Tuesday, December 27, 2016

Discharging Student Loans in Bankruptcy

There's no shortage of articles warning of an impending student debt crisis in the U.S. News organizations are quick to remind us that student debt now represents a larger portion of overall outstanding debt than credit cards and auto loans. So I dug into it a little bit...

It's over $1 trillion, and all the reports warn of the potential damage it can do if a large swath of the country is buried under debt -- sacrificing other forms of consumption to go towards digging out of the hole.

It's not hard to imagine why student debt loads have increased so dramatically. If there's one theme that's been pounded into our collective heads regarding education, it's that it is the primary tool to realize economic/social class mobility. If there's another theme, it's that college keeps getting more and more expensive. Put those two themes together, and you have a recipe for increasing student debt, but with a critical catalyst that I'll get to shortly.

As the parent of two young children -- that college prices are exploding has me concerned. The raw increase in college costs has been pretty extraordinary, just one data point:

This fall, Harvard's annual tuition and fees (not including room and board) will set you back $45,278, more than 17 times the 1971-72 cost. If annual increases had simply tracked the inflation rate since 1971, next year's tuition would be to just $15,189.

I know it's Harvard, but what can I say? I'm setting my expectations for my kids very high! Although by the early 2030's when they'll be looking to go, who knows if I'll be able to afford what it costs.

Let's set my own finances aside, and come back to what's driving the increase in college costs. Much is made of colleges building amenities and features that range from the merely opulent to the truly fantastical. Climbing walls in state-of-the-art fitness centers, dorms with private bathrooms, and iPads as far as the eye can see. That's a line of thought that gets buy-in and nodding from liberals and conservatives. Then there's another focus on increase in administrative staff -- more frequently raised by conservatives -- because to attribute the cost increases to nest-feathering bureaucrats who happen to tilt liberal fits well with the conservative view of the world. With that said, it's very likely true to some degree as well.

But I was curious if another structural force could be at work to drive increasing college costs and resulting debt obligations. That's the inability of borrowers to discharge educational debt in bankruptcy.

Unlike other forms of debt -- student loan debt doesn't disappear if you try to declare bankruptcy. It doesn't get discharged. It stays there forever.

And this isn't some historical artifact, the major legislation which drives it dates back only about ten years ago:

Before 1976, all education loans were dischargeable in bankruptcy. That year, the bankruptcy code was altered so loans made by the government or a non-profit college or university could not be discharged during the first five years of repayment. They could, however, be discharged if they had been in repayment for five years or if the borrower experienced “undue hardship.” Then, the Bankruptcy Amendments and Federal Judgeship Act of 1984 made it so all private student loans were excepted from discharge too.

Two decades of further tweaks to the bankruptcy code ensued until 2005, when Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which made it so that no student loan — federal or private — could be discharged in bankruptcy unless the borrower can prove repaying the loan would cause “undue hardship,” a condition that is incredibly difficult to demonstrate unless the person has a severe disability. That essentially lumps student loan debt in with child support and criminal fines — other types of debt that can’t be discharged.

So we treat student debt in the same way we treat criminal fines or child support -- you can't get out of it, pretty much under any circumstances. Although there are some measures like repayment programs that try to make it easier -- it's not a stretch to say it's extremely difficult and unlikely you'll escape from student loan debts if you're unable to pay them back.

If we think through the impact of that legislation -- I'd argue you can draw a pretty clear line to an ever-increasing debt load for students in the U.S. Thinking about it logically, the bankruptcy legislation eliminated a major cost for student debt issuers. With the threat of bankruptcy discharge off the table, financial institutions would be much more liberal in doling out money, as they're no longer left holding the bag if a student can't pay. Now it doesn't matter if a student can't pay, the debt stays with them, and while it's clearly not as financially beneficial to a bank vs. paying back a loan on schedule, they maintain the means to get theirs even if it takes decades and essentially throws the student into a practical debtors prison.

Looking through some research to find evidence of this thought - I came across an NBER paper summary which explains exactly the phenomenon I assumed existed:

The answer is that by making it harder for consumers to escape their debts, the new law dramatically reduced lenders' losses from default and bankruptcy. As a result, they started lending more, even to consumers with bad credit. Credit card debt increased more quickly during the past two years than at any time during the previous five years.

Consumers should have responded to the new harsher bankruptcy law by borrowing less, which would have lowered their risk of getting into financial distress. But not all consumers behaved in this rational way. Instead, many behaved shortsightedly and took advantage of the greater availability of credit to borrow more than they could easily handle --- ignoring the risk of financial distress. (Economists refer to this shortsighted behavior as "hyperbolic discounting" - consumers who are hyperbolic discounters intend to start paying off their debts immediately, but each month they consume too much and end up postponing repayment until the following month. So their debts steadily increase.)

The new bankruptcy law exacerbated the problem of shortsighted consumers borrowing too much, because it prevented many of them from using bankruptcy to limit their financial distress. Many consumers in financial distress are unable to file for bankruptcy under the new law, because they cannot afford the costs of filing, cannot meet the new paperwork requirements, or are ineligible. This means that their debts will not be discharged and they will remain vulnerable to creditors' collection calls and to wage garnishment that may take funds they need for basic necessities. Because of the new bankruptcy law, consumers can end up in deeper financial distress than would have been possible before 2005.

This paper is about credit card debt, not student loan debt, but the principle is the exact same. Eliminate the potential write-off cost of default from the lender, and not so surprisingly, they lend more!

Reading more on the legislation ticked me off a little further -- especially given that support for the 2005 bill turned out to be bi-partisan, passing with over 70 votes in the Senate and over 300 in the House. Even Joe Biden voted for it (I assume because Delaware has some big interest in the credit card business), although Obama notably didn't.

If we're interested in reducing the amount of student debt borne by borrowers -- I'd advocate for allowing bankruptcy protection for borrowers. I'm not persuaded by the argument that loosening the rules will create tons of strategic bankruptcies by fresh Yale grads with Art History degrees. Bankruptcy, although it would help reduce debt loads, still has very real costs in terms of credit score impact that aren't easy to walk away from. The more persuasive counter-argument, is that allowing students to declare bankruptcy will tighten lending exactly for the group of prospective students -- those without much financial means -- that need it most.

I think that's probably true, but only to a point. I think it could dramatically reduce lending to students aiming to attend for-profit institutions, the same ones with pretty dubious records of leading to gainful employment in a given field. I also think that's probably a good thing. You wouldn't want to keep someone from being able to borrow to get an education that would dramatically help their career prospects -- but you would want to keep someone from being able to borrow to attend a crappy online college that can't help them get a job. If you were truly worried about the latter, I'd argue maybe you allow bankruptcy filing for borrowers attending for-profit colleges, but not for non-profit ones. Given that for-profit students make up 35% of all loan defaults, it would at least be a start

Monday, November 21, 2016

At least one point of optimism

Sure, the election results were terrible, and President Trump, despite receiving an initial benefit of the doubt from some in the mainstream pundit-sphere, seems intent on stocking his administration with the kind of loyalists and sycophants that at best would support a kleptocracy and at worst will be quick to start wars and trample the Constitution.

And then there are the clowns, the white nationalists using this as a signal to climb out from under their rocks (or mother's basements) and start making Nazi salutes. That Trump condemns a broadway show and NOT these deplorables implies he's either oblivious or despicable (and both are bad)

But in a search for a silver lining, one thing I do feel a little comfortable about is that progressive change can still be made. While there won't be any progress from a federal level (there might even be pullback) on issues like equal rights and gun safety -- my hope is that we'll still be able to drive change by leveraging corporate influence.

The federal government may not be on the side of freedom for the next few years -- but powerful examples now serve as a template for driving change.

The nonsense legal attempts by Indiana and North Carolina to restrict the rights of the LGBT community met with swift resistance. But the resistance didn't just come from typical activist groups:

Example 1 - North Carolina

Opponents of North Carolina's HB2 "bathroom bill" - which prevents transgender people from using restrooms that do not match the gender on their birth certificate - are being joined by some very powerful partners.

Former Solicitor General and Prop 8 litigator Theodore B. Olson has authored an amicus brief supporting the Justice Department's effort to block HB2, and 68 major corporations have signed on. These companies include American Airlines, Apple, Cisco, eBay, General Electric, IBM, Intel, LinkedIn, Microsoft, NIKE and Salesforce.

Example 2 - Indiana

A new study from Visit Indy — Indianapolis's convention and tourism organization — found that Indiana lost at least $60 million in revenue after lawmakers there passed the so-called Religious Freedom Restoration Act, which gave businesses the greenlight to discriminate against LGBT people on religious grounds.

In both of these cases, while the state government felt beholden to appease the will of troglodytes and bible-thumpers, they didn't anticipate opponents marshaling corporate resources against them so effectively. Turns out that corporations that need to compete in the modern economy, both for talent in their offices and customers (particularly the ones that have money), look as though they may take an increasingly active role in pushing back against discriminatory and/or bigoted policies.

If some of the particularly nefarious parts of the Bannon/Trump agenda (i.e., Muslim registry) come to pass -- my sincere hope is that while we who would oppose it can't pin our hopes on the official checks and balances within the government -- we can exert enough influence on and from within the business community to block such awfulness.

