Ideoblog

The geography of the Superbowl

I'm not much of a football fan. In fact, I'm not any of a football fan. But I am nevertheless perfectly positioned to present the geography of the big game next weekend, living as I do exactly equidistant from both Chicago and Indianapolis (about 130 miles from each). I do this as a public service for those of you living in the relevant parts of America – that is, the bands of it that lie on the Atlantic coast near New York and on the Pacific coast near Los Angeles.

Many people have asked me: so, you work at the University of Illinois. How do you like living in Chicago? Indeed, at a recent conference in New York I was identified as being at the University of Chicago. Actually, I don't live in or work at Chicago. For the benefit of my coastal readers, Chicago is a city within the state of "Illinois." I live in a separate city, known as Champaign. Indianapolis is also a city, and it lies within a separate state, known as "Indiana."

Let me give you an analogy. New York City is a city within a state known as New York. This has been at least as confusing for those of us in the interior as the Chicago/Illinois confusion is for you.

To make things even more confusing, some people from here will be rooting for Indianapolis.  In fact, if I were to relive the days when I was a football fan, I would harken back to my college days in Baltimore and cheer for the Colts.  Is Johnny Unitas still the quarterback?

GMU and Cincinnati

I know these two universities might seem not to have much to do with each other. Indeed, their names derive from two very different individuals – George Mason is known as an architect of our Bill of Rights; Cincinnatus was a dictator who opposed giving rights to the plebes.

The connection is basketball. As discussed in today's WSJ, Cincinnati's president fired its coach because he recruited players who, while good athletes, were not good students, to put it mildly. In other words, it ultimately decided to put education over sports.

GMU has not made the wrong tradeoff. It is striving to be a good place to get an education, where sports have come second. It doesn't even have a football team or stadium, or at least didn't when I was there (until 2002). Its remarkable basketball success comes despite rather than because of the level of its investments that sport.

But GMU is the center of a lot of buzz about whether its success in basketball could drive its success as a university. The latest is this WSJ spread.

On the face of it this seems odd. Why should the exceptional performance of a few guys on the basketball court make so much of a difference to a sprawling 30,000 student university?

I don't recall this sort of buzz when two GMU faculty won their Nobel Prizes – sure, some buzz, but not this much. Those achievements clearly should be more important, because they show that the university can attract and support the sort of people who are central to a university's mission.

Yet I don't doubt that basketball success will pay off big for GMU, particularly having seen over the last few years how much basketball matters to my current institution (Illinois).

I can understand why people would pack the stadium or arena – why the university would sell tickets. I love Illinois basketball. But I don't understand why this should determine people's willingness to support the school's academic programs. Having graduated from two schools (Johns Hopkins and Chicago) that hardly cared at all about sports (well, JHU does have this funny game played with sticks and strings) it's always been hard for me to understand the role of sports in the university.

In GMU's case, it may be a matter of salience – the Final Four draws attention to GMU, people will like what they see. But for other schools I suspect people are drawing the erroneous inference that success in sports is a strong indicator of general university quality.

I don't think GMU will become a worse place as a result of its success. I also don't think that Illinois has suffered – like the other ten schools in the Big Eleven, it has its priorities straight with respect to the kinds of students they allow to play for the school. What worries me is that this success will weaken the hand of places like Cincinnati that face harder tradeoffs between academics and sports.

But even if I'm right, shouldn't schools play the sports card if that's what it takes to succeed?  In other words, forget about "university social responsibility" and act like a profit-maximizing institution that goes with what the market wants, without asking why.  I have expressed some sympathy for this approach.  I would only note here that this isn't the current model of the university.  And if it should be, then this should extend beyond sports.  It might even raise some questions about the appropriate role of faculty governance.

A reminder: greed is good

The sorry story of Barry Bonds is much in the news. Bonds was, it seems, a very bad man. According to an already famous book, he cheated, and as a result, like other cheaters, sullied the sport – in a big way, because he was one of the really big stars.

