Value and market inefficiency of non-playing staff
Any team which is smart can exploit the sports transfer market immediately!
First of all, it seems that I have picked up a lot of new subscribers to my Substack today - welcome to all! To any new or regular reader, I would appreciate it so much if you could share my content to whatever social media and networks you associate with - stuff like Twitter, Reddit etc would be amazing.
There’s an old proverb which goes along the lines of ‘If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.’ The essential meaning of this is obviously that giving that person a fish fulfils a short-term need (they have food for that day) but if they are taught to fish, they then learn the ability to be self-sustainable and can have guaranteed food for the rest of their lives.
The transfer market in sport can also be considered along similar lines. A football team purchasing a player in the last hours of the transfer window is being fed for a day. On the flip side, a football team purchasing the recruitment team of a proven to be successful smaller team gives them the opportunity to be fed for much longer. The irony is, the latter, long-term solution, is often cheaper than the first, short-term solution, as well as being likely far more effective!
Interestingly, there have been studies which illustrate in football that the points per game benefit per million pounds spent on additional players is far lower than many people would anticipate, with some interesting articles being here and here. Quoting from the 21st Group’s second article linked: ‘We know, for example, that net transfer spend in January has just a 5% positive correlation with change in points per game, and that €20m in net spending has delivered on average just a 0.03 increase in points per game in the big 5 leagues since 2015.’
I came across Federico Mari recently - an Italian football writer, podcaster and investor. He was part of a select group (including myself) invited for an enlightening private Q&A with Bayer Leverkusen’s Sporting Director, Simon Rolfes. Federico is a very interesting follow on Linkedin, often posting thought-provoking and unusual content.
Federico’s post here discusses whether football clubs could win more by lowering the Wages/Turnover ratio. He establishes that ‘probably after a certain threshold, say 60%, it is smarter to allocate funds to other departments.’ The chart he posted, covering wages to turnover percentages for various leading European clubs, courtesy of
is shown below:-
So, based on the above information from 21st Group and others, it would be reasonable to assume that a smart team would not be looking to splash the cash in January, with these frugal returns from such high spending figures. Imagine what you could do with a €20m net spend instead - a team could purchase a clubs, or multiple clubs in overseas leagues as an attempt to upscale multi-club ownership. There are teams in overseas leagues which have superb academies, consistently producing quality prospects - and these teams could be bought for a fraction of some of January’s Premier League signings.
This has been written about in several articles here and here by MRKT Insights. It also talks about how multi-club owners could circumvent work permit regulations, which are more stringent in the UK than other countries. This extends to cricket as well - I know several players that I would consider for overseas signings but cannot recruit because they haven’t hit the work permit criteria.
This is such a shame because the presumably unintended consequence of the rules is that it punishes the teams who are looking to achieve great value in the market and who go the extra mile with their due diligence. A multi-club ownership model in cricket could similarly circumvent such regulations - let’s say I find a young potential superstar playing Second XI cricket in Pakistan but they don’t qualify for a work permit, if I was running a coterie of teams I could recruit them, then send them to another league (e.g. USA or Emirates) to play the required matches to obtain a work permit.
The obvious other way of spending this money more efficiently would be for a team to look to revamp their entire analytics department. There have been various studies in baseball which have shown that the value of the first analyst hire produces superb value from a points gained per dollar spent perspective, and the next few analysts hired in the same team also have strong value too, albeit dropping off towards an eventual plateau.
Based on all of this, you’d think that teams would be fighting to hire the best analysts (and basically any high quality non-playing staff), willing to pay the best huge sums of money given the relatively higher expected points per dollar return for them compared to the poor value playing staff. Look at how Liverpool’s fortunes post Michael Edwards have declined - with the value he generated, they could have paid him £50m over a few years (less than they paid as a transfer fee for Darwin Nunez) and he’d still be good value for money. I somewhat doubt he was on much more than a small fraction of this pay packet. If you are Chelsea, or Manchester City, or Manchester United, or any team with the financial means and ambitions, they should really be having a bidding war for the likes of Edwards and his high level peers.
This has happened in lower divisions as well. I know of a good example of a current League One team who let a renowned Twitter analyst join a rival team (who were in the same division last season), when the smart move would have just been to pay him a lot more to stay. The rival team are now competing for promotion to the Premier League.
Such a discussion reminds me of a Twitter thread I quote tweeted last week, which picked up quite a bit of interest, regarding wage compensation for high upside employees.
While we’ve focused on football teams so far, cricket teams have still yet to grasp the value in this market as well. In my view, the overwhelming majority of the 18 counties in professional cricket have at least one squad member (and often more) who should be subject to requirements - how much value does the least used squad member produce from a points per game perspective? Not a great deal. If you diverted their salary to hiring a strategist, or paying them more, or invested in additional analytics tools, how much benefit would this yield? I’d suggest far more.
The same goes for the IPL as well. Apart from head coaches, you might be surprised if you were told how much some non-playing staff were actually paid. Yet the value that some of these bring is truly incredible compared to some of the squad players who tend to do little more than make up the numbers.
In the 2022 IPL, 67 players were paid 40 Lakh (around £40,000) or below - these can be categorised as the lowest paid players in the tournament. All teams had at least four players in this price bracket, with several having nine or ten on their roster. These 67 players contributed just 149 combined appearances between them in 2022 (average of 2.22 appearances per player), with only four players - Mukesh Choudhary (CSK), Ayush Badoni (LSG), Jitesh Sharma (PBKS) and Shashank Singh (SRH) making double-digit numbers of appearances. 33 players - almost half of the 67 in this price bracket - failed to make an appearance, and you could count the number of players in this price bracket who made a big impression on the tournament on one hand.
There is no obligation for IPL teams to have a full squad, or to spend their entire auction budget. So I finish by asking readers this question:-
From an expected points per dollar/lakh/pound spent, what offers greater value for teams - buying a few players, likely to make negligible or no contribution, for 20-40 Lakh each, or diverting this resource to analysts and strategists?