Because if it comes to a fight over protecting people's rights, we don't have the seats in congress, the supreme court, or the White House. But we do have more money and more shares of stock -- and we'll have to use whatever weapons are at our disposal

Sunday, November 13, 2016

Way Too Late Election Thoughts

At this point, there have been far too many thinkpieces on Donald Trump, Hillary Clinton, what Trump's victory means, what it doesn't mean, and how no one really knows what it will mean. There have been columns, and responses to those columns, and responses to the responses.

They've infiltrated my podcast feed, my twitter feed, and they're all over my facebook feed.

So what's one more.

Look, I was totally stunned by the election results. I'm a politics fanatic and listened/read all kinds of stuff over the last two years (enough to even go to Breitbart routinely -- though it's tough getting the stench off my hard drive) -- and I felt so confident we'd be talking about Clinton transition today.

I wish we were -- but we're not. We're talking about Donald Trump's transition to his presidency. It's still barely believable as I type it. And even as I try to avoid seeing any more news about it, as if that would somehow mean it wasn't actually happening, my blinders can't completely block out the massive, neon 'TRUMP' logo forcing its way on my mental image of the White House.

I wanted to write down some thoughts in the immediate aftermath, but I was insanely busy at work and my 2 year old doesn't really want to spend her nights talking politics. That helped. The election has made me feel all kinds of different feelings (nearly all of them negative) -- and sitting down at a keyboard last Tuesday night would've resulted in something you'd expect from the Unabomber.

I'm ashamed of the election -- not that the result didn't go my way -- but because it means that cynicism has delivered a crushing blow against hope.

That the Republicans, who have obstructed and stymied any and all efforts by President Obama to address any problem, are now poised to control all three branches of the federal government, almost feels unfair.

Many Americans are upset that the government isn't doing a better job to help them, and I get that, but to ignore Republican behavior in creating that atmosphere is frustrating. Between the Obamacare repeal efforts, shutting down the government, refusal to even consider filling a Supreme Court vacancy -- this is a party that has done far more than its fair share to destroy the chance of a functional federal government.

That is their wont -- but for them to be rewarded for it by those who are angry at the dysfunction -- well, it's like a town with a crime problem firing the police chief and hiring the local mafia boss to clean things up.

Make no mistake -- I am distraught at the agenda the Republicans are now salivating over. I'm distraught that they'll take the legacy of President Obama, and all the good he's fought to achieve, and rip it to pieces -- turning our country into the Ayn Rand Fantasy Camp Paul Ryan has been dreaming of (where the only things the government provides are paved roads and a box of shotgun shells).

But what's even worse -- if that's possible -- is where President Trump could force our country to go.

Now I've already listened to a bunch of pundit takes suggesting that Trump will 'evolve' or 'grow' into the job -- once he sees how much power and responsibility he has. Or that the Republican party leadership will work to rein him in. That's a great idea, and wonderful wishful thinking that I hope comes to pass, but my response to that would be -- have you not been paying attention to anything he's done?

The man is 70 years old and near as I can tell, has never had anyone tell him he's wrong. Now he's just succeeded in breaking all the norms of politics and defeating the two biggest political dynasties of the last 30 years. You mean to suggest this is someone who will change what he's doing? And by the way, the Republicans who noticeably ran away from him in their elections (examples: Mark Kirk, Joe Heck), lost.

Trump runs the Republican party now - and I don't see him willingly handing over the keys.

If this were only about Republican policy (or whatever policy Trump actually believes in), it wouldn't be so bad. I'm a white male with a pretty decent job -- that's a good recipe for success under Republican rule.

But it's two elements of his victory that are significantly more scary.

One -- is the penchant for nationalism at the expense of globalism.

I don't know much about what Trump really believes, but the man is an ardent nationalist. The electoral wind at his back rode in on a nationalist tide -- it was right there in the slogan -- 'Make America Great Again'. This is a stark contrast to Obama (and my own) world view.

I look at the global market and see greater interconnected world as a source of stability and prosperity. The more you trade with everyone, the less likely you are to want to blow them up. It's not complicated -- you figure that out anytime you play Civ.

Trump -- it appears -- doesn't agree with this world view. America needs to be number one, and this is a zero sum game. It's odd to hear the President-elect talk about trade with other countries as if its zero-sum, and that we need to win and others need to lose. That, plus his emphasis on halting immigration, withdrawing from defense agreements like NATO. These are all signals that, to Trump, if you're not first, you're last.

It's not just the U.S., lots of other countries including France, the UK, have seen an increase in nationalism. What worries me most, is that Nationalists need a foil, an enemy, someone to direct the negative energy at. During the election, it's easy for Trump to scream 'Lock Her Up!' as Clinton is a great enemy to rally around. But now that he's running the U.S., and the Republicans have unobstructed power at the federal level, who will play the bad guy?

China? Mexico? Illegal immigrants?

Trump is making a lot of economic promises -- and when those promises (4% GDP growth!) don't come to pass, someone will have to take the blame.

Trump has also shown that he can't accept losing face - and putting that all together presents scenarios that I'd have considered unthinkable.

Two -- is that there really isn't anyone who would stop him

In an ideal world, if Trump went too far in his nationalism or his aggressiveness to the point of danger, we'd hope that our legislature would band together across party lines to stop him.

But this election has only demonstrated the degree to which Republicans value party unity over American principles.

During Trump's run, he's pushed an absurdly large number of irresponsible ideas into the mainstream (too many to name here). In response to this, while a couple Republicans disavowed him entirely, the vast majority wouldn't let that get in the way of letting the ends justify the means.

Maybe a few of them made some statements -- but they all voted for him. He received 90% support from Republicans. This despite views on immigrants, Muslims, Mexicans, that are distinctly un-American at best and dangerous at worst. Republicans viewed this with a collective pause, and then went right ahead.

Paul Ryan, Marco Rubio, and others have made their true feelings known. Many of us won't forget.

I wish there were a better outcome in store for us. Perhaps I'm wrong in my dismissive attitude to a Trump change of heart, and I absolutely hope I am. But there are dark clouds ahead for the federal government -- and the key for those of us who now find ourselves and our philosophies in harms way owe more than just some blog posts and tweets in protest.

There is still work we can do, and still progressive change we can create (remember there are 50 state governments and thousands of city/local ones). If nothing else, maybe such a challenge can persuade some of us to do more than vote once every four years.

Friday, September 2, 2016

New Regulations to Reduce Salary Gap #FB

I fall for clickbait all the time. Slideshows featuring the 50 most exotic hamburgers? A quiz to tell me what brand of cereal I am?, Stories where a dog does something but you won't BELIEVE how it turns out?

NOMNOMNOM - I take all the clicks.

That's particularly true when I see an article run about wage-gaps or salary information in the workplace. Those headlines are boring by comparison but I always read them. I came across an op-ed in the Washington Post that I thought was interesting

Why did I find this interesting?

- I had no idea there were laws under consideration (and apparently passed in MA) that preclude employers from asking job applicants about their previous salary

- I agree with the author's conclusion (this seems like a bad idea), but not her reasoning

The argument for the legislation (I assume) goes something like this: There is a pay gap among women/minorities, and if employers are allowed to ask about previous salary, those previous salaries reflect our current gap-heavy environment and thus will be perpetuated.

The author's argument is that if you prevent employers from asking about applicant's salary history, they'll simply use proxies and get to the same outcome.

I think both of these arguments are not persuasive. The author's reference to proxies uses the example of employers now forbidden from using criminal history and proxies including things like drug tests. OK, I could see how an employer could argue that drug use is an indicator of criminality, there's an explicit link there. But what proxy are they going to use to guess at what your past salary was? Your brand of shoe? Your address? Do they own their own home? The links here are less clear and harder to boil down to an objective question on a job application. But I agree with her that the laws seem wrong, so let's set that aside.

What's more of a driver of wage gaps, to me, is there's not enough transparency in compensation. And it's not as big a problem among new hiring, but among existing employees. These new laws seem to think that less transparency will help the situation, which feels wrong.

The legislator's argument runs into a problem if you consider the employer as a rational actor in the hiring marketplace with a set of many candidates. If they find two candidates of equal talent/ability - one a man and one a woman, only the woman's prior salary is 20% lower - then you'd offer the woman the job for a lower salary and hire her.

This is a great outcome for the company, an employee at a 20% discount. This is not so great for the employee, who is taking a discount. But the key is to move the salary interaction from a one-time anchoring into a more dynamic engagement. How can we get the woman to earn her true worth once she's there? Lack of transparency within the workplace makes wages more sticky than they need to be, so even if whomever you hire demonstrates their value, there are fewer mechanisms/nudges to drive that higher.

The legislator seems more worried about the first part of the equation and a general employment context, that's probably not wrong. Nearly all salary discussions/changes seem to happen within the context of taking a new job (either changing companies or promotions). But why should that be the case, considering those events are few and far between for many people.

I think a better alternative is to make compensation policies more dynamic and more transparent for existing employees.

I'll use two incidents from my own personal experience.

