Russ Roberts interviews Eric Topol – Great discussion about medical paternity. Many doctors withhold notes and decisions from patients under the pretext that the doctor knows best. We should instead be having healthy discussions between doctor and patient since sometimes that patient knows his/her body better than the doctor does. We expect financial advisers, lawyers, and our government to be transparent and don’t allow them to act autonomously under the guise of them “knowing best,” so why should we allow our doctors to do so? The Theranos discussion hasn’t aged well, but the rest of the interview is fantastic.
Mark Schreiber on how the name “Mao suit” came to be – The suit Kim Jong Un wears is called the “Mao suit” by English news services but is called the “Sun Yat-sen suit” (Zhongshan-zhuang) by the Chinese living in Asia. Interestingly, the name Zhongshan was a name adopted by Sun Yat-sen when he was in Japan out of fear of being abducted by agents of the Chinese imperial government. Therefore, the streets in China named Zhongshan road and the “Sun Yat-sen suit” originated from a Japanese alias, which is ironic because of the animosity historically between China and Japan.
Scott Alexander on suicide rates and guns – The US is an outlier in homicide rates but not in suicide rates even though there is a clear relationship between gun ownership and suicide rates but not between gun ownership and homicide rates. His conclusion is that if the US decreased its gun ownership, it would probably have even lower suicide rates and would be among the lowest in the developed world. He doesn’t mention it in this article, but conversely, decreasing gun ownership might not significantly decrease homicide rates.
Russ Roberts interviews Michael O’Hare about art museums – I learned so much from this podcast episode. The largest art museums only show around 5% of their collection at any given time, and since they continually acquire more art and perpetually display their staples, the majority of their collection never sees the light of day. O’Hare asserts that selling just 1% of their collection would not only allow the most well-known museums to fund admissions for perpetuity so that everyone could see their art for free, but would also give smaller art museums the opportunity to acquire more well-known works that currently aren’t seen by anyone. However, the current system all but prevents art directors from selling anything in their collection unless it is to acquire other works. So, we end up in a position nobody wants to be in: the largest art museums have so many works that will never see the light of day, works that smaller museums would kill for, and we have to pay ever increasing admission prices, ostensibly to provide the money “needed for a museum to operate.”
“The Education Tax Reduces Inequality and the Incentive to Work” – By Alex Tabarrok using data from David Leonhardt. College tuition is so much more expensive for Affluent families (~186k in income) than Upper-Middle families (~123k in income) that the earnings gap between them is smaller than first glance. Based on the data, when an Affluent family has 2 kids in college, their take adjusted income is actually less than an Upper-Middle class family. The post was thought provoking but I’m highly skeptical about this reducing the incentives of workers to earn more money.
The Verge article by Christine MacDonald on how Coca-Cola isn’t really water neutral – Good news: Coca-Cola is “water neutral,”ostensibly meaning that it gives back the same amount of water it uses. Bad news: its method of calculating its water use leaves out ~99% of its actual water use since it is only counting the water used in production, not the amount in its entire supply chain. For example, a half-liter of Coke takes ~35 liters of water to make (28L for growing sugar beets, 7L for the plastic bottle, and 0.4L for the actual liquid), but Coca-Cola is only counting its water use as 0.4L.
Helen Rosner on MSG – Mind blown. I had no idea that it’s been known for a while that MSG is not bad for you, despite the public perception, even among Asians, that it is. Why the perception? It originated from bad science, and possibly a dose of racism/xenophobia and then stuck despite many studies that have since debunked the myth. That it stuck illustrates the power of inertia and the difficulty in changing public opinion.
Scott Alexander weighs in on whether the thinks of “the intellectual dark web” can be silenced even though they’re popular – Scott points out the error in publications that conflate being popular with not being able to be silenced. Just because a popular proponent of a certain view cannot be silenced doesn’t mean that the other people supporting the same view, those without a big platform, cannot be. An example he gives, is that Caitlyn Jenner can be extremely famous, rich, and have a popular platform while transgender people, in general, can be stigmatized and oppressed. The two are not mutually exclusive (he also notes that he’s not comparing the marginalization that transgender people face with what supporters of “the intellectual dark web” face).
