Archive for the 'Reflections of a Serial Entrepreneur' Category

The author Michael Lewis is famous for Liar’s Poker and Moneyball – both are among my favorite books.

Moneyball is an extremely well-written book focused on a young general manager of the Oakland A’s by the name of Billy Beane. In the early 2000s, the small market Oakland A’s achieved surprising success. They did it despite having a payroll that was among the lowest in the league, and a fraction of big market teams such as the New York Yankees and the Boston Red Sox. How did Beane do it? Perhaps this will be a topic of a future post but first I want to discuss Blind Side, which was also authored by Lewis. You might think of Blind Side as the sequel to Moneyball.

Blind Side centered on a kid by the name of Michael Oher. An extraordinarily large kid, Michael was built to be a football player. He had a lot more than size. His speed and strength were off the charts. Making a long story short, Michael had an impoverish upbringing and struggled with grades and discipline in his early teens. He quit football after his freshman year at a Memphis public school, but was discovered by a high school coach and recruited into Briarcrest Christian School. He went to University of Mississippi and became a first round pick in the 2009 NFL draft. His rookie contract for the Baltimore Ravens resulted in him making $13M over a five year contract.

Oher’s story is only a backdrop for Blind Slide. The book was about more about the position that Oher plays—Left Tackle. The offensive line in football had traditionally been the least celebrated positions in the NFL. Offensive linemen don’t throw or catch the ball. They don’t sack the quarterback; nor do they make interceptions. They don’t win games in the last second with a 50-yard field goal. They are big and bulky—and often have a thick layer of fat covering their sizable muscles. Offensive line is the least glorious position in the glorious game of football.

Given all of this, you’d expect that offensive linemen were paid far less than their glorious teammates. Prior to the 2000s, this assumption would have proven accurate. But, in the mid 2000s, the relative compensation of an offensive lineman had changed in an unexpected way. The salaries for one of the offensive lineman positions—the Left Tackle—began to skyrocket. In Blind Side, Michael Lewis explains how the Left Tackle became the 2nd highest paid position in the NFL. Only quarterbacks were paid more. How could this be? And what lessons can we take away and apply to our business?

Quarterbacks are paid a lot of money for a good reason. Quarterbacks are the key to a football team. Franchise players like Tom Brady, Peyton and Eli Manning, Ben Roethlisberger, and Drew Brees win games, fill seats and sell jerseys.

What is the second most important position? Is it running back? Wide receiver? Kicker? Middle linebacker? Defensive end? The answer to all of these is NO.  Surprisingly, the 2nd most important position is the Left Tackle. You know, the big and bulky linemen whose names are called only when a holding penalty is called. And you only notice him when he missed a block and the lucky linebacker delivers a crushing blow to the quarterback.

How do we know the Left Tackle is so valuable? According to Michael Lewis’ book Blind Side, Left Tackles, on average, get paid more than every position other than quarterback. They get paid millions despite being largely invisible to football fans. Owners pay them the big bucks despite gaining no “ego-stroking” value as a side benefit. That is, the owner is far more likely to invite the middle linebacker to the weekend barbecue than the Left Tackle. If the owner is courting a trophy wife, he will introduce her to the wide receiver instead of the Left Tackle.

Why is the Left Tackle so valuable? The answer is quite simple. Quarterbacks are the most valuable and it is devastating when the quarterback gets hurt.  Quarterbacks are most vulnerable to getting hit on their blind side, particularly if the hit was delivered by Lawrence Taylor in his prime.  Since the vast majority of quarterbacks are right handed, the blind side is to their left. As a quarterback goes to throw, he turns his body so that his back is to the left side of the field. If the 350 lb defensive lineman coming from the left gets around his blocker, the lineman comes crashing into the quarterback. Often, the QB just doesn’t see this coming because he has his back to this charging lineman. Hence, “blind side” was coined.

The Left Tackle’s job is to protect the quarterback’s blind side. A great Left Tackle is much more likely to be successful than an average one. Success helps ensure the franchise quarterback stays healthy throughout the season and playoffs. Failure could mean the QB is out for the year, leaving the team to fall apart. That is why the Left Tackle is the second highest paid position in football. Their job is to protect the highest paid position.

No matter how big of a football fan/expert you are, you’d never figure this out by watching a game. Even those who were the biggest experts—coaches and general managers—were slow to figure it out. In Blind Side, Michael Lewis shows that not until the 2000s did the salaries of Left Tackles skyrocket, reflecting new insight into the importance of their role.

A valuable business lesson can be gleaned from this story. Over time, certain NFL coaches discovered the importance of the Left Tackle position. And they quantified its importance. That is, they quantified the relative value of a great Left Tackle relative to an average Left Tackle. And they used this intelligence advantage to sign the best Left Tackles at salaries well below their value.

Certain coaches discovered this intelligence despite the fact that it was not obvious. In fact, conventional wisdom would have steered them elsewhere. Conventional wisdom was that running backs or receivers were more valuable. Conventional wisdom was that the lean and muscular defensive lineman was far more valuable than the big and bulky offensive lineman.

Conventional wisdom was challenged. Perhaps the ideas originated during coaches’ brainstorming sessions over pizza and beers. Perhaps the ideas were a result of highly analytical college grads looking to discover a new angle. Either way, the key was the pursuit of new ideas that create a competitive edge. What might we do different that might give us an advantage over our rivals?

A second key is perhaps more important. Analytics. Fact based financial analysis. The conviction to act on the idea—and to know how to act—comes from quantifying the “value”. That is, a team must carefully compute the relative value of a great Left Tackle relative to a mediocre one. And, even more difficult, the calculation needs to compare the value of a great wide receiver relative to an average one. Are we better off spending $10M on a great Left Tackle, leaving us only $5M for a middle-of-the-road receiver? Or would we create more value by spending $3M on a mediocre Left Tackle, which would leave us $12M to get a prime-time wide-out?

Developing conviction in the answers requires a strong commitment to data gathering and quantitative analysis. Your average football coach circa 1995 was unlikely to be receptive to such an approach. They were more likely to rely on the gut instincts of a 30-year lifer, who almost certainly never used excel and thought NPV was the Swedish expression “No Puck’