When I was a much younger person, I was looking to change jobs within the finance industry. I also wanted to move back to Philadelphia, and I was pretty motivated to do so. I found a firm and encouraged them to hire me. They didn't really want to - they had just hired someone with more experience and were looking for one more person at more of an entry-level. They ultimately offered me the job (I forget if they knew my historical salary, they probably did), but at less of a base salary than I had made previously. I was fine with that trade-off because I really wanted the job...until I accidentally found out I was making less than a newly hired administrative coordinator.

I didn't leave the job because it was part of a long-term plan to go to B-school, but it certainly ticked me off and stuck with me (apparently). At the time I was a major asset to our firm's primary investment activity, and had I known of the gap, I certainly would have said something and am convinced it would have been a persuasive argument.

Let's contrast that with my post B-school career in consulting.

In that case, I knew what just about everyone else at the firm was making at all times. There were set cohorts with fixed salaries and bonus thresholds tied to employee ratings. I didn't know how everyone got rated, but I knew the scheme and there were relatively clear criteria on how to achieve it. Whenever I got promoted, I already knew what my new compensation would be. I never had a complaint about compensation, and you could argue over ratings and speed of promotions, but the rules of the game were clear. In such an environment, I think a wage gap is significantly less likely (although there's a very valid argument that qualities that get promotions are biased towards men or white people etc., I won't dispute that possibility, but it's a second order question in my mind)

If everyone knew what everyone else earned, I think that would be a huge nudge toward eliminating wage gaps and biases against certain groups. Nudge is probably too soft a word, I think it would be a shove. The less people know about how compensation works within the organization, the less they're able to articulate why they deserve more because like me all those years ago, they might have no idea they deserve more.

The argument against doing this, is that it's going to piss off lots of folks and set off a series of 'how does THAT guy get paid THAT MUCH?' That's why you'd see this much more easily implemented at new companies rather than existing ones, and at smaller ones vs. larger ones.

But if your goal is to reduce bias, a change that makes compensation more public is, in my mind, a much more effective way to go about it.

Friday, August 19, 2016

How can the NFL Make More Money? #FB

No election talk for now - I promise.

Even though that's what's been dominating much of my podcast and article feed for now, I wanted to think about something else, if only for a little while.

Football season is coming, and even though the Eagles don't look like they'll be all that great (prediction: 8-8, I think the defense is better than people expect and the offense is worse), I remain thrilled about it being back. I was ecstatic to spend $100+ on DirecTV's Sunday Ticket streaming package, and would happily give the NFL more money if they would just find more ways to give me football.

So I tried to think, what if I were the commissioner of the NFL? And what if I were charged with growing the world's biggest sport (by revenue, yeah I know soccer is more popular)?

Where would I look first?

I had to set one quick guardrail for myself -- I'm not allowed to just make changes that have no prayer of happening in reality anytime soon...that means no more games (because the players won't approve), and no cyborg player technology (because that doesn't exist...yet). But if I had to present to all 32 owners a concrete plan of how I was going to make them more money...what would I go after?

Unfortunately, the NFL is in a tough spot, because it's already so damned huge. It made $13B last season (per wikipedia), so big growth isn't going to be that easy (unless you launch a hostile takeover of the NBA and force LeBron to play for the Browns)

The way I look at it, the NFL only succeeds in making money because every Sunday, me and millions of other people like me glue our eyeballs to various screens to watch the football. There aren't many places where you can depend on those eyeballs showing up, and the NFL is a huge one. Because revenue is tied to those eyeballs, I see a few discrete ways to grow:

1. Increase the monetization of the eyeballs you already have
2. Increase the time those eyeballs are spent watching the NFL
3. Increase the number of eyeballs watching the NFL

Those are the big types of opportunities in my mind, and as you'd might expect I've got some thoughts on each one.

1. Improve Existing Eyeball monetization: This is deriving incremental revenue from the customers (eyeballs you already have). Now, in any of these areas there are tons of possibilities. What I'm trying to focus on is what's both more achievable and large. So while some ideas might be compelling (e.g., create new products to sell to fans, create new pricing/loyalty schemes to more effectively price discriminate), there's the big easy one that's too obvious to pass up:

Uniform sponsorship.

It's coming, it's just a matter of time. Major non-U.S. soccer clubs around the world sell jersey advertising. Every Nascar is basically a billboard. The Sixers have finally broken the seal of the major four sports leagues (MLS and others have already done it years ago), and for an NFL who has officially-sponsored everything, the spartan uniforms are
sacrificing revenue for the sake of, I don't know, traditionalism? (Which is nonsense btw -- the Green Bay Packers were the freaking Acme Packers in their first season)

Now, this is such an obvious opportunity that people have already quantified it:

According to a Horizon Media study, the Dallas Cowboys, New England Patriots and New York Giants could all land jersey sponsorship deals worth more than $14 million per year.

That study, says the biggest teams would be worth $14M a year. If you assume the average NFL team is half of that ($7M, as I'm assuming that they're evenly distributed between $14M and $0. That may be conservative, especially because I'd argue every team is essentially a nationally-watched team), then you've just made the league an extra $224M.

That's an easy way to grow 2%.

2. Grow Eyeball duration The last bucket was focused on getting more money out of existing viewership/fanbase. This one is similar to that idea, but rather than through improved monetization, this is just expanding share of time we're all spending with the NFL. It doesn't enhance the value of the content, it's creating more content.

Now I stipulated that we can't make more games. That's the easiest way, but let's take that off the table. So what's my big idea?

Expand the Regular Season.

Wait, what?

Before someone calls the Players Association on me. I'm not saying teams should play more than 16 games. In fact, call the Players Association, because they would love this idea.

The NFL generates $7B a year in TV revenue from all their network partners. Why is that? Because football fans are obsessed with following the league every week of the 17 week regular season.

But why does the regular season have to be only 17 weeks?

Teams currently play 16 regular season games and get one bye week off. OK, well under my new and improved regular season, teams still play 16 regular season games. They just get two weeks off instead.

Expand the calendar, and expand your eyeball duration. Because if you tell me that fans forget about the NFL when their local team is on a bye week, I'll tell you you're full of crap. Whether it's fantasy football, gambling, or just finding a way to avoid their families, football fans will watch the NFL when it is on, even if their team isn't playing.

Now you've got 18 weeks of content for the networks to sell advertising against.

And if you'd protest by arguing that you can't fit it into the calendar, then fine, lop off the 4th week of the pre-season. No one cares about it anyway, I'm sure an extra week of full-on NFL regular season would be a little more revenue generating.

If that $7B package per year was for just the regular season and not the post-season, pro bowl, draft or other events, to me, that means this opportunity is worth an extra $400M.

Grow Eyeballs: This is the toughest one for me. How to create new fans essentially. It might be the hardest one to do, unless you take my previous idea of a hostile takeover of the NBA

Destination London.

OK, this is a bit of a cheat. If I had to be honest, I'd say that it's more of a Grow Eyeball Duration instead of Grow Eyeballs, but I think it could be both.

The NFL has been hosting games in London for a number of years. And if you want to get more fans, you can try to pick up more fans in the US (tough) or you could try and make a go of it in an untapped market (tough too, but a different kind of tough).

A problem we have is that I'm taking expansion off the table. Expansion would be a way to create marginally more fans in a specific US market (imagine Las Vegas, or whatever, St. Louis I guess). But that expansion comes at the expense of diluting the revenue shared by everyone else. You'd create a one-time lump sum payment to the existing owners in return for giving them a slice of the pie forever.

So no expansion.

That means growing eyeballs would necessitate relocating a franchise to help you create incrementally more NFL fans. The most effective way to do that is to take a team no one would miss and ship them to a huge market somewhere.

Toronto would be a candidate, but I prefer London. I suspect the NFL does too.

Why? Two reasons:

1 - It's bigger. The UK has ~60M people, Canada only has ~30-35M. If you're trying to get more people into the NFL, go where they are.
2 - It can also expand your eyeball duration

So ignore the complexities of how a team in London would work schedule-wise. Yes the travel would be tricky, but with my new double-bye week schedule it could be easier to have teams visit London around a bye. I'm sure we could solve that.

But when the London team plays its 8 home games a year - you've got a new 10am timeslot for a nationally televised game. Again, we're taking the same amount of content and stretching it out, allowing more people to watch it and more importantly have network partners sell more advertising against it.

It would mean I'd have to miss Meet the Press 8 times a year, but that's a sacrifice I could live with.

If you only think about how much that could be worth, it's not unlike the Thursday night package the NFL artificially created with the exact same strategy. That deal is worth $450M a year.

Now, weeknight prime-time is obviously more valuable than Sunday morning. But would Sunday morning be worth 25% of that? I'd need a media expert's help to confirm, maybe it's only 10% of the value. But that's still between $50-$100M in revenue.

So there you go Mr. Goodell. I've just given you about $700M+ in ideas that are both pretty achievable and pretty significant.

I'll just wait for my check. You can hit me up on Twitter @jaredscohen.

Wednesday, August 10, 2016

Donald Trump and Collective Behavior Thresholds #FB

I was reading an article about football strategy not long ago. The article was on football referred to a podcast on basketball, which itself referred to a sociology paper from 1978. But as I was thinking about the presidential election and how things have evolved over the last week -- I thought the theory made a lot of sense as it relates to where Donald Trump currently finds himself.

