Stray reflections in sport.

We end the Sunday Columns of 2024 today. 

December for some is the start of Advent, a time of preparation for something more important than random blowhard opinions (on the sportsbiz). For most others, this month is just a time to start winding down for what is now called the Holiday Festive Period. 

Either way, it’s a good moment for a pause in these diaries. It’s always a positive to know when to take your leave, when you are perhaps over-exposed, and when you’ve just said enough for the time being. Over 2024, this Column has indeed said a lot on myriad different aspects of our industry, and from many different perspectives. We have hopefully reflected well on the ghosts of Christmas Past and Present in sport, and, looking at the body of work in the past 12 months, it’s been a decent effort. So many lovely images from Jac. Like today. 

So all that remains is to ask where we are, as the year draws to a close? What big questions await us in 2025? Is there any “clarity” in this crazy industry of ours?

 

Wisdom is all around us, just not always in the container we would expect. 

There are so many qualified people and publications putting out really good insight on sport, every single day. But often now I find that the most provocative stimuli are coming from outside our industry, and in fact one of these thinkers, with his latest podcast, has motivated this final Column. 

Jawad Mian is a Pakistani Muslim residing in Dubai, making his living in very high-end finance, and his philosophy has influenced me a fair bit. Much more than one would have ever thought, as we are not natural bedfellows, for more reasons than one. Jawad (as a Muslim) and I may disagree on whether the Nazarene is only a prophet, or the true son of God, but that doesn’t matter, certainly not for this Column.  

We met some years ago, through our mutual friend Grant Williams, who had assembled a few of us, at Tony Deden’s house in Lucerne, mainly to brainstorm what Grant’s new media business (TTMYGH) could look like. As a product, as an audience, as a business model, all under the obligatory guiding principle of “authenticity”. The debate on pricing inelasticity, amongst a well-heeled macro-finance customer base, was particularly memorable. 

In itself, a fantastic discussion, but for me the bonus was meeting my new Muslim friend: a seeker of truth and a principled investor. Looking back, it all makes sense why Grant would have him there. 

 

The Maharishi.

“An antidote to the great angst of modern life.”

It is exactly that. Yes, Jawad’s book “Stray Reflections“ is one of the most impactful reads I’ve ever had the pleasure to digest. The cover promo here is actually bang on, and I could not put it down, literally. even feeling obliged to buy copies to send to various friends and colleagues. It really is extraordinary, especially in our world of today, so seemingly confused and lost as to values and North Stars.

Imagine, I had started those two days in Switzerland teasing Jawad with the nickname Maharishi (which actually makes no religious sense at all), as his calm authority and gravitas I think kind of pissed me off. A classic Glasgow reaction. But as our time together continued, I realised how superficial that was, although to be fair the reference to the mystic guru of John, Paul, George and Ringo was, in truth, pretty funny. At least for me.

By the end of the sojourn, I knew I was in the presence of someone rather different and I completely understood why this person was so well considered by the top end of the finance community.

He is not a hard “value” guy like Grant, Tony and me, but he sees things others don’t. He feels the markets, the way a proper football fan may know nothing of XG, but can see who Rodney Marsh was, after only a couple of touches.

 

Wisdom, a rare intangible product.

Jawad here reflects on his own life journey, mainly over the last ten years, dealing with for example his imposter syndrome, his personal growth, his limitations. I can strongly suggest that this podcast finds its way into your list of downloads, as it is full of something that is in short supply these days.

Wisdom. A rare intangible product that has sadly been forgotten, but is never without true value. 

It won’t be for everyone, but it has holistic messages for us all, if we are open to go beyond the common first-order thinking. He quotes various personalities, of faith and not, to find very deep insight.

Man shall not live on bread alone. – Matthew 4.4

Jawad could be running big money in his own hedge fund, and doing very well, but he isn’t driven by today’s revenues. Similarly, our own sector of sport is badly in need of thinking beyond this top-line, and equally could reflect on its own direction.

Less is more. Scarcity has great worth. Authentic has longevity and purpose, but Jake Paul ultimately doesn’t. 

 

“Know Thyself”.