Dan Carlin Common Sense – Dan Carlin’s politics podcast. He rarely releases episodes so I’m always excited when he finally does.
Alex Tabarrok’s post on Andrew Leigh’s new book Randomistas – TOMS donates a pair of shoes for every pair bought. Instead of resting on its laurels, TOMS wanted to see the effect it was having and allowed economists to randomize shoe distribution to study the effects. The results weren’t great, and TOMS is reevaluating how it’s giving. The book sounds interesting and props to TOMS for studying the actual impact of their donations.
Latest This American Life episode – This episode documents one female airport security guard’s journey to combat discrimination. With all the news around MeToo today, we forget that low-paid, hourly female employees are probably the ones that face the most difficulties in overcoming gender barriers, and this episode shows just how hard it can be. I don’t think it’s hyperbole to call LaDonna a heroine.
Ezra Klein interviews Mehrsa Baradaran on costs imposed on black and poor people – The section that was most thought-provoking for me was when Mehrsa talked about the difficulties imposed on poor people who do not have access to banking. I take my checking account for granted, but if you’re poor, your checking account isn’t free, so you can’t afford one, which means that you have to go in-person to individually pay all of your bills. Crazy.
Tesla is the first successful American car company since Chrysler, which was founded in 1925. It completely revolutionized the automobile industry, forcing other car companies to shift their strategy to acknowledge the appeal of electric cars as a wonderful driving experience and as a status symbol for the liberal elite, who not only get to drive a beautiful car but who also get to feel virtuous while doing so. Tesla’s market cap is greater than Ford’s and almost as large as GM’s despite hemorrhaging cash and a lack of profit because the vision Elon Musk paints about its future is so captivating: the car’s eventual autonomous capabilities, the factory’s use of automation to rapidly scale manufacturing, the company’s strategy of building luxury cars to prove a concept and generate profit so that they can build cheaper mass-distribution cars, and of course, the company’s mission to stave off global warming. But the company has also had a history of labor violations which, I propose, stem from Musk’s penchant for over-promising and from moral licensing.
Move Fast and Break Things
Silicon Valley’s ethos is probably best summarized by Mark Zuckerberg’s famous quote “move fast and break things.” He may no longer subscribe to his own quote now that Facebook is out of its hyper-growth stage, but companies still in that stage, like Tesla, certainly still do. In F18 Q1, Tesla increased car production by 40% over the previous quarter, but was still almost 500 units under the Q1 target of 2,500 Model 3 cars, and it’s still aiming for 5,000 units per week by the end of Q2. Musk has a history of over-promising in order to push himself and his employees to the limit to try to meet those ludicrous goals. Moving fast and breaking things at software companies might lead to stressed out, sleep-deprived engineers, which is unfortunate but not disastrous. At a manufacturing company like Tesla, however, it can result in an unsafe work environment with a culture of downplaying and misreporting injuries.
Reveal, in a collaboration with KQED, did an investigation into the working conditions in the Tesla factory and found that although Tesla claims it brought down its injury rate significantly in 2017 to match the industry average, it was actually failing to report some serious injuries, allowing a better-than-reality injury rate to be reflected. Some serious injuries were labeled as only requiring First Aid whereas other work injuries were labeled as “personal medical” cases that wouldn’t be counted on Tesla’s injury report. In an article published a month later, Reveal found that Tesla added 13 injuries to its 2017 certified, legally mandated report despite emphasizing emphatically in the previous article that it was very confident in the injury rates reported and even stooping to accuse Reveal of being an “extremist organization” that was “creat[ing] a calculated disinformation campaign against Tesla.” Even more concerning is that all of those 13 injuries added were from the last few months of 2017 and Tesla hadn’t added any injuries from before September 2017. Why’s it so concerning? Because those injuries were added right after the California Occupational Safety and Health Administration opened an investigation into Tesla, and since the agency “can’t cite an employer more than six months after the injury should have been recorded,” Tesla only has to cover its tracks for the last few months, indicating with extremely high likelihood, that although there are injuries that should be added from the early months of 2017, Tesla won’t add them even though doing would more accurately reflect actual injury rates. This should dispel us of the notion that Tesla “records injuries accurately and cares deeply about the safety of its workers” (quote from Tesla in first Reveal article).