The thrust of the football article is about how a construct around individual behavior thresholds might apply to NFL coaches. In short (and probably summarizing in a way that doesn't do justice to the academic paper), the typical model of how coaches would make 4th down decisions is a little too simplistic. In this simplified version, coaches are either aggressive or conservative, and this trait is fixed.

In considering the impact of thresholds, there's the thinking that it's not necessarily a binary condition. You aren't firmly conservative or firmly aggressive...rather, there are conditions where you'd decide in a conservative way and conditions where you'd be aggressive. Seems pretty logical.

Those conditions include (and for the purposes of discussion only consist of) the behavior of the collective body of coaches around you.

Think about a coach with a relatively high threshold for aggressiveness. He needs to see a lot of collectively aggressive behavior in order to be persuaded to take aggressive action himself. Maybe he needs 20 other coaches to make aggressive decisions.

Then there is a coach with a low threshold. Maybe he only needs 2 or 3 other coaches before the actions of the collective are enough for him to make an aggressive choice.

Chase Stuart explains this all much more clearly than I can in the article...but the model is interesting to think about in consideration of lots of collective action situations (example most commonly used would be riots/looting -- it's not that everyone becomes a maniac when their team wins the Super Bowl, it might be that select individuals with low thresholds for rioting start something, which creates a snowball effect as the broader group crosses their respective individual thresholds)

So as I'm reading article after article about Trump, it occurred to me that this may be a useful construct with which to view the collective actions of Republican office-holders at large.

Trump has done a bunch of, let's put this diplomatically, wacky-ass-shit, over the last few news cycles. Most recently, he subtly raised the idea of his supporters shooting Hillary Clinton (or her designated judges). Whether these individual comments were beyond the pale or not is not what I'm thinking about. At this point, Trump is a fairly known commodity.

But Republicans continue to waver in their level of endorsement/support -- and if we think about each of them as having a threshold for their support based on their collective behaviors, there are some interesting implications.

The first incumbent congressperson to come out against Trump (i.e., say they wouldn't vote for him), was Richard Hanna from NY.

Ok, the first one, someone with a low threshold to going public with his lack of support (in part, because he's retiring. That's a different conversation around what might influence your threshold)

Then, if I remember correctly, came Adam Kinzinger of IL. Kinzinger, as far as I'm aware, still plans to serve in Congress.

After that, it was a Senator, Susan Collins.

In each of these cases, it's interesting to consider whether it wasn't a particular soundbite, action, or polling number on Trump's part that drove the legislators to come out and announce their opposition, but potentially the acts of others who had preceded them pushing them beyond their internal threshold for action.

If that is the scenario, there are obvious implications about an impending death spiral of a campaign. As more Republicans abandon ship, they embolden those that remain.

It's an interesting way to think about their collective action (and one that I selfishly hope comes to fruition).

Tuesday, July 26, 2016

Trump's Way of Screwing Suppliers Isn't Crazy...

One of the aspects of Donald Trump's business career that will be debated over the next several months is his, what should we call it?, tendency, to not pay his vendors.

There have been lots of discussions on it in the media, using a long list of examples:

Company X (usually a small business) gets the opportunity to work for Trump on a project...Company X fulfills all or part of its obligation...Trump tells Company X to screw off when it's time to pay up.

This isn't like Trump University, where Trump takes advantage of people to sell them on an over-valued product, but it's related.

The most recent example comes right from the Trump campaign -- involving a group of dancers called the 'USA Freedom Kids'

Here's a link to the broader story, but it sounds very similar to ones I've read before.

The USA Freedom Kids were offered a chance to perform as part of the Trump campaign extravaganza. But after they performed, and in other instances after they did their best to meet their end of the agreement, they couldn't get compensated from the Trump organization. From the reports, the Trump organization didn't hold up their end of the deal across multiple instances. USA Freedom Kids ended up out a considerable amount of money (not to mention some probably disappointed children)

I bring up the example because you might read it an wonder, why (and how) can someone routinely pull this off?

If you think about it for a minute, it's actually pretty logical for Trump. First, you have to assume he's someone who puts earning money ahead of being a good person (not a tough stretch).

But now that we've done that, consider how most commercial transactions work in the world. In most cases, engaging in business is a repeated-game scenario. Let's say you and I live in a small town. I run the town's carpet cleaning business and you own the town's carpeted adult movie theater. Let's say you come to see me about some carpet cleaning. My first question to you would be why the hell is the theater carpeted, but my second question would be when can I show up to clean the carpet.

In this scenario, you could decide to screw me over and not pay your bill. But given that we both operate businesses in the same town and we both may have to work together again, you don't have an overwhelming financial incentive to do that. Because if you skip out on the bill, you won't be able to get me to clean your carpet in the future. We're playing a repeated game - the get your adult theater's carpet cleaned regularly game.

The risk you face when you rip me off is actually a bit larger when you consider that I could go around telling everyone you ripped me off. If we're in a small town, they might listen and stop doing business with you on other things for fear you'll screw them. I could also sue you for the money you owe me (because I'm great at cleaning carpets)

But now let's think about Trump and all these vendors. The cases we're talking about, at least the anecdotes that have been reported on, describe lots of various small businesses. A kid's dance crew, an architect, small contractors. In all of these cases, the vendors got the opportunity to work with Trump, but Trump wouldn't pay the bills.

Well, why would he?

If he's hiring small businesses and works in discrete one-off projects (build a building here, build a golf course here, create an grotesque presidential campaign here), then Trump isn't playing a repeated game. Trump is playing a single-period game. The mistake vendors make is when they assume Trump will play like it's repeated. It's an easy mistake to make, because that's how just about every business in the world operates.

But for Trump, there are a number of conditions that would make him more likely to view each project as a single period game:

- His projects are discrete (e.g., a building, a golf course)
- His projects are geographically diverse (outside NYC) - making it hard to really create a risk to his long-term reputation
- Partners are disproportionately local/smaller - creates a dynamic where threats of lawsuits are less of a risk
- Partners are service providers, not manufacturers of goods - No mechanism for slighted partners to recoup their investment by repossessing work product (what's an architect going to do once you've built the building?)

If he picks a small business to do some work for him -- he can save money by not paying his bills and assume he'll find a new small business partner a few years down the road if he happens to be in the same place again. He gets to save money, and all the small business can do in response is try to ruin his reputation and/or sue him. Neither of which is easy for a small company against a large one.

So Trump can get the vendor's work, pocket the money, and look for his next mark when the time comes. If you're someone focused on money (and he's running a business after all), it's pretty hard to argue with the logic. The only concern would be that if enough of these instances occur, eventually your reputation should suffer (I mean, it would have to, right?).

But by that point, maybe you've moved on to a new career...maybe something in politics...

Friday, July 22, 2016

What worries me about Trump...

Fresh off a Republican convention managed by a team bent on persuading us that our country has never been weaker -- I've been thinking a bit about political rhetoric in general and what truly terrifies me about a Trump election scenario.

It's no secret that I'm absolutely not going to vote for Donald Trump this Fall -- even though I'm not a straight democratic ticket voter -- I just can't consider voting for him.

There have been no shortage of pieces on why Trump is a danger -- hell there have been no shortage of pieces that used the phrase 'no shortage of pieces.' So offering up my reasoning is absolutely not breaking any new ground here.

But as I've been thinking about Trump's candidacy - there are a number of elements that I don't like. I don't like his 'policies' such as they are, and I use that term loosely. I don't like that he doesn't really have policies. I don't think his business record is compelling. I don't think the fact that his major leadership team is comprised of his kids is indicative that he can find the right talent and match them to the right jobs. I don't really love his hair.

All of that ground is well-trod territory, and so is the case that Trump doesn't have the right temperament to be President. I think that's what bothers me most, but it's a specific aspect of the temperament that has me most concerned.

Trump seems to relish being a bully, from all the behavior we've seen. That would be bad enough -- but my biggest concern is that I've never, ever, seen him de-escalate a situation.

Trump, to me, is someone who has to constantly project the image that he's winning. I don't think he knows how to lose (despite having lost all the time in his business career), and I don't think he knows how to take a tense situation and settle it down. Witness his recent spat with Ted Cruz, who went out on the convention stage and did not endorse Trump as a candidate. Did Trump let it go? No, he came right back at Cruz again in a press conference this morning -- when he should be focusing attention on why people should vote for him.

Trump's record is full of instances like this. He's got a tremendous track record of never forgetting to pay back a slight or an offense.

If you asked Trump what the term de-escalation even meant, he'd probably say it's when you convert your casino tower over to stairs.

In the business world, that means you end up in court a lot (story checks out)

In geopolitics, that means you can get a lot of other people hurt.

I can't picture Trump ever taking a measured approach to anything -- anything that would happen under his administration would engender a disproportionate response -- because Trump cannot allow himself to be seen as anything but a clear winner.

And a mental framework like that would create ratchet-like effects for fighting complicated issues, most notably global extremism/terrorism.

Imagine if there's a terror attack on American soil under a Trump administration -- well, clearly Trump would do something extreme in response. Maybe bomb somebody, maybe halt all immigration, who knows...but the response would be disproportionate -- he's said as much when he declares all immigration from terror-impacted countries should be halted.

