Q score but creative ability, yet econ grad schools now reject applicants with high absolute GRE-Q scores (the relevant threshold) because the relative score is not quite high enough. (Here's Levitt's blog on whether he could get into Chicago's econ program).

Friday, January 19, 2007

A global brand 

The announcement this week that the Premier League had raised £625 million (almost $1250 million at today’s exchange rate) from the sale overseas broadcast rights means that over the next year the Premier League will share a total broadcast and media income of £2.7 billion over next three years (just under $5.4 billion), equivalent to £45 million (just under $90 million) per club per year. Note that $5.4 billion was the estimated total combined income of the other four major soccer leagues in 2004/05 (Italy, Spain, Germany, France). The Premier League has been a class apart in income terms for some time. An increasingly large share of the top players now play in England, and the Premier League is showing that it can capitalise on this in terms of overseas presence. If this continues, the Premier League will soon become a truly international brand. Meanwhile, the regulators who would like to see it cut down to size are sharpening their knives.

Record Naming Rights Deal Announced 

Barclays, a British bank, has reportedly agreed to pay $400 million dollars over 20 years for the naming rights to the New York Nets' new arena. The previous record for a naming rights deal was the $185 million over 20 years paid by Royal Phillips Electronics in 1999 to put their name on Phillips Arena in Atlanta where the Hawks and Thrashers play. The new arena is part of the $4 billion Atlantic Yards development in Brooklyn, and the Nets impending move will return major league sports to Brooklyn for the first time since the Dodgers left.

The Barclays deal exceeds the Phillips deal by a wide margin. In today's New York Times, columnist Richard Sandomir wonders if Barclays overpaid. To which I respond: "Duh!" According to Forbes, the estimated value of the Nets is $244 million. Instead of spending $400 million on the naming rights, why not pull a Red Bull - buy the franchise and rename it?

Thursday, January 18, 2007

Subsidies for minor league hockey? 

Jay Lacke, a marketing professor who "love(s) AHL hockey" argues in favor of subsidizing a new arena in Allentown.
The city's main asset is still its ability to provide agglomeration advantages. But those benefits are now on the consumption side of the economy. Quality of life issues are increasingly important, especially for the high-skill workers who are experiencing significantly rising real incomes. The Philadelphia Federal Reserve Bank has demonstrated that growth in real income increases demand for a greater variety of goods and services, including theaters, restaurant cuisine, parks and recreation, good schools ... and professional sports teams. This, says the Philly Fed, implies that larger cities with more choices will attract high-income households. These folks also tend to be the high-skill individuals whose presence supports the new economic function of cities — incubators of new ideas and innovation.

Nexus derives from "to bind (things or persons)." The new theory of the American city is that high population and employment concentrations promote the exchange of ideas between people, something that economists dub "knowledge spillovers." Especially among the high-skill individuals, these ideas are generated, transmitted, and percolated very rapidly if the people are linked, connected, bound together.

That binding doesn't just happen. It depends on infrastructure. Yale professor Douglas W. Rae argues that viable cities must "nurture the unplanned civic engagements that make mixed-use city life so appealing and so civilized." Cities do not even need to expand their populations and employment, or look like the thriving suburbs, to be places where the creation of ideas creates sustained economic growth. They need what sociologist Richard Sennett calls "useful disorder," the challenging yet socially productive complexity that results from the interactions of diverse people and ideas.

A new arena and a new minor league hockey team is a great consumptive asset that helps make the city a better nexus.
Steve Dittmore, a professor in sports management, responds citing evidence and economic reasoning which are inconsistent with Lacke's claim that a hockey arena "would be a good economic development vehicle."

I think this is where the argument has been pushed. The economic spillovers are either not there or can't be measured. So proponents now base their case on hard to refute claims - arenas as a "consumptive asset," a nexus for "unplanned civic engagements," and so on. And on these terms, they win. Libraries could and do serve a city in the way described by Lacke. But the librarians are always telling people to "keep it down" whereas the arenas feature cheerleaders and piped in music to "jack up" the crowd. For better or worse, the arenas have the winning formula in today's society - even in the minor leagues.