The safety issues and inaccurate injury reporting at Tesla stem directly from Musk’s lofty promises. The culture of a company is shaped by its leaders and since Musk has been Tesla’s CEO for almost 10 years and has been a key leader for even longer, he’s obviously had an enormous impact in creating the culture and hiring the type of managers that will preserve that culture. So, is it really a surprise that Musk, known for being a hard-driving taskmaster who pushes both himself and his employees to the limit, is in charge of a company that does the same? The onerous burdens thrust upon front-line employees and the inaccurate, possibly fraudulent, injury reporting are a byproduct of the Herculean goals Musk imposes on himself and his leaders, goals that are then cascaded down the org chart.
A recent Freakonomics episode talked about corporate social responsibility (CSR) and how firms that advertise a job see a 33% increase in application rates when they emphasize their CSR compared to when they don’t mention it; workers also supposedly work 10 to 25% harder when they believe in the company’s CSR compared to when they don’t, driven by women. The episode transcript didn’t link to those studies, so I wasn’t able to dig deeper, but the studies conform with my priors that firms with genuine CSR like Patagonia or Tesla will be able to attract more workers and will have better motivated workers. 90% of Global Fortune 250 companies publish annual CSR reports, but there’s a difference between companies like Pfizer and Coca-Cola (not sure if they publish CSR reports but just an example) that cynically publish CSR reports and companies like Patagonia and Tesla that live and breathe their corporate-social mission. So, my intuition is that even though a large majority of large corporations publish CSR reports, they won’t benefit from the two CSR effects mentioned earlier, but companies like Tesla will.
The Guardian reported a year ago of workers complaining about the same issues mentioned earlier, but even those workers expressed enthusiasm for Tesla’s world-changing mission. It’s clear that many of Tesla’s employees are motivated by its laudable mission and it’s no surprise that they’re willing to work diligently for the company. The Freaknomics episode mentioned earlier is actually centered around moral licensing, the effect that when we do good in one act, we become less concerned with doing bad in another; we use the good we did earlier to justify the bad. A basic example would be using your earlier 5-mile run to justify the pint of ice cream you’re about to inhale now. The study cited in the episode comes from List and Momeni. The study had over 3,000 participants from Mechanical Turk who were divided into 6 groups. The most conclusive result found was that an appeal to CSR made the workers more likely to cheat in their task; workers were not only more likely to cheat, but would also cheat with more intensity (though that finding is on less firm ground than the previous finding). Therefore, the workers on MTurk were using the appeal to CSR to justify the cheating in their work.
I propose that managers at Tesla are similarly using moral licensing to justify the subpar working conditions at the factory and inaccurate reporting of injury rates. The employees are so concerned with ensuring Tesla’s success and doing good in the world that they start to rationalize the corners they cut. The serious injury starts to look less serious. The on-the-job injury probably originated off the work. Temp workers don’t count as actual workers do they? Now, I could be wrong and the managers in charge of worker safety might have done a utilitarian calculation and found that it’s actually better for the world if they fudge the numbers a little, but I think it’s much more likely that the combination of pressure from their superiors and moral licensing convince them of their justification for the small cheating.
