Basketball in the bubble, Skin in the Game, and doing the “right thing” with nothing to lose
The NBA restart has been a slam dunk: competitive games, virtual fans, a fun vibe of March Madness meets Summer League, and of course the surprising, yet ultimately tragic, run by my Phoenix Suns, who closed out the season 8-0 as the only undefeated team in the bubble, and still didn’t make the playoffs.
And crucially: zero positive tests for COVID-19 among players, as of August 12, 2020.
The league’s pivot to the pandemic is even more impressive when you consider the degree of difficulty and operational complexity required to move everything to a secure “bubble” in Orlando, in the middle of a pandemic, under intense scrutiny and uncertain timelines.
But when you watch this new version of the NBA, it’s clear from tipoff that basketball in the bubble is about much more than just the game on the court.
Skin in the Game
The name on the court — front and center, above the NBA logo — speaks volumes: BLACK LIVES MATTER. The league, its players, sponsors, and media, have been using the games to promote social justice causes, namely Black Lives Matter (BLM).
Setting personal feelings toward the causes aside, it’s interesting to view the league’s moves through the lens of Skin in the Game, which Nassim Taleb defines in the book Antifragile as:
Skin in the Game / Captain and Ship Rule: Every captain goes down with every ship. This removes the agency problem and the lack of doxastic commitment.
Agency problem: Situation in which the manager of a business is not the true owner, so he follows a strategy that cosmetically seems to be sound, but in a hidden way benefits him and makes him antifragile at the expense (fragility) of the true owners or society. When he is right, he collects large benefits; when he is wrong, others pay the price. Typically this problem leads to fragility, as it is easy to hide risks. It also affects politicians and academics. A major source of fragility.
Doxastic Commitment, or “Soul in the Game”: You must only believe predictions and opinions by those who committed themselves to a certain belief, and had something to lose, in a way to pay a cost in being wrong.
A simplified way to think about Skin the Game is from Wikipedia: “having a measurable risk when taking a major decision”.
With those concepts in mind, let’s discuss a few examples of how they apply to today’s NBA.
First, from an Us vs Them perspective, most NBA players are black and have likely, unfortunately, experienced acts of racism. These players are also influential members of black communities in the US. Thus, when black communities are threatened or hurt it hits close to home for the NBA family. They have Skin in the Game (in the fight against racism in the US) and it follows that their leaders would leverage their influence to stand up for their communities and send a strong signal of solidarity with BLM.
Second, the league also has Skin in the Game from a financial standpoint. It’s in the league’s interests to align their messaging with causes that motivate their fans, many of whom, I imagine, are passionate BLM supporters. For example, if the league is perceived as not supporting the popular cause, their fans (customers) may walk away. A material decline in say viewership or sales would make these already tough economic times even more painful. Alternatively, the league (including its sponsors, like say, Nike) has a lot to gain by championing causes that are popular with their fans, strengthening relationships with their customers.
Third, if we expand our scope to broader human rights, global markets, and geopolitics, the league’s Skin in the Game gets more complex.
A couple weeks ago, just before the NBA restart tipped off, ESPN released this alarming story: ESPN investigation finds coaches at NBA China academies complained of player abuse, lack of schooling. It shines a light on human rights violations — including the millions of Uighur Muslims held in concentration camps in Xinjiang — taking place in China, one of the world’s most powerful nations, and also the NBA’s biggest market.
It’s a bad look for the NBA and China, and it’s logical — though disappointing — that the investigation would be overlooked amid the hype of the restart, effectively swept under the rug. Why is it logical? Skin in the Game (and lack thereof):
1. The league risks a lot financially any time it touches a third-rail issue for China;
2. Financial risks are particularly painful now, in the middle of a pandemic and severe economic recession;
3. The league learned its lesson — silence is golden — from last year’s SNAFU with China (which I wrote about in Red Nation);
4. Compared to social justice and US politics, human rights and geopolitical issues in China are of little interest to the league’s US audiences.
As much as I shake my head at the hypocrisy — how the same NBA people espousing “Silence is Compliance” in terms of social justice and BLM, are Silent and Compliant in terms of democracy in Hong Kong and genocide in Xinjiang — it makes sense when you look at the incentives and the varying degrees of Skin in the Game.
This Skin in the Game analysis also highlights why it was worth the herculean effort to get basketball back on TV in the first place: money.
Basketball — bubble or no bubble — is a business, a business with a strategy.
The NBA’s Strategy Credit
Ben Thompson coined the term “Strategy Credit” in this 2013 Stratechery article:
Strategy Credit: An uncomplicated decision that makes a company look good relative to other companies who face much more significant trade-offs.
Given the various applications of Skin in the Game motivations presented above, I think the NBA’s tack to go all in on BLM is a textbook example of a Strategy Credit.
The Strategy Credit concept also articulates why, even if I may agree with the underlying values being espoused, I’m not gushing, and I’m not convinced the league’s actions are particularly brave, courageous or heroic.[efn_note]To be fair, as I noted in Red Nation, I do think it took a lot of courage when NBA Commissioner Adam Silver last year prioritized freedom of expression, sacrificed revenue, and resisted calls from China to fire Houston Rockets General Manager, Daryl Morey.[/efn_note]
To fine tune this point, I’ll reference a great line from Thompson’s 2019 article, Google Fights Back:
To be clear, to say that something is a Strategy Credit is not a bad thing: it is simply an observation that doing the “right thing” requires no trade-offs when it comes to a company’s core business model;
This clarification also helps articulate a related point I made in Waking the tiger: “It’s easy to voice popular opinions, even if — especially if — they happen to be right.”
Tying basketball in the bubble, to BLM, China, Skin in the Game and Strategy Credit also helps explain why the league is controlling the degree to which the players express themselves in the bubble: the kneeling during the Star-Spangled Banner is sanctioned; the messages on jerseys are approved; the absence of anything related to Xinjiang, FIGHT FOR FREEDOM STAND WITH HONG KONG, or other third-rail China issues, is no coincidence — it’s business.
One final Strategy Credit point relates to timing and competition: any risk of losing NBA fans who are alienated by the BLM messaging is likely mitigated by the simple fact that there’s not much else to watch in terms of live sports right now. The timing makes an otherwise risky, polarizing move a relatively safe bet in the COVID-19 landscape where many people really just want entertaining live sports back.
I know I do, and even though the Suns are out, I’ll be watching.