Wednesday, January 17, 2007

The Indianapolis Colts Don't Want You, Patriot Fan 

From the Boston Globe:

The Indianapolis Colts, like the San Diego Chargers before them, made it impossible yesterday for New England Patriots fans to buy tickets online for this Sunday's AFC Championship game in Indianapolis.

The Colts put nearly 1,000 tickets on sale, but the only people who could buy them were walk-up customers at the RCA Dome in Indianapolis and at Ticketmaster outlets in Indiana and Louisville, Ky. No tickets were sold online or by phone.

Bruce Mohl, the author of the article, notes that the Chargers had a similar ticket policy for their playoff game against the Patriots, reasoning it would improve the homefield advantage. It may have, a-priori. Ex-post it did not.

But it's not clear why the Colts enacted their policy. Assuming it's for the same reason, placing such restrictions on 1,000 tickets in a 60,000 seat stadium would seem to have a negligible expected marginal effect on homefield advantage (even if there were a 100% chance that any random remaning ticket ticket would go to a Patriots fan). But any a-prior improvement in homefield advantage has an a-priori effect on revenue. If the marginal cost of taking this action is close to zero, the restrictions can be interpreted as profit-maximizing.

But we know that when there's a will, there's often a way. From the Worcester Telegram comes an editorial footnote about the secondary market for tickets, where these restrictions do not matter and where those who are willing and able to pay the most get the tickets.

Of course, fans for whom money is no object can buy seats from so-called “secondary sellers.” Yesterday one online site we found was selling tickets ranging from $222.50 to $2,500 and another priced tickets at $345 to $1,955. In what we can only hope was a typographical error, two other online sites were advertising tickets for seats high up in Section 330, almost at the top of the stadium, for an astounding $4,641 to $4,825.75 each.

And the secondary market makes the effect on homefield advantage even more negligible. This underlies one of the reasons why some sports teams favor scalping laws: it gives them more control over who comes to their games.

Lastly, here's a video on some legal aspects of the Chargers' ticket policy, video that includes analysis by Michael McCann of Sports Law Blog (HT to Michael's post).

Monday, January 15, 2007

Racial Discrimination in the NBA 

For Martin Luther King Day, Gregory Mankiw has published an excerpt from his textbook at his blog. The excerpt details research on the extent of discrimination in professional sports, specifically the NBA. Unfortunately, the latest study Mankiw lists comes from 1990.

Last year The Handbook of Sports Economics Research (edited by John Fizel) was published. For this book I was asked to review the literature on the NBA, which included a discussion of the many studies of discrimination in the sport. By my count, since 1990, 17 different studies have been published on this subject. In other words, the vast majority of the research in this area has been published since 1990.

For those interested in a quick summary, HERE is a table that summarizes the results from the studies that have looked at salary discrimination in the NBA. And HERE is a table that summarizes the studies that have looked at customer and hiring discrimination. And HERE are the citations of the twenty studies I reviewed.

What lesson do these studies teach? Here is how I summarized the literature:

What have has been learned from the study of racial discrimination in the NBA? The results are mixed. Recent work indicates little salary discrimination, ambiguous hiring discrimination, and probably some customer discrimination. Discrimination in all areas appears to be diminishing over time. One should be cautious, though, in comparing results. Because each new study examines new data and new methods (if it hopes to be published), comparisons are often between apples and oranges. More studies should consider taking the approach offered by Jenkins (1996) and compare data from both the 1980s and 1990s and now the 2000s with the same methodology. When such a practice becomes more common, our knowledge of how racial attitudes have changed over time will be improved.

In sum, there has been a fair amount of research in this area. But as so often is the case, more needs to be done.

Thursday, January 11, 2007

End of the Beginning or Beginning of the End for MLS? 