Fine, pretend whatever he'd do would be acceptable (even though it clearly wouldn't fit with American principles). What happens when there's another one?

For someone who can't de-escalate a conflict and can't bear to be seen as a 'loser,' that means you have to go even further with your next response.

And so on...

I can most easily imagine these scenarios in terrorism-related situations, but it could just as easily be applied in any engagement foreign or domestic.

What about China's land reclamation in the South China Sea? Trump's already blasted the Chinese as thieves and currency manipulators -- so we're off to a great start -- but he's not someone who would let an international court rule against China and act as though that settles things. So maybe it's trade tariffs if we're lucky, or maybe it's military intimidation if we're not. But he can't allow himself to look weak - so those actions are a one-way street. Every step is a new point of no return.

Now what makes me feel a bit better about this is that I honestly don't see Trump winning the election. Everyone is taking the primary as proof that the impossible is possible, but I maintain that these are fundamentally different situations. A 1-1 race is very different than a 15+ candidate field (was it 16? 18? Is that Gilmore guy still running?) and while the GOP primary insulated Trump because his opponents couldn't criticize his truly disgusting statements (hard to criticize banning Muslims when your base is super excited by the idea), that protection is gone in a general election.

But what does concern me in the long-run is how it might impact future candidates. If they see this type of character as something to emulate, something that they can leverage, we might see more macho posturing and more refusal to approach situations with willingness to tamp down escalation. That doesn't seem like character that's made for a successful peaceful leader anywhere in history.

Wednesday, June 22, 2016

NBA Lottery Fixes

There was an interesting article/proposal from Bill James today on how to fix the NBA's draft system. I had been doing some thinking about the NFL draft earlier, related to my previous suggestion that the NFL should move to a full auction format from it's current standard draft format.

It was great to see James suggest something very similar to help the NBA with tanking, although he added a couple wrinkles that change it up quite a bit.

Here’s my solution. Create a system in which:

1. Each NBA team has an agreed-upon amount of money that it can use to sign players coming into the league, and
2. Each player may be drafted not by one team, but by three teams.

In other words, permit a bidding war—thus permitting competition—but a limited bidding war. The bidding war is limited because:

1. Only three teams can participate for one player, and
2. Those teams have a limited amount of money that they can spend.

How would this work in practice? Let’s say that each team has a “rookie fund,” and there are limits as to how much each team can put into that fund ($7 million in one year, $25 million over four years) and limits as to how rapidly they can spend out of that fund ($20 million in one year, $45 million over four years). Don’t focus on the precise dollar amounts; that would require negotiations among the teams. The key is each player can be drafted by three different teams. If there are five “special” players in the draft, there aren’t five teams that have a shot at them; there are 15—and really, it is more than 15, if we assume that draft rights can be traded or sold. Let’s say you have a franchise that is determined to acquire, let’s say, Brandon Ingram. In the current system the only way you can take a shot at him is to acquire one of two draft picks—the first, or the second. What if there were six shots instead of just two?

James gets to the heart of the issue with all current pro sports draft formats. They currently are fixed within a format of locked individual choices, and inherent in that system is the fact that an earlier pick is more valuable than a later pick. Earlier is always better in terms of the player you can get, and there will always be a tension in the way you allocate those choices and set the order.

The only way to avoid that is to change the format and remove ordinal choice. An auction accomplishes this.

I think the next step is to actually demonstrate it conceptually. If I were the NBA, and I really wanted to fix this...there's a very easy way to test it out.

You get former/retired personnel guys, and you have each of them assigned to a team. You set the constraints/rules of the new auction format, and you have them mock it up. You see how it would work -- hell, I'd even watch this on television.

Saturday, May 21, 2016

Please - don't draft a kicker early

My brother (@EaglesRewind) commented on the other day about this tweet, referring to the Tampa Bay Buccaneers drafting strategy:

The Bucs reportedly had a first-round draft grade on kicker Roberto Aguayo, who they actually drafted in the second round of this year's draft.

So under their logic, the Bucs got a steal by snagging a kicker in the second round!

This almost made my head explode - and then I read this article which evaluates whether the Raiders 2000 drafting of Sebastian Janikowski in the first round was a good idea or not.

The article doesn't come down one way or the other, the writer sees both sides of the 'debate.'

That did actually make my head explode.

I wanted to dig into it - and I did - and the answer is Janikowski pick was NOT a good one.

Now, I don't have to waste time talking about the case against drafting a kicker (even one as successful as Janikowski) in the first round. Anyone who's reading this blog is likely already familiar with all those thoughts (e.g., massive opportunity cost to pick at a low-value position). So we'll focus instead on the arguments 'for' drafting a kicker high.

The primary argument I've seen, is that Janikowski has been a good kicker for so long, that he was worth the investment. He played from 2000 to 2015 -- which is admittedly an absurdly long career for the NFL.

And when someone wants to make that argument, they'll point to something like PFR's Approximate Value metric. And it's true, Janikowski generated an career approximate value of 53 in aggregate across his career. The average of all other first round picks output from 2000 through 2015 is only 50 in career approximate value (this includes seasons when these players didn't play).

OK, by only that one measure, you could argue Janikowski was worth it -- but it's tremendously flawed logic, because it ignores one simple idea.

The time value of 'approximate value'

There's never any talk about a discount rate for this value, and that ignores the reality that performance generated for the team today is much more valuable than performance generated 15 years from now.

Talking about discount rate is usually reserved for financial discussions - but it's pretty straightforward. What's worth more to you, a dollar today or a dollar given to you in fifteen years?

It's also the reason why a general NFL draft rule of thumb is trading for a draft pick this year will cost you a pick in a higher round next year.

So if anyone claims that Janikowski was a good pick -- it's because they effectively have a discount rate of practically zero.

I'll show you.

I took data from the first round of the 2000 NFL draft - including approximate value generated by year by player. First, let's look at cumulative AV generated by Janikowski over his career vs. every other player in the first round.

You'll notice that Janikowski starts off behind and the gap grows very quickly - until it's highest point in 2008. Keep in mind the average of all first round picks includes both those who played well (Brian Urlacher, Career AV of 118) and those who, well, didn't (R. Jay Soward, Career AV of 2). For the first nine years in the league, that non-Janikowski average pulled away from the Raiders kicker.

That's because, as you'd expect, Kickers don't generate a ton of value by themselves. But in the world where you're trying to rationalize taking a kicker first, you'll point out that because kickers can play forever (and the Raiders happened to find a good one), that eventually Janikowski matches and passes his first round peers by 2015.

That's great, but we're evaluating a decision made in 2000. So if you were back at the draft in 2000, fresh off a sigh of relief that Y2K computer malfunctions didn't make all our planes drop out of the sky, and if you had perfect information on how Janikowski and his peer group would perform, would you still make the pick?

That's where the discount rate comes in.

Now the typical NFL discount rate seems like it would be pretty high. The NFL is a win-now league and most QBs/Coaches/GMs don't keep their jobs past a few years. That means you'd willing to give up a lot of future value for production today. No one (at least that I've seen) has put a good handle on it, but it's a relatively high number.

In the corporate world, you typically have a longer time horizon and things are a bit less focused on immediate return. Often you'll see discount rates between 10-20% for the valuation of internal projects (though of course, this can vary)

So, what I thought would be helpful is to run scenarios and see what discount rate you'd need to have in order to make Janikowski's long term AV return 'better' than his peers. If that was your personal discount rate as an NFL GM, you'd be thrilled to take Janikowski. If your personal discount rate is higher, you'd want to take the peer group, who will generate more value sooner, which is what you want.

Below is an illustration of the valuation curves for Janikowski and all the other first round picks averaged together.

Just to clarify, these 'valuations' are basically how much AV it's worth on draft day in 2000, given a varying discount rate.

If you squint, you'll barely be able to see the point at which the Janikowski curve crosses the peer group curve. Because once your discount rate exceeds 1.6%, the peer group average is worth more to you.

The only situation where you'd ever value Janikowski more than the rest of his draft group is if you have a discount rate extremely close to zero.

The implication here, to me, is that if you took a time machine and with all of today's data went back to the Raiders draft room in 2000, you would never make this pick again (you'd probably take Tom Brady instead).

And so when I see the Bucs take a kicker in the second round, and I try to think through their case that it's not an idiotic decision, I just can't do it. You basically have to assume that Aguayo will play as long as Janikowski, be significantly better than Janikowski, or you have to have a discount rate so small you must be planning to hold your GM job for the next 15 years.

Call me skeptical.

Friday, May 6, 2016

Do Small School QBs Underperform?

Welcome to the Carson Wentz era!

Now that the Eagles draft is behind us, we can start thinking about what's in store for us in the future.

The Eagles have a shiny new QB in North Dakota's Carson Wentz -- and while they still haven't figured a way out of the messy situation San Bradford has created (yes, I'm putting the blame on him), that shouldn't stop us from wondering what a Wentz' led Eagles team could look like.

I have to admit, I wasn't following all the pre-draft hype that closely, but once the Eagles moved up and were in a position to draft Wentz, I started wondering about one specific narrative that would obviously become attached to him.

Wentz played at North Dakota State, which is about as far away from a college football powerhouse as you can get unless your college has the word 'barber' or 'clown' in front of it.

