Soccernomics (8 page)

Transfers in soccer are very different from trades in American sports.

In soccer, when a good player moves, his new club usually pays a “transfer fee” to his old club. Moreover, the player’s old contract is torn up, and he negotiates a new deal with his new club. Each year European 47

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clubs pay each other a total of between $1 billion and $2 billion in transfer fees. (The record is the $130 million that Real Madrid paid Manchester United for Cristiano Ronaldo in 2009.)

But much of this money is wasted on the wrong transfers. In fact, the amount that almost any club spends on transfer fees bears little relation to where it finishes in the league. We studied the spending of forty English clubs between 1978 and 1997, and found that their outlay on transfers explained only 16 percent of their total variation in league position. By contrast, their spending on salaries explained a massive 92 percent of that variation. In the 1998–2007 period, spending on salaries by clubs in the Premier League and the Championship (the second tier of English soccer) still explained 89 percent of the variation in league position. It seems that high wages help a club much more than do spectacular transfers.

Manches ter U nited

A rs enal

R = 0.887 2

C helsea

Liverpool

Ast on Villa

N ewcastle

Charlton

Leeds

W igan

M anch es ter City

Derby

Pres ton N orth End

Millwall

-1

Plym outh

Nottingham Forest

G illin gham

Hud dersfield

-2

C rewe Alexandra

Swindon

QP R

verage league position (-log(p/(45-p))

R otherham

Port Vale

A

-3

Bright on

-4

-2.5 -2 -1.5 -1 -0.5 0 0.5 1 1.5

Wage expenditure relative to the average (log)

F I G U R E 3 . 1
Premier League and Championship teams, 1998–2007

In short, the more you pay your players in wages, the higher you will finish; but what you pay
for
them in transfer fees doesn’t seem to make much difference. (This suggests that, in general, it may be better to raise your players’ pay than risk losing a couple of them and have to go out and buy replacements.)

G E N T L E M E N P R E F E R B L O N D S

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F I G U R E 3 . 2
The more you pay your players, the higher you finish, 1998–2007

Wage spending

Average

relative to the

league

average spending

Club

position

of all clubs

Manchester United

3.16

Coventry City

27

0.70

Arsenal

2.63

Sheffield United

27

0.50

Chelsea

3.50

Barnsley

28

0.45

Liverpool

2.68

Preston North End

28

0.26

Newcastle United

1.93

Watford

29

0.48

Aston Villa

1.34

Norwich City

29

0.50

Tottenham Hotspur

10

1.60

Sheffield Wednesday

29

0.68

Everton

12

1.41

Crystal Palace

30

0.47

Middlesbrough

12

1.32

Nottingham Forest

31

0.62

Leeds United

13

1.70

Millwall

31

0.30

West Ham United

14

1.31

Cardiff City

33

0.37

Blackburn Rovers

14

1.48

Burnley

33

0.28

Charlton Athletic

15

0.98

Huddersfield Town

34

0.35

Bolton Wanderers

16

0.92

Plymouth Argyle

34

0.16

Fulham

16

1.24

Stoke City

35

0.26

Southampton

16

0.92

Gillingham

36

0.19

Sunderland

18

1.00

Tranmere Rovers

37

0.25

Manchester City

18

1.24

Stockport County

37

0.20

Wigan Athletic

19

0.59

Oxford United

38

0.23

Wimbledon

19

0.94

Crewe Alexandra

38

0.13

Birmingham City

20

0.74

Grimsby Town

38

0.20

Leicester City

21

0.88

Queen's Park Rangers

39

0.55

Derby County

23

0.82

Hull City

40

0.23

Ipswich Town

24

0.65

Bury

40

0.21

Bradford City

24

0.55

Swindon Town

40

0.28

West Bromwich Albion

25

0.52

Walsall

40

0.19

Reading

26

0.50

Port Vale

41

0.24

Portsmouth

26

0.73

Rotherham United

41

0.15

Wolverhampton Wanderers

26

0.61

Brighton & Hove Albion

42

0.15

While the market for players’ wages is pretty efficient—the better a player is, the more he earns—the transfer market is inefficient. Much of the time, clubs buy the wrong players. Even now that they have brigades of international scouts, they still waste fortunes on flops like Blissett. (The transfer market is also of dubious legality—do clubs really have a right to “buy” and “sell” employees?—but that’s another matter.) 50

Any inefficient market is an opportunity for somebody. If most clubs are wasting most of their transfer money, then a club that spends wisely is going to outperform. In fact, a few wise buyers have consistently outperformed the transfer market: Brian Clough and his assistant-cum–

soul mate Peter Taylor in their years at Nottingham Forest, Arsène Wenger during his first decade at Arsenal, and, most mysteriously of all, Olympique Lyon, which has progressed from an obscure provincial club to a dictatorial rule over French soccer. From 2002 through 2008, Lyon won the French league seven times running. The usual way to win things in soccer is to pay high salaries. These clubs have found a different route: they have worked out the secrets of the transfer market.

There is a fourth master of the transfer market who is worth a look, even if he works in a different sport across an ocean: Billy Beane, general manager of the Oakland A’s baseball team. In his book
Moneyball
, Michael Lewis explains how Beane turned one of the poorest teams in baseball into one of the best by the simple method of rejecting what everyone in the sport had always “known” to be true about the transfer market. Lewis writes, “Understanding that he would never have a Yankee-sized checkbook, Beane had set about looking for inefficiencies in the game.” It’s odd how many of the same inefficiencies exist in soccer, too.

MARKET INEFFICIENCIES

If we study these masters of transfers, it will help us uncover the secrets of the market that all the other clubs are missing. First of all, though, we present a few of the most obvious inefficiencies in the market. Although it doesn’t take a Wenger or a Beane to identify these, they continue to exist.