This isn’t meant as a slight, and is honestly probably more of a compliment, but if there’s anyone that actually did the utilitarian calculus and decided it’s better for the world if the numbers are fudged a little, it’d be Elon Musk. I remember reading Ashlee Vance’s biography of Musk and being astonished by Musk: his first-principles, long-term thinking, his calculated risk-taking to do the things to benefit society that no one else will do, and above all his determination and grit in working as painstakingly as is needed to succeed. I admire him greatly, and I realize that what makes him so great and what causes the poor work conditions may originate from the same place. But, I don’t think my admiration of him and my criticism of things that he and his companies should rightly be criticized for are mutually exclusive. It makes logical sense to me that I can still admire Tesla as a company, but hope and want for it to do better in certain aspects. It’s such a cliché, but it’s important to remember that even the people you admire have flaws and to not be blind to those flaws. I also understand that Tesla is still in a precarious position as it keeps racking up unprofitable quarters and that there must be immense pressure on Musk, but I don’t think that, or his praiseworthy mission should detract from appropriate criticism. And, as a huge fan of his, I find Musk’s seeming inability to distinguish appropriate criticism from malicious vitriol to be disheartening.
Radiolab episode titled “More or Less Human” – The episode starts with audience members trying to distinguish a chatbot from a real person and then moves to toys with some emotions encoded. The Furby, for example, would cry for help when it was held upside down, and in an experiment, kids that held it upside down put it right-side up much faster than a Barbie doll, which they put right-side up only when their arm grew tired. The episode also talks about a disturbing video of people abusing a toy that had emotions programmed into it to fulfill sadistic desires or simply for amusement. And, it concludes by describing a virtual therapy session in which the patient and therapist are the same person. By understanding our interactions with technology infused with human behavior, we can understand more about ourselves. All of Radiolab’s episodes are fantastic but this one is a cut above the rest; must listen. (64 min.)
New article by Richard Thaler – Thaler discusses many of behavioral economics’ key contributions including loss aversion, sunk costs, fairness principles, the endowment effect, nudging, and rejection of the efficient markets hypothesis. (10,600 words)
Russ Roberts interviews David Skarbek about prison gangs – Skarbek describes how prisons were completely different decades ago when the prison populations were smaller and when everyone knew each other’s reputations. Nowadays, however, the population is too large and Skarbek describes how a hierarchy has arisen among the prisoners to manage each other. (76 min.)
The Guardian on the biggest merger in the eyewear industry – The eyewear industry is dominated by two companies, Luxottica and Essilor, and they’re merging. The article digs into the history of the two companies and how they grew so dominant and talks about the possible consequences of the upcoming merger. (8,600 words)
Franchise values and player salaries in the NBA have skyrocketed in the last decade, and it feels like the NBA, when compared to the other major U.S. sports, is growing the fastest in popularity. I personally love the current state of the NBA, but through the lens of someone who wants more parity and competitive balance, the NBA has an incentive issue. Players have been ring-chasing since time immemorial but superstars have generally waited until they were past their prime before doing so (Karl Malone, Gary Payton, Shaq, etc.). Two factors changed the landscape and resulted in the arms race we have for talent today: the creation of the Boston Big Three, and LeBron James.
A Brief Journey Down Memory Lane
The Celtics finished the 2007 season at the bottom of the Eastern Conference with a measly 24 wins, but that summer, Danny Ainge traded for both Ray Allen and Kevin Garnett; combined with Paul Pierce, they formed the Big Three. They completed a massive turnaround, winning 66 games the next year and defeating my beloved Lakers in six in the Finals.
LeBron James was one of the most hyped prospects ever, and the crazy thing is, he actually lived up to the hype. He went straight from high school to the NBA, was picked #1 overall by his hometown Cleveland Cavaliers and won Rookie of the Year, averaging 20.9 points, 5.5 rebounds, and 5.9 assists in his first season. He would only improve further from there, averaging 27.2/7.4/7.2 splits in his second season and 31.4/7.0/6.6 splits in his third! But, his own greatness was a burden. By the time LeBron got into the league, sports media was becoming more and more of a 24/7 news cycle, with talk shows that needed material to fill in airtime. This was only exacerbated by Twitter as he hit his prime. As possibly the most hyped prospect ever and someone who became one of the league’s best players from basically the minute he stepped onto the court in a Cavs jersey, LeBron was being lambasted more and more by the media with every passing year that he didn’t win a championship. It didn’t matter that he carried a bunch of nobodies to the Finals in 2007 or that he won MVPs for lifting the Cavs to the top of the Eastern Conference; expectations had grown so high that anything less than the title would be viewed as abject failure. LeBron was labeled a choke artist that couldn’t carry his team to the promised land.
