The Business Models of Sports Leagues

Most pro sports in the US are built around business models that make no market sense. They are quasi-monopolistic guilds classified as non-profits but run for profit.

The incumbent advantages and tribal fandom means they aren’t going anywhere soon. Still, there’s so much room for innovation, and I love thinking about changes to existing leagues, or brand new leagues, or even brand new sports.

The first thing I like to think about is more market mechanisms and fewer central plans. Price floors and ceilings and collective bargaining could get scrapped. The draft order being pre-ordained for losing teams could be scrapped. Imagine if draft picks had a true open market, and rookie contracts too. Teams would be forced to choose whether to keep a player or sign a new one. Picks would be weighed against free agents equally, with no bargain deals for new draft picks. This would be great for sports fans and media, because we’d get to have endless debate about whether a guy coming out of college was really worth picking up at the same price as an aging star. Comparison is the cash crop of sports talk.

I think about college sports a lot too. They’re a total corrupt racket top to bottom, and the players get the rawest end of the deal. Not getting paid by the school is one thing, but being banned from accepting pay to do commercials or other off-field/court activity while the college forces you to shill for their fundraisers? Sheesh. More talent will and should opt out of this high risk low reward charade if they have an alternate way to develop skills and transition to the pros.

Obviously, competing with college by creating a minor league is an uphill slog. Few things run deeper than college fan loyalty. I’d love to see some enterprising university sell their sports team. Split if off. Privatize it. Let it run as an independent business, paying the players, negotiating TV deals, etc. Let them keep the records, tradition, history, and mascot. Let them play in the on-campus stadium. Let students get discounted admission, and pay the university some fee every year.

You could turn pre-pro sports into something far more rational. Pro teams and scouts could get involved without scandal. Shoe deals could be made. Players could be traded. Players would do so much better for themselves, and fans would get to keep the same loyalties and colors and rivalries. Colleges would lose their stranglehold of control over the team, it is true. But they’d get great PR, avoid dirtiness of dealing with scandal, exploitation, fake-passing athletes in classes, coaches high salaries making professors envious, etc.

That’s just scratching the surface. I have a whole mental folder of ideas for leagues and sports, including some far-future ideas about gravity-free environments and what kind of sport works best with an extra degree of movement freedom.

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This One Weird Trick for Legalizing Marijuana

Governor Andrew Cuomo “insisted Monday (April 1) that New York will pass a law to legalize recreational pot before the Legislature adjourns in June,” The New York Post reports. He’s been promising legalization for some time. Many New Yorkers had hoped the measure would be included in this year’s state budget.

What’s the hold-up? “You still need to control and regulate,” says Cuomo. “You don’t want 14-year-olds having access to marijuana, so how you do it is frankly the tougher part of the equation. In the rush of the budget, we couldn’t do it intelligently.”

News flash for Governor Cuomo and New York’s legislators (and for politicians in all the other states lagging the legalization trend): Those 14-year-olds already have access to marijuana. So does everyone else.

Sure, the price of “illegal” marijuana might be slightly higher than the price of “legal” marijuana (to make the profits worth the risk of going to jail), but anyone who wants a bag of weed can get one in a New York minute.

And they’ll still be able to get it after legalization, no matter what byzantine regulatory schemes the politicians come up with and no matter how solemnly they aver that those schemes are “for the chilllllldren.”

Here’s a weird trick for legalizing marijuana:

Legalize marijuana.

Yes, that’s really all there is to it.

If you feel some irrational need to “protect the children” from a plant, set an age limit. Problem solved.

Yes, they’ll ignore it.  Just like they ignore the age limits on alcohol and tobacco. They’ll ignore it even if you only allow it to be sold in licensed facilities. They’ll get fake IDs, or find helpful adults, or just buy it on the black market like they do now. They’ll ignore it, and they’ll ignore you. But hey, knock yourself out.

Confused about how to tax marijuana? Fine — DON’T tax it. Or at least don’t tax it any differently than any other similar plant. Deem it a non-taxable food, or a taxable confection, or a taxable houseplant. There, you’re done.

There’s nothing complicated about this. People have used marijuana for millennia. New Yorkers have used marijuana since there have been New Yorkers. They’re using marijuana now and they’ll be using marijuana a hundred years from now.

The only relevant question is whether or not they should go to jail for using it.

The only correct answer to that question is no, they shouldn’t.

Legalize it, New York. All you other states, too. Let’s get this silly war on a plant over with. The plant won. The plant has never not been winning. Surrender already. It’s good policy, it’s good politics, and it’s just the right thing to do.

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Liberty isn’t Utopia

Statists. You can’t even get them to ask (or acknowledge) the right questions.

Whether the topic is “borders”, drugs, guns, rights, or socialism, they address all kinds of peripheral questions which seem to legitimize more statism when answered, but they avoid the real questions which would completely invalidate statism.

Is it intentional or are they really that ignorant? I honestly don’t know, and suspect it is some of both.

For example, I recently heard one arguing against ending prohibition because when the “laws” against Cannabis are loosened and the cartels’ profits go down, the cartels turn to smuggling opioids. What? How does that justify propping up the failure which is prohibition? All you’ve managed to point out is that if you relax prohibition in a piecemeal way, the cartels will focus on those areas where the profit motive is still high due to continued prohibition.

When you sink that deep into statism, you can’t seem to see beyond statism.

