8 similarities between MBAs and the Premier League (2/2)

[continued from last week]

5. The importance of diversity could lead to artificial price disconnects: In the article mentioned in the first part of this post, Bhavik Trivedi, managing partner of Critical Square, an MBA admissions service, put it simply: “Gender diversity is important to schools and competition to attract top female talent is steep”. Practically speaking, one could expect that, all other things being equal, business schools will be more willing to stretch their offer to attract talented female students. In Premier League, the ‘Home-Grown Player Rule’ requires any squad to include at least 8 (out of a maximum of 25) players who have played at least for 3 entire seasons or 36 months in English or Welsh leagues before the age of 21. And yet the depth of the England-raised talent pool has varied over time and this has led to episodes of relative supply shortage, and therefore inflated prices for English players. One may remember the £30.75m Liverpool paid to lure Andy Carroll away from Newcastle in January 2011 to replace Fernando Torres. Experts judged at the time Liverpool overpaid Carroll, primarily for two reasons: (i) having lost Torres, Liverpool was short of a striker 24 hours before the end of the transfer window and (ii) the club was also close to breaching the ‘Home-Grown rule’. Ultimately, Carroll scored only 11 goals in 58 games under the Reds jersey before being sold to West Ham in 2013 for £13m – probably not the best return on investment.

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Andy Carroll celebrating one of his £2.9m goals for Liverpool

6. The price to pay will increase for the general public: Tuition fees for MBAs have increased over the last decade much faster than inflation or growth for MBA salaries. In a 2013 article, The Economist criticised the London Business School (LBS), UCLA Anderson and the Hong Kong University of Science Technology for having excessively raised their fees since the beginning of the decade – +250% between 2000 and 2013 for the latter. The trend has not slowed down since; for instance LBS raised its fees from £57,000 in 2012 to £70,800 in 2016 – a 5.6% CAGR, well greater than inflation. The Premier League has also become increasingly onerous for all stakeholders since its creation in 1992. On the media right side, BSkyB and the BBC managed to broadcast the 1992-1993 season paying less than £65m in rights. This era is over. In the most recent round of negotiations, Sky and BT together had to pay a total of £5.2bn to secure TV rights for 3 seasons, from 2016 to 2019, representing a 71% increase compared with the price for the period 2013-2016 and leading each game to cost on average £10.2m in rights only. Spectators and TV viewers were not left out of the spiralling inflation, with ticket prices and TV subscription prices sky-rocketing. Even the English people’s legendary composure proved not sufficient to digest the bitter medicine. In Liverpool, fans organised a ‘Walk out on 77’ a couple of weeks ago to protest against the price of tickets for the game against Sunderland – the cheapest were priced at £77.

7. Coaches/teachers are highly paid but their impact on performance remains to be proven: The salary comparison website Glassdoor states that an Associate Professor at the London Business School earns an average of £155k, although the quality of teaching has a limited impact on the MBA graduates’ future career prospects. In football, coaches are very often pointed out and they are usually the first – because least expensive – fuse to be replaced when their team performs below expectations. Conversely, coaches with outstanding track records have seen their quote soar over the last few years, and ‘stars of the bench’ have nothing to envy with the likes of Messi and Ronaldo when it comes to salaries – Guardiola and Mourinho make close to €20m a year. Academic studies have nonetheless demonstrated that a mid-season change in coach has ‘no statistically significant impact’ on a football team’s performance, i.e. the performance evolution post-change is not better than the usual ‘regression toward the mean’ the team would have witnessed anyway, irrespective of the coach.

Merit or statistical artefact?
Merit or statistical artefact?

8. Clubs/business schools entering a downward spiral will struggle to survive: All business schools cannot brag about an impressive alumni network, state-of-the-art buildings and glossy school magazines. ‘Top-tier’ business school are just the trees that conceal the forest. Indeed, behind this handful of stellar brands, a significant share of the post-graduate education market struggles to survive financially, despite the aforementioned increases in fees. As explained in a Financial Times article dating back from 2012, some of the key reasons are simple to understand: if not protected by the ‘power of their brand’, MBAs face increasing competition from alternate ways of learnings, primarily MOOCs (Massive Open Online Courses), which offer highly customisable, great quality programs at a fraction of the cost of an MBA. Furthermore, MOOC platforms have developed a system of official certificates to ensure that students can get recognised for completing these online trainings. In football, a series of disappointing performances or poor (not to say unlawful) club management practices can lead a formerly European title contender to the abyss of minor leagues. Numerous examples have emerged over the last few decades across Europe, including Parma in Italy (which went bankrupt twice in the space of 10 years), Leeds United in England and the Glasgow Rangers in Scotland. Despite their old glory and impressive number of fans, it will take years for those three clubs to get back on their feet and play the top roles again.

The Glasgow Rangers playing a league game in 2015 against Alloa, a town with a population of 19,000.
The Glasgow Rangers playing a league game in 2015 against Alloa, a town with a population of 19,000.

Any other idea? Feel free to share it as a comment below!

Updated: The Financial Times reported this morning that Liverpool was indeed offering the most expensive Premier League season tickets when adjusting prices for local income levels.

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