The power of incentives and why Spurs are finally in a position to achieve success

poch3_etihad

Over the interminable international break, I’ve been thinking a lot about two things — Spurs and politics.

In politics, I’ve been following the US election avidly and trying to understand why, despite everything we are learning each day, tens of millions of perfectly sane and patriotic Americans will vote for Donald Trump on November 8th.

For Spurs, I’ve been thinking about the success the club is currently experiencing, and trying to understand if there is some deeper explanation than merely an outbreak of managerial competence and a couple of decent signings.

In these two divergent trains of thought, strangely, I’ve found myself coming back to a similar place: the importance of incentives, both good and bad, in shaping outcomes and behaviour.

To a neutral observer (at least as neutral as anyone can be given the impact the US president has on the whole world), Trump’s rise has been baffling. Trump appears to be a sociopathic, predatory conman whose hiding-in-plain-sight brazenness and questionable sexual history has more than a shade of the Jimmy Saville about it. His evident emotional, intellectual and political shortcomings threaten a dangerously volatile presidency, and this could have all manner of devastating consequences given the power of the office (like, you know, commanding the US armed forces).

However, if you’ve spent the past eight years and more watching Fox News and listening to US talk radio, it will have seeped into your subconscious that America is changing for the worse, you are the main loser from that change, and that the current political establishment, embodied by one Hillary Clinton, is creating that change. I’m generalising of course, but you can see the incentive is now there to vote Trump: If you believe the current system is the problem, you have the incentive to vote for the one guy who appears to be from outside it and is talking very loudly about destroying it.

The rest — the ability to ignore facts about Trump and believe lies told by Trump — is an unparalleled epidemic of cognitive dissonance, and will be studied by psychologists and political scientists for generations to come should, as the polls suggest, Clinton limp pathetically to victory.

If that’s an example of a “bad” incentive — although philosophically speaking an incentive is just an incentive, immune to such subjective labelling — then Spurs currently are an example of the “good”.

Arguably the most famous example of incentives in football is the other lot. For years, Arsene Wenger has been told to deliver a Top 4 finish and Champions League football, and been strongly incentivized to do so through ongoing employment on increasingly lucrative terms. Arsenal fans no doubt wonder, if Wenger had been incentivized to win a title — through either the offer of more money or the threat of the sack — he may have done more to seriously challenge for the title in the past dozen or so seasons.

Chelsea are another example of how incentives can have a fundamental impact on a football club. Despite investing millions and being a dominant force in youth football, Chelsea have failed to see an academy graduate (barring the expensive Matic outlier) given an extended run in the first team since John Terry. The problem has been that a succession of managers have been so concerned about satisfying Roman Abramovich’s thirst for trophies that none has been able to risk the inevitable ups and downs that come with blooding young players.

In North London (yeah, take that, any Arsenal fans who read this), Spurs have been having some incentive problems of their own through the ENIC era. Specifically, the “buy-low, sell-high” business model that powered Spurs up from the middle of the Premier League pack to the “best of the rest” may have inadvertently created the incentives that prevented the club from taking the next step.

Think of that giddy time when Gareth Bale was beginning his metamorphosis, or Luka Modric was making Harry Redknapp’s team hum in central midfield, or Dimitar Berbatov was oozing class up front. There was always that fear we had as fans: “If he keeps playing this well, we’ll never be able to keep him.”

And this wasn’t mere pessimistic terrace talk — this was simply a statement of fact, given the financial model of the club at the time. This model created perverse incentives — success in player development and coaching could mean instability and the loss of key players, and what could be a step forward in fact turned into a step back. Little wonder, then, the club churned through a succession of managers.

The debacle that was the post-Bale reboot brought into full view the flaws of this strategy. The vision for how the club was supposed to be run hasn’t changed on a strategic level since Daniel Levy decided to move on from Harry Redknapp: an ambitious young manager committed to playing dynamic football and running the club in a modern, professional way.

Andre Villas-Boas, for all his personal shortcomings, was hamstrung by conflicting incentives and objectives: he had to sell his star player, yet somehow mould a collection of cheap replacements into a winning team without a sustained dip in performance. There were many reasons that AVB failed, but the incentives were never right.

I’m pretty sure that AVB was supposed to become what Mauricio Pochettino is now, but for Pochettino the incentives now are perfect.

He is charged with building a team that is greater than the sum of the parts, without the need to sell key players but accepting as a consequence that there are limited funds to acquire new ones. Instead of trying to compete with the moneybags clubs in the transfer market, Spurs are forced to do things in a different way, and are benefitting from doing so through squad unity and a vibrancy other clubs lack. Pochettino and the club have every incentive to develop young homegrown talent, especially since Harry Kane has shown how worthwhile it can be. Crucially, with no need to sell, there is no upper limit now on what can be achieved — when Pochettino talks about building the “project” and competing for titles, he means it, because that is the aim.