A New Manager Wastes Money

Typically, the new manager wants to put his mark on his new team. So he buys his own players. He then has to “clear out” some of his predecessor’s purchases, usually at a discount.

G E N T L E M E N P R E F E R B L O N D S

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Strangely, it’s Alan Sugar’s tightfisted Tottenham that provides the worst example. In May 2000 the club’s manager, George Graham, paid Dynamo Kiev $16.5 million—nearly twice Spurs’s previous record fee—

for the Ukrainian striker Sergei Rebrov. Clearly, Rebrov was meant to be a long-term investment.

But nine months later, Sugar, the club chairman, sold his stake in Tottenham, whereupon the new owners sacked Graham and replaced him with Glenn Hoddle. Hoddle didn’t appreciate Rebrov. The record signing ended up on the bench, was sent on loan to a Turkish team, and in 2004 moved to West Ham on a free transfer.

A few years later Spurs discovered a new method for short-term money burning: sell and then buy back exactly the same players. In January 2008, they transferred Jermain Defoe to Portsmouth for nearly $15

million, and six months later sent Robbie Keane to Liverpool for $38

million. Then, in January 2009, under their new manager, Harry Redknapp, they bought both players back again. They shelled out about the same total sum that they had received for the duo the year before, though their outlay could rise by about another $11 million depending on how often Keane plays. If you add in agents’ fees, taxes, the loss of a year of Defoe’s services and six months of Keane’s, plus the twofold dis-ruption to the team, this sort of waste helps explain why Spurs got left behind by Wenger’s Arsenal.

Yet Spurs and Newcastle are only marginally sillier than most clubs.

This form of waste is common across soccer: a new manager is allowed to buy and sell on the pretense that he is reshaping the club for many years to come, even though in practice he almost always leaves pretty rapidly. He doesn’t care how much his wheeler-dealing costs: he doesn’t get a bonus if the club makes a profit.

Stars of Recent World Cups or

European Championships Are Overvalued

The worst time to buy a player is in the summer when he’s just done well at a big tournament. Everyone in the transfer market has seen how 52

good the player is, but he is exhausted and quite likely sated with success. Overpaying for these shooting stars fits what
Moneyball
calls “a tendency to be overly influenced by a guy’s most recent performance: what he did last was not necessarily what he would do next.”

Newcastle is, of course, the supreme sucker for shooting stars. This is largely because its fans demand it. Newcastle (or Spurs, or Marseille in France) probably isn’t even trying to be “rational” in the transfer market. Its aim is not to buy the best results for as little money as possible. Rather, its big signings (like buying fragile Michael Owen for $30

million) are best understood as marketing gifts to their fans. Buying a big name is a way of saying, “Yes, we are a big club.” It gives the supporters the thrill of expectation, a sense that their club is going somewhere, which may be as much fun as actually winning things. Buying big names is how these clubs keep their customers satisfied during the three-month summer shutdown.

So addicted is Newcastle to buying big names that even its high spending on salaries doesn’t bring it the high league position you would expect. When Francisco Pérez Cutiño analyzed data for the Premier League for the 2006–2007 season, for an unpublished MBA paper at Judge Business School in Cambridge, he found that “only Newcastle United seemed to significantly underperform taking into account its wage expenditure.”

Certain Nationalities Are Overvalued

Clubs will pay more for a player from a “fashionable” soccer country.

American goalkeeper Kasey Keller says that in the transfer market, it’s good to be Dutch. “Giovanni van Bronckhorst is the best example,”

Keller told the German journalist Christoph Biermann. “He went from Rangers to Arsenal, failed there, and then where did he go? To Barcelona! You have to be a Dutchman to do that. An American would have been sent straight back to DC United.”

The most fashionable nationality of all in the transfer market is Brazilian. As Alex Bellos writes in
Futebol: The Brazilian Way of Life
: G E N T L E M E N P R E F E R B L O N D S

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“The phrase ‘Brazilian soccer player’ is like the phrases ‘French chef’ or

‘Tibetan monk.’ The nationality expresses an authority, an innate vocation for the job—whatever the natural ability.” A Brazilian agent who had exported very humble Brazilian players to the Faeroe Islands and Iceland told Bellos, “It’s sad to say, but it is much easier selling, for example, a crap Brazilian than a brilliant Mexican. The Brazilian gets across the image of happiness, party, carnival. Irrespective of talent, it is very seductive to have a Brazilian in your team.”

A wise club will buy unfashionable nationalities—Bolivians, say, or Belorussians—at discounts.

Gentlemen Prefer Blonds

At least one big English club noticed that its scouts kept recommend-ing blond players. The likely reason: when you are scanning a field of twenty-two similar-looking players, the blonds tend to stand out (except, presumably, in Scandinavia). The color catches the eye. So the scout notices the blond player without understanding why. The club in question began to take this distortion into account when judging scout-ing reports.

Similarly, Beane at the Oakland A’s noticed that baseball scouts had all sorts of “sight-based prejudices.” They were suspicious of fat guys or skinny little guys or “short right-handed pitchers,” and they overvalued handsome, strapping athletes of the type that Beane himself had been at age seventeen. Scouts look for players who
look
the part. Perhaps in soccer, blonds are thought to look more like superstars.

This taste for blonds is an example of the “availability heuristic”: the more available a piece of information is to the memory, the more likely it is to influence your decision, even when the information is irrelevant.

Blonds stick in the memory.

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The inefficiencies we have cited so far are so-called “systemic failures”: more than just individual mistakes, they are deviations from rationality.

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All this is what you might call Transfer Market 101. To learn more about how to play the market, we need to study the masters.