So, look at my crude graph . Sorry, it’s not to scale or painted (a lame Back to the Future joke).

See how I readily admit there are still problems with a condition of zero statism (total liberty)?

So?

Utopia isn’t an option.

But statists don’t like that admission and it’s a deal-breaker for them. Liberty would have to be Utopia with no problems at all for them to accept it in place of their favored statist Dystopia– no matter the specific issue.

Obviously, death– with no more problems for the dead– will result from increased statism long before total statism (whatever that may be) is achieved, but the exact place where that happens will vary from individual to individual and is hard to pin down. Use your imagination to adjust the exact scale of the graph.

We live somewhere along the line between zero statism (liberty) and total statism. The exact spot is debatable, but it’s irrelevant for my point. Wherever we are, there are problems– more problems than there would be under liberty. But statists don’t like liberty so that option is unthinkable and invisible to them. They advocate more statism to solve the problems which exist; most of which are worsened due to statism. They will claim that with added statism, the total problems will decrease. That’s not reality. More statism equals more problems.

But, because there are problems, and they can see ways to justify more statism because of those problems, they are blind to solutions which don’t mean more statism. They won’t even ask questions which might risk opening their eyes to the reality.

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Without Profit, There Would Be No Investment

Among the numerous fallacies embraced by socialism, one of the most notable is completely ignoring the value of investment and risk. Socialists love to talk about the value of “labor” and how profit is made on the backs of “labor,” but they ignore the fundamentals of human nature and of how the market actually works.

Labor doesn’t invest in building a widget factory. Labor doesn’t take the risk of widgets going out of style or being supplanted by something new in the market. Labor doesn’t pay for health and safety inspections. Labor doesn’t take the hit of depreciation.

Labor is paid first, before any profit is seen. Labor loses nothing when the factory burns down. Labor makes no investments and takes no risks, and therefore labor is not entitled to share in the reward. Labor makes a direct trade of time and skill for money. Beyond that, labor has no claim on the possible profits which a capitalist’s investment and risk may generate.

To be a laborer rather than a capitalist is a choice. It is a safe choice in which risk is traded for certainty and the possibility of profit is traded for the guarantee of wages. Most people are both laborers and capitalists. We engage in some direct trades of time and skill for money but we also make investments—be it in the stock market, bonds, cryptocurrencies, or even a loan (with interest) to a friend or neighbor.

Profit is not earned through labor. Wages are earned through labor. Profit is earned through investment and risk. The socialist sees this as unfair, but the socialist cannot explain why anyone would undertake a risky investment if there were no possibility of profit. Instead, the socialist is forced to embrace central planning as an alternative to all the productivity of the free market.

The socialist would have “the state” take on all the risk of investment in industry, infrastructure, research and development, and all other such things and then selflessly distribute the profits it will theoretically generate to the people—the laborers—regardless of what role or lack thereof they played in the generation of said profits.

What could possibly go wrong?

Everything, as it turns out. Unlike capitalists, who regularly fail, go bankrupt, and lose everything, the state cannot afford to take such significant risks. The state lacks the motivation of the capitalist and so it recoils when faced with the same odds at which the capitalist would jump. Even if one ignores the corruption and inefficiency which are endemic to all states, the state is just too risk averse to make meaningful gains in any sectors where it has primacy.

The possibility of profit is what makes investment and risk worthwhile. Without it, there is no incentive for investment and risk, and without investment and risk, there is no societal advancement, no innovation, and no wealth creation. People aren’t going to risk their resources unless the reward for doing so outweighs the risk. That’s basic human nature.

Contrary to what you may have heard, socialism doesn’t “work on paper” any better than it works in practice. It just doesn’t work, period. Attempting to remove profit from human existence removes the motivation which drives humanity to improve itself. Even if socialism didn’t fail catastrophically (as it always has when put into practice), it would, at best, still lead to the devolution of mankind as productivity ground to a halt. That’s not a future anyone should advocate.

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Intellectual Property & Stealing Future Profits (30m) – Editor’s Break 115

Editor’s Break 115 has Skyler giving his commentary on the following topics: resources and scarcity; the purpose of property rights; ideas as patterns of information; the attempt to apply property rights to non-scarce ideas in the forms of copyright and patent; why intellectual property makes everyone a thief; how intellectual property rights necessarily violate material property rights; the argument that copying ideas is to steal future profits; and more.

Listen to Editor’s Break 115 (30m, mp3, 64kbps)

Subscribe via RSS here, or in any podcast app by searching for “everything voluntary”. Support the podcast at Patreon.com/evc.

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On Intellectual Property

The hue and cry against “stealing” intellectual property makes a terrible assumption: that the creator or inventor is being robbed of something. What exactly are they being robbed of? Copying a creative work or building someone else’s invention does not deprive the originator of their work. When you steal someone’s car, they no longer have their car. When you “steal” someone’s story, they still have their story. On this point I hope we can agree, no theft has occurred. So where is the robbery? It is claimed that the robbery occurs when future profits are moved from the originator to the copier. Can robbery occur over future profits? If that is true, then wouldn’t other events that affect future profits also be considered robbery? May businesses compete without robbing each other of future profits? No, and that’s the point of competition, to “steal” profits from the other guy. Should competition be outlawed, like “stealing” creative works and inventions is? If we are to be consistent, then yes, it should be. What kind of world would that be when stealing future profits in every case is illegal? I don’t want to know. And that’s today’s two cents.

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