No doubt the club’s ability to resist cashing in on star players will be tested in years to come. But curiously, the new stadium, while hindering the ability to spend, creates a further incentive not to sell.

Spurs will be borrowing a lot of money to build the stadium, but the success of the investment ultimately rests on selling the 25,000 extra tickets each match and filling the lush new hospitality areas. This will be much easier with a successful and appealing team — as the ability of the club to sell out Wembley against three deeply uninspiring Champions League opponents this season attests. Spurs, therefore, have every incentive to keep Kane, Dele Alli and so on, no matter how easy Manchester United fans seem to think it will be to eventually tempt them away.

There are many reasons why I’m excited about Spurs at the moment, and there are many explanations about why the club is now moving forward even at a time it is increasingly financially disadvantaged compared to cash-rich rivals. This isn’t to take away credit from the remarkable job that Pochettino is doing, and the contrast with AVB is stark. Pochettino has immense sway at Hotspur Way now — a strong manager has the power to shape incentives.

A lot of things have to go right for a football club to succeed, but if the incentives aren’t right, change is just going round and round in a circle.

Think of the current team, if the old problem of selling star players reared its head again. Instead of building a single, ongoing project, Pochettino would be facing the challenge of replacing departing talent with cheaper, younger alternatives. You can’t defy footballing gravity forever, and Pochettino wouldn’t have the incentive to risk this damage to his reputation. Eventually he’d would walk away, reputation enhanced, like he did at Southampton (or, if he left it too late, leave sacked and heading back down the managerial pyramid, like most of his predecessors at Spurs).

There are many ways to describe the state of affairs at Spurs currently, but when we talk about stars aligning, virtuous circles, everyone pushing in the same direction or whatever expression it is (i’ve used a fair few…), key to it all is that the incentives are right.

Long may it continue.

And now, having written all that, I’m off to put a fiver on Trump to beat Clinton and West Brom to beat Spurs on Saturday.

Thanks for reading. Please follow me on Twitter for more Spurs chat.

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9 thoughts on “The power of incentives and why Spurs are finally in a position to achieve success

  1. Totcat

    I’ve recently come across this site and I’ve taken time to read this and your previous articles and the comments attached to them. In this rush rush world where time is money and every second counts it is an absolute pleasure to know that I’ve not wasted any of it. The balance of fact, detail, knowledge and opinion that you use is perfect, the layout and flow of your writing is excellent (all a sign of a true wordsmith) and the comments section shows a level of sophistication not seen on many websites, if fact the overall package that the Spurs Report presents must make it one of the best on the inter-web. COYS.

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      1. Totcat

        Thanks for taking the time to reply to me and that only goes to further confirm to me that this blog/site is a passion for you and not simply a task/job. I think I’ll be an future reader and occasional commentor who avidly awaits your next “insight”. I didn’t realise that my original comment was a compliment as I thought it was just a statement of fact, but credit where credit is due and you deserve a lot of kudos for the time, effort and energy that you put into your work, so here is a compliment I think this site is as good as Toby’s defensive work. COYS.

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  2. hotspursam

    Interesting article and well put Richard.
    I think you are a tad hard on the club and Levy by association with the buy low sell high strategy. I think that was just to see us through the period until we had the new training centre built and operational, so that a manager could bring through home grown players, as we paid for a stadium to be planned and built and paid for as we went along. A grand strategy so to speak.
    The training centre took many years to complete from initial inception, seeking to purchase a golf club and build there only to have that plan rejected. Then to ‘find’ and buy Middleton House, plan, abd build that etc, all took a long time. Meanwhile the club had to compete at the top level and maintain their status.
    While all that was going on properties were bought up and accessed for a possible future stadium. Not easy at all. On 36k capacity funds had to be generated somehow and apart from the millions put in by Enic to help this mainly by equity . So, a buy low sell high strategy wasn’t such a bad thing per se, although a trophy or two would have been nice on the playing side.
    The new training centre is up and running, has produced a few players with more in the pipeline and we have a manager willing to utilise this resource as the stadium comes to fruition.
    Don’t you just love it when a plan comes together.
    Probably jua a LOOB by me, but a point worth considering I think.

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    1. thespursreport Post author

      I think the buy-low, sell-high era arguably went on a bit long — i think that’d be my only criticism. The rest is hindsight, and what’s done is done — the only way is up — although that may not be quite the right phrase as we sit in 2nd position…

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  3. Ggreybeard

    Brilliant – but not only the Spurs bit. Your three paragraphs on the American election neatly summed up that imposter Donald Trump!

    For me the question with the new stadium will be how to fill it for each and every game, including League Cup matches, where even WHL does not get filled to capacity.

    I recall the crowds in the 50s and 60s sometimes reached capacity when it only cost two bob to get in – but was more often than not well under the capacity of about 68k.

    Exciting times ahead!

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  4. Pingback: Winter break: Links and recent articles | The Spurs Report

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