Tuesday, July 30, 2013

Free Ryan Braun! Or the Real PED Problem in Pro Sports

Braun's PED use became apparent when he spontaneously combusted
Last week, Major League Baseball gave Ryan Braun of the Milwaukee Brewers a 65-game suspension for using performance enhancing drugs (PEDs), and this week MLB is promising to dole out major suspensions to an unknown number of other players. Broadly speaking, MLB is being praised, by players and the sports media, for taking a tough stance on PEDs. The NFL has also taken an increasingly tough approach to PEDs, although it still doesn't test for human growth hormone use. The NHL and NBA are equally vocal in their opposition to PEDs, but those two leagues seem to have less of a problem in this regard, or perhaps it's just that their testing protocols are ineffectual. I'd argue that players have a perfect right to use PEDs, and should be encouraged to do so. More on this later.

The real PED problem in pro sports comes from the team owners and their use of a myriad of barely legal, and generally unethical, Profit Enhancing Devices (it's not the best made-up acronym, but bear with me). What are these devices? The predominant one is the use of blackmail to force state, provincial and local governments to either wholly or partially underwrite the construction of arenas and stadiums. The list of sports facilities built with public money for the profitable use of pro sports teams is a very long one. And even with an existing building that's owned by the city, as in Glendale, Arizona, teams can usually extract an "arena management fee" that doubles as a subsidy. The leverage used to obtain these free or nearly free facilities is the threat to leave town for even more generous municipalities, or the promise to bring a team to town and "revitalize" an urban core. The debts incurred by municipalities to finance these facilities are, of course, paid through taxes, which in turn leads to cutbacks in civic services to finance the debts. So if thanks to cutbacks your local EMS didn't arrive in time to save the life of your loved one, at least you can wipe away some of your grief by cheering for your local athletic heroes.

The profit-taking doesn't stop with milking cities for all their worth. In the latest round of collective bargaining agreements between the NHL, NBA, NFL and their players, the leagues all took a bigger slice of the pie. The most egregious of the bunch were the NFL owners. Owning an NFL franchise is a licence to print money, and has been for a very long time. Evidently the owners want to print more money, because they attempted to take an extra $500m from the players. All three leagues ended up paying their players less for the same work, which neatly reflects the reality faced by the vast majority of workers over the last thirty or so years. And the worst of the bunch are the US colleges, who hand out scholarships like candy to lure high school athletes into sports that earn billions in TV revenues. The college players receive none of those monies, and their "scholarships" are usually contingent on staying on the team or are limited to a small variety of easy programs that carry no prospects for future non-football employment.

And like any other large corporation, sports franchises can use the full gamut of accounting tricks and tax avoidance schemes to funnel profits away from their teams so they can go crying to local politicians and ask for an increased arena management fee or a new arena with more luxury boxes. This is a popular tactic with NHL teams. In the past week the Minnesota Wild have claimed a $30m loss. This is the same team that fearlessly splashed out over $100m on new contracts for Ryan Suter and Zach Parise one year ago. Something doesn't add up, but you can be sure Minneapolis city council will soon be getting a begging call from the Wild.

My point, and I do have one, is that team owners work ceaselessly to maximize the profitability of their sporting assets, and they'll use every trick in the book, some just this side of legal, to rake in more cash. Ryan Braun, and PED users like him, is doing exactly what pro sports team owners are doing: he's maximizing the profitability of his assets. In Braun's case, his asset is his innate ability to hit a baseball. Let's look at this from Braun's perspective: his natural, unaugmented talent is worth x dollars, but with the addition of PEDs his talent now has a worth of x + y dollars, with y representing a shitload of money. The math speaks for itself. I acknowledge that MLB has clear rules against the use of PEDs, but there are also rules, or at least principles, of accounting that say corporations should not obscure the truth about their financial status. Sports teams are notoriously slippery when it comes to basic accounting for the simple reason that they want to share as little as possible with the players. So why should Ryan Braun behave any differently than the owners of the league he works for? Like the owners, he wants to squeeze every last dollar out of his asset, and in his case the most efficient way to do that is with PEDs. From a Harvard Business School point of view it's a no-brainer--pass the PEDs!

Baseball purists argue that PEDs distort the statistical purity of the game; a player on drugs is putting up numbers that aren't an accurate reflection of his skills. True enough, but the financial maneuverings of owners can skew numbers just as effectively. The most obvious example is the New York Yankees. Because the Yankees have used their financial muscle to assemble de facto all-star teams over the past fifteen years, the individual stats of Yankee players have benefited enormously. For example, a cleanup hitter playing for the Yankees in that time period could come to the plate expecting to have more men on base, and his RBI totals would benefit accordingly. The same hitter playing for Kansas City or Pittsburgh, teams that can't or won't pay for better players, would have significantly poorer stats. Fans and sports writers often moan about big market teams using their money to buy up the best players, but that's just another case of an asset's profitability being maximized.

The other major sports leagues have salary caps of one kind or another, but that doesn't stop the owners from tweaking their sports, and thus the statistical results, in the name of profits. In an effort to make their games more entertaining, and thus more lucrative, the NHL, NBA and NFL have brought in all kinds of rules that have also affected the statistical character of their respective sports. The three point rule in basketball, the designated hitter in baseball, increased penalties for obstruction in hockey, and enhanced protection for quarterbacks and receivers in football are just a few of the rule changes that have altered the stats of these sports.

In sum, the major sports leagues and individual teams will use any and all available means to increase their profitability, and if that affects competitiveness or the stats of individual players, so be it. So why should players not adopt the same strategy? Taking PEDs is not illegal in the non-sports world. Doctors can prescribe all the steroids and HGH they want, so it could be argued that sports leagues are trying to restrict or control a perfectly legal activity. It's understandable that a company would argue against the use of substances that impair performance--no one, for example, wants a drunk bus driver--but where's the logic in decrying the use of something that improves performance? As long as the owners use every financial and legal trick at their disposal to fatten the bottom line, I see no reason players shouldn't do the same. And perhaps if enough players come out in favour of PEDs, or get caught using them, we'll finally have an honest discussion about the profit principle in pro sports. Play ball.

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