There are so many soft, horizontal, lateral lessons in the faith and wisdom of Jawad, using beautiful words like “grace” to make his points. In fact, his book is arguably one of the best manuals on HR you can possibly find, and every single recruiter should read it.

Being aligned in heart, mind and tongue brings clarity. And if you can’t achieve that state, stay silent. – Jawad Mian.

An axiom so so profound. The core of today’s essay.

Staying silent is something many of us just can’t attain when hubris gets in the way, as Jawad explains to us so well. In my case, so do others.

Not every thought you have needs to be posted, Roger, no matter how interesting it is. – Jim Kerr

When you stop feeling the need to live up to your persona and brand image, maybe that’s when you can really offer proper insight. The truth is always the victim of protecting your ego and/or your source of income.

“Know Thyself“ is a concept going way way back, to the Greeks like Aristotle. You can’t be a great operator or investor, a great advisor or commentator, if you don’t know yourself.

If you don’t know who you are, the financial markets will be a great place to help you find out. – Jawad Mian

Ouch. That will of course come with a lot of pain, and a heavy monetary toll, but it will force you to work out who you are and how you work. Some would say the exact same thing about the game of golf.

Every golfer of intelligence knows exactly who they are.

 

So where is this “clarity” in sport?

What is the ghost of Christmas Future showing us at the end of anno domini 2024? 

If, as Jawad says, you can only offer “clarity”, when your heart and mind are aligned, this really hits the absolute source of all the angst in our industry today. In sport, in every way, every day, the head and the heart usually want to run in very different directions. Like in all the creative industries.

I’d want to think that our body of work over these 6 years has tried to marry the two of these, and suggest an equilibrium point. Because it is the only real key to hoping to manage both a Balance Sheet and a Bob Dylan. An Income Statement and an Ian Dury.

The very best part of working in these industries is this eternal challenge. There is no real destination, but the journey itself is the privilege, and the win. 

 

So, putting aside all the emotion, all the virtue-signalling, all the fear of offending, all the ego, what do we, at Albachiara, see going into 2025?

The macro insight; the stuff Jawad likes.

 

The futile quest for the truth on “value”. 

Investing in sport in this moment is in a “twilight zone” of misalignment. People are confused.

Asset valuations offer no rhyme or reason, no trendline to extrapolate, no playbook, no formula for certain return. On fundamental analysis, so many of the values we see around us in this industry are just so wrong; way way too high. Painfully mispriced on any metrics of profits and free cashflow.

And, yet, they exist. Comfortably exist. And we have become comfortably numb to them.

Why?

The reason lies in classical economic theory. The “demand” today, from a certain type of investor, vastly outweighs the “supply” of available premium sports assets. This point is well made by another type of philosopher. One very different from dear Jawad. 

Prof Scott Galloway isn’t my cup of tea as a person, (he’s a fan of Glasgow Rangers, and suffers from that club’s same defect: an idea of inherent superiority). But he is objectively very good.

Here he talks F1. 

What is definitely going to happen, though, is that sports teams are going to keep increasing in value, even though they’re shitty businesses in terms of cash flow. As long as the fastest-growing demographic group is billionaires, who tend to be at the age where the fear of death erupts, and leagues maintain monopoly power, we’re going to see a continued increase in the terminal value of teams. Most of them will lose money every year. Then, in a few years, they’ll sell at extraordinary multiples to the next generation of men in their sixties still trying to impress their dads. – Scott Galloway

 

Still trying to impress their dads!

I love that, in its casual en-passant reference to one of the great truths of life. The absurdly complex relationship between a boy and his dad. This is the macro that Jawad “feels” in his own markets. It’s wonderful writing.

Note however his caveat: “If leagues maintain their monopoly power.”  In rugby, in soccer, in MMA, etc, these monopolies now are all being challenged. Seriously challenged. Maybe not the US, but European sport is in full disruption. Galloway’s insight, however, remains solid. What does it mean for us?

Sport, as an industry, to see a clear road ahead, needs to really know itself. If it is now truly just an ego and legacy play for an increasing number of very wealthy men, we need to set ourselves out to manage that. We need to reflect on how all those dominoes will fall.

 

What is Jaguar thinking? 