But Joel Achenbach raises the ante:

If the book is correct, this is a case of unbelievable athletic greed. This isn't a guy who has to choose between steroids and unemployment. No, he was just jealous of Mark McGwire. . . . .Pride comes before the fall. Bonds is, like all great athletes, incredibly competitive. And so Bonds, according to the Chronicle reporters, embarked on a systematic steroid-fueled campaign to transform himself into the greatest slugger in the game.

The point I want to make is that the best thing about Bonds is his greed for fame and glory. He could have just rested on his laurels, as Achenbach said, but something made him drive for more. Had he not cheated, had he only been a very unpleasant person to those around him, or insufferable for his unremitting drive, he still would have been better for the rest of the world, for raising the standards of his sport, and immensely entertaining us. He deserves condemnation for his rulebreaking, if that's what he did, but praise for his greed.

Same in business. When I go to Beijing, or Trivandrum or wherever and I can play my PowerPoint on whatever computer is there, I have Bill Gates' greed to thank. He could have retired with enough money for all the toys in the world long ago, but no, he needed to own every computer screen in the universe. Think what a mess we would have without him.

Now, sometimes greed gets out of hand, as it evidently did in, say, Enron. When greed results in breaking the rules, we should punish the rulebreakers. But we shouldn't punish them because they're greedy, and we shouldn't design the rules to catch the greedy.

As Gordon Gekko once said (you knew I'd have to quote this)

Greed is good. Greed works, greed is right. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed in all its forms, greed for life, money, love, knowledge, has marked the upward surge of mankind. . .

And now back to our regularly scheduled programming.

What kind of sport is a partnership?

Steve Bainbridge says that "the difference between football and baseball explains why a corporate governance guy like me prefers the former."  He's referring to this Michael Novak view of the difference:

In football, on each play eleven men act in unison, and in each action not the individual but the corporate unit acts. When Bart Starr completed a pass for the Green Bay Packers, all the Packers could be said to share the deed; one man alone is quite helpless. When Joe DiMaggio stepped to the plate in Yankee Stadium with his unforgettable stance and fluid swing, DiMaggio stood in spotlighted solitude, and none of his teammates could act in his behalf. Football is corporate, baseball an association of individuals.

And so Steve asks: "I wonder if partnership law expert Larry Ribstein prefers baseball? If so, we've got a falsifiable hypothesis."

Ok, I’ll bite. First, a clarification. Although I'm glad to accept Steve’s kind characterization of me as a “partnership law expert,” I should point out that I’ve done a lot more corporate law than, say, Joe DiMaggio did football. I’m not sure my willingness to think about other business forms should carry over to sports tastes, but that’s not the point of this post.

Second, for the record, I am not a football fan. I spent last night in the air rather than watching the stupid game, and cringing as the pilot insisted on announcing the score (I know, I really need to bring an MP3 player.) I now consider myself more a basketball man than anything, which shares teamwork characteristics with football. I think we have an omitted variable problem in testing Steve's hypothesis.

Third, the characterization of partnership law as the opposite of football from the standpoint of team vs. individual play needs work. After all, a central principle of partnership law is “delectus personae” – you choose your members. Sounds more like Bart Starr than Joe DiMaggio. In any event, partnership law has always had many “entity” features (see Bromberg & Ribstein on Partnership, section 1.03) and are now officially regarded as “entities” (Revised Uniform Partnership Act section 201(a)).

I think what Steve means is that partnership law differs from corporate regarding the “aggregate” feature of capital lock-in – partners by default are entitled to cash out of the business rather than just sell their shares to someone else.

In fact, partnership law has always permitted capital lock-in, though not by default. I have an article that’s about to hit SSRN discussing that point. At the same time, it’s fair to say that partnership law does differ from corporate law in being hospitable to capital liquidity, as I discuss in my Accountability and Responsibility in Corporate Governance and Why Corporations?

So maybe the distinction between the two forms is the corporation’s (and some corporate scholars') anal retentive insistence that everything must stay together vs. the partnership’s (and some partnership scholars') flexible, accommodating contractual approach.

I guess the sport I’d compare partnership with is 43-man squamish.

Illini basketball today

I haven't weighed on this topic so far this season, but since we're off to the Flying Saucer shortly I thought I'd check in with a quiz. Guess which team:

(1) Has the most wins in the country this season?

