31 December 2020

Are Sports Win-Win or Win-Lose? It Depends. (or, how what we believe changes facts or how Phil Knight and Michael Jordan changed the NBA)

What we believe changes facts.

If we believe that the world is zero-sum (and many people still do), it will be. What I get comes at the expense of you (and vice versa) so I compete rather than cooperate. This belief creates a world of scarcity and competition. It's win-lose.

If we believe that the world is variable-sum (and fortunately a growing portion of people do), it will be. What we get is the product of our cooperation and planning so we spend more time cooperating than competing. This belief creates a world of increasing prosperity and cooperation. It's win-win.

You might point to sports and say, "Well, sports will always be competitive." True. Sort of. But that misses a larger point. Teams have to cooperate even to create schedules, playoff criteria (best of 3, 5, 7?) and an image in the marketplace. More than that, some actions create more revenue for everyone in a sport even if that sport never increases the number of annual championships beyond one.

Phil Knight was looking for endorsements to raise the profile of his fledging Nike in the early 1980s. Basketball was not an obvious choice. It ranked well below baseball and football in popularity but it offered an advantage over those sports: given sneakers don't have cleats, you could wear basketball shoes on the street. Fans could wear the same shoes their sports idols wore. Michael Jordan, too, was not the most obvious choice but Nike built an entire line of shoes around the "Air Jordan" model, paying the rookie Jordan millions. This endorsement was huge money; Jordan's first contract paid $2.8 million over four years and he got $2.5 million from the Nike contract in just the first year.

But the NBA enforced uniformity on NBA uniforms. Even though Knight loved the controversary and promised to pay any fines Jordan would be levied for wearing his Air Jordans, the NBA banned them. Commissioner David Sterns soon realized, though, that Michael and his Air Jordans could feed the popularity of the NBA and allowed Jordan and other stars to begin wearing shoes they'd endorsed on the court. In a world of win-lose, this sort of publicity was a win-win-win, helping the players, the owners, and the folks selling shoes and apparel.

This has worked out well for everyone. Last year, Jordan earned $130 million from his Nike contract. Phil Knight is now worth $50+ billion. And the NBA has surpassed football and baseball (those cleated shoe sports) to become the world's second most popular sport. NBA players benefit from this: Steph Curry was paid $40 million - and 28 player were payed more than $28 million - last year, multiplies of what Jordan's first contract paid.

Is the NBA win-win or win-lose? It depends on whether you're talking about the world on the court or off. And whether scarcity or abundance follows depends on which belief holds.

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