An investment market for Charlie Pallilo

TRADING%20floor%20042007.jpgMy favorite sports talk radio show in Houston is Charlie Pallilo‘s afternoon show over at 790-AM, but I’ve always wondered why the quite bright Pallilo isn’t off making millions trading bonds or running a hedge fund. Moneyball’s Michael Lewis reports in this CondeNast Portfolio article about a market that is right up Pallilo’s alley — investing in professional athletes:

Wall Street is about to launch a new way to trade professional athletes the way you trade stocks. A piece of Tiger, anyone?
When financial historians look back and ask why it took Wall Street so long to create the first public stock market that trades in professional athletes, they will see ours as an age of creative ferment. Theyíll see a new, extremely well-financed company in Silicon Valley that, for the moment, sells itself as a fantasy sports site but aims to become, as its co-founder Mike Kerns puts it, ìthe first real stock market in athletes.î . . . The athlete would sell 20 percent of all future on-field or on-court earnings to a trust, which would, in turn, sell securities to the public. Theyíll also single out the birth of the first European hedge fund that runs a multimillion-dollar portfolio of professional soccer players, the value of which rises and falls with the playersí performances.
As a number of smart people seem to have noticed at once, professional athletes have all the traits of successful publicly traded stocks, beginning with enormous speculative interest in them. Americans wager somewhere between $200 billion and $400 billion a year on sports, and between 15 million and 25 million of them play in fantasy leaguesówhich is to say that a shadow stock market in athletes already exists. That market may not know everything there is to know about the athletes it values, but it probably knows more than New York Stock Exchange investors know about the N.Y.S.E.ís public corporations. ìPeople worry about lack of transparency in sports,î says the leading sports agent. ìMy newspaper this morning has two and a half pages of business news and 17 pages of sports. The day after the game, you know Peyton Manningís thumb is hurt. What do you know about the C.E.O. of I.B.M.?î

Let’s see now. You will soon be able to place a legal bet on a professional athlete over the Internet, but not on the outcome of a game?

Joey Crawford and corporate governance

JoeyCrawfordTechnicalFoul.jpgOnly Professor Bainbridge has the special insight to note that NBA referee Joey Crawford’s suspension-drawing ejection of the Spurs Tim Duncan in a game last week confirms the core of the Professor’s approach to corporate governance — “Whether on the court or in the board room, the power to review is the power to decide.”

“I’m a Texan, but . . .”

gillispie-billy-mug.jpgThis post from a couple of weeks ago observed the following about then Texas A&M University basketball coach Billy Gillispie:

. . . Aggie basketball coach Billy Clyde Gillispie is the toast of Aggieland and he is getting noticed nationwide. This NY Times profile does a good job of describing this somewhat peculiar character — a pure Texas gym rat basketball coach in the middle of football country. Although Kentucky is now looking for a new coach, my sense is that they need not bother calling Gillispie, who appears to be quite comfortable in Aggieland.

Well, that was two weeks ago. Yesterday, good ol’ boy Billy Clyde’s strong affinity for Texas evaporated under the heat of a $16 million contract that the University of Kentucky threw at him. No word on whether a horse farm was thrown into the deal for good measure.
Gillispie’s decision to leave emerging basketball power Texas A&M for Kentucky is understandable, given the money and UK’s legacy in college basketball. But one has to wonder whether Gillispie is making a wise move from a career standpoint. At A&M, he would always be the man that transformed the basketball program into the top-tier of major college basketball and soon would have all the resources that UK offers. Moreover, things have changed over the past decade or so in the college basketball landscape — Kentucky is no longer the dominant force that it once was. Perhaps Gillispie can return UK to its glory days, but the program is running behind two programs — Florida and Tennessee — in its own conference, and neither of the coaches at those programs appear to be going anywhere soon.
Finally, channeling the absurdity noted in the previous post from yesterday, UK would have paid even more for its new coach than the $16 mil that it is doling out to Gillispie — Billy Clyde was UK’s third choice (after Florida’s Billy Donovan and UT’s Barnes)!
Update: The Chronicle’s John Lopez reports that A&M’s loss of Gillispie may have been the result of A&M AD Bill Byrne’s inept handling of the situation.