LA Galaxy have signed Real Madrid and former Manchester United star David Beckham for a 5-year deal said to be worth $250 million. Until now MLS has made few attempts to sign big names and have built audiences slowly. This looks like a big push to make a bigger national impact. Apart from wondering whether soccer can make it big in the US (I subscribe to law of large numbers here: try often enough and one day you'll get lucky), the big question may be whether Beckham is worth the money. He has been the biggest commercial draw in soccer for the last ten years, despite not being rated the best player. He has also opened branches of his soccer academy in LA, giving him another marketing foothold. But 2006 was not a great season for him, and he is clearly on the decline. Still, we can surely expect some significant promotional investments in order to market this property.

Wednesday, January 10, 2007

Quick Ride Down from Mount Olympus 

In 1998, the baseball world heaped adulation on Mark McGwire and Sammy Sosa in their pursuit of Roger Maris' single season home run record. Eight years later, the Hall of Fame voters among baseball writers chopped the feet off of the McGwire statue, delivering only 23% of the 75% of votes needed for election in the Hall. In past posts regarding the steroid issue in baseball [Truth on Bonds & Palmeiro Files], I've seen that it generates strong passions among Sports Economist contributors and readers. This post doesn't get into the right or wrong of the matter, only the consequences for HOF voting.

Last spring after Sports Illustrated published its expose on Bonds, I mused about his HOF chances along with others caught up in the issue. That story along with prior continuing revelations from other sources, in my view, had ratcheted up the "believability index" among fans and writers with regard to not only Bonds but McGwire, Sosa, and others use of illicit performance enhancers. As a purely seat-of-the-pants guess, I placed McGwire's chances of HOF induction (say over his first 5 years of eligibility) at 50-50 with Sosa and Bonds much lower. Some of my colleagues thought that about right, others thought it too low.

After yesterday's vote, I'm suspecting that 50-50 was overly generous. Yes, a few HOF inductees scored as low as McGwire on their first ballot [See HOF site for player by player voting]. For example, Duke Sinder garnered only 17% in 1970 but was inducted in 1980. Don Drysdale received only 20% in 1975 only to gain entrance in 1984. Billy Williams and Luis Aparicio are two others with similar outcomes. [While HOF voting has been studied at length, these dynamics of HOF voting have not been]. However, as Peter Gammons pointed out last night (he voted for induction), none of these players had the cloud hanging over their head. The magnitude of the McGwire smackdown by voters can be seen in comparison to his peers on the all-time home run list. Every eligible player above him cruised in on the first ballot with at least 89.6% or higher. Of the eight eligible right below him, six went in on the first ballot. One of these, Jimmy Foxx, is from a whole different voting era. The other, Harmon Killibrew, went in on his fourth ballot but garnered about 60% his first year of eligibility.

Next year may be a telling vote for McGwire. If his total stays about the same, Cooperstown may be out. Gammons speculated that over time, if voters come to view the bulk of players as using steroids, then McGwire and others may get in based on being the best from the era. I'm guessing that Bonds' first ballot is about where McGwire's is or lower. He's never been liked as well as McGwire, and his leapfrogging of the icons among icons like Mays, Ruth, and possibly even Aaron has only increased the acrimony about his results. Still, I suspect that the McGwire vote provides a pretty good picture of the breakdown of writers who think the issue should matter and those that do not, so Bonds' numbers may be about the same. A "futures contract" on induction would be an interesting proposition for Tradesports.

Misunderstanding the MRP of College Coaches 

Reader Trent sent me this column by Greg Easterbrook on all the attention (and cash) heaped on college football coaches. There are other bloggable points in the column, but I focus on the following (which Trent pointed out as well):

Next is the winner-take-all aspect of modern economics, nodding here to Robert Frank of Cornell University, who has documented this phenomenon. Coaches at the top of pro and college football today earn 50 times what a high school varsity football coach earns. Not a single one of the top pro or college coaches is 50 times more able than the typical high school coach. I'd estimate that today's very best football coaches, such as Bill Belichick or Carroll, are approximately twice as good at what they do than any high school football coach who won a 4A or 5A state championship this fall – but Belichick and Carroll earn 50 times as much. At the high school, small-college, big-college and NFL level there are several thousand skilled, competent football coaches of approximately equal ability – coaching skill at the small-college level is especially overlooked. Of the several thousand able football coaches, a handful become rich while the rest labor for typical wages. This distorts our perspective of coaches, as winner-take-all economics distorts our perspective of Hollywood figures, CEOs, rock stars and the rest.

