Economist Writing Every Day

Equities are an excellent long-term investment in part because they offer nearly zero value outside their prospect to grow in value. Ownership of a share of a publicly traded firm exists as nothing more than byte in a digital ledger, asbsent any aesthetic or collectible value. In contrast, a beautiful painting or a bottle of whiskey offers consumption value. You can speculate on the future value of such assets, but the prospective consumption value will always be baked into the market equilibrium price. If you want to maximize the expected growth in the market value of your holdings, focus on investment assets that have near-zero consumption value. It is because of your sports team’s failure to invest solely in assets based on their value as inputs into the production of wins that they suck and should immediately fire everyone.

Yes, in years past your sports team used to be bad. They were bad for many reasons. They were poorly managed. Fewer resources were invested in your team. They existed in a less attractive city to live for prospective players and other employees. They were badly coached and never listented to you.

But then a miracle happened.

I can’t speak to the specific miracle(s) that happened to your team, but it likely includes one or more players undervalued by the market that came into your team’s employ only to subsequently reveal their true value through the quality of their play. They were outstanding and, in turn, your team started regularly winning at a rate previously considered unachievable. Supporters grew emotionally attached to their outstanding players. They hung banners, wore jerseys, gifted bobbleheads to wide-eyed children. Being a fan of your team began to pay emotional dividends that went beyond simply cheering for a winning team. It meant being a part of something emblematic of teamwork, a source of collective joy.

And that’s where it all began to go wrong.

Players are employees. They signed contracts reflecting their market value which was itself a collective estimation of their future output. Your team benefited from employing this underpriced input, freeing up resources otherwise constrained by either finances or a cartel…I mean league-mandated salary cap. Contracts aren’t forever, though, and those contracts are starting to run out. You beat the market once, but those assets are now properly valued. Furthermore, the uncertainty discount that applied before is long-gone, replaced by the premium that applies to a sure thing. Whether or not you can afford them, they will no longer offer any advantage, in terms of freed up resources, relative to any other player in the market.

But that’s not your biggest problem.

Your team’s biggest problem is you, the fan. You are emotionally attached to this cohort of players that brought you previously unknown levels of success. Success you’ve grown maybe just a bit accustomed to. Returning to past, lower, standards of quality, of winning, will not return you to your previous level of contentment. You’re gonna complain. Gripe. Call in. Tweet. Boo. You demand they retain these players you’re emotionally attached to so you might maintain the standards of winning you are entitled to.

We haven’t even gotten to the bad part yet.

There’s going to be a de facto auction for the players whose contracts are up. A bidding war. And in that bidding war the team that values them the most is going to get them. Which is obviously the team whose fans are desperate to retain their beloved heroes. Congratulations, you’re now a textbook example of the the winner’s curse. You’re going to win an auction already buoyed, not by the average value in the market but by the teams that have overestimated their future value. That certainty premium probably got a little too big because at least one poorly managed team doesn’t seem to appreciate that playing thousands of minutes of professional level sports takes a grinding toll on the body and that eventually leads to injuries at worst, athletic decline at best. But you’ve paid even more for these players than that the team that over-valued them the most because the team used to be so bad for so long and then they showed up and the team stopped being bad and you love them for it.

The rest of the market is evaluating them as inputs into the production of wins. You’re getting additional consumption value out of having their specific last names on your jerseys. Of seeing their faces and hearing their voices and remembering the good times. You’re getting the warm fuzzies of a good hang. And every dollar you pay for that hang is one less dollar to spend on other players. Other inputs into the production of wins.

So you need to ask yourself, next time you’re mad that your team isn’t good anymore, why are they bad? Is it bad luck? Limited resources? Poor management? Or is it because of you and your insistence on getting more out of supporting a sports team than just victories accumulated within a ledger that accounts for competitive success that you in no way contributed to?

Maybe your sports team is bad because you were part of a fanbase that wanted more than just wins. A fanbase that wanted to let the emotional investments they made in specific humans pay out for just a little bit longer. Your sports team is bad because you are rationally maximizing the emotional consumption value out of supporting them. It’s your fault and that is totally ok.

But if this goes on much longer they probably should fire everyone.