It is mainly men (and their ego) who need this kind of stuff, and this is why the Jaguar rebrand is just insanity, and completely misses the simple honesty of Galloway’s point. Men of a certain type have always needed a symbol of their virility and success. A dick substitute. This is the very clear “brand essence” of the alpha man who, when he feels his power fading in the crisis of mid-life, often looks for a faster car and a faster woman.

Owning sport now is the new E-type. That’s my clarity this Sunday. That is why valuations in sport are all over the fucking shop. There are just a lot of very wealthy guys with a growing sense of mortality.

We have a couple of other sources of excess demand into sport assets that exacerbate this wall-of-money driver. People who have raised investment funds and need to deploy their LP money before they lose it. These folks won’t look too closely at multiples of profits or cash flow, and they don’t want to hear people telling them things are overpriced and with no “margin of safety”. We also have the geopolitical investors like Saudi, with wider KPIs. They are unpredictable in how they will move. Even within the Kingdom, there are many diverse stakeholders and decision-makers, operating different agendas. 

So, in summary, there is a serious “bid” for sport that allows no alignment between the fundamentals (the head), and the non-economic impulse (the heart). None of this will get better or clearer in 2025.

Investing in our sector is a living exercise in “Play the Player”.

 

The real truth about our female games.

Many investors see women’s sport as the Big Idea. And rightly so. Of course all the challenges in finding “value”, as mentioned above, are even more complex here. But, for so many, it is heresy to even question if one should look objectively at these assets. That’s a problem.

Sadly we live in times where many people have forgotten that progress has always been made only when an entrepreneur or investor thinks there is a financial return to be had. Classic Adam Smith. In these last decades of infinite debt, especially post COVID, people no longer accept that money does NOT grow on trees, and wealth is only created by investors willing to risk their savings and capital on these new ideas. Big Ideas.

I know no man who would turn up his nose at making money investing in women’s sport. But I know few world-class investors who would, when the hard numbers don’t add up. And you are not even able ask the real questions.

Today, certain folks will demand that the female games must de facto be considered at absolutely the same level of worth as men. It’s obligatory. Thinking in any way different to that will never go down well with some, but we all must have the courage to call it out for what it is. At Jaguar, no one had the balls to do that, apparently.

So, some days it’s very frustrating to see how people now think and comment, and you just can’t stay silent, no matter how much you try.

 

It’s an unfair man’s world. No one denies that. 

Money deployed into women’s sport, by capital, by broadcasters, by sponsors, is in reality now full of malinvestment, and the reasons are all understandable. It’s driven by culture battles, a sense of past injustices, a need to now compensate for old discriminations.

I get it. We all do.

Mr James Brown says it best, but all of this angst has got absolutely nothing to do with good investing or good business. Never forget that.

Women’s sport today as an “asset class” is in a complete misalignment of the heart and the head. Too many people don’t see this, or don’t want to see this. For example, they seem to demand that money is directed into the female side of our industry through a free ride unabashed linkage with the men’s game. The WNBA, tennis majors, investment into women’s soccer teams by clubs like Manchester United.

These bundles are all in reality emotional subsidies. The heart is too dominant, the head suffers, and the sector is full of women’s sport assets being overvalued (and overcompensated) on a guilt-trip. Not on hard business analysis.

“Know Thyself”. 

 

This is how a pro thinks. 

Here is what one really needs to ask about the future of women’s sport, once you liberate yourself with the truth whose name must not be spoken.

Do women and girls really care about sport in enough numbers to justify the attention and investment they have already received?

Today that is a clear “no” for me, but many will disagree, and say it’s only a question of timing. In the long run, it will come, in spades.

But will it?  Quickly enough for investors? 

In the long run we are all dead. – John Maynard Keynes.

 

Better to frame the conversation in proper strategic marketing terms.

In the blue corner, male sport has been around for 150 years, with a very established audience and loyalty. It is known to us all, warts and all, as a very special product with a unique place in our lives. Its roots run through the entire planet, in every household from Lima to Liverpool, from Tokyo to Toronto. In product/market fit language, male sport is as sticky as it comes. Generational, societal, with a heritage and tradition that nothing else has. 