(2) Has the winningest coach in the country over the last four-and-a-half seasons?

(3) Has won the most games over the last five-and-a-half seasons?

Did you answer Duke to all of these?  Well you got 2 out of 3 wrong. You'd be right about (3), but Illinois is second.

Football by the Numbers

Espn.com has an interesting feature today on statistical truths and myths about winning in the NFL.  They looked at 2003 and 2004 regular season statistics in an attempt to verify or debunk  conventional wisdom regarding what leads to wins (or losses) in the NFL.  Here are a few correlations I found to be surprising (or at least interesting):

    1.    The team that trails after the first quarter loses 75% of the time.
    2.    The team that loses the turnover battle loses 81% of the time. 
    3.    A team allowing a 100 yard rusher loses 75% of the time, but a team allowing a 300 yard passer is more likely (barely) to win (54%). 
    4.    Neither having fewer penalties (54%) or a special teams touchdown (42%) is strongly correlated with winning.

I find the magnitude of the correlations in #1 and #2 surprisingly strong, and the finding regarding special teams scores interesting in light of the fact that many teams now use starters on their special teams, i.e. Marvin Harrison returning kicks for the Colts.  Of course the real impact of special teams is in the field position battle, not necessarily returning kicks for touchdowns, but I would still think that a special teams touchdown in the NFL would be more strongly correlated with winning than these figures suggest.

Say it ain't so, Joe

While most of the TV-viewing country was watching the 2005 White Sox make it into the World Series -- one step closer to Chicago's first baseball championship since 1917 -- I was, as readers of this blog would expect, watching a movie about the 1919 White Sox -- John Sayles’ Eight Men Out (1988). 

This film is a good example of filmmakers' disparagement of business, motivated by the artist's struggle with the capitalists, described in my paper, Wall Street and Vine. Here’s what I say about the film in the current version of my paper:

John Sayles’ Eight Men Out (1988) presents the 1919 “Black Sox” cheating scandal as the players being forced by economic hardship (team owners and gamblers get all the money) to sell out to the gamblers. The plot reflects the sentiments of Sayles, an independent filmmaker. (The film is a followup to Sayles’ film about the brutal treatment of striking miners in Matewan (1987)). So does the film’s length: the studios wanted a film that was less than two hours, and Sayles gave them one hour, fifty-nine minutes and forty-eight seconds.

On this viewing, my first in several years, the film seemed even more blatantly Marxist than I remembered. There’s much talk about oppression of the workers, and (in a speech near the end by Eddie Cicotte (David Strathairn)) about how the workers contribute the value while the capitalists reap the rewards.  Ring Lardner (John Sayles) comments that this sort of thing wouldn’t happen if only Comiskey paid his players a “living wage.” (Factoid: One of the players is said to be making $6,000, which is about $66,000 in 2005 dollars. Less than A Rod, but not exactly starvation.) The businessmen and gamblers are portrayed as all of one slimey piece. 

And as in many of the films I discuss in my article, the journalists are the voices of Truth and Justice. We are meant to see them in films as stand-ins for the filmmakers. In this case we don’t have to use our imaginations because the director plays one of them. Everyman Studs Terkel plays Hugh Fullerton, who in reality did play a role in exposing the scandal.

Many elements of this film appear in Robert Redford’s film, Quiz Show (1994) about cheating on the TV game show, “21,” which I also write about in my paper.  In Redford’s film, though, the Marxism is muted – it’s more about how the intelligentsia, in the person of Charles Van Doren, betray society when they sell out for filthy lucre.

Apart from the politics, is the film any good?  It is quite well made. In an outstanding cast, John Cusack (as Buck Weaver), in his first major role (he was 22), basically stole the show.  Most of the film, showing the playing and fixing of the series, expertly makes us feel what it’s like when some team players are cheating and some aren’t. The sequence about signing the players up for the conspiracy is also an interesting lesson in game theory (e.g., one player says if the two best pitchers are in the conspiracy, he may as well be).

But the movie isn’t as good as it could be.  And that, I believe, is because it’s one of the clearest examples I know of a film that was ruined by its anti-business message.  The players' economic motivation had to be the least cinematically compelling aspect of this story. Yet it apparently was the only story Sayles cared about.

