ContrariLand

Have you ever seen a Komodo dragon eat?   He finds prey and bites it.  But the venom is slow-acting and won’t kill for a few weeks.  So the komodo dragon follows the prey around until it finally collapses, and the group of dragons feast.  This slow-acting venom is a useful advantage because unlike other poisonous creatures the prey doesn’t immediately see the impact, so they are less fearful of the creature.

The Ringer did a great oral history of how Fox got the NFL broadcast rights.  Back in 1993, with the economy coming out of recession, CBS and NBC were unwilling to increase their offers for broadcast rights, given their short-term focus on quarterly profits and stock price.  Rupert Murdoch came in and dramatically “overpaid”, by offering WAY more than what the other networks did.  He did this not because of profits in years one or two, but because having the NFL would allow him to build a 4^thbroadcast network.  Football gave Fox not just credibility but a platform from which it could advertise its other shows.  By recognizing the second-order impacts and long-term value creation, Murdoch was playing a totally different game than the execs at NBC and ABC.

The New England Patriots have built an unprecedented 18-year dynasty in a sport known for parity.   Yes, there has been a handsome Brady and great in-game coaching, but the most important factor has been roster design.  Football executives and coaches have an extreme bias for the near-term.  This is partly human nature (studies show that most people would rather have $100 today than $120 in one year) but it is also due to the high personnel turnover in sports.  Coaches and GMs are strongly incentivized to win soon, even at the expense of long-term success.  In one example, in 2012 the Redskins traded four picks (three of them future first rounders, and one 2^nd) to get RG3.

Over the past 18 years, the Patriots have intentionally utilized this bias to their own advantage.  They consistently make two types of trades: A) the “one for many” in which they might offer a first-round pick in exchange for a 2^nd, 3^rd and 4^th round picks.  B) A “now for later” in which they will offer a current year 2^nd round pick in exchange for next year’s 1^st round pick.  The team on the other side of the trade is often much worse (making their pick more valuable) but also much more “insecure”, feeling a need to win now, or else.  Belichick and the Pats are secure, and just continue stock-piling value.  The best person to trade with is the one who is afraid of losing their job.

In the most recent mid-terms there was an item on the ballot in a few states on restoring voting rights to felons.   In Florida, it passed with 64% of the vote.  Crucially, it was written to not take effect until a few years in the future.  At the same time, Republican Rick Scott won the Florida Senate seat.  I would wager that if the bill was slightly different, and that people were voting on whether ex-felons could vote immediately, it would fail, and the results would line up more like the Senate vote. People vote very differently when items are in the future (I think they vote more in line with the person they would LIKE to be, as opposed to the person they ARE).  Similarly, bills limiting the impact from gerrymandering in Colorado, Mississippi and Missouri passed, but again crucially the impacts were not until the future.  People trying to get initiatives passed should recognize this and when proposing something that they know appeals to people’s better angels, they should put the impacts into the future a bit, separating people’s current and future selves.

It has become clear that the self-described king of the deal Donald Trump is not great at negotiating.  He has a very high discount rate, highly values immediate gratification and doesn’t seem to be able to think beyond 24 hours.  His objectives and time horizons are so transparent that competent negotiators like Nancy Pelosi can play him, while still telling him what he wants to hear.  He would be a terrible komodo dragon and a terrible football GM.

In the business world, it is not a coincidence that two of the most valuable companies in the world – Berkshire Hathaway and Amazon – are run by men with extremely long-term horizons. This allows them to reinvest in their businesses and make investments that won’t pay off immediately but will position them very well for the long term.  People laughed for years when Amazon was losing money, but meanwhile it was laying down the strategic track for the dominant position it holds today.  Neither Bezos nor Buffett claim to pay much attention to their stock markets and the market rightly rewards them for just that. This fixation on the short-term is driving the move towards more companies choosing to remain private rather than go public.

People (and animals) are impatient and the examples above – komodo dragons, Bill Belichick, Rupert Murdoch, Donald Trump, ballot initiatives, Jeff Bezos – show that there are ways to strategically exploit this.