Galloway again says it best:

There’s something more here. One in 7 men can’t name a single friend, and 1 in 4 can’t name a best friend. The Premier League, the NFL, and F1 give men license to bond and express emotions in a safe place. In addition, these events happen in the most wonderful venues ever constructed: not on a fucking screen. We are a social and emotional species, and being part of a collective watching people with speed, strength and alien-like instincts compete… Puts us in the moment.

In the red corner, female sport arrived only yesterday, certainly in major sports like soccer, basketball, rugby, golf. As the product of a strategic marketeer, it could be called a brand extension, a new launch. Normally these types of investment look to take market-share from an existing total addressable market, but that doesn’t apply for women’s sport, because there is no established customer base today. It has all yet to be built, over many many years of grind. To be very fair, the prospects for doing that are somewhat encouraging; young girls want to play sport. In places, like Caitlin Clark, it seems young girls want to also watch sport. So is it correct to say it’s just a matter of time? Inevitable?

 

Ignoring the due diligence. 

My main issue with “build it and they will come”, as a very cold CFO and investor, is what seems to be the deliberate obtuseness of not seeing obstacles. And, more importantly, not pricing that risk into the cost of capital. Hence, valuations. Hard corporate finance. 

Any advisor worth their salt needs to direct attention to a couple of major issues in considering any investment in women’s sport.

 

A more complex machine with a higher CPA

Young teen girls frankly are a lot more independent and discerning than young teen boys. Lads are a simpler machine, with fewer buttons to push, much more easily drawn into what their friends, brothers and fathers like. We are a blunt instrument that works on hormones, testosterone and tribe. 

Girls aren’t, and that’s a compliment to them. Their headspace is full of many more thoughts and impulses, so they are a harder sell. For anyone building women’s sport; finding, attracting and retaining a female fan is going to be a much harder task; and you are starting all that from frankly zero. In marketing talk, the cost of customer acquisition, CPA, of a girl sports fan is going to be significantly higher than for a male fan. A higher CPA, and I’d argue a lower lifetime value (LTV). Girls won’t have the tribal loyalty of the male sports fan, as they are just much more complex and fickle than us. They will churn.

CPA  >  LTV is a bad formula of unit economics to give confidence to a pro investor.

 

The turn-off of having to beat “men”!

The trans debate is a serious threat to all those young girls, now starting to play soccer or cricket, etc. Especially if ambitious enough to hope to excel. How many are going to get turned off completely by seeing themselves unable to compete with a guy who has genuinely or falsely now identified as female? This is a major major issue for any businessperson or marketeer investing in a new product, from a low base. 

Women’s sport isn’t listening to people like Davies, Navratilova etc, and it is just disgraceful arrogance and hubris. It is by far the biggest threat in the SWOT.

 

It isn’t hypocritical to not do both!

My own summary is that male and female sport are two completely different products and investment propositions. Why no one seems to see this is beyond me. They even say it is “hypocritical” to not do both.

🤷‍♂️

The risk of investing into women’s sport is much much higher than with the men. That should be reflected in the discount rate used to value their stream of future cash flows. And those cashflows, we are told, will only happen many years into the future. Anyone who knows how to do a discounted cash flow (DCF) understands what those both mean for the valuation.  Woman’s sports assets are in most cases overvalued. And here this is where maybe Galloway is right: Michele Kang is no different from what he describes on the male side. 

As long as the fastest-growing demographic group is billionaires, who tend to be at the age where the fear of death erupts, we’re going to see a continued increase in the terminal value of teams. Most of them will lose money every year. 

If so, we all need to change our process of investment evaluation and due diligence. Will there be enough billionaires, sensing their own mortality, to give us a good chance of exit?

I’d suggest with confidence that there will be a lot less of them on the female side, but this is the type of question that someone like Jawad can answer better than me.

 

Always find someone to challenge your beliefs.

Read Stray Reflections.

If it doesn’t change you, I will give you your money back. 

Enter 2025 with an ecumenical mind. Think lateral not linear. Reject all absolutism and surround yourself with people better than you.

Don’t drink the Kool Aid, and remember that great financial returns almost never come investing with the accepted wisdom of the pack.

Buon Natale. Buon Anno.

​