How else might the film have been done?  How about doing a better job of developing the players’ relationships. Even better, develop the Ring Lardner angle.  Lardner wrote what I think is still the best baseball story, You Know Me, Al.  The book is about the White Sox, written before 1919.  The 1919 season was evidently shattering for Lardner.

So see the movie at some point during the coming World Series, but don't think that it's only about baseball.   

A theory of anti-scalping laws

Here’s a little break from Miersmania.

I have wondered about the rationale for anti-scalping laws.  Why not allow people to resell their tickets?  I suggested that firms might want to control who is in the audience. 

Maybe I was onto something. A recent paper by Curry and Busch, Rock Concert Pricing and Anti-Scalping Laws: Selling to an Input, suggests that scalping prevents sellers from selecting their audience.  Here’s the abstract:

This paper develops a model that jointly explains excess demand for performance events and the presence of anti-scalping laws. The explanation is based on the fact that the buyers of tickets are also an important input into the performance experience. The use of line-ups as a screening mechanism (leading to apparent under-pricing of tickets) can be profit maximizing if the input quality of a given buyer and her willingness to pay for tickets are not sufficiently positively correlated. Such a mechanism is not possible, however, if the resale of tickets above the posted price is permitted. Since resale amounts to input substitution, banning such resale is therefore efficiency enhancing.

As the paper explains:

performance attendees are an important input to the experience and that individuals are heterogeneous in their quality as an input. A rock concert or sporting event in a venue full of screaming and yelling fans is considerably more entertaining than one where the fans quietly sit in their seats.

One reason why screaming and yelling in sporting events is important is that it might influence the referees.  Coincidentally another recently posted paper discusses this point.  See Dohmen, Social Pressure Influences Decisions of Individuals: Evidence from the Behavior of Football Referees.  Here’s the abstract:

Analyzing the neutrality of referees during twelve German premier league (1st Bundesliga) football seasons, this paper documents evidence that social forces influence agents' preferences and decisions. Those, who are appointed to be impartial, tend to favor the home team as they systematically award more injury time in close matches when the home team is behind. Referees also tend to favor the home team in decisions to award goals and penalty kicks. The composition of the crowd affects the size and the direction of the bias. The intensity of social pressure as measured by the crowd's proximity to the field determines how strongly referees' decisions are influenced. Not all agents are, however, affected to the same degree by social pressure.

There are, however, big problems with audience control as an explanation for anti-scalping laws. For one thing, the laws apply to many events where these explanations do not hold. For another, it’s not clear why private contracts and policing wouldn’t work, at least well enough so that the costs of broad criminal statutes would exceed the benefits.

Coach K, Sarbox fan

So what do Sarbanes-Oxley and sports have to do with each other?  As an Illini fan and Sarbox critic, I'm proud to announce that Bruce Weber will not be the keynote speaker at the Sarbanes-Oxley Conference and Exposition -- Coach K will, the Terps fan over at the Securities Litigation Blog tells us. Somehow this fits. 

Illini v. UNC: stars vs. teamwork

WaPo, among others, plays up the angle that the Illini's success is all about unselfish teamwork.  The politics has to do with disgust at the money hunger of professional stars, and fits in with labor troubles, steroids, high ticket prices, etc.

I don't like the politics, and don't see the merits.  On the politics, maybe I'm super-sensitive, but I see the parallel with the creeping negativism about business generally.  Professional athletes are business people and entitled to act like same.  Like other business people, however, that doesn't mean they can ignore social interests.  Taking illegal drugs can be bad for your business health.

On the merits, I don't get the dichotomy between team and individual. This is supposedly about how individual stars help their employability and pay at their team's expense.  But it's all about metrics. Illinois guard Deron Williams may sacrifice point production to pass rather than shoot and defend against the Arizona and Louisville stars, but surely somebody is watching points-against and assists, and if they aren't they're not doing their jobs. Obviously Williams' new employer in the NBA will care most about winning and how Williams can help them do that. 

On the really important issue, as I said when the tournament began, "if the Illini make it to the Final Four they will win, guaranteed." I'm sticking to that.

Update:  Oh well.