This is a gross misunderstanding of the marginal revenue product of college coaches. I am unsure how one would measure the marginal product side of the ledger. Assume Easterbrook is correct in saying "that today's very best football coaches, such as Bill Belichick or Carroll, are approximately twice as good at what they do than any high school football coach who won a 4A or 5A state championship this fall" (or is twich as productive at the margin). Then the average "very best" college coaches will be worth 50 times as much as the average championship college coach if the added productivity is worth 25 times as much to the average fan. Casual observation of comparative ticket prices, TV exposure, game attendance, etc. suggests this is likely the case.

Come to think of it, this would make an interesting research project, so get to work. ;-)

Monet Madness 

In Raleigh this week, the toughest ticket in town is not to see the #1 Tar Heels, but rather, the traveling exhibition "Monet in Normandy."
The N.C. Museum of Art has oh-so-sold-out the "Monet in Normandy" exhibit, which closes Sunday. Since the sellout over the weekend, desperate ticket seekers have offered lower-level Carolina Hurricanes seats, hand-knit items and, yes, tickets for the No. 1 Heels in exchange for passes to see the 50 paintings by impressionist master Claude Monet.

Robin Parrish, 30, of Raleigh bartered two $75 tickets to a Canes game against the Washington Capitals for a pair of $15 tickets for Monet.
As usual, exchange via barter allows for a legal transaction, whereas the payment of $75 for a Monet ticket would be illegal under anti-scalping laws. The Museum has sold about 225,000 tickets to see the exhibit, which closes this week before moving to Cleveland.

Monday, January 08, 2007

What's Blocking a D1 Playoff? 

Earlier I wrote that there is likely to be no playoff in D1 football for two reasons:

  1. There are too many schools in D1
  2. Too many schools stand to lose from a switch from the current BCS bowl system to a playoff system (the playoff would make the lower bowls virtually meaningless)

I'm always willing to update my priors/theories/arguments. Here is a Yahoo! Sports column by Josh Peter suggesting the primary person in the way of instituting a playoff is Big 10 commissioner Jim Delany (and the presidents of the Big 10 schools who have given him power). It's a fascinating read.

Friday, January 05, 2007

The Handwringing Has Begun 

Recently I wrote:

As Skip notes, surely there will be much hand-wringing and tut-tutting about the size of the contract - messed up university priorities and whatnot. The priorities may be messed up at Alabama (I'm in no position to judge this), but it's rather doubtful that the next-best alternative to the boosters, ticket buyers, and sponsors of 'Bama football is the 'Bama student education.

Case in point:

If Ohio State coach Jim Tressel wins the BCS title game this upcoming Monday, his current contract has a provision which stipulates that it must be torn up, and that a new arrangement needs to be negotiated. If the Buckeyes do indeed defeat Florida on Jan. 8, you can bet that Tressel will receive money that's comparable to this Alabama deal. Much as Steve Spurrier pulled yearly coaching salaries up to the $2 million mark in the 1990s, this Nick Saban deal will pull coaching salaries still higher. This trend of rapid upward escalation in coaching salaries — while evidently necessary to land or keep big-name coaches, as this Alabama deal proves — is simply not a healthy development in American society. While loads of problems exist in the world of primary education, this country's secondary institutions are throwing around ungodly sums of cash so that King Football will succeed on Saturdays. One hastens to say that this is not Alabama's fault; the whole college football industry is collectively responsible. Nevertheless, a healthier society would be devoting a greater share of enormous financial resources to more noble goals and ends. That's the dreary socioeconomic undercurrent to Nick Saban's money grab in Tuscaloosa.

A few comments:

1. Saban's salary is going to be paid out of money generated by the football program (by boosters, ticket and souvenir sales, and the proceeds from the sale of media rights) and the reason why Saban's salary is so high is that the demand for 'Bama football is high. As I wrote yesterday, it is not clear whether the multitudes of people who spend money on the Alabama football would spend it on education if the football program didn't exist. Moreover, those choices are rational. Who are we to say that all those individuals have messed-up priorities because they don't have education as their number one priority?