I'll be honest, that concerned me. Would Wentz be at a significant disadvantage because he played in college football's lower level?

My first thought was that this will be easy - let's just look and see all the other lower division quarterbacks that have been drafted and see how they've done.

Only problem...look at this list

That's a link to all non D-1 quarterbacks drafted over the last twenty years.

You'll notice that only one lower level QB in 20 years has been drafted in the first round. Joe Flacco.

Not exactly a robust set of comps. It felt very unsatisfying.

But then I had a thought, that just looking at D-1 vs. non-D-1 QBs might be to strong of a distinction.

What I'm trying to see is whether quarterbacks at lower level football programs perform disproportionately better or worse than those who play at higher level programs. It's easy to see why the narrative might logically apply -- a higher level program is one with more pressure, more fans, more talented athletes -- so it seems plausible that QBs exposed to that crucible and perform well are more likely to succeed in the NFL than those who don't (and ostensibly, might not have their weaknesses exposed).

Yet, D-1 vs. Non-D-1 QBs is only one way to get at that distinction - it's a binary one and as we can see, there are near zero observations.

So we need another basis for comparison to measure how 'big-time' a college football program is.

What I thought would be just as good of an indicator of how 'big-time' a college football program is, is the capacity of its football stadium.

A college with 100,000 fans in the bleachers every Saturday is going to be one with a lot of exposure, pressure, and talent.

A college with 20,000 fans in the bleachers, is going to have less of all of those things.

If we use that capacity as our metric, all of a sudden we have a much broader set of observations -- you can play at a small school in the highest level of college football (e.g., Tulane, which has a capacity of only 30,000). Now those small stadium teams may still play against better competition -- but we have to use what we can.

I'd argue that going a QB from Tulane might be better compared to other small school QBs than a QB who played at Notre Dame or USC.

So I took every quarterback, from all schools, drafted in the first round since 2000, and charted them on two dimensions:

1 - The capacity of their college football stadium (thanks Wikipedia)
2 - Their career Approximate Value (Pro-Football-Reference's stat) per Game

If highly drafted quarterbacks from small schools (e.g., Carson Wentz) are more likely to underperform, we'd expect to see QBs from smaller schools have a lower approximate value, while the QBs from football factories will outpace them once they get to the NFL.

That red line is the trendline, which shows a slight negative correlation. Across our 41 quarterbacks, the data does not suggest that those from smaller schools are any worse than those from big schools. If anything, it suggests the opposite might be true.

Now this isn't a perfect methodology, but it's enough for me to feel comfortable that smaller school QBs don't clearly have a handicap relative to guys from bigger schools. But you'll also notice that the sample size of small school QBs is small -- like REALLY small.

Carson Wentz's stadium at North Dakota St. has a capacity of only 18,700, smaller than any QB drafted that high since 2000. The only guys even really close are the aforementioned Flacco and Big Ben (Miami of Ohio had a capacity of under 25k).

Even if you go back 40 years - you only have a few more first rounders from small schools.

Steve McNair - 1995 (Alcorn State)
Ken O'Brien - 1983 (Cal-Davis)
Phil Simms - 1979 (Morehead State)

So while the data suggests there's not an inherent issue with small school QBs taken in the first round, these cases just don't come along very frequently. There have been six (including Wentz) in the last 40 years.

Of course, looking across that list, all but O'Brien led their teams to at least one Super Bowl appearance.

So we got that going for us, which is nice.

Sunday, April 24, 2016

Should Rookie QBs Start Right Away?

Anyone remember an Eagles off-season where they didn't make headlines?

Howie Roseman and company just set off a massive trade bomb, exchanging a bounty of current and future draft picks with the Cleveland Browns in exchange for the second overall pick in the draft -- which the team will use on a quarterback.

Now let's ignore which of the top quarterback prospects the Eagles are going to take -- and let's focus on the choice the Eagles will have to make after they draft in the highest slot since they took that guy from Syracuse.

Should they start the rookie?

Now we know what Roseman has indicated they'll do. It appears the Eagles will keep Sam Bradford and Chase Daniel and let them be the primary quarterbacks this year (Sam Bradford's rumored trade demand notwithstanding).

But that's not our question -- our question is what SHOULD the Eagles do with their newly drafted first round QB?

I was having this debate over email with friends -- is it better to start a rookie QB right away or to sit him for a year. We were talking pros and cons of the two approaches, but kept reaching for standard QB narrative tropes -- that sitting would let him learn, avoid bad habits, etc.

We've heard all these things before. There are people who would say that rookies really benefit from time to 'learn the speed of the NFL game.' There are others who would argue the best way to learn the game is to actually play it. Both the sit and wait camp (look what happened to David Carr) and the start them right away (Andrew Luck is good!) have tons on anecdotes to throw around.

But no one really looked at the data -- and some brief google searches didn't scratch my itch -- so I thought we should fix that.

I pulled together data from all first round quarterbacks drafted since 2000, and looked across each of them to identify the first year they truly became 'starting quarterback.' That distinction is based on playing time (if you started most of your team's games) and media reports on when quarterbacks were named starter going into the season.

We have have two groups -- guys who started immediately and guys who had to wait. With that distinction, we can compare how they performed and see if either group is distinctly outperforming the other. The implications could suggest how the Eagles SHOULD handle their new QB of the future.


We have 42 quarterbacks in our sample -- and the split is roughly 60/40 -- 24 of those quarterbacks started immediately and the remaining 18 took over the job some year(s) after their rookie season. Below is a table of our QBs and how they were defined:

I pulled in a whole slew of performance metrics compared the two groups. And what's key in comparing the two groups of QBs to each other is lining up their first starting years with each other. It makes no sense to compare the rookie years of both groups when one didn't play. So in our analysis, you'll see I aligned all the quarterbacks around their respective First Starting Year - the first season where they were their team's starting QB.

If you'd argue that sitting a rookie quarterback for a year or more to acclimate to the NFL would be beneficial, then we should see some outperformance either in that First Starting Year or in their career performance trajectory.

Below are illustrations of average performance of those QBs who started immediately after being drafted (orange) and those who had to wait (blue). There are three charts, the first is using QB rating, the second is using Passing Yards per Attempt, and the third is using Pro-Football-Reference's Approximate Value metric. See if you notice a pattern.

In looking across all these metrics -- I wasn't able to identify any clear outperformance by quarterbacks who waited to get their job. Across all the variables, the guys who wait extra year(s) perform pretty much just as well as the guys who start right away.

Also - you don't see any significant trajectory changes over time - by that I mean the guys who wait don't get any kind of long-term performance advantage in doing so.

The only difference I could really see was in their ages (obviously). QBs starting immediately are on average, 22.8 years old. QBs who wait, they're 24.1 when they get the job. It just doesn't appear as though there's any difference beyond a slight age gap.


This data would suggest that all that time riding the pine isn't really worth it for the QB's ultimate performance. They sit, they go to meetings and practices, but once they actually start they do just about as well as the guys who are thrown right into the fire.

Now, if we were in college and debating the merit of red-shirting freshmen quarterbacks, there's really not much downside to having the prospect wait. College players have a defined window of eligibility and cannot play beyond it. But NFL rookie QBs have much longer potential tenures, and they start their careers on fixed contract terms with clocks that tick even when they don't play.

If you're a college coach, redshirting a quarterback means you'll still get four years of performance, you just need to wait one year.

If you're an NFL GM/coach and you have a first round rookie quarterback, that quarterback is on a fixed four-year contract (five with a team option). If you bench that quarterback for a year, that contact becomes a three-year deal with an option. Benching him does come at a cost - because that's one less year on his rookie deal.

If you keep a quarterback on the bench for a year and he turns out to be a superstar, well then you've wasted a year of his term. If he's a bust, then it's kind of a moot point because you're probably going to lose your job regardless.

What's particularly interesting is that the NFL may have figured this out.

Below is an illustration of all the QBs in our sample by draft year. They're split across our two buckets, those who waited to start and those who started immediately. See if anything jumps out at you.

The practice of benching a rookie first round quarterback for a year or more to learn the ropes has declined noticeably since 2000. Before 2008, only one-third of first round QBs started right away. Since 2008? About 80% of them have started immediately.

It's now much more rare to see a QB drafted in the first round and benched for a year. The only one drafted in the last few years who wasn't made starter on Day 1?

Johnny Manziel.

While it's hard to identify a specific driver for the shift in team behavior -- it may be that teams have looked at the data and come to the same conclusion -- that you don't gain very much by waiting.

So what does that mean for the Eagles?

Well, data suggests there's likely no performance benefit to sitting the new quarterback on the bench a year. We could debate that point if that quarterback is Carson Wentz, who lacks playing experience -- but I doubt he's a special exception to the overall trend.

If there's no real benefit to benching him, then what you SHOULD do is look to move Sam Bradford. While there are some sunk financial costs from the new deal you just signed him to -- moving him might be a way to recoup some of the draft capital you burnt to move up in the draft. That's probably what I'd do.

