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There’s an interesting survey the New York branch of the Federal Reserve published last year that compares the policy views of undergraduates majoring in economics to other students. Unsurprisingly, on most issues the economics majors tended toward more ”conservative,” free-market beliefs than their peers but, more interestingly, the undergraduate economics students also had much more conservative views than actual economists. The explanation has something to do with an old adage that Texas Agricultural Commissioner Jim Hightower applied to then-Vice President and presidential candidate George H.W. Bush at the 1988 Democratic Convention: “George Bush,” he said, “was born on third base and decided that he’d hit a triple.”
The subjects dealt with in your average undergraduate economics class are necessarily superficial: simple versions of straightforward models concerning inflation, the effect of tariffs, the impact of minimum wage laws on employment. Graduate school is where things get complicated, and where the more committed students are forced to learn about the complicating effects of externalities; the value of trust; the feedback loops between politics, wealth distribution, and economic policies; and places where markets break down. They might even learn a little history and see the fragility of free markets when transported into countries without the same legal and social history we have in the United States and Western Europe. Apply it to their daily lives, and those students might see the importance of paying for University police and administrators to keep the physical education majors on the football team from clobbering the economic dorks over the head and taking their lunch money every day.
For Roger L. Martin, this blissful, undergraduate state of contextual ignorance is roughly the situation American businesses and CEOs find themselves in today. CEOs worry about stock prices, anti-regulatory dogmas, and personal compensation packages, while forgetting the very things that make all this possible: a system where the consumer is king, corporations can be trusted, and government regulators and self-governing executives keep greed and short-term incentives from running off the rails. An influential author, columnist, and Dean of the Rotman School of Management at the University of Toronto, Martin’s latest book is called Fixing the Game: Bubbles, Crashes, and What Capitalism Can Learn from the NFL. In Martin’s take, the NFL is one of the most wildly astute and innovative industries around. It’s a league deeply aware that, first and foremost, its survival and success depends on the entertainment value of the game. “What the NFL has done,” Martin says, “is to keep focus first on the fan experience, with the belief that everything else…will fall into line after that.” At the center of this focus is the league’s rules committee, which constantly tweaks the game to keep an innovative and entertaining balance between offense and defense. San Francisco 49er’s coach Bill Walsh introduced a shorter, more accurate passing game that tipped things in the favor of offense, so the league gave defensive backs more leeway to harass wide receivers. Innovative defensive thinkers like Bill Parcells and Bill Belichick and players like Lawrence Taylor found new ways of putting pressure on quarterbacks, so the league gave offensive lineman more options to block onrushing defenders.
Acting in the role of benevolent regulator, NFL Commissioner Roger Goodell and his rules committee let the creative capitalist coaches constantly look for inefficiencies, loopholes, and ways to turn the market to their advantage—all while keeping the fans paramount and changing the rules to keep coaches from going too far and destroying the underpinnings that pay for all that innovation. Fans in the NFL, consumers in the marketplace: It’s a strong analogy, and far from the only one in Martin’s book. He compares company earnings to team records and stock traders to NFL gamblers—a group the league acknowledges, but tries to minimize the influence of, the precise opposite of our stock options and earnings expectations world. He looks at the league’s revenue sharing-formula, free agency and salary cap structure, and its adoption of new technologies to find useful comparisons to the American economy—taking shots at hedge funds, corporate CEOs, and the theory of maximizing shareholder value along the way.
Some of the areas Martin delves into are well trod by other writers, particularly from an innovation standpoint. However, by more explicitly drawing out the lessons of football’s successful formula (leaguewide revenue in the $7 to $10 billion range, depending on how you calculate it, an average EBITDA of $30 million/team), Martin imparts useful lessons. He writes clean, readable prose and does a good job of explaining some of the more technical aspects of football and business, without coming across as pedantic or patronizing. A touch of brevity in some areas would help (an otherwise excellent section on the irrationalities of executive compensation packages would do more if it contained a bit less), but holistically, the book offers an excellent read as the economy continues to stumble, big businesses and CEOs are increasingly reviled, and the NFL season gets under way.