The connection between coaching salaries and making book

ncaa-logo2.jpgThe questionable nature of the NCAA’s regulation of intercollegiate athletics has been a frequent topic on this blog, and two recent posts point out a couple of the perverse effects of that regulatory scheme.
First, in this Sports Economist post, Berri points out that the exorbidant salaries being paid to coaches at the top levels of college football and basketball are a direct result of the NCAA’s regulation of player compensation:

The research of Robert Brown and Todd Jewell indicates that a future NBA first round draft choice will generate more than $1 million in revenue each year in college (and this was based on data from 1996, so the $1 million figure understates the revenue generation occurring today). Clearly this sum greatly exceeds the cost of a scholarship. Because the NCAA does not compensate the players for the money being generated, this money has to go elsewhere. It seems reasonable that much of this money is currently flowing into the pockets of the coaches. But if the players were paid, the money would not be available to the coaches, and consequently wages paid to coaches would decrease.

Meanwhile, in this Wages of Wins post, Stacey Burke points out that the NCAA’s restriction on player compensation also promotes point-shaving, even at such remote outposts as the University of Toledo!:

I think it is a shame that any player (college or pro) shave points or fix games, but the real shame is on the NCAA. College athletes ñ like menís basketball and football ñ who generate large sums of money for their schools are not receiving a salary for their time and effort. This lack of payment occurs so that the NCAA can maintain the appearance that college games are amateur contests. Who does the NCAA think they are fooling? If the NCAA was willing to allow paying college athletes this would substantially reduce the incentive of point shaving.

Again, for decades, university presidents have been easy money for the owners of professional football and basketball teams, who have foisted the risk of capitalizing a minor league system for developing players on the colleges. This appears to be changing somewhat in basketball, where several minor professional leagues are now competing with the colleges for players. But the situation is not going to change for good until the colleges do one of two things — either embrace professional sports and manage the AAA minor league teams as owners do in the baseball minor leagues or convert intercollegiate football and basketball to the college baseball model and force the owners of professional football and basketball teams to capitalize their own parallel minor league systems.
Frankly, I don’t really care which approach the university presidents choose. I just want them to get on with it by showing the courage and leadership to turn their back on the antiquated hyprocrisy of the currently bloated NCAA regulatory scheme.

The allure of real college basketball

Division%20II%20title%20game.gifThe upcoming Final Four phase of the NCAA Basketball Tournament is going to have to be pretty darn entertaining even to come close to topping the final 45 seconds of the Barton-Winona State NCAA Division II title game. It’s not really necessary to sponsor a minor league for the NBA in order to have exciting and enjoyable intercollegiate competition, now is it?

Extraordinary performances

kobe%20bryant.jpgAlthough most folks who enjoy basketball are currently preoccupied with the ongoing NCAA Basketball Tournament at the moment, Kobe Bryant’s extraordinary effort over the past week should be noted as the Lakers star scored 65, 50, 60 and 50 in consecutive games. Only Wilt Chamberlain has scored at least 50 points in more consecutive NBA games, having reeled off a streak of seven games during the 1961-62 season. To appreciate just how zoned in Bryant is right now, check out this turnaround three-pointer he nailed the other night against Portland.
And while on the subject of spectacular NBA performances, don’t miss this five minute video of former Celtic great Larry Bird’s seemingly endless array of buzzerbeater baskets with some pretty funny commentary from his teammates and opponents.
Finally, this short video includes the best piece of sportscasting commentary that I’ve heard in a long time.

A basketball school?

gillispie-billy-mug.jpgNow really. When Texas A&M hired new coaches for its football and basketball programs four years ago or so, who among you thought that it would be the basketball program that by this time would be regularly competing at the elite level of big-time college athletics?
Well, despite a heartbreaking one-point loss to Memphis last night in the Sweet Sixteen phase of the NCAA Basketball Tournament, Aggie basketball coach Billy Clyde Gillispie is the toast of Aggieland and he is getting noticed nationwide. This NY Times profile does a good job of describing this somewhat peculiar character — a pure Texas gym rat basketball coach in the middle of football country. Although Kentucky is now looking for a new coach, my sense is that they need not bother calling Gillispie, who appears to be quite comfortable in Aggieland:

ìIn the state of Texas, if Billy doesnít know you, he knows your aunt, uncle and cousin and the truck driver that lives in your neighborhood,î said St. Johnís Coach Norm Roberts, who worked with Gillispie at Illinois. ìEveryone in Texas knows Billy Clyde.î [. . .]
Gillispie said he feels more adjusted in College Station than he did in El Paso [he previously coached at UTEP], where his life was so unbalanced that his house was barely furnished. When he held a Selection Sunday gathering in March at his house in El Paso, the Christmas tree was still up. Still, he knows he spends more nights dissecting film than hanging out with friends.
ìI probably neglect myself socially,î Gillispie said. ìBut Iím the happiest guy in the world. What my being requires for happiness is totally different. I understand, Iím a different person. I know itís not as healthy as it should be.î

By the way, speaking of the Kentucky coaching job, folks with interest in the UT basketball program might want to read the end of this article.

Entertaining corruption

150px-2007FinalFour.pngThe dubious nature of the NCAA’s regulation of big-time intercollegiate football and basketball has been a frequent topic on this blog (see here, here, here, here and here), and one of the best examples of the hyprocrisy of that regulation is the NCAA Men’s Basketball Tournament. As Peter Gordon notes, the tournament is hugely entertaining, but also hugely exploitive, and he passes along the following passage from Lawrence M. Kahn’s article Winter 2007 Journal of Economic Perspectives ($) entitled Cartel Behavior and Amateurism in College Sports to make his point:

Big-time college sports programs appear to extract rents from revenue-producing athletes by limiting their pay and requiring them to remain amateurs. These rents are spent on facilities, non-revenue sports, and possibly head coaches’ salaries. On average, the two big revenue sports of men’s basketball and football run a surplus; however, college sports as a whole — including the non-revenue sports — report operating losses. Some evidence suggests, although not unambiguously, that college sports have positive indirect effects on public and private contributions. Moreover, sports success appears to generate interest by students that may lead to a modestly stronger student body. In this consumer-oriented era for higher education, universities need to maintain their appeal to future applicants, many of whom are future alumni or future voters for state legislatures, and having successful sports programs may be one way to do this. The popularity of college sports events and of schools with big-time athletic programs suggests that the idea of amateurism may have some market value. Arms race considerations suggest that society may gain from some spending limits on college athletics. From an efficiency point of view, these societal gains would have to be weighed against the losses caused by movement down the supply curve of star athletes.

Professor Gordon boils it down:

Paradox resolved. Exploitation, inefficiency, politicized anti-trust status and “consumer-oriented … higher education.”

Jody Conradt steps down

Jody%20conradt2.jpgLongtime University of Texas women’s basketball coach Jody Conradt resigned on Monday, ending a coaching career at UT that spanned 31 years and produced 900 wins, a national championship with an undefeated team in 1986, 21 NCAA tournament appearances, three trips to the Final Four and membership in the Basketball Hall of Fame. The Chronicle’s Richard Justice has a nice tribute to Coach Conradt here.
I’ve never had the pleasure of meeting Coach Conradt, but we have many mutual friends who tell me she is a classy person. A fixture at University of Texas athletic department golf outings around the state during the off-season, Coach Conradt can tell a story with the best of them, as reflected by this classic one about former Longhorn Coach Darrell Royal. Inasmuch as she remains quite popular at UT and in Austin, Coach Conradt will almost certainly be retained by UT in some alumni-related capacity.
By the way, the end of this Joseph Duarte/Chronicle story on Coach Conradt’s resignation contains this week’s candidate for the worst sentence published in the Chronicle:

“Conradt said she’s comfortable leaving the program where it’s at.”

Argh!

Mount Mutombo

mutombo.jpgThe Rockets recently endured a 32 game stretch in which their star center, Yao Ming, was out while recovering from a broken leg. Rather than fall apart, the Rockets won 20 of those 32 games.
Most folks simply assumed that the Rockets’ other star player, Tracy McGrady, was the main reason that the Rockets were able to win that many games without Yao, and McGrady certainly played well over most of that stretch. But as this Dave Berri post explains (see also this followup post), the primary reason that the Rockets were able to survive reasonably well during Yao’s absence was the outstanding play of none other than 40 year-old reserve center, Dikembe Mutombo.
What is it about Houston that all these 40 year-old professional athletes are able to continue performing at a high level?