Speaker 1: These sees Bloomberg Business Week with Carol Messer and Tim
Speaker 1: Stanovic on Bloomberg Radio. We also wanted to bring to
Speaker 1: you someone we caught up with back in December when
Speaker 1: we were live from the Stanford campus to mark the
Speaker 1: Stanford Graduate School of Business, big name once again by
Speaker 1: Bloomberg Business Week is the top NBA program in the US.
Speaker 1: We had a conversation live on air, and we knew
Speaker 1: Tim we wanted to talk a little bit more with him.
Speaker 1: It's Paul Oyer, Senior Associate Dean at the Stanford Graduate
Speaker 1: School of Business, Professor of economics, also the author of
Speaker 1: an Economist Goes to the Game, How to Throw Away
Speaker 1: five eighty million dollars and other surprising insights from the
Speaker 1: economics of sports. He joins us via zoom from Stanford, California. Professor, Oy,
Speaker 1: are good to have you back with us. How are
Speaker 1: you great to talk to you again. Thanks for joining us.
Speaker 1: We we promised we'd do more with you, and we're
Speaker 1: eager to have you back this afternoon because we've got
Speaker 1: so much to talk about, especially with regard to your book.
Speaker 1: But before we get to your you know what's in
Speaker 1: the book. I want to know what got you to
Speaker 1: write this book, Like, what was the number that you
Speaker 1: ran across that this label went off in your head
Speaker 1: and you said, Okay, there's there's so many inefficiencies when
Speaker 1: it comes to the way that people think about sports.
Speaker 1: It could fill a book. Yeah, I that's I don't
Speaker 1: think there was any one moment, although if maybe it
Speaker 1: was thinking about kids sports. The first chapter is youth sports,
Speaker 1: which um may have been what really drew me into this,
Speaker 1: having kids and taking them to do sports and thinking
Speaker 1: about whether that was a good use of resources or not.
Speaker 1: So I think that may have really got me into it. Also,
Speaker 1: when I started the book, my son was um in
Speaker 1: college and he helped me with a lot of the
Speaker 1: original research. So it was a good chance for us
Speaker 1: to work together. He doesn't have much interest in economics,
Speaker 1: but he has a lot of interest in sports, so
Speaker 1: so it was a good chance to get to do
Speaker 1: some spend time with him while calling it work. Is
Speaker 1: your kid a pro athlete? Sorry? He was? He was
Speaker 1: on the gun high school baseball too. The reason I
Speaker 1: ask is because the first chapter is should you help
Speaker 1: your kid become a pro athlete? Yeah? You should not? Well,
Speaker 1: it depends. That's where the chapter is it depends, But
Speaker 1: for most kids the answer is no, you you don't
Speaker 1: want to um. It's not the best use of funds
Speaker 1: to try to help your kid become a pro athlete.
Speaker 1: It is kind of shocking. Now. I have to say
Speaker 1: I rememb when we talked with you. That really resonated
Speaker 1: with me, because you know, I've seen it in people
Speaker 1: I know where they're like Johnny or Susan they're gonna
Speaker 1: be the best and they're gonna go pro and da
Speaker 1: da da da da, and they never do because the
Speaker 1: odds are stacked against them. And I just find it
Speaker 1: interesting troubling. Well, it is troubling if you give up
Speaker 1: other things. So if you sort of do it as
Speaker 1: I'm gonna learn a lot. I'm going to really focus
Speaker 1: on sports and that will help me be more disciplined
Speaker 1: and other things that might come out of it. There's
Speaker 1: not a lot of evidence that that helps you in
Speaker 1: the labor market later in life, by the way, but
Speaker 1: at least if you don't go all in, you can
Speaker 1: see the argument for it. What if it helps you
Speaker 1: get into college, that is a big So I think
Speaker 1: that if you're going to make the case for if
Speaker 1: you're gonna make the case for investing in your sports
Speaker 1: career as a kid. I think you need one of
Speaker 1: two things. You either need to argue it's going to
Speaker 1: help you get into college. And one of my economist
Speaker 1: friends says, if you're going to do that, you should
Speaker 1: get your kid into fencing. The fencing is a particularly
Speaker 1: good way to help you get into a good, uh
Speaker 1: and elite college. So getting into college is one thing,
Speaker 1: and in the book I go into that. Of course,
Speaker 1: it's it's hard to even show a lot of evidence
Speaker 1: that that there's a big advantage to that, because, um,
Speaker 1: it might get you into a slightly better college, but
Speaker 1: economists generally aren't sure that the quality of the college
Speaker 1: on the margin makes that much difference. So if the
Speaker 1: same kid goes to Ohio State or Harvard, it's not
Speaker 1: a complete given that that it has a big difference
Speaker 1: on their outcomes. And yet you do say, what if
Speaker 1: your kid is Kevin Durant, So that's the other So
Speaker 1: I said there were two reasons you might do it.