Boston’s Big Three presented an almost insurmountable challenge for LeBron. They had three bona fide superstars; who were the Cavs’ Big Three? LeBron, Mo Willians, and Zydrunas Ilgauskas? The ever-increasing media abuse about whether he was “clutch” enough to carry his team to the title, combined with the three-headed dragon in Boston, all but forced LeBron to leave the Cavs to find a team that had another superstar. Enter the Miami Heat Big Three. LeBron, Chris Bosh, and Dwayne Wade all took paycuts in their prime in order to play together. The media frenzy that LeBron naturally brings, combined with some silly choices (live broadcasting The Decision, “not one, not two, not three”) created unprecedented scrutiny on the Heat. At the time, many critics and pundits labeled Lebron’s decision to team up with fellow superstars as a complete tarnishing of his legacy (while forgetting that Magic had Kareem and Worthy, Bird had McHale and Parish, MJ had Pippen, Kobe had Shaq, and on and on, while LeBron was stuck with a bunch of bums). Yet ultimately, forming the Big Three ended up being a boon to his legacy. After winning two chips in Miami and heading back to Cleveland to win one more, LeBron is universally recognized as one of the five greatest players of all time. Many view him as second only to His Airness himself and within striking distance to pass him, especially if LeBron keeps up his current production for a few more years.
LeBron’s decision, so contentious at the time, hasn’t left even the smallest blemish on his sterling legacy. His earlier “playoff struggles” are now packed into a narrative that only foreshadow his later greatness. The younger generation of players now in their prime have meticulously observed LeBron’s career and decisions to better shape their own legacy.
The NBA’s Current Incentive Structure
The factors currently incentivizing players and teams to form superteams are:
Massive salary and endorsement deals combined with players being praised for taking paycuts
Superteam feedback loop
Get into a debate with anyone about whether player X is better than player Y, or watch any sports commentator, informed or not, rank their all-time players, and championships will invariably come up. Rings are justifiably the #1 factor in ranking how good a player was, but a lot of the infatuation with the number of titles won is unwarranted. There’s a saying in sports along the lines of “winning solves everything.” Some problems can’t be fixed by winning, but they definitely won’t be fixed by losing. Remember what happened with LeBron; he was being pilloried for his supposed poor performance in the playoffs and for teaming up with contemporary stars in Miami. However, years after the fact, after LeBron won a couple of championships, his earlier playoff troubles become a distant memory. Some people will still hold him teaming up with Wade and Bosh in Miami against him, but had LeBron not gone to Miami, he might still be stuck without a championship, putting up monstrous numbers on deadbeat teams; in that scenario, those same critics would be even more harsh. Winning doesn’t solve everything, but it sure solves a whole lot.
Now take Kevin Durant. When he joined the already-stacked Warriors, his decision was portrayed as cowardly and critics insisted that his legacy would be forever tainted. Fast forward a couple of years, and most of that criticism is already gone. If he were to retire today, he would rank higher on people’s all-time lists for winning a championship with the Warriors than staying on the Thunder and not winning. Sure, people will bring up the fact that he joined a championship team and dock him for that, but, as with LeBron, those same people would’ve docked him even more if he had no championships.
