Olympic Games – Small is not beautiful

Olympic-logoThe Olympic Games came to an end a little bit more than a week ago. Beyond the last-minute logistic annoyances, the United States showed the rest of the world that one more time they were dominant in the Olympic arena. Good surprise came from team GB, which benefited from years of investment and the partial ban of the Russian delegation to clinch the runner-up spot. On the other end of the rankings, almost 100 countries will fly back with no medal.

The question is what is the best predictor of a nation’s performance at the Olympics? First, we need to be clear about what we mean by ‘performance’. Limiting myself to countries which have managed to take a medal home, I have used the official medal table and I have allocated 5 points for a gold medal, 3 points for a silver medal and 1 point for a bronze medal – I could have used the gold medals only but this would have created an ‘edge effect’ as many countries have won no or very few gold medals. The official ranking (taking only gold medals into account) is largely preserved: only exceptions in the top 10 are France (with its famous ‘fear of winning’) and the Republic of Korea.

Points ranking according to our methodology.
Top 10 countries according to our methodology.

We can use a few macroeconomic indicators to assess whether they are correlated to the success of a given country. It is important to note here that a regression only enables us to conclude about the presence or absence of correlation and not about the presence of a causality effect. For instance, if we plot population on the X axis, we see that the bigger a country is, the more medals it tends to gather – with the notable exception of India, circled in red, whose poor performance has been largely documented throughout the event. So what we can conclude is that there is a correlation, but we cannot state that ‘a higher population leads to a higher number of medals’ (which is nonetheless probably true) or that ‘a higher number of medals leads to a higher population’ (if so we would have baby booms in the US every 4 years).

Regression log(population) (X) - log(points) (Y).
Regression log(population) (X) – log(points) (Y).

The Economist argues that the most significant driver is actually GDP. The correlation effect is also significant.

Sans titre
Regression log(GDP) (X) – log(points) (Y).

What it means, interestingly, is that GDP per capita correlates poorly with the ultimate country performance – contrary to what the same Economist article may assert. The nominal sizes of the economy and of the population thus prevail. This is understandable: more money overall tends to mean more investment in infrastructures, training etc. However, we would need to dig further as wealth created is not evenly allocated to the development of sports in each country.

Log(GDP per capita) (X) - log(points) (Y)
Regression log(GDP per capita) (X) – log(points) (Y).

Goldman Sachs performed a forecasting exercise using its proprietary Growth Environment Score (GES), which captures “important features of the economic, political and institutional environment that affect productivity performance and growth across countries”. Simply said, Goldman Sachs uses a multi-variable correlation instead of relying on one macroeconomic driver as we have done so far. The algorithm grants extra points for the last two hosts (i.e. Brazil and the UK) to acknowledge the important investment and support of the crowd. The accuracy obtained is remarkable.

Sans titre
Number of gold medals for top 10 countries: Goldman Sachs forecast vs. actual.

In its paper, Goldman Sachs states that “a country is more likely to produce world class athletes in a world class environment”. I took the statement seriously and checked for a correlation between the number of medals and the Human Development Index, which accounts for human well-being beyond economic considerations by including data on life expectancy and education, among other factors. A high correlation would be fantastic news: sports excellence would be a ‘by-product’ of the improvement in life standards. The result can be found below.

Regression HDI (X) - log(points) (Y)
Regression HDI (X) – log(points) (Y)

Although we could advocate for a slight correlation, the effect of human development remains limited compared with the one of money. This conclusion highlights a fact that is widely shared throughout the sporting world (including football, which we will deal with in a later post): human effort alone only returns sweat, but only with a wallet will it be worth its weight in gold.

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.

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.

8 similarities between MBAs and the Premier League (1/2)

A cynical mind could defend that the ultimate goal of both education and sports is to rank people according to intellectual or physical ability, and this at all levels. At the top of the pyramid, MBAs tend to be regarded as the most prestigious diplomas, while high-flying professional leagues, such as the Barclays Premier League in football, dominate the world of sports. Interestingly, interesting parallels can be drawn between those two areas. I have listed 8 points, but I am sure there are many others. I have split this post in two parts to make it more digestible. The second half will follow early next week – in  the meantime please feel free to comment and add your own.


  1. The objective economic value of both MBAs and the Premier League is debatable: For MBAs the question has been around for years, and actually a straightforward Google UK search for the terms ‘Is it worth doing an MBA?’ will return an excess of 24 million results. The opportunity cost of taking one or two years off often outweighs the accelerated career progression an MBA promises – and even when it happens it is never possible to cleanly delineate the benefits directly attributable to MBAs. When it comes to the Premier League, one could adopt a relatively harsh viewpoint and declare that this competition does not manufacture any product or does not create any value-added service – although this statement obviously neglects the economic activity induced by the organisation of such events as well as the social and health benefits of physical exercise.

2. Competition between top schools/clubs is increasing and happens on a worldwide basis: MBAs have been fighting against each other for years, trying to make it to the top of world-famous rankings such as the Financial Times’ Global MBA ranking. Competition has undoubtedly reached a worldwide scale if we look at the origin of the business schools contained in the latest FT ranking: 19 countries are represented in the top 100, from the US (50 schools) to the UK (13), China (6) and more ‘exotic’ locations such as Portugal (1) or South Africa (1). In football, the 1995 Bosman ruling facilitated the transfer of players within the EU and the net has since then widened to allow clubs to recruit a limited number of non-European players.

3. The price for top talent will keep rising: In football, the globalisation of the market for top talents, coupled with the development of football as an economic powerhouse, has led to an explosion of the price paid for top players. A Wikipedia article has listed the highest player transfer fees over time. Even when adjusting for inflation, some of the best players of the past decades would be considered as bargains by today’s standards: Johan Cruyff’s 1973 move from Ajax to Barcelona cost the Spanish club the equivalent of a mere £922k and no transfer fee had ever exceeded the £15m mark before 1996 with Alan Shearer – the same mark would apply to an ‘average plus’ player today. Since then inflation has been more and more pronounced, culminating with Cristiano Ronaldo’s and Gareth Bale’s transfers to Real Madrid for £80m and £85m at the beginning of this decade. The rising role of Mid-Eastern and Asian clubs witnessed during the recent transfer windows – in particular China last month – will only accelerate this trend.

A £165m hug

Competition for MBA students has not reached this extreme – and will likely never do so -, although an interesting article from the Financial Times concludes that business schools are more and more using their scholarships as a way to attract the best students rather than broadening the pool of potential applicants. On top of fiduciary benefits some schools also offer ‘benefits’ such as “preferential access to certain faculty members or guest speakers” according to the same article.

4. Schools/clubs are building a strong intake/team not only to reign now, but also to facilitate recruitment in the future: The quality of the alumni network is a key component of the MBA offering and top business schools need to maintain their status as a regular supplier of blue-chip executives. The recruitment of high-quality students can therefore be considered more as a long-term investment aiming at improving the executive pipeline in the future – for an example see this page listing selected famous Harvard alumni. For football clubs, the recruitment of a star is a way for a club to signal a step change in standing and to lure other strong players as part of this ‘transformation project’. Putting aside Real Madrid, who has been spending huge amounts in top-class players for years, Fulham for instance (unsuccessfully) tried to do so in the early 2000s, then Manchester City, and more recently Paris Saint-Germain with the recruitment of Zlatan Ibrahimovic, without whom PSG would certainly not have signed the likes of Di Maria, Cavani and Thiago Silva.

Zlatan and his gang of lads
Zlatan and his gang of lads

[To be continued…]