Racism, Business and Winning

I was reading through the comments in the Washington Post article “How the NFL Blocks Black Coaches“, and this comment drew my attention:

I was not aware the NFL has affirmative action buried in its mission statement. Let’s be realistic. A .500 season is not what the fans want. If so, it better be supported with an slick near-term winning plan. It matters not the color of the Head Coaches or Position Coaches. Win Baby, Win is the mantra. Also, The NFL now has no time to deal with racism. The league is in a highly funded and focused plan to build a lucrative gambling platform. NFL football is a large audience form of entertainment. Thus Amazon’s entry into the market with Thursday Night Football live steams. I suspect the company will also get a chunk if the gambling revenue too.

The part about the lucrative gambling platform is interesting; unfortunately, it is out of scope for this essay. I will say that I want no part of the sports betting action, and leave it at that.

There were several reader responses based on this logic:

1. An NFL team is a species of what we discussed in microeconomics as a firm.
2. Firms exist to maximize profit.
3. In order to maximize profit, the management of the firm must make cold, rational decisions daily, allowing nothing to get in the way of profit maximization.
4. An NFL team maximizes profit by winning games and championships.

Item 1 is, by definition, true. The rest are easily challenged by anyone with real world experience.

Plenty of businesses exist to make life comfortable for the owners or executives. They want to make just enough money to keep the lights on.

Every day, in Corporate America, management teams are making decisions for reasons other than profit maximization. As Art Klein described in Who Really Matters, organizations are run by what he called a core group, and, unless the wolf is at the door and his breathing is audible inside, the people in the core group frequently make decisions to better their own lives rather than to better the financial results of the firm.

Even if the owner of an NFL team is focused on financial results, there are many ways to achive that. For the 20 years ending with the 2021 season, the Raiders had 121 wins and 200 losses. They only made the playoffs 3 times. They moved, yet again, from Oakland to Las Vegas. Yet the team is now estimated to be worth $5.1 billion. The Raiders make $549 million on personal seat licenses; the purchaser is paying for the opportunity to pay more money to actually get a ticket to see a game. The team leads the NFL with $119 million in actual ticket revenue and has an enormous engine marketing licensed products bearing their logo. It is not necessary to have a winning record to keep this machine running.

Racism is bad for profit maximization and business effectiveness. The decision maker is deliberately reducing the candidate pool using criteria having nothing to do with the ability or demonstrated record of the applicant. It does not follow, however, that a decision maker would avoid racism simply for that reason.

There is a lot of material in the Washington Post article. I am not weighing in on the overall merit of the arguments the authors make. Read the article and consider it for yourself. I will say that I believe any commercial business that had the kind of evidence marshalled against it that the Post writers have provided would be in front of the U.S. Equal Employment Opportunity Commission.

My point here is that arguments of the form “team owners wouldn’t do that because it would be bad business” do not stand up to real-world experience.