Whenever the greatest NBA players ever are debated, no player can sniff the top 10 all-time discussion without at least one ring; the two closest are probably Charles Barkley and Karl Malone but they would probably not even make most people’s top 15. Of course, other factors are considered; nobody rates Robert Horry as a better player than Barkley, nor would most people rank Bill Russell ahead of Michael Jordan despite Russell having more rings than fingers. But, rings are the most important factor because so many other factors correlate with winning: being a good teammate, putting up eye popping stats, performing well in the playoffs. Players that don’t win are sometimes unfairly depicted as lacking those characteristics. The narrative crafted is dependent on whether a player subsequently wins: Kobe’s airballs as a rookie against the Jazz in the playoffs were lessons learned that paved the way for his later clutchness and greatness, whereas Chris Paul’s late game mistakes against the Thunder in 2014 and the Clippers blowing a 3-1 lead against the Rockets the following year are viewed as indicative of how badly CP3 always chokes. The consistent statistical output, the load carried when he was on the Hornets, and the clutch shots such as the game winner in Game 7 against the defending champs on a hobbled hamstring become forgotten footnotes in the wider narrative crafted about him.
The lesson to be learned is trite but worth repeating: do whatever it takes to win a championship. There might get intense criticism in the moment, but the criticism will fade; when all is said and done, and a player’s legacy is being evaluated by fans, the media, and other players, winning a ring (or many) will be considered far more heavily than how they were won.
Increase in Salary
The above graph shows the salary cap over time (data from Basketball Reference). The salary cap has increased an average of 10.6% per year from 1985 to 2018; stated another way, the salary cap today ($99M) is almost 28x the salary cap of 1985 ($3.6M). After some period of slow growth in the 2000s and early 2010s, the salary cap increased tremendously the past 2 years, and is projected to increase even more in the coming years (2020-2021 projection).
The salary cap is indicative of how players’ salaries have increased over time but is imperfect since in earlier years, team would routinely go over the cap whereas in recent years, it has become less common. The below graph is the average salary of the ten highest salaries that year from 1991 to 2018 (1991 to 2016 from here and 2017-8 from Wikipedia).
The average of the ten highest salaries increased by 8.9% from 1991 to 2018. Most of the increase came in the earlier years and the two most recent years, the latter mirroring the cap increase. Top ten salaries, like the cap, remained relatively stagnant in the 2000s and early 2010s (side note: the top ten salaries were high relative to the cap in the late 90s were what lead to the lockout in the 1998-9 season).
As you can see from the graph, salaries have shot up in recent years and will only further increase. Players like Steph Curry, Russell Westbrook, John Wall, and James Harden, have qualified for and signed the Designated Veteran Player Extension that pays them more than $40 million per year. On top of that, top players are supplementing their on-court income with similarly gargantuan salaries off the court. According to Forbes, in the 2018 season, Lebron made $52M in endorsements, Curry $42M, and Durant $33M.
So, why do I bring up the massive amount that top players are earning? It’s not because they don’t deserve such massive salaries. They do. It’s to illustrate how much and how quickly salaries have increased. NBA players were already enormously wealthy in the late 90s. Now, they’re making so much money that they can afford to take discounts to allow their franchise to assemble a better team. For instance, Kevin Durant took a $9.5M paycut (SI) this season to allow the Warriors to keep Iguodala. Despite that huge discount, his salary this year was still large enough that he would’ve been either the highest paid or second-highest paid player in any year before the 2017 season. This is the point I wanted to make with those two graphs. Players’ salaries have increased so much in recent years that they can afford to take a big discount and still be paid an enormous amount. Combined with the pervasive ring-fetish, superstars are incentivized to take a discount to stack their team with talent. The Big Three in Miami would’ve never been formed if Wade, LeBron, and Bosh all wanted max contracts so they each took a discount to make their dream happen. The superstars of today who are being pilloried by the press for their inability to win a championship will look to take a discount to form their own superteams and will be able to do so with minimal financial impact.
