Ben Perreira

My head's dropbox.

Month: March, 2012

The Magical Power of Sports

Word came in last night that a group led by Magic Johnson and longtime baseball executive Stan Kasten had been approved by a bankruptcy court to purchase the LA Dodgers from Frank McCourt. I have no idea what Magic is worth, and I’m sure he contributed a significant amount given that in the last couple years he cashed out on a 100+ unit Starbucks franchise and a minority holding in the Lakers. However, I imagine his name is at the top of the list because of his clout more than for his financial contribution. It makes sense, of course, given that people don’t buy sports franchises for traditional dividends. In sports, the main dividend is ego.

The value of a business is generally set at the present value of all future cash flows. Future cash flows, as anything in the future, can be quite difficult to predict. Owners expect a return on their investment at a rate greater than the market average. That could mean 10% or 15% or more, depending on the individual and what they benchmark their investment against.

Sports franchises have the luxury of not having to return dividends. A cash payout at the end of the year is always nice, but even the best teams (e.g., the 2010-2011 Dallas Mavericks) lose money.

In some ways, sports franchises employ a “greater sucker” method, in which an owner must find a greater sucker than him to buy the business at his own gain at some point in the future. McCourt and his wife paid under $400m for the team in 2004, incurred huge debt to the team and yesterday sold it for $2.3b. That means the value of the company grew 475% in nine years; Only Apple is supposed to make these kind of returns.

Teams make money, yes, though we generally don’t know how much because the only public sports franchise in the United States is the Green Bay Packers. (Team profitability, or lack thereof, was a huge source of contention in the NFL and NBA collective bargaining sessions last summer/ fall.) However, the main reason teams can command such huge sums when they change owners is because they are scarce. A team may go on sale once in a lifetime. Who cares about annual profitability when you can go around town telling everyone you own the Dodgers? I say this with only the smallest hint of irony. If you have the cash to otherwise support yourself (and all these owners do), why not buy a team and have some fun?


Learning By Failure

There’s something about learning that is inherently painful. It’s possible to learn something by being told or by reading something, but it doesn’t seem to kick in unless it’s completely shocking. New territory must be blazed and old habits must die.

For example, I started to learn how to surf when I was about 11. The only way to learn how to do new maneuvers in surfing is through iteration. Even if one can land a trick the first time, the odds are he will have to fall many more times to achieve ultimate mastery. Eventually one has tried enough times to figure out his boundaries (in my case they seem to be quite well-defined, to my dismay) and can commit that process to memory. 

This idea is probably most true with anything that offers a proper challenge. For those who seek such challenges, the cycle goes:

Fail –> Fail –> Fail –> Master –> Repeat with new challenge

Make a Decision

About three years ago I was working for a sports agent and met a gentleman who was a Harvard Business School graduate and all around smart guy. He was also slightly shady and could be a real prick, but I still learned a ton from him. I was looking into business schools at the time and asked his opinion. It was: 

Do you want me to save you $100k? I can sum up what I learned in three words: “make a decision.”

I didn’t heed his advice to forego business school and save the money (thankfully not $100k), but it was great advice that holds true after my experience of (almost) getting an MBA. 

That’s the purpose of this blog, in a way. 

I have had a few different blogs in the past, but haven’t been able to decide on a format. This is in some ways an extension of my Twitter feed: stream of consciousness and constantly inspired by new things. I am inherently curious, perhaps to a fault, but I wanted a place where I could discuss business through the various contexts through which it is often presented. Maybe I’ll even debunk some nonsense for a couple people.

Committing to something can prove psychologically hazardous, as Dr. Robert Cialdini notes in his seminal tome, Influence. It can force us to stay with that thing simply to avoid cognitive dissonance, or feeling uneasy. However, fuck it.

Another quote a saw recently that highlights the importance of moving forward:

Of indecisive paralysis or making a mistake, the former is the more insidious organizational issue.

Steve Jobs had a famous saying that “artists always ship,” and that work is useless if it stays on your shelf.

So here’s my blog, shipped.