Speaker 1: One is college and the other is if your kid
Speaker 1: is six ft eight and very coordinated at age thirteen,
Speaker 1: then the odds changed dramatically. Um, so Kevin Durant is
Speaker 1: a is a wonderful example that I go into in
Speaker 1: the book because he has a bunch of He has
Speaker 1: a bunch of things in favor of him becoming a star.
Speaker 1: One is, well, the reasons he became a star with
Speaker 1: his physique, just the fact that he's such a gifted
Speaker 1: athlete and he happens to be six ft eight inches
Speaker 1: tall as as they as the basketball players say, you
Speaker 1: can't learn tall, So he had that advantage going for him.
Speaker 1: Um and then um. But the other thing, the other
Speaker 1: thing about Kevin Durant is the calculus is slightly different
Speaker 1: if you're if you come from a background where your
Speaker 1: labor market prospects may not be as great. And so,
Speaker 1: given how hard it is to move up the socioeconomic
Speaker 1: ladder in the United States for you know, reasons you've
Speaker 1: probably talked about on your show before, the economic mobility
Speaker 1: isn't what we would hope it would be. Um. And
Speaker 1: so if you come from a really tough background, sports
Speaker 1: might be looked like a better way to really jump
Speaker 1: to a higher income distribution relative to more traditional ways
Speaker 1: in the labor market. And Kevin Durant came from a
Speaker 1: very humble background and and um, you know, if you
Speaker 1: just sort of statistically looked at what is future might
Speaker 1: have been like without sports, it may not. You know,
Speaker 1: it wasn't a rosy picture. Yeah, I think of like
Speaker 1: you know, Venus and Serena Williams. I mean, and they
Speaker 1: obviously had a dad that was very driven, in a
Speaker 1: family that was supportive, and it was a tough background.
Speaker 1: But it's you know, you wonder how much of it
Speaker 1: is it because of the dad and pushing them, how
Speaker 1: much of it was just you know, natural skill. I mean,
Speaker 1: there's a there's a lot that has to be taken
Speaker 1: into consider. Can you answer that professor that you know,
Speaker 1: the nature versus nurture debate HEREH Well, yeah, I mean
Speaker 1: I think it's easy to answer it in basketball because
Speaker 1: the answer is, if you're six ft eight, your odds
Speaker 1: of getting for the NBA are just like wildly higher
Speaker 1: than if you're six ft tall. So in the book,
Speaker 1: I talked about Russell Westbrook, who went as a kid
Speaker 1: into much the same investment mode as Kevin Durant. His
Speaker 1: family went all in on basketball, and of course it
Speaker 1: paid off for both of them, But if you looked
Speaker 1: before they made those investments, Kevin Durant probably made a
Speaker 1: rational investment. Russell Westbrook probably got lucky, meaning a six.
Speaker 1: There are tons of athletics six ft kids, and the vast,
Speaker 1: vast majority of them never get to the NBA. There
Speaker 1: are not that many six ft eight thirteen year old
Speaker 1: and a substantial fraction of them get to the NBA.
Speaker 1: So Venus and Serena again probably obviously worked out amazing.
Speaker 1: But if you were to try to run the numbers,
Speaker 1: was that a good investment beforehand? I think you would.
Speaker 1: I think you would have to say it wasn't. But
Speaker 1: it just paid off. It did end up paying off
Speaker 1: really well. Obviously we're gonna go into more chapters. Just
Speaker 1: got a minute before we have to take a break,
Speaker 1: and then we'll come back and continue. But as someone
Speaker 1: who is Czechoslovaki and I love this chapter two, what
Speaker 1: do Silicon Valley and Check Women's Tennis have in commons?
Speaker 1: You've got a minute to talk about it. Then we'll
Speaker 1: talk some more. But what is the connection? Just quickly,
Speaker 1: well very quickly, I like to say, um, Check Women's
Speaker 1: Tennis is this is like uh, Silicon Valley. There's not
Speaker 1: a natural reason why Check women should be so great,
Speaker 1: but there's a combination of historical accidents and then these
Speaker 1: network effects where the check women sort of push each other,
Speaker 1: but check girls push each other so hard that they
Speaker 1: end up becoming just great tennis players. There's no natural
Speaker 1: reason they should be any good. You know, if you
Speaker 1: look at why are Norwegian so good across country skiing
Speaker 1: as you do as I do in the book, there's
Speaker 1: a lot more of a natural reason for that. But
Speaker 1: economic networks and economic competition really can lead to what
Speaker 1: about the weather as well? Well, the weather doesn't work
Speaker 1: for the check story, the Norwegian story. I know what
Speaker 1: the answer is because my family is two kid that
Speaker 1: check women were strong like bull So that's why, you know.
