The SportsFolio Journal - October 31, 2021
Sports is the New Oil
What do we mean by “Sports Is The New Oil?” At the most basic level, it means that sports become the new organizing principle. There is so much good that is happening in sports already (gambling excluded), we should take those principles and translate them to how we run our society.
Let us let you in on this a little more. The following is not an exhaustive list, but here are some of the significant features. In sports,
There Are Consequences. You can not run slow and expect to win a competitive race. You can not miss shot after shot as a team and expect to win the game. You cannot keep dropping passes if you need touchdowns. These are some of the reasons we love sports after all. It’s one of the most meritocratic institutions in the world. Bad luck happens, but even then, hard work is rewarded. As Vince Lombardi, one of the greatest coaches of all time once observed, “winners never quit and quitters never win.”
Is life meritocratic? We all bought into this dream that it is and maybe that was more true than false at some point, but lately that has been slipping. The Great Recession of 2008, memorialized in the excellent book Too Big to Fail, was perhaps a turning point that may have reinforced the idea that the risk-reward principle applies a bit differently to big companies. When life-changing wealth, $5.7 billion to be exact, accrues not to the hardest workers but to a lucky speculator dabbling with a dog-themed crypto, it is becoming increasingly hard to argue that hard work is the only way. When somebody can amass in 12 months, with just a few clicks, the same wealth as their parents who got there through lifelong financial discipline, something has gone wrong.
The Consequences Are Immediate. Actions having consequences is one thing; that the consequences are rather immediate is another. Havlicek stole the ball, and five seconds later, the Boston Celtics won the Eastern Conference Finals. 10 days later, they were the NBA champions of the 1964-1965 season.
Delayed punishment generally does not work for young children. Actually, we doubt that it works for anybody. DraftKings has been offering fantasy sports in New York for a long time (about 10 years), and what has happened? Other than a very brief period of time (three months), they were able to operate, in our opinion illegally, pretty much uninterrupted the whole time. When it seemed that the New York Court of Appeals may just outlaw daily fantasy sports in the state, the case was scheduled for reargument. A resolution now seems to be deferred again until later, most likely 2022. We have narrated the entire case in our sister blog, Full Court Press. Here is Part 1 of the 12-part series.
We can look at all of what happened with DraftKings and use it as an example of actions not having consequences. Putting that aside for a moment, this New York stuff, in isolation, is a good example of actions not having immediate consequences. There is still a possibility here that there will be a consequence, but we know this: even in that case, it will be far from immediate.
Long-termism Is Supported. On-field actions have short-term consequences that are immediate, but off-the-field actions can have long-term consequences. Rebuilding is widely accepted as a necessary phase toward success, even when the short-term looks bleak. Teams can rebuild precisely because the fans, the ultimate stakeholders of the sports franchise, don’t mind being patient. The 76ers haven't won an NBA championship just yet, but they contend every year. The fans, well, maybe not all fans, but most, “trust the process.” Patiently putting together the necessary pieces, hopefully at reasonable prices, was on full display with Moneyball. It didn’t give the Oakland Athletics a ring, but it put them on the map. Theo Epstein applied similar principles in Boston a few years later, delivering a long-awaited championship to the city.
How do we incentivize companies and their managers to make decisions with the long term in mind? Eric Ries, the author of The Lean Startup, has founded the Long-Term Stock Exchange (LTSE) to take a crack at that problem. We have been anxiously waiting to see who is going to bite first, and we were glad to see that Asana and Twilio decided to list on the exchange. As they say, the first one is the hardest. Congrats to Eric Ries and the LTSE. Make no mistake, there will be more (maybe even us one day?)
It’s Hard To Bend The Truth. Have you ever seen a swimmer swim the fastest and lose a meet? Time is a great judge that way, it never makes a mistake. Simply put, if you are the best in that race on that day, you win.
Team sports are a little bit different, where the individual contributions are hard to measure, even with the box score. Even if you happen to find yourself on a bad team, somebody will take notice if you are playing well and putting up good numbers. In fact, it has become better over time; we have data and tools that go beyond the simple box score. Was Jeremy Lin all hype? When people looked at the data, it became clear he is one of the most explosive athletes in basketball.
It is much easier to bend the truth in real life. People can pretty much say anything they want these days, and misinformation can live for a long time with limited or no consequences for those people. This is a whole essay in and of itself, but let us just say this, both Section 230 and defamation laws really need a rehashing if we want to move forward positively as a society. What starts out with good intentions, certainly does not always end up that way.
Tech is Our Friend. Is this a goal? Watch this and decide for yourself.
There are a couple of other sports moments that have been controversial and significant, Maradona’s infamous “Hand of God” being one of them, but this one is as consequential as it will get. This was England vs. Germany in the 1966 World Cup Final. The teams were tied 2-2 at the end of regulation, so the game went into overtime. Hurst’s goal above was his second (he would end the game with a hat-trick), which put England ahead on their way to their first and only World Cup title to date.
We are humans. We make mistakes. The question is how we can use technology that could aid people in making better decisions, or perhaps replace humans entirely. Even MLB seems to be moving in that direction. Obviously, replays have been in play in sports for a while now. Soccer now employs Video Assistant Referee (VAR) reviews. Not everybody likes it, but it improved the accuracy of critical decisions from 92% to 98%, and we believe that’s a great improvement. The referees from the 1966 final, by the way, seem to have been vindicated.
Tech, then, is not just useful to appropriately reward talent through sophisticated data analysis, but it can also be good at preventing snap judgments that can be costly. How does that translate to the broader society?
Judges are not that different from referees. They have limited information to go off of and need to make a judgment call rather quickly. If referees can be assisted by (or perhaps even replaced with) technology, would our society benefit from a similar approach?
What is the role of tech in law? As of today, not much. To be clear, there are worthy efforts in legal reform and some of them are tech-related. Fix The Court is making some contributions, including posting digitized reports on the financial disclosures from the Supreme Court Justices. Free Law Project is also using software and data, and recently helped expose 131 federal judges.
These are great efforts but in the long term, tech needs to play a much bigger role in law. Arguably, a wrong legal decision is even worse than a wrong decision in sports. That is so because a wrong legal decision is not just costly for one of the parties, but for everybody else that comes after them, as the decision may set a wrong precedent. It is very critical that the legal decisions are right, whether at the outset or with an immediate appeal process potentially sustained or overruled with the assistance of tech. AI, anyone?
All of that’s great, you may say, but still wonder: what is the engine that propels all of this? How do we truly unlock all of this value? Outside the competitions itself, the biggest use case of sports, so far, has been sports gambling. Thus, these are legitimate questions.
You’re right. Sports gambling may be all you’ve seen or known up to now, but that doesn’t mean that’s all there is. Gambling might be good for some for a while, but eventually, it will be marginalized and something else will take its place. That something else, we fully believe, is AllSportsMarket.