Some might argue that Bradford gives you the best chance to win now and that in a weakened NFC East you should definitely take that chance. My counter to that would be as follows:

- You've just spent a ton of capital to acquire a QB, and the data suggests keeping him on the bench won't make him that much better
- If the new quarterback can't be ready to play right away -- why is he worth giving up so much in draft assets
- Sam Bradford is not a Super Bowl caliber quarterback - demonstrated by his entire career to date - so what's the point in continuing to run him out there if the ceiling is limited?

It doesn't appear that the Eagles are going to go this route -- all indications are Bradford will be the starter and the Eagles new quarterback will sit and wait. Just know that the evidence suggests an extra year of waiting won't make much of a difference.

Wednesday, April 20, 2016

Quick Takes on a Massive Eagles Trade

Last night all of Eagles Twitter was, well, atwitter, with rumors of the team trading up for the Browns pick in the NFL draft. The Eagles would move up from #8 overall, which they acquired from Miami for Kiko Alonso and Byron Maxwell, for #2 overall. Such a move would put them in a spot to guarantee the ability to draft one of the two top quarterback prospects -- Jared Goff or Carson Wentz.

I was really hoping the rumors were false, and then, sure enough, news broke just a few hours ago that the Eagles and Browns made the trade.

The Eagles acquire the 2nd overall pick and an additional conditional fourth round pick next year in exchange for pick #8, 3rd and 4th round picks this year, next year's first round pick, 2018's second round pick.

That's a mouthful. But basically, the Eagles gave up a ton of picks to move to #2. So, here are a few quick thoughts:

- I hate this trade: I don't believe trading up is a successful strategy in NFL drafting, and the evidence seems to back me up. There's just too much uncertainty around the success of any individual football player to put all your eggs in one basket. Just go back and look at the data, rare is the example that works out for the team moving up. I'm not going to re-litigate the issue, but Bill Barnwell recently posted an article on ESPN making exactly the same point analysts have made for years. Draft picks are lottery tickets, you should always want more.

- Just because I hate it, doesn't mean it will work out: Look, given all that, I'm still an Eagles fan, and I'd much rather this trade become the exception that teams will cite for years and years as the time moving up for a QB worked out. The one counterargument I can think of to my 'never trade up' philosophy is when it comes to the game's most valuable position.

My last analysis looked at where QB value is generated, and a majority comes from first round draft picks (one of my recent posts, link on the right). Also, that share of value has been progressively shifting towards first round draft picks over time.

Basically, the place you really need to look for a stud quarterback is early in the draft. And if you believe that, then moving up to take the best prospect seems a little less insane

- The odds say this won't work: I don't want to be a Debbie Downer...but drafting QBs is a low-odds game even when it's at the high end of the first round. Here's a list of QBs drafted in the top 10 since 2000:

Jameis Winston
Marcus Mariota
Blake Bortles
Andrew Luck
Robert Griffin
Ryan Tannehill
Cam Newton
Jake Locker
Blaine Gabbert
Sam Bradford
Matthew Stafford
Mark Sanchez
Matt Ryan
JaMarcus Russell
Vince Young
Matt Leinart
Alex Smith
Eli Manning
Philip Rivers
Carson Palmer
Byron Leftwich
David Carr
Joey Harrington
Michael Vick

Not exactly a murderer's row. Go through that list and count the number of teams that would do the same thing all over again if they had the choice. If you hold out the newest guys (Winston, Mariota, Bortles) I think you come up with 7 of 21. I'd guess that Luck, Newton, Stafford, Ryan, Manning, Rivers, and Palmer would all be repeated. And if Wentz/Goff turns out to be in that category then great for the Eagles...but the data would suggest there's a 66% chance at being wrong. Now, you could certainly argue that Bradford hasn't worked out and there was no other way to get a QB - but let's not pretend like this is a lock to succeed

- I worry that recency bias played a huge role in this: My concern as the Eagles approached this draft was that Roseman has been overly concerned with getting his targets sniped by another team. My take is that he saw what happened in 2014, where he had several targets and all of them went just before he was forced to take Marcus Smith, and he's vowed never to let that happen again. That means fewer trade downs and way more aggressive trade ups to get 'his guy' because it's so fresh in his mind. I worried that it could lead Roseman to overpay to move up, and we may be in exactly that scenario.

- This determines Howie and Doug's future in Philadelphia: Some of my other research into coaching tenure made one thing abundantly clear. Coaches get one shot at investing draft resources in a QB, they almost never get more than one. So Pederson's job security is now entirely dependent on whether the new Eagles QB can play or not. Roseman, even more so than Pederson, is now in the same boat. No one is going to remember he traded Kiko Alonso or DeMarco Murray, or even that he drafted Marcus Smith (w/ Chip). The singular defining event of Roseman's entire tenure is this draft pick -- he'll either have a long career here or be gone in three years, but there's really no in between.

- Howie thinks this team doesn't have lots of holes: Make no mistake, the Eagles gave up a boatload of draft assets to move up and get this quarterback. Not as much as the Redskins in going after RGIII, but a LOT of draft assets. To me, that signals both a clear need for a quarterback and that Roseman is fairly confident the rest of the team is pretty solid. If the team had a TON of holes, giving up so much draft capital would be hard to reconcile, but I think Roseman thinks the Eagles aren't that bad. On this point I think he could very well be right.

The Eagles have a bunch of good defensive assets -- and now Jim Schwartz to run them. They also have offensive assets that I don't think are as bad as people believe. I think Kelce and Johnson are good, and supplemented with new FA additions. I think Ertz and Matthews are good. I think Ryan Mathews is good. Do they need more talent at receiver? Probably. Do they need another lineman and a starting cornerback? Probably. But I don't think this team is in bad shape - maybe that's just wishful thinking.

But the trade up for the #2 pick is a massive decision that will define the Eagles success/failure for the next five years. While I still think the odds are against us, I must remind everyone of one simple question:

When's the last time the Cleveland Browns came out ahead in any trade???

Wednesday, April 6, 2016

Should NFL teams draft developmental QBs?

Matt Barkley

Mike Kafka

Andy Hall

All of these guys were at one time the Eagles 'developmental QB of the future.' It's a standard NFL draft narrative for teams to use a mid/late round draft pick on a quarterback when they already have confirmed starters on the roster.

When that happens, pundits love to talk about how the pick is a plan for the future, how the young quarterback will come in and learn at the foot of the experienced starter and be groomed to eventually take over.

The problem I've always had with this narrative is that I don't think it really ever plays out, and that those picks are generally a poor use of draft capital.

But I've never seen the data - does it make sense to use late round draft picks on quarterbacks? Do they succeed more often than I think they do?

So in the interest in destroying cliched narratives - I decided to take a look.


I started by pulling data on all quarterback seasons since 2000 (because Y2K is a nice round time bound). For each quarterback-season, I included the way in which that quarterback was acquired, and broke it down across the following buckets:

- First round pick
- 2nd/3rd round pick (Now Day 2 draft picks)
- 4th/5th/6th/7th round picks/Undrafted FA (Now Day 3 picks)
- Free Agency (excluding undrafted guys)
- Trade (yes, there are a few of these guys too...)

A quarterback's acquisition definition held as long as they didn't change teams, but once they move teams, their next season starts a reclassification. For example, Peyton Manning is defined as a First Rounder for his tenure with the Colts, but defined as a Free Agent for his tenure with the Broncos.

We also needed some measures of performance - so I'm leveraging Pro-Football-Reference's 'Approximate Value' metric. That's a metric created by the PFR guys to try and generalize performance over the course of a season - and I think it's better to use this type of measure rather than something like passing yards, QB wins, or something else that has some very tricky flaws.


The first look I put together was a view of Approximate Value distribution across our acquisition methods for each season. This was to see how much 'value' was generated by each group of quarterbacks, and see how that shifts over time. The year over year mix is illustrated below:

The first thing that you'll notice is that first round quarterbacks have typically generated 40%+ of all quarterback value over the last decade. If you include Free Agents, that jumps to about 60% of all value.

Late Round picks? Less than 20%.

A final observation from this data is that the mix has definitely shifted over time. The share of value created by first round picks has increased, while the share of value from picks made in the second round or after has declined from well over 40% in 2000-2001 to 25% in 2016.

Interesting, and we'll come back to that.

But you could look at these distributions and raise the question of playing time as a driver of that mix. First round quarterbacks are likely to get more starts than quarterbacks acquired in later rounds, so what happens when we adjust for that?

Great question.

I went back to the data on each quarterback season and adjusted the Approximate Value to a per game basis. This way, we can control a bit for playing time and the natural tendency to start first rounders won't skew our data.

Once we created our per game approximate values, I graphed the distribution of results by acquisition method.

We can see that, on a per game basis, the middle 50% of first round quarterbacks is significantly higher than all other acquisition methods. The remaining methods are relatively close to each other, but the group with the lowest middle 50% is our set of late round/undrafted quarterbacks. When you adjust for playing time, late round guys do significantly worse (except for the maximum value which is quite high -- we can call that the Tom Brady factor).

