Former Parramatta and Australia fullback Jarryd Hayne is in the United States trying to swap his National Rugby League (NRL) colours for a chance to play in the National Football League (NFL). A two-time Dally M Medallist as the league’s Player of the Year, Hayne shocked the rugby league world by announcing his immediate departure from the Australian game to pursue a career on the gridiron.
Hayne’s bold decision reignited recent arguments about the possible changes to the way some key players are paid to keep them in the game and stop them jumping to other – potentially higher-profile – codes.
In this context, watching Hayne’s announcement, I couldn’t help but cast my mind to some of the lessons that can be learned about big picture strategic planning from a Nobel Prize-winning economist.
Game theory and dining out
To be a little more specific, I started to think of some of the principles of game theory, a branch of mathematics with diverse applications including business, biology, psychology and many more fields.
Game theory is the study of strategic decision making. Probably the most famous game theorist is Princeton University’s John Forbes Nash, who won the Nobel Prize in Economics in 1994. Nash should be familiar to some league fans as South Sydney Rabbitohs co-owner Russell Crowe somehow ticked and twitched his way to a swag of awards and nominations for portraying him in the 2001 movie A Beautiful Mind.
A classic example of game theory is the Unscrupulous Diner Problem. Consider the following scenario.
A diner goes to a restaurant on his own. There are two menus to choose from: a standard menu at A$10 per meal and a premium menu at A$50 per meal. While the diner would prefer to eat a premium meal, he concludes that the difference in price is not worth it so his best option (weighing up both cost and benefit) is to spend A$10 on a standard meal.
Imagine now he is in a group of 20 other diners and for reasons of simplicity they have agreed that they will all order whatever they like and will split the bill evenly.
The diner now reframes the options in front of him. While the premium meal will cost the group A$40 more, it will only cost him personally A$2 more (since he is only paying 1/20th of the total). He cannot control what any other diner chooses, so concludes that whatever his bill will be with a standard meal, it will only be A$2 more with a premium meal, so he chooses from that menu.
The logical conclusion of this is that if all 20 diners choose to maximise their own position (and think they spend only A$2 more for a premium meal) then, collectively, the bill will be A$1,000 so every single diner winds up with the less preferred position of paying A$50 each.
While the above example is, to some degree, an abstract exercise, it is a simple case of where failure to see the big picture can lead to a series of small scale decisions, which are each individually best but which collectively add up to the worst case scenario.
The diners could easily avoid paying A$50 each (as, individually, they would choose to do) if they simply looked at the overall picture in advance and agreed to work towards the best result for the group.
Game theory and the footy
Having taken the scenic route to my point, what does all of this have to do with Jarryd Hayne and whether or not he heads off to wear a helmet for a living?
The rumblings are that the NRL is considering implementing a new system whereby they would employ some players centrally, paying them above what their clubs would do if they would otherwise be lost to the sport.
The NRL would, in essence, subsidise the contracts of high-profile players outside of the clubs’ salary caps to lure them into rugby league or to keep current players from defecting to other codes.
The faults with such a system are countless. Most obviously, it will completely invert the primary function of the salary cap. Teams with more elite players will get their salaries partly paid so will have more payroll space to further improve their squads.
One of the ironies of this situation is that the system was first proposed as a knee-jerk reaction to Israel Folau’s signing with NSW Waratahs rugby union after Parramatta was unable to register a contract for him.
One of the barriers Paramatta hit was the league’s meddling with its own assessment of a “fair market value” for his contract, an idea introduced as a knee-jerk reaction to Mark Gasnier’s code-hopping a few years prior.
So one short-term fix created the need for another and another. The big picture, inevitably, was nowhere to be seen.
It’s not all about the money
The great strength of a league with an even salary cap (assuming all clubs can afford to spend to the limit, as is the case in the NRL) is that player acquisition is as close as you can get to a true free market, without wage bills crippling any of the clubs (as with the insane logic of some European football teams).
The league really cannot, or should not, meddle with such a system with phony and arbitrary ideas such as “fair market value”. If a player is really willing to sign a lesser-valued contract with a club with limited salary cap space he desperately wishes to join, then why shouldn’t he?
Sure, there are external factors that may swing a player towards or away from a club, for example the climate or whether or not he enjoys driving around roundabouts enough to move to the national capital of Canberra.
Furthermore, there will always be more marketing or media opportunities in Sydney or Brisbane than in Townsville. That is unavoidable, but short of cutting all television or advertising opportunities to players, little can be done.
The lessons for the NRL
Strategic management cannot afford to be myopic or reactionary. When making a series of connected decisions, the longer-term, larger scale picture must always be kept in mind. As the Unscrupulous Diner example illustrates, even a series of individually optimal decisions can deliver less than the ideal outcome.
Implementing a system of lucrative centralised contracts may well persuade one or two superstar players to switch to, or to stay in, the league, whether permanently or just for a few additional years. Such signings inarguably represent short-term successes for the game but the sum total of these contracts would be anything but the best case scenario.
Rugby league has a long history of short-term thinking and knee-jerk reactions. The game’s previous administration was often openly criticised for being reactive, not proactive in its thinking.
Strategic changes often came about in response to immediate crises or negative headlines. The end result was a Frankenstein’s monster of management; individual strategies sewn together without a coherent structure or purpose.
Jarryd Hayne’s move stateside is certainly a short-term blow to Australian rugby league, but no more than that. A panic-led initiative to throw lucrative contracts, and potentially to open to the door to players financially holding the game over the barrel of a gun will do far more damage than any one man’s bold career choice.
In 2012, the game appointed a new Chief Executive, Dave Smith, a man with no background in sports administration but an impressive track record in banking and financial management. Smith’s optimal decision now is to look at the long-term picture and heed the lessons of game theory.
The Nobel Prize Committee – and Russell Crowe’s shiny Golden Globe statuette – stand testament to the fact that sometimes accepting a few short-term deficits is the best course of action.