football – BLG – Bacharach Leadership Group

Don’t Recruit Like the NFL

In the NFL’s annual draft the worst teams select rookie players earlier. This is done so losing teams will get the best players and keep the NFL balanced and competitive. Subsequently top draft picks are highly coveted by teams. Quickly glancing at the draft orders of the past decade reveals this line of thought to be flawed. As it turns out the same teams are continually at the bottom of the league and at the top of the draft. New research by Professor’s Cade Massey and Richard H. Thaler posits that the highly valued first pick in the draft is, on average, the least valuable pick in the first round.

In The Loser’s Curse: Overconfidence vs. Market Efficiency in the National Football League, Massey and Thaler compare the market value of draft picks with the actual performance of the players selected. They found that NFL teams overvalue the highest picks in the draft. Their analysis shows that players chosen early rarely perform well enough to justify the trade value of their pick and that players selected later in the first and second rounds offer the best value. Thaler and Massey note that psychological factors such as overconfidence, false consensus, and ‘the winner’s curse’ distort NFL teams’ ability to accurately predict the future value of the players they draft.

So how does the selection of world-class athletes relate to the world of leadership and organizational structures?

Massey and Thaler’s findings about the market for football players extend to any labor market where organizations select talent. Meaning their observations can help shed light on selecting new CEOs to newly minted graduates. In the world of business, too often we try to hit home runs: confident that one big hire or staff expansion will spur a team towards prolonged success. In doing so, we forsake consistency and reliability in the hope that a savior is on the way. As Bob Nardelli and Howard Stringer can attest merely being called a savior and actually being one are two very different things.

As Thaler and Massey write: “In our judgment, there is little reason to think that the market for CEOs is more efficient than the market for football players. Perhaps innovative boards of directors should start looking for the next Tom Brady (pick number 199 of 210) as CEOs rather than this year’s hot young prospect.”

A lot of times things like baseball cards and stamps become worth a great deal of money, not because of their intrinsic value but because of accidental scarcity. Consider Mickey Mantle’s 1952 Topps baseball card that is estimated to be worth around $30,000 today.

There is a good chance that you’ve heard of Mickey Mantle even if you are a baseball novice. He was more than just an athlete; he was and still is a defining part of American culture. The reason this flimsy 2-3/4” x 3-5/8” piece of colored cardboard fetches 5 figures has less to do with his home run power and matinee idol looks and it has more to do with luck.

In 1952 The Topps Company (which, to this day, still makes sports cards) released a set of 407 baseball cards in installments over the course of the baseball season. Mantle’s card was in the last lot of cards released and by the time it came out late in the season, people were more focused on football and other fall sports. The higher-ups at Topps found themselves with tons of merchandise and no one to buy it. So what did they do with all the cards no one wanted? They dumped them into the Atlantic Ocean, thus accidentally creating an instant rarity.

Here’s the only problem with this story and those like it: collector’s items can rarely be consciously created, most of the time they have to emerge organically. Lots of companies try to sell us their junk by saying like “Only 100 made!” or “Available for a Limited Time Only!” but most of the time these “rare” items end up in dollar store discount bins and in neglected eBay auctions

It happened in the baseball card industry. Once greed set in, collecting cards went from a hobby to a business. Everyone was trying to find, or for that matter create, the next 1952 Mantle. By the late 1980’s the card companies realized that they could make a mint from what had previously been a children’s toy and flooded the market with pre-packaged, limited-run, “collectibles.” As more companies jumped into the business (Fleer, Donruss, Upper Deck, etc.) merchandise began to clog shelves. By the late 1990s the whole business went bust and many of us were left with closets filled with worthless memorabilia.

The moral to this story is two fold. First, things gain worth for more than just the obvious reasons. Mickey Mantle is an American legend and Hall of Fame baseball player, but his most expensive card got that way because of a twist of fate. Second, you can’t always create “worth” and if you actively try to it will often have the opposite effect. Things (and people) gain worth through an organic process that combines quality, need, patience, and, more often than not, a little bit of dumb luck.

Picture Credit: National Baseball Hall of Fame & Museum

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