The focus on titles isn’t the only factor incentivizing players to take discounts for their team. There’s also the perception of being “a team player.” Tim Duncan was praised for giving discounts to the Spurs over the years to allow them to keep their best players together while Kobe Bryant was criticized for making almost $80M in his last three years. Why millionaires should be giving discounts to billionaires is beyond me, but that’s a debate for another time. The fact is, players will be lauded for doing so. So, to summarize. Superstars are incentivized to focus solely on winning championships since that is the #1 factor in how their legacy will be judged; players who form superteams, like LeBron and Kevin Durant, will be heavily criticized in the moment but, as long as they perform well, the criticism will quickly fade, and the championships that they’re able to win after forming the superteam will be a big net-positive for their legacy; superstars nowadays are making so much money now that they make more than equivalent players from just a few years ago, even after taking a discount; and, they are incentivized to do take discounts because it lets their franchise build the best team possible and because they’ll be celebrated as “a team player.” This brings me to the last contributing factor to superteams.
Feedback loops are formed when the outputs become inputs and vice-versa, creating a loop that feeds upon itself. They govern many of the things around us and examples include the stock market (positive outlook results in higher stock prices which results in a more positive outlook and on and on, leading to a bubble; the opposite then happens in a crash), the climate (ice melts, resulting in less ice to reflect the sunlight, which causes more ice to melt), and the dominance of many successful companies (people sign-up for Facebook because that’s where their friends are which leads to more people being on Facebook, which leads to more people signing up).
The NBA is also governed by many feedback loops. Sports are quickly becoming the last TV event that must be viewed live. The drop in viewers in other programs lead advertisers to flock to sports, which leads to more sports coverage and an increase in its popularity and profits, which lead to more advertisers. The increase in popularity and profitability means that the NBA’s salary cap and its players’ salaries, on and off the court, will keep increasing in the near future, and the increased media scrutiny will create more pressure for superstars to win a championship. Combined with their increasing pay, players will be further incentivized to take a pay cut and to team up with fellow stars to win. As more superteams are formed, even stronger superteams will have to be formed to try and beat them, creating a feedback loop that increases the gap between the good and bad teams.
How I Could Be Wrong
Despite what I laid out, the simplest reason I could be wrong is that NBA superstars simply refuse to take a paycut. It takes a high amount of competitiveness to just make it into the NBA; the top players are all ultra-competitive and know that they’re worth the max, if not more. Giving a discount will be a concession that many won’t make. For example, LeBron, who took slightly less than the max to form the Big Three, hasn’t taken less than the max since he left Miami and there are reports that he refuses to do so (Yahoo Sports). Nor should he. His true value to any franchise is way more than the max. But it’s not just LeBron. It’s hard to get any superstar to take a discount. Very few rich people have ever believed they were rich enough. Wealth is its own feedback loop, with those that make a lot of money desiring to make even more. Moreover, being a max contract player signals that you are worth the most a team can pay you. There’s a certain status with being paid the max, a status that many highly competitive players won’t be willing to give up; conversely, accepting less than the max might hurt your status in the eyes of fellow players, the media, or the fans.
As long as LeBron is playing at a high level, more superteams will be formed. He needs more championships to topple MJ as the greatest player ever and will need to create superteams to compete with the Warriors and the Rockets. After he retires, there might be a slowdown in the formation of superteams for a few years, but soon the media frenzy will look for a new victim to criticize, and the pressure will be on the superstars in the next generation to win. When that pressure reaches a tipping point, those superstars will look to form their own superteams, kicking off the cycle once again.
Felix Salmon on the philanthropic mindset of many tech billionaires – I think Salmon’s generalization of tech billionaires is too facile but his article does raise interesting questions about philanthropy. Is it better to balance the playing field for the billions already living or to create the conditions so that many more billions can be born? Is it better to focus on moonshots or the incremental change?
Kelvin Stott on the pharma industry – Stott says that the return on investment has been declining for the past 20 years and will soon reach 0% due to diminishing returns. Furthermore, the industry will start to decline within a few years and will have to adapt to the new environment in order to survive. Not sure how to reconcile this article with all the articles about the pharma industry overcharging for drugs and making massive profits.
Bill Simmons interviewing Ethan Hawke – Skip the first 23 minutes if you’re not interested in hearing about sports. The interview goes into the Before Trilogy (best trilogy ever), being on the set with Denzel Washington, Ethan Hawke’s early career and more.