2. The real losers in all this, as always, are the athletes who have a legitimate claim to some of the cash but, because of the sanctity of amateurism, don't get it. But since Saban can influence which athletes come and which don't, he gets part of the spoils that would go to players in a professional athletics free-agent market.

3. Is Saban worth it? The 'Bama folks certainly think so. He has a proven track record of winning in collegiate athletics and he seemed to have a decent gig in the NFL - at least it paid well. So he had good alternatives and, it seemed, a good share of the relative bargaining power in this negotiation.

One thing seems likely. Saban, as the author of the article notes, is becoming the Larry Brown of college football. Those he recruits against are going to use this against him: "So you wanna go play for 'Bama, eh? What makes you think Coach Saban is going to be there when you are an upperclassman?"

Saban's a proven winner in college. But his nomadic tendencies will be marginal factor he'll have to overcome.

4. Saban's high salary is *not* a sign of an unhealthy society. As I wrote in the earlier post, the diamond-water paradox applies. According to the paradox, water is necessary for life but diamonds are not, yet the price of diamonds is much higher than water. Understanding the solution to the paradox comes from understanding two things: 1. the value of any good is determined by the satisfaction consumers obtain from it at the margin; 2. the price of anything is determined by its relative scarcity. It's quite possible for there to be quite a gulf between the two (the so-called consumer surplus).

Diamonds are more pricey than water because they are relatively scarce while water is relatively abundant. The price that people pay for diamonds is much closer to the marginal satisfaction they obtain from them while the difference between the marginal satisfaction obtained from water and the price of water is much greater. The fact that water is necessary for life and we can get it for a cheap price is a cause for celebration, not general alarm.

The same thing can be said about a collegiate education and football. The talent that Saban, Tressel, and other coaches have is relatively scarce. The Sabans of the world are even more scarce. On the other hand, the talent it takes to teach effectively, for example, at the collegiate level is more abundant. So the price of coaching talent is much higher than the salary obtained by most professors. But people obtain a lot more satisfaction at the margin from education than they do from football.

Thursday, January 04, 2007

Struggles of the Irish 

LSU's 41-14 drubbing of Notre Dame makes the 9th straight bowl game dropped by the Irish, creating a little media frenzy. As a fan, I'm enjoying ND's hardships. As a sports economist and analyst, I'm left wondering what's going on. My first question is whether the streak is genuine evidence of a down program or just a run of bad luck where a number of games could have gone either way. Here's the streak (from College Football Data Warehouse):

Season-Coach-Bowl-Opponent - Score
2006 Wies Sugar LSU 14-41
2005 Wies Fiesta Ohio St
. 20-34
2004 Willingham Insight Oregon St
. 21-38
2002 Willingham Gator NC State 6-28
2000 Davie Fiesta Oregon St
. 9-41
1998 Davie Gator Georgie Tech 28-35
1997 Davie Independence LSU 9-27
1995 Holtz Orange Florida St
. 26-31
1994 Holtz Orange Colorado 24-41



These results, at least on the surface, suggest ND has not merely fallen victim to a string of bad luck. The median point differential is -17 -- not exactly nail biters. The only game where they lost by less than a touchdown was the 1995 Orange Bowl.

Last night on ESPN, ex-Ohio State runnning back turned analyst, Robert Smith, was asked what his explanation was. He said, "Notre has been overmatched." That's pretty much self-evident when viewing the results above. He went on, however, to add that Notre Dame's ability to bring in viewers and fans lures bowls into consistently placing them against better opponents than they really have the ability to play.

The next question is how did ND get in this position. From 1987-1993, they won 5 of 7 bowl games and only got drubbed once. Yahoo!'s Dan Wetzel offers the most immediate answer:
Once you ignore the preseason magazines and the NBC hype and just watch them get thoroughly outclassed up and down the field, that fact becomes obvious. Forget what the vaunted Notre Dame public relations machine says. The Irish don't have enough good players to hang with anyone that does.
Wetzel goes on to offer evidence based on the paucity of NFL-caliber players coming out of ND in recent years. I think that Wetzel is right on the Mark. A good coach, like Weis, can do a lot for an offense with a good QB and decent receivers, but defense is another story. In games against Michigan, Michigan State, USC, and LSU, Notre Dame gave up 47, 37, 44, and 41. LSU's players dominated the second half with their speed and size.

Why a lack of players? Some ND supporters would offer the academics response. However, ND was a top flight undergraduate school and still attracted top flight players before 1995. A September 30, 1995 summary of NFL "Wunderlic" scores by college in the Wall Street Journal placed ND only at 11th, below the likes of Oregon State and Nebraska -- so much for the academics answer.

An alternative answer might be ND's strategy of staying independent. By the early to mid 1990s, every major independent football chose to hook up with a conference. Even powerhouses like Florida State and Penn State opted for that strategy. ND joined up in other sports but viewed its football program as so special as not to need conference support. After all, ND signed its own network football contract. As big as that seemed at the time, even to me, it now seems much less important. Oh, it brought in big bucks, but the television landscape for college football has been much different in the 1990s and 2000s than before. The recruiting advantage of ND's NBC deal is nothing like it would have been in the 1970s. Programs like Michigan, Texas, USC, or others may not have exclusive deals with a network, but their games, at least the ones that matter, are almost on all TV.

Wednesday, January 03, 2007

$40m for a college football coach 

ESPN reports that Nick Saban is leaving his $4.5m per year job with the Miami Dolphins for Alabama. Given his losing record in Miami, an 8-10 year deal worth $30-$40m in a league where he was highly successful makes sense -- for Saban.

But does it make sense for Alabama? For the NCAA? You can expect this news to bring forth many columns of criticism of Alabama, and the money that coaches are making these days in college football.

The length of the contract is what makes the deal such an eye-catcher. But the annual pay rate is also mighty large. At about $4m per year, Saban's deal is double that of Auburn's Tommy Tuberville and half a million to a million more than Iowa's Ferentz, Oklahoma's Stoops, and USC's Carroll. (See USAToday's analysis of current NCAA coaching contracts).

In bringing Saban on board, Alabama has hired a proven winner that maximizes their chance of returning to the summit of college football. Is that worth $2m more than the next best guy? It is hard for me to say. Surely, the money people at Alabama have the best feel for how much more boosters, sponsors, and ticket purchasers are willing to pay for an enhanced product.

A salary cap for coaches, given legal precedent, would violate anti-trust law. So the NCAA is powerless to stop the spiral in coaching salaries, short of stopping the flow of revenue into the game -- fat chance -- or shifting it to the players and away from the coaches (i.e. the player proxies). Also not likely.

As the money flows into the game, coaches' salaries will flow with it. Roll Tide!

Tuesday, January 02, 2007

Game Theory, Mixed Strategies, and a D1 Playoff 

If you are a fan of game theory (or even if you're not), you probably loved last night's BCS game of Boise State against Oklahoma. The favored Sooners spot the Broncos a quick 14 points and the Broncs, through their spirited effort and Sooner QB Paul Thomspon's poor decisions take a 28 - 10 lead, only to see the Sooners take a 35-28 lead with less than a minute to go on a muffed out-pattern that OU picked and ran back for a TD.

The Broncos appeared to be finished when Oklahoma cornerback Marcus Walker intercepted Zabransky's pass and returned it 33 yards for a touchdown to put the Sooners ahead 35-28 with 1:02 remaining.

Then, knowing they are likely to catch the Sooners off guard and with desperation calling, the Broncos pull everything out of the game plan but the blue field. The lateral to tie the game and send it to overttime.

The magic came on a stunning 50-yard touchdown play on fourth-and-18 in the final seconds of regulation. Zabransky hit Drisan James at Oklahoma's 35, and James pitched the ball to Jerard Rabb, who raced into the end zone with 7 seconds to play.

The statue of liberty* for the 2-point conversion to win the game (where did I see something like that before?) in overtime .

On the decisive play, Zabransky looked at three wide receivers to his right, then handed the ball behind his back to tailback Ian Johnson, who raced untouched into the end zone.

It was pure and beautiful game theory put to work. Certainly a mixed strategies Nash Equilibrium was at play.

I am skeptical about the potential for this game to bring a playoff. Yes, some of the "little boys" can beat the big boys and would do well in a playoff. But a playoff system would, for all intents and purposes, kill the non BCS bowl system. By adding every bowl but the EverythingButTheKitchenSink.com Bowl, the NCAA has nearly done this already. Getting into a bowl game isn't that big of a deal anymore - a 0.500 team can make it - and a playoff system would make lower-tiered bowls even more irrelevant, a football equivalent of the NIT. Those who would be most adversely affected are the schools perenially out of the top 25.

There are too many schools in D1 that have little shot in a reasonable playoff format who have a better shot at some kind of recognition (and cash) in the current bowl system. Their presidents can out-vote the presidents of the OU's and Texas's in the NCAA. So let's be frank. Don't blame the final exam schedule for the lack of a playoff. Blame the size of the NCAA and the majority of college presidents in the NCAA who believe they have little shot at making it in a playoff system.

*Update: Doc corrects me. The final play was the ol' statue of liberty, not the hook and lateral as I originally wrote. And I call myself a football fan!

Monday, January 01, 2007

The Blind Side: Two Very Different Books in One 

Last month I finally had a chance to read The Blind Side by Michael Lewis. I had thoroughly enjoyed his two previous books, Liar's Poker and Moneyball, (both of which are well worth reading if you have not already read them), and I was looking forward to reading this one. Overall, I'm glad I did.

As so many other reviews have pointed out (this is a particularly good one by David Berri), The Blind Side details the evolution of the importance of football's left tackle position on the offensive line to protect the blind side of right-handed quarterbacks. The analysis and the writing are typical, high-quality Michael Lewis work. I learned a lot from the book, and I enjoyed reading this material.

But none of the reviews I've read has raised serious questions about the Michael Oher portion of the book. On the surface, the story looks like a rags-to-riches, Christian, giving, sharing story. A kid from the ghetto has the general physical tools and ability to become a left tackle, and a family takes him in, buys him clothes, and helps him get through a private high school and into a major university. Given his nearly complete lack of education, he pretty much has to cram all of grades K - 12 into three or four years of school, and his success came about primarily because of the dedication and wealth of his foster family. He worked hard, and so did they; and eventually he received a full ride to Ole Miss. From the telling of the story, it seems likely that they'd have done most of this regardless of whether he'd had the physical traits to be a left tackle, and so the story really does involve dedication and giving on the part of Oher's foster family.

Beneath that cinderfella story, though, we learn that his foster family hired tutoring galore for him, and that even after the tutors worked with him for several years, his reading comprehension and concentration were so low that he had to have major works of literature read aloud to him and explained to him so he (or a tutor?) could write out short essays about them. We learn that he was given a driver's license because he was a football player, even though he apparently failed the exam. We learn that even though his tested I.Q. score increased after a few years, his ACT score was still sufficiently low that he needed to take some remedial courses online (and get very high grades in them) to qualify for admission to university. We learn that his private tutors, despite all their time and effort in high school, had to go to university with him to help him maintain his eligibility there. We learn that he had several people working specially with him to teach him the playbook - that he didn't seem to be able to learn it on his own. And we learn that his rich step-father bailed him out of a difficult assault situation during his first year in university.

How many times has Michael Oher been given the message that because he might become an NFL left tackle, people will bend or break the rules for him. What message does this send to him and to others in a similar situation?

My hope is along with everything else, Michael Oher has learned or will learn a sense of personal responsibility: that in the end, Michael Oher and his foster family recognize that he got lucky, both physically and in being hooked up with the family. He received a chance that so many others in his situation will never receive. If/when he makes it to the NFL, I hope he uses some of his income and wealth to provide many, much earlier, educational opportunities for others from similarly destitute backgrounds.