Labor market tournaments and the cost of almost making it

Two weeks ago Tyler Cowen observed the increasing presence of family lineages in the NBA. The post is without much commentary, so I won’t impute any theory on Tyler’s behalf, but I suspect most people would observe this as the a product of genetics combined with the increased ability of NBA teams to precisely identify the attributes and aptitudes they want. There could also be a component of nepotism i.e. 2nd generation players are given greater leeway and time to develop, but given the revenues on the line in professional sports and the dependence on labor to compete, those effects are likely to be weak.

I’d like to offer an alternative theory to genetics that I refer to as “Better last than second”. There are certain lines of work, such as athletics, acting, music, or twitch streaming that are best thought of as winners-take-all labor tournaments. Any occupation where the concept of “making it” is well understood by its participants as an elusive but desirable goal can be considered a labor tournament.

There are lots of labor tournaments (academia for instance), but in most of them 2nd, 3rd, or Nth place are reasonably tolerable outcomes because the rewards correlate fairly linearly with any success level beyond abject failure. Nobody worries about being the 27,342nd ranked accountant in the world – that person likely makes a good living. Even if they can’t get a job as an accountant, they have skills that readily translate to a variety of other well-paid occupations. Winning is merely a (highly remunerative) cherry on top of an already pretty good oucome.

Basketball players worry a great deal about being the 474th best in the world.

The NBA at any given moment has 450 employees on their rosters. A couple dozen more float in and out on short term contracts to fill in for injuries and other player absences. The league minimum salary is $925k per season. The NBA developmental league (the G League) pays about 37k per season. That already makes it sound like the earnings dropoff from being the 449th best player to the 474th player is enormous, but it’s actually much, much worse.

It’s worse because basketball skills translate to the tiniest sliver of other jobs. Television acting, DJing house music, colorfully live streaming a Castlevania speed run: these are all skills that can pay large sums of money if you cross some imaginary threshold and “make it.” The catch that distinguishes “better last than second” markets from other winner-take-all labor tournaments is that participation requires the dedication of tens of thousands of hours building human capital whose rewards are skewed almost entirely towards a selected few. Those thousands of hours play out over the course of a survival game where, month by month, year by year a new round of “losers” is selected out.

The irony being that losing first is better than than getting the silver medal. Losing first means rebooting your life early and building up your human capital in something else (hopefully in something more forgiving of merely being very, very good). The silver medalist is, in fact, the biggest loser. The opportunity cost of time and energy they will never get back and never be rewarded for. I don’t worry about players that don’t get NCAA scholarships or drafted for the NBA. I worry about the guys hanging around in the G league until they’re 34 only to get released from their contract over a text message. I worry about the actors who’ve spoken 15 lines across 24 television guest spots and 3 commercials in 11 years based mostly on aesthetics, only to wake up at 34 and find themselves in the uncastable valley of normalcy. I worry about the members of all the bands I like but none of my friends have ever heard of.

Which brings us back to NBA lineages and why they seem to be becoming more common. If your father was in the NBA in the 80s or 90s, you probably come from upper-middle class or better means and, in turn, have the backing to tolerate the financial risk of not making it. Second, almost making it is likely to be less costly for you because you are part of a basketball family. Your name will grant you far greater access to the small number of basketball-adjacent jobs that will value your skills (i.e. coaching, scouting, recruiting, commentary, etc). Being part of a lineage makes that silver medal a lot more valuable. Maybe just as importantly, your family is likely to be a lot more supportive and tolerant of the risk you are taking. If your one of your parents had a six year run on Dynasty or made a living on the LPGA tour, they’re that much more likely to see a path to success for you.

As athletics become more lucrative, they become better understood. As they become better understood, the body of highly specific tacit knowledge grows as well. Lineage players will have access to this tacit knowledge through their parents. Dell Curry knew his son wasn’t going to particularly tall (Steph Curry is listed as 6′2", and official NBA heights are notoriously generous). This lead him to entirely reinvent his son’s shooting form in a manner that rendered him unable to shoot from any distance at all for months, entirely based on his understanding as a former NBA player that his son’s lack of genetic predisposition to play in the NBA required a motion that would catapult shots over much taller players. Even if lineage players do have genetic advantages in the high school and college stages of the tournament, the value of these advantages pale in comparison to the advantages of tacit knowledge precisely because of the stage of the game at which they are leveraged.

One could even argue that any genetic advantages that correlate to success at the early stages of a “better last than second” tournament (i.e. being 6’8″) are akin to a resource curse, giving the false impression of a non-trivial probability of “making it.” Conversely, a lack of genetic gifts (i.e. being 6’2″) while having access to the tacit knowledge valued at the last stage of the tournament truly are a blessing. If you survive the tournament until the last round without the obvious endowments other players have, you probably have a rich portfolio of other skills which, combined with the previously mentioned late-stage tacit knowledge, means you’ve been playing the game with less risk and greater expected value than others.

“Better last than second” labor tournaments are common in high prestige entertainment fields, but they aren’t limited to them. Any academic field that produces PhDs with little to no demand in the private market shuttle thousands of students through exactly such a tournament. The only difference is that the gold medal is a $87k a year job with the job security of tenure and “almost making it” often includes crippling student loans. It shouldn’t be much of a surpise that academia is full of lineages, too. And with those academic parents will come the knowledge of how decisions made in high school, college, grad school, and beyond will determine they win their respective labor tournaments. Or lose and have to settle for saving the world.

One thought on “Labor market tournaments and the cost of almost making it

  1. StickerShockTrooper June 28, 2022 / 12:11 pm

    Great article. Someone should turn this into a couple of posters, and put it in the office of every high school counselor in the country.

    Scratch that….if you want to get the college application demographic, you need to turn it into an Instagram post or Tiktok….


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