Wednesday, September 21, 2022
HomeFinancial AdvisorThe Financial Drawback with LIV Golf – Pragmatic Capitalism

The Financial Drawback with LIV Golf – Pragmatic Capitalism

* It is a bit off subject, however as an informal golfer/watcher and financial nerd I feel it’s an fascinating subject.  

The creation of the LIV Golf tour has shaken the world of golf to its core. LIV is the Saudi Arabia backed league designed to “compete” with the PGA Tour and different world excursions. As a realistic capitalist, I clearly love competitors, however this isn’t competitors. The truth is, I feel it’s prone to harm golf as a result of it’s anti-competitive.

This example is a extremely fascinating one from the attitude of market primarily based competitors as a result of the PGA, like many different sports activities leagues, primarily has a monopoly. However can a non-public monopolist compete with a authorities funded entity? On this case, the true monopolist is LIV as a result of LIV is being funded by a really rich nationwide authorities. They usually’re throwing cash at this challenge prefer it’s manna from heaven. Which is the first drawback with this example. Why is a nationwide authorities, that represents the pursuits of their taxpayers, concerned in making an attempt to create a golf league? It’s a weird state of affairs when you consider it. How is it within the nationwide curiosity of Saudi Arabia to pay billions of {dollars} out to foreigners taking part in most of their tournaments in overseas venues? The financial proof on funding home sports activities is combined at greatest, however this isn’t even funding home sporting infrastructure.

Think about if the US authorities began a golf league to compete with the PGA – we might be outraged. And no, this has nothing to do with the ethical stance of the Saudi authorities. That, to me, is an empty speaking level as a result of when you observe the paper path from any authorities you’ll discover abuses. The vital level is that the US taxpayers would under no circumstances profit from the US authorities paying millionaires lots of of tens of millions of {dollars} to play golf.

And that is the place the LIV league is problematic for golf extra particularly. Not solely are they a authorities funded entity misusing taxpayer funds, however they’re creating an anti-competitive state of affairs that hurts golf. The explanation this hurts golf, from a aggressive perspective, is that the gamers transferring to LIV haven’t any incentive to play effectively. As an illustration, Dustin Johnson signed a assured $125 million deal for 4 years. Not solely is he assured this big payout, only for displaying up, but when he finishes in final place on this week’s Portland occasion he’ll make a assured $120,000. In different phrases, there’s no pores and skin within the sport right here. Johnson has nothing to lose. He simply wants to indicate up, hit 180 photographs right into a Portland forest and go spend per week on a yacht till he does all of it once more in a couple of weeks. One in every of golf’s most fun gamers has no incentive to play good golf sooner or later. He has no have to follow, enhance or actually do something. How is that this a very good factor?

This all raises the problem of presidency spending and its internet current worth. For my part most authorities spending needs to be on public coverage initiatives that the non-public sector can’t or won’t do as a result of they’ve an inherent damaging internet current worth. As an illustration, the non-public sector doesn’t need to fund a navy as a result of it’s not worthwhile to blow issues up and kill your workforce. Wars are excellent for public coverage as a result of they’ve a monetary damaging internet current worth and a social optimistic internet current worth (assuming you don’t lose totally). However what does this golf league present for the taxpayers of Saudi Arabia? It not solely has a damaging internet current monetary worth, however it has a damaging internet current social worth as a result of it erodes the standard of worldwide golf by watering down the competitors and diminishing the motivation construction to play good golf.

From the participant’s perspective you’ll be able to’t actually blame these guys for taking the cash. If a nationwide authorities have been prepared to pay me lots of of tens of millions of {dollars} to provide folks monetary recommendation I would definitely bounce on the alternative. It might be an apparent abuse of taxpayer {dollars}, however Saudi Arabia doesn’t appear to care about that. And as I stated above, the ethical problem is a non-issue. All governments are concerned in unhealthy stuff of various levels. Certain, the Saudis is perhaps worse than others, however that’s not the true problem right here. The actual problem is that nationwide governments shouldn’t be paying millionaires billions of {dollars} to play a sport that received’t profit the residents of Saudi Arabia. However from a participant’s perspective they’re simply benefiting from this authorities misuse of funds. Sure, the gamers ought to in all probability care extra in regards to the well-being of golf, however that’s a extra private problem that every golfer has to think about at a micro degree primarily based on their potential private contribution to the sport and private monetary wants.

The creation of a authorities funded golf league makes me very uncomfortable as a result of the financial incentives aren’t within the curiosity of home taxpayers AND as a result of it erodes the standard of the leisure by creating an anti-competitive taking part in discipline. For my part the entities that care in regards to the historical past of golf and the aggressive nature of golf, have to pushback in opposition to this. That is very true of the entities that function golf’s most vital historic occasions just like the British Open and The Masters. Augusta Nationwide, which operates The Masters, as an example, may ban any participant as long as they’re taking part in within the LIV league. In doing so, they shield the aggressive nature of golf and assist the long-standing historical past of the sport. I’m all for competitors and none of that is to say that the PGA is an ideal altruistic entity, however it seems fairly clear to me that this isn’t a very good state of affairs for the long-term well-being of the sport or taxpayers.

NB – Somebody raised a very good level that different sports activities have assured cash and gamers nonetheless carry out at a excessive degree. However I feel that is totally different as a result of golfers are unbiased contractors, not staff of a staff. If a participant within the NBA decides to not follow he hurts his total group. He’s held accountable by the staff even when he has assured cash. If a golfer decides to not follow he solely hurts himself and is accountable to nobody. 

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