Speaker 1: I'm just kidding. I'm just kidding, But we did used
Speaker 1: to say that at home. You want to get back
Speaker 1: to our guesta with us. Paul Oyer he Senior Associate
Speaker 1: Dean and economics professor at the Stanford Graduate School of Business.
Speaker 1: We're talking about his book and economist goes to the
Speaker 1: game how to throw Away five eight million dollars and
Speaker 1: other surprising insights from the Economics of Sports five eighty
Speaker 1: million dollars? Wait, wait, where'd that number come from? So
Speaker 1: that's an estimate I calculated based on the strike at
Speaker 1: the NBA, and I believe it was two thousand eleven. So, um,
Speaker 1: there was a maybe a more up to date version
Speaker 1: to talk about was there was a strike in Major
Speaker 1: League Baseball at the beginning of the most recent season.
Speaker 1: Aren't you remember last spring training? Not a strike? Sorry,
Speaker 1: I lock both cases. It was a lockout, not a strike.
Speaker 1: So the point in whether talking about the NBA or
Speaker 1: Major League Baseball or whatever, is you see in sports,
Speaker 1: and this is a broader thing. You see it in
Speaker 1: other collective bargaining agreement situations where, um, you get these
Speaker 1: two these two groups in the case of sports, it's
Speaker 1: the owners and the players union, and they rely so
Speaker 1: much on each other there their options are so much
Speaker 1: better if they work together than if they split up.
Speaker 1: But at the same time, they can't help themselves from
Speaker 1: trying to steal a bigger share of the pie. It's
Speaker 1: a It's a very common thing in economics where you
Speaker 1: have these bilateral agreements where there's a lot of value
Speaker 1: captured by the by the agreement, and you you don't
Speaker 1: want to mess it up, but at the same time
Speaker 1: you can't help but try to take too much, and
Speaker 1: when that leads to a lockout, as it did in
Speaker 1: the NBA, it's sometimes is just like literally the end
Speaker 1: and the players pretty much just burned a pile of
Speaker 1: five million dollars that they'll never get back. Okay, it's
Speaker 1: a lot of money. I want to I want to
Speaker 1: talk cheating. I want to talk cheating. Okay. There's an
Speaker 1: entire chapter in your book dedicated to cheating, and it
Speaker 1: talks about Lance Armstrong and the way that it asked
Speaker 1: the question about whether or not you can actually win
Speaker 1: the Tour de France if you're not doping. Um take
Speaker 1: us into this chapter and why athletes cheat? So um
Speaker 1: they they You've only got half of it. I like
Speaker 1: to think that chapter is about why they cheat and lie.
Speaker 1: Oh sorry, excuse me, thank you said they cheat and
Speaker 1: lie because the incentives there are very strong. I mean,
Speaker 1: we see this in other places as well, when when
Speaker 1: we set up rules that we can't enforce and the
Speaker 1: value of breaking those rules is really high, people are
Speaker 1: going to break them. And it sad because that's human nature,
Speaker 1: but it's what we need to expect. And you know,
Speaker 1: if you there there was a period of time, I
Speaker 1: don't know, maybe the testing is better now, but there
Speaker 1: was a period of time where you had to cheat
Speaker 1: to win. They to win the Tour de France and
Speaker 1: to win certain sprinting events in track and field. It's
Speaker 1: just every single person who won over a long period
Speaker 1: of time and both those sports was taking steroids and
Speaker 1: lying about it. And what the reason it happens is.
Speaker 1: It's just simple prisoners dilemmas, straight out of your most
Speaker 1: basic college game theory class. If you don't cheat, there
Speaker 1: was no way you were gonna win, and the incentives
Speaker 1: from winning were so are so large. I mean, think
Speaker 1: about it. What was Lance Armstrong gonna do if he
Speaker 1: wasn't a champion biker? His next best option was not
Speaker 1: making a little bit less than he made. As a vice,
Speaker 1: are you see the ends justify the means? Well, I'm
Speaker 1: not saying this is an advice. This is um you know,
Speaker 1: it's descriptive, it's not prescriptive. I'm not telling you to
Speaker 1: lie or cheap, but i will tell you that in
Speaker 1: situations like the Tour de Front, you have to recognize
Speaker 1: that your opponents will be cheating, and so you do
Speaker 1: have to think about that. It's interesting, though, because it's
Speaker 1: not just kids around the world are not listening to me.
Speaker 1: But what I think is pretty remarkable about this is
Speaker 1: is it is just numbers at the end of the day.
