Football is just business

Written on 1 March 2019, 05:08pm

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I recently wrote a post on a Romanian sports site about trying to apply an IT process to find the root cause of a football problem. I will try to make a summary here since the post that I wrote is in Romanian.

It’s about Liverpool FC and it essentially starts from 4 facts about Premier League (PL) football:

  1. Modern football is a business. There are revenue streams (media, commercial, match-day), expenses (squad, facilities, etc), assets (the players and the staff) and risk management governing the entire process. In order to survive, a business needs to turn a profit.
  2. For the Top 6 PL teams, the main source of revenue is the participation in Champions League (CL). The difference between finishing 1st and 6th in PL is few million pounds (basically peanuts), while missing out the Top 4 (ensuring CL participation) could have significant financial impact. Example – Liverpool reaching the CL final last season meant that their profits tripled compared to the previous year.
  3. Every business has a vision, and a strategy for implementing the vision. The vision means the desired future position, while the strategy is a long-term plan to implement the vision. To implement the overall strategic plan, a shorter-term, tactical plan might be needed – easier to monitor and coordinate.
  4. Higher ambitions means higher risks. It all depends on the risk appetite of the business.

With these facts in mind, I try to make a root cause analysis of the reasons why Liverpool seems to lose pace in the recent period. Many supporters see the recent transfer window as a missed opportunity. Despite several injuries, in January 2019 the club was still on the 1st place with several points advantage. You would expect a club to strengthen from a position of strength. It didn’t, and the takeaway is that the vision of the club is different from the vision of the supporter. While the supporters would aim to win the PL, the club vision is to maintain a sustainable growth and sound financial management. This can be done by remaining in the Top 4 (virtually achieved at this stage of the season) and staying in CL for as long as possible. Aiming for the first place would involve bringing in new players, which introduce additional costs and risks. Higher ambitions means higher risks, which are not necessarily accepted by the business.

In these conditions, winning the PL would be simply a happy side-effect.

In the end, I touch on two more things. First, having the realization above made have a more relaxed approach in supporting Liverpool FC. I understand that my expectations are not necessarily aligned with the club priorities, and therefore I have to manage these expectations. For the first time in the last few years, last weekend I decided to skip watching a Liverpool game and enjoy some time with the family:

Time to chill

The second point is that I am getting a little bit annoyed with the extremists-optimists supporters on social media. This tweet is spot on:

Nobody is denying the progress Liverpool made since Klopp took over. I fully support him and I think he’s a perfect match for the club. In any other season, having 66 points after 27 games would virtually guarantee you winning the league.
But that doesn’t mean that we can pretend things are going great: Liverpool won a single game from the last 5, it’s definitely not the right time to celebrate being first of the league with a mere point ahead of the second place, when all the bookmakers and predictive models predict that Liverpool will finish second. Hypothetical statements such as ‘if you would have known this at the beginning of the season…‘ don’t go anywhere and tend to focus more on the past rather than the future.
This is the political correctness applied to football.

Conclusion: doing a root cause analysis using the 5 whys to find why Liverpool is no longer favorite to win the PL leads to the following results:

  1. Why? Because the squad is not good enough to fight the financial giant currently on the 2nd place
  2. Why? Because there are big differences between the starting XI and the bench
  3. Why? Because the club did not bring in enough players during the last 2 transfer windows
  4. Why? Because it was not needed; finishing in Top 4 is virtually guaranteed
  5. Why? Because football is a business and trophies are just a caprice of the supporters

Stock market news is (almost) never breaking news

Written on 19 January 2019, 12:09pm

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Did anyone notice how every drop in the stock market is reported as breaking news but the subsequent recovery is completely ignored?

3rd of Jan 2019: breaking news after the Apple shares plunge 9%
19th of Jan 2019: the Apple shares are back to the level before the plunge

Later edit, 1 October 2019:

1st of October 2019: stock news is never breaking news

The drop from 158 to 142USD was breaking news. But 9 months later the price is 226USD, thank you very much.

A few thoughts on entrepreneurship

Written on 23 September 2018, 02:55pm

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Some thoughts about succeeding with your start-up:

  • It’s the idea that matters, not the money. Money is relatively easy to get, what’s more difficult to have is a brilliant idea for your startup. 
  • But to get money you need a business case. This forces you to analyse and validate your idea. Of course, more than 99% of the ideas will be either not feasible or simply rubbish. Nobody will give you money for free, and going through the analysis required by a business case increases the chances that the money are well spent. 
  • Risk management is essential. After your idea takes contour and you have the necessary funding, it’s all about managing the risks. Start with identifying your assets, look at their vulnerabilities and the possible threats. Then perform a proper risk assessment (likelihood and impact) and manage the risks (mitigate, transfer, avoid, accept). Keep looking at the risks and the implemented controls periodically; it’s likely that you will play in an always evolving environment where the risk landscape always changes.
  • Always be better. Just because you have something out there (a product or a service) doesn’t mean that it will necessarily bring profit. Keep asking yourself what needs does it fill, and how these needs will evolve. Keep asking yourself if your product or service still brings value. You need to adapt to survive.  

A discussion from my first year of university (2000) stuck with me until now. I was chatting to one of the older students who was already leading his own business and was doing the university more out of curiosity. I understood the value of an idea when he told me that he is ready to go with me to the bank and get money, as long as I am coming up with a business idea that can be implemented. Needless to say, after a few tries we both concluded that there’s no need to bother the bank, and for the following years I kept thinking about good business ideas that never came.

Fast forward to 2012, and I was involved with a couple of friends into my first and only startup so far. We had an idea and we had the energy to build it ourselves. And we did it, and then we launched it. And boy, it was working! But soon, everything fell apart. As soon as the software product was built, we needed sales people to move things forward. We were engineers trying to solve a sales problem and not realizing that all we needed was to go to the bank and ask for money.

So in the end, doing the 4 things above offers no guarantee that you will succeed. Doing the right things at the right time takes practice. And that only comes after repeated failures.