One last quick measure I looked at, almost as a check, was Pro Bowls. I know Pro Bowls aren't the best metric to judge true performance, but it's correlated with performance and I wanted to check what we've already seen here. So, below, is a quick list of the number of quarterbacks in each acquisition method bucket, the number of Pro Bowlers, and the share of quarterbacks in that bucket who have been to at least one Pro Bowl. (Note: players are unique by acquisition method, so Peyton Manning is in here once for the Colts as a First rounder and once in here for the Broncos as a FA)

- First Round: 58 quarterbacks, 19 pro bowlers, 33%
- 2nd/3rd Round: 55 quarterbacks, 8 pro bowlers, 15%
- Late Round/Undrafted: 168 quarterbacks, 8 pro bowlers, 5%
- Trade: 47 quarterbacks, 8 pro bowlers, 17%
- Free Agent: 125 quarterbacks, 12 pro bowlers, 10%

Again, this shouldn't come as a surprise. Late round picks at quarterback rarely do much of anything. They're extremely unlikely to make the pro bowl -- whereas a third of first round quarterbacks since 2000 have made it.

But let's bring back a point our earlier analysis showed -- that the value created by late round quarterbacks has declined dramatically over the last 16 years. I think that's extremely interesting, particularly given the fact that NFL offenses have shifted more towards passing and placed more of a premium on quarterback play. Few would argue that quarterbacks are more valuable than ever.

But quarterback value is being created more and more by those taken at the top of the draft. The Pro Bowl data confirms this a bit -- the most recent late round quarterback draft pick to make at least one Pro Bowl was in 2006, ten years ago (and it was Derek Anderson!). Maybe Kirk Cousins changes that someday, but less and less value is being generated by quarterbacks taken in the later rounds.

I thought part of it might be, that with increased emphasis on quarterback play, teams are reaching for QBs earlier and earlier in the draft and that's had a natural inflation effect on where they're drafted.

But I checked the data and it's just not true.

Are these newer first round quarterbacks just better than they used to be?

I don't think that's the case either.

At this point, my theory as to what's driving the shift is QB longevity. Quarterbacks drafted in the first round are more likely to be good, but with both improved medical technology and tweaked rules to keep them safe, quarterback tenure should be increasing. So I'd hypothesize that good quarterbacks are keeping their jobs longer because they aren't getting hurt, and the longer they play the more the mix shifts to more first rounders as teams without them bring them in.

We've seen the data that shows just how much more value first rounders create than other acquisition methods -- the implication there is clear -- the best way to get a good quarterback is to take one in the first round. And as those teams find good quarterbacks in the first round (unless you're in Cleveland), they hang on to them.

But the other implication is that taking 'developmental quarterbacks' in the later rounds is generally a waste of time. I'd have to check with other analysis on other positions' success in the later rounds, but I'm fairly confident the opportunity cost of taking a quarterback vs. another position is non-trivial. I'd suggest that teams looking for a developmental QB are better served signing a free agent that's been in the league, and use their picks on other positions with a higher likelihood of success.

And if you find yourself in need of a quarterback -- remember the best place to find them is in the first round of the draft. The idea that you'll get a Super Bowl QB in the later rounds is pretty much a fantasy.

Friday, March 25, 2016

Finally, a thinkpiece on the election

I haven't actually written anything down about the Presidential election, outside of some stray tweets and private email discussions. I'm not sure if I've ever blogged about an election before (and I've blogged since the early 2000's), but I feel like maybe it's finally time I put something down on paper.

Part of that is just so I can go back and look at it later - but part of it is I'm getting more and more interested in politics. I was never really interested in Presidential elections until 2000, and I think I've been fairly passionate about them since, but it feels like I'm getting deeper and deeper as I get older.

I was trying to think through why I feel that happening, and I've got a couple theories:

1 - I'm becoming a more responsible adult/citizen as I get older: I find this theory deeply unsatisfying and disturbing. I'm still immature, I swear (at this point I took a break to watch a YouTube video of crotch shots.)

2 - Politics is my new favorite sport: One thing that's definitely true about getting older, is that I'm starting to acknowledge the decreasing likelihood that I'm going to become the starting Free Safety for the Philadelphia Eagles. I'm still a big sports fan, but there's something a bit weird about watching and cheering for people much younger than you. I mean most pro athletes are now younger than just about all the people I know on Earth. Politics has that same competitive intensity (some would say that's a bad thing), but politicians are old! There's still an escapism element of putting myself in their shoes, and that's part of the fun. Plus, the stakes are actually meaningful.

3 - Expanded supply is meeting my demand: Sure I'm hugely into this election, but what I perceive as being more deeply invested is also a result of the continual media content explosion. Back in 2000 I don't really remember where I was getting my political news. Probably CNN? Now there are dozens and dozens of lowly-paid content-monkeys punching computer keys and smartphones at all hours of the day. I've listened to three different political podcasts this week. I've got Tweets coming in every second. With no costs or constraints on distribution there's no end to my election news binges. Back on 2004's Election night I remember watching the Bush-Kerry results come in on TV, but not being satisfied, going to the internet and getting county-by-county vote tally updates. Now that live vote tallying is part of the regular primary night coverage and tons of correspondents are bringing in even MORE content.

I think it's mostly #3.

But regardless of why I feel I'm more interested in the election, how do I actually feel about the election???

Cautiously optimistic.

I'm supporting Clinton, for a whole bunch of reasons, even if I remain a little underwhelmed by her. She's just most aligned with my views on the largest number of issues I think are important. It would be interesting to contrast her against a Republican with some reasonable views on those issues -- but that's apparently asking too much.

And since I'm pulling for Clinton, and she seems to be the most likely outcome, I'm as I said, cautiously optimistic.

But I've been disappointed before.

On the Democrat side -- I'm eagerly awaiting a Bernie Sanders dropout, but am resigned to that campaign going on for months. I'd love it if the Democrats could start rallying around Clinton, but Sanders seems like the type to continue to run in the face of overwhelming evidence that he can't win. That's his call, and I get it, particularly as he's bringing up some extremely relevant issues focused on the working-class, but selfishly it'd be best if he just packed it in.

I don't have a big problem with Sanders sticking around, but what's gotten under my skin is the idea that the hardcore Sanders supporters say they won't ultimately support Clinton in a general election. Now for the record I don't know any individuals who have said this explicitly - but if they're out there, I'd love to smack some sense into them.

People who would argue that they see no difference between a vote for Clinton and a vote for a Republican remind me of the same type of doofus you heard from in 2000. The ones who said they'd vote for Ralph Nader instead of Al Gore because Gore and George W. Bush were basically the same. You know, the ones who damned us to easily the worst administration since I've been on this planet.

My guess is those Sanders' idealists don't really have an appreciation for the very real consequences of their choice. That's too bad, but something I think will soften once the general election match-up actually becomes clear.

Again, I'm cautiously optimistic.

On the Republican side though, wow, it's really amazing to watch.

What started as a field of seemingly infinite candidates has dwindled and dwindled to just Donald Trump, Ted Cruz, and John Kasich.

It's amazing that this is what it's come to, and even more amazing is that Kasich is the first candidate I can recall who's trying to succeed with the Steven Bradbury strategy. Who is Steven Bradbury? He's the guy that wins the race in the video below...

I would've guessed he had no shot, but hey, last man standing might just win this thing.

There has been no shortage of Donald Trump think-pieces since he first emerged in the race, and I'm not going to rehash them all here. Honestly, it's tough just to keep them all straight.

But there are a couple things about the Trump emergence that I do believe:

- Trump's succeeded because he's telling a good portion of voters he cares: A lot of my liberal friends have wondered this for years...why working class voters support a Republican party that pursues policies that hurt them economically. It's the whole 'What's the Matter with Kansas?' problem. I'd argue that Republican historical success with those voters could be linked to a whole bunch of things beyond economic policy (e.g., social values, national security, etc). But, for the first time, there's a candidate that's actually focusing a populist economic message to these folks who, at least in economic terms, haven't been helped by their party. It's a hell of a white space, it's just amazing Trump's the first one to hit it.

- It reflects a natural outcome of the conservative media industry: You can debate why they've become this way, but it's hard to deny that a big swath of conservative voters have gotten angrier and angrier over the last decade. These people want the system to change (can't say I blame them) and the longer they go without seeing change, the more extreme measures they'll be ready to take. Now, extreme conservatives would say this is a natural response to a President who doesn't respect the rule of law, works around the Constitution to pass big government disasters like Obamacare, and is actively working to destroy the country. Regardless of whether you believe that or not, there's a massive conservative media industry who has built their success on perpetuating that narrative while insisting that anyone else in power/media is in on the whole conspiracy. With this segment of the population, they've systematically dismantled any faith in institutions or idea that the 'other side' wants what's best for America.

I'm sure some people would dispute that line of thinking - but I've spent a lot of time listening to Patriot Radio on XM - and that is absolutely what I've heard. I don't know who actually listens to people like Mark Levin, but I have, and it's absolutely nuts.

But taking a step back, if you've built a business on getting people angry (and angry people will keep listening and calling), and you've told them that all the standard players in the world of politics are against them, and you convince them of that fact, what recourse do they have?

They can start small -- Tea Party wave in 2010 -- with elections where they can make a difference. But what if that doesn't work? Where do you turn to next?

Bigger change right? And so here we are.

My hope is that there are enough OTHER people who haven't been, is radicalized too strong a word?, that our country won't go completely off the deep end. Based on all the data and analysis (remember I'm a technocrat), I remain cautiously optimistic that it won't happen.

:::Knocks on wood:::