Speaker 1: Because there are downsides to to pumping your body full
Speaker 1: of these bad substances. There are downsides to uh blood
Speaker 1: transfusion that you do on the road with blood that
Speaker 1: you know was taken from your body, uh months earlier
Speaker 1: when you weren't so tired. I mean, bad things can
Speaker 1: happen to you. Yeah, So, so keep in mind that
Speaker 1: not everybody will lie in cheat. A lot of people
Speaker 1: who could have been great bikers will see that the
Speaker 1: only way they can get ahead is to lie, to cheat,
Speaker 1: and they take and they have they place a high
Speaker 1: cost on the things you just mentioned, either the long
Speaker 1: term damages or just they have moral qualms. They're like,
Speaker 1: I can't do that. And so for those people, they
Speaker 1: put it into their own personal calculus and they say
Speaker 1: I'm not gonna lie in cheat. Now they don't become
Speaker 1: um famous, famous um bikers as a result. So it's
Speaker 1: absolutely the case that there are costs to this, and
Speaker 1: a lot of people just opt out of the system
Speaker 1: when that's the case. Hey, one thing I want to
Speaker 1: get to and maybe because we were all obsessed with
Speaker 1: Taylor Swift last week and you know, trying to get
Speaker 1: tickets for a concert, I couldn't get one bummer bummer.
Speaker 1: But anyway, we're looking at, you know, um, getting tickets
Speaker 1: for for things, and I'm assuming sports games as well.
Speaker 1: Especially when you know, we get to something like the
Speaker 1: Super Bowl or the playoffs, things get a little pricey.
Speaker 1: You have a chapter that talks about ticket scalpers making
Speaker 1: the world a better place? Is that a question mark
Speaker 1: or affirmative? Well, I mean I wouldn't say that about
Speaker 1: every single ticket scalper, but as a collective they do now.
Speaker 1: Not the not the ones who go out and use
Speaker 1: bots to and and make every waste everybody's time, but
Speaker 1: the traditional ticket scalper, the old days when you would
Speaker 1: go to a shop and buy and sell tickets, or
Speaker 1: go on eBay StubHub and buy and sell tickets that
Speaker 1: people just had extra tickets and wanted to resell them.
Speaker 1: There's a lot of value in that right. Just more broadly,
Speaker 1: resale markets are really good. They transfer items from somebody
Speaker 1: who values them less to somebody who values them more. So,
Speaker 1: if you have a ticket to a game and you know,
Speaker 1: your kids soccer team is going to play some playoff
Speaker 1: that day and you want to resell that ticket. That
Speaker 1: is great that you have the ability to go on
Speaker 1: stub Hub and make somebody's day where they were dying
Speaker 1: to have a ticket to that game, and now you're
Speaker 1: both better off. You have some money and you go
Speaker 1: to your kids game and that other person goes to
Speaker 1: the professional sports game that you sold them a ticket
Speaker 1: for resale is fantastic. And the middle people who make
Speaker 1: that happen, which now is more stub Hub, but traditionally
Speaker 1: was ticket scalpers or ticket agents. Those those people are
Speaker 1: providing a really valuable service. You know, it's not just tickets,
Speaker 1: it's used cars, it's all sorts. And increasingly ticketmasters getting
Speaker 1: into it as well. I mean you can you can
Speaker 1: buy and sell tickets on that platform. Yeah, and so
Speaker 1: they're there in lies the problem right with ticket Master.
Speaker 1: I'm not as crazy about ticket Master and some of
Speaker 1: what's going on there because what happened is traditional ticket scalping,
Speaker 1: where you have a vibrant and fragmented market with a
Speaker 1: lot of competition. That's good. What what gets ruined is
Speaker 1: when somebody gets exclusive rights to resale or exclusive rights
Speaker 1: to you know, Ticketmaster is now sort of has arrangements
Speaker 1: where they'll sell the ticket and you have to resell
Speaker 1: it through them. And then I'm not as excited about
Speaker 1: because then you start having more um uh pricing power
Speaker 1: in the part of a single entity. All right, Paul,
Speaker 1: One last question, what's the FED gonna do? No, I'm
Speaker 1: just kidding. I'm just kidding. We're not going to talk
Speaker 1: about that. Segments about talking about Hey, there there are
Speaker 1: more chapters. Are athletes worth all that money? If your
Speaker 1: hometown host the Olympics? This is really a fun game.
Speaker 1: A proliferation of French Canadian goalies. Um. Such a fun
Speaker 1: read and just plays into I mean, we talked about
Speaker 1: the businesses sports all the time, and there's a lot
Speaker 1: of really thoughtful chapters in his book. Paul Owyer, thank
Speaker 1: you so much. Fun to catch up with you again.
Speaker 1: He is Senior Associate Dean Economics Professor at the Stanford
Speaker 1: Graduate School of Business. Check out his book and Economist
Speaker 1: Goes to the Game, How to throw away five eighty
Speaker 1: million dollars and other surprising insights from the economics of sports.
Speaker 1: Right here on Blueberg