The SportsFolio Journal - April 22, 2021

Apr 23, 2021

Super Soccer League: A Super Failure

The idea was promising. The creme de la creme of the soccer teams facing each other again and again and again. Fans marveling at the skills of the best players in the world week in and week out. A format that would bring “increased financial support for the wider football pyramid.”

The teams that signed up? A who’s who of elite competition:

Real Madrid
Barcelona
Atletico Madrid
Manchester United
Liverpool
Manchester City
Arsenal
Chelsea
Tottenham
Juventus
A.C. Milan
Inter

When SportsCenter, ESPN’s flagship program was first broadcast in 1979, the late Lee Leonard, the co-anchor opened it by saying:

If you're a fan, what you will see in the next minutes, hours and days to follow may convince you that you've gone to sports heaven.

If SportsCenter was sports heaven for the sports fan, the Super Soccer League would be the sports heaven for the soccer fan. For any middle-aged soccer fan who could think about nothing but soccer when they were a kid, this roster of teams evokes so many memories. A personal one for us is a Platini- and Rossi-led legendary Juventus team choking against Hamburg, a solid, but not top-tier German team in 1983. The excitement Barcelona gave us in the early 1990s with Koeman, Nadal and Ferrer in the backfield. When A.C. Milan won it back to back in 88-89 and 89-90. The legendary comeback of Liverpool in the instant classic against A.C. Milan when they managed to score three goals in six minutes after being down 3-0, and then winning on the penalty shootout.

Now, you put all of these teams into a league and let them compete. What’s not to like?

Turns out, a lot. The backlash was imminent and powerful. The narrative almost immediately became one of greed, one that would further deepen the gap between the haves and have nots. The story was income inequality, and FIFA, for one, was not happy at all. It sent a strong warning through its president:

If some elect to go their own way then they must live with the consequences of their choice, they are responsible for their choice - concretely this means, either you are in, or you are out. You cannot be half in and half out. This has to be absolutely clear.

David Beckham didn’t like the idea either:

It has been my life for as long as I can remember. I loved it from when I was a young child as a fan, and I’m still a fan now. As a player and now as an owner I know that our sport is nothing without the fans. We need football to be for everyone. We need football to be fair and we need competitions based on merit.

Even Boris Johnson, the UK’s Prime Minister weighed in:

We are going to look at everything that we can do with the football authorities to make sure that this doesn't go ahead in the way that it's currently being proposed.

Oops. It’s not a good look when half of the teams are from the UK and the Prime Minister is not on board.

These top teams had all the branding in the world, deep pockets and a strong partner in JPMorgan Chase, who pledged more than $4 billion to the effort. It didn’t matter, however, because soccer is a unifying force for all, not just a select few. More than a sport, soccer is hope. For many kids who were not born to rich families, it is sometimes the only way out of a poor life. For fans, it is hoping to become a part of something bigger. Soccer is also the hope for a middle-tier team in a middle-tier league that they, too, could become champions one day. The Super Soccer League, then, was not just threatening the existing power structure in the sport, it was a threat to one of the most fundamental needs of humanity: hope.

Soccer was a big business already, but this was too much. Just a couple of days after it was announced, the Super Soccer League was dead.

We can argue whether or not this was right or fair, but what is more difficult to argue is the theme that is emerging. When a sport with a big following is not monetized enough, at least in the eyes of its top teams and players, there will be efforts to revamp it. It is happening to tennis, it is happening to swimming and now, it is happening to soccer.

Maybe the Super Soccer League was doomed from the beginning because it did not have the broad coalition it needed, nor did it give a good reason to a lot of the stakeholders to support it. In hindsight, picking the best teams in the top three soccer countries in Europe was never going to work. It was too exclusive in a world that is increasingly and rightfully, moving toward inclusion.

That said, money is a powerful motivator. There will be other efforts and they will continue to take place across a wide range of sports.

Luckily, there is a better way. A new paradigm. An untapped ecosystem that will benefit all. We call it The New Sports Economy.

The Ponzi Confusion

I was staggered. For several years I'd been living under a death sentence, terrified that my pursuit of Madoff would put my family and me in jeopardy. Billions of dollars were at stake, and apparently some of that money belonged to the Russian mafia and the drug cartels — people who would kill to protect their investments. And I knew all about Peter Scannell, a Boston whistleblower who had been beaten nearly to death with a brick simply for complaining about a million-dollar market-timing scam. So I wouldn't start my car without first checking under the chassis and in the wheel wells. At night I walked away from shadows and I slept with a loaded gun nearby; and suddenly, instantly and unexpectedly, it was over. Finally, it was over. They'd gotten Madoff. I raised my fist high in the air and screamed to myself, "Yes!" My family was safe. Then I collapsed over a wooden railing.I had to grab hold of it to prevent myself from falling. I could barely breathe. In less time than the snap of my fingers I had gone from being supercharged with energy to being completely drained.

This is an excerpt from No One Would Listen, courtesy of John Wiley & Sons. No One Would Listen is the story of a whistleblower, Harry Markopolos, who tried really hard to warn the regulators that something wasn’t quite right with Bernie Madoff. He was right. Madoff, a man who seemingly had it all, was running a giant Ponzi scheme and when the scheme finally collapsed, billions of dollars were lost.

Madoff was sentenced to 150 years in prison and he passed away in prison last week.

Meanwhile, Nassim Taleb, whose Fooled by Randomness consistently ranks as one of the best business books of all times, weighed in on Bitcoin recently:

#BTC is just an open Ponzi scheme: money made by someone is taken from someone else.

There is no question that Bernie Madoff was running a Ponzi scheme. There was nothing but vaporware. Just an empty promise of future profits that could only come from future participants that are recruited to the scheme.

Here is the question: Is Bitcoin a Ponzi scheme?

We are obviously not huge fans of Bitcoin. It is not a functioning currency, at least not yet. Further, it certainly is not a financial asset, it just masquerades as one.

All that said, there is a clear need to distinguish bubbles, the Greater Fool Theory and Ponzi schemes. Here is how we reconcile all of this:

Bubbles: Substantial overpricing of assets relative to value. An individual stock can be a bubble and we can also think of the stock market being a bubble. Of course, it is hard to know who is right and when. Was Amazon ever a bubble stock? The bubble characterization, by definition, depends on value (an opinion), and reasonable people can agree to disagree on their value opinions.

What is not arguable, in our minds at least, is that a bubble requires a (financial) asset, because value can only be calculated for financial assets. Bitcoin is not a financial asset, therefore it cannot be valued, therefore it cannot be overpriced relative to value. Thus, Bitcoin cannot be a bubble.

Greater Fool Theory: One can argue that if a stock is in bubble territory, you need a greater fool whom you can sell it to. However, that doesn’t need to be foolishness, it can just be disagreement on value. Or it can be rational agents agreeing with the bubble characterization, but nevertheless deciding to participate in the bubble.

Therefore, it is best to limit the Greater Fool Theory to things that we trade that are not financial assets, like gold or Bitcoin. Those pseudo-assets have had relative success (though the jury is still out on Bitcoin) based on strong cultural narratives, but they don’t produce cash flows. You can’t buy and hold Bitcoin like you can buy and hold a stock, at least one that is paying or expected to pay dividends in the future. That strategy all but guarantees that your return will be zero; you need a willing buyer. But, who will buy something that doesn’t generate cash flow? A greater fool, of course!

To be clear, a fool can make a lot of money. We had the same position on Bitcoin when it was 10 bucks. People who bought a lot at those levels can retire while we still need to work hard every day (not that we mind). In any event, though, the concepts are what they are. Bitcoin is a modern application of the Greater Fool Theory.

Ponzi Schemes: A Ponzi scheme is not about assets and it’s not even about something that you can trade. It’s certainly not about a functioning business. A Ponzi scheme is nothing but empty promises of future returns that come neither from an asset, nor a business, nor anything you can trade. In a Ponzi scheme, money simply moves around from new participants to existing ones.

Bitcoin is not an asset, but it is not a Ponzi scheme either. It’s a construct that could become a currency one day, one that is currently trading mostly for speculation purposes. Greater fools are needed to keep it going. That alone, though, does not make it a Ponzi scheme.

Verdict: Taleb is a thinker we respect, but on the account of characterizing Bitcoin as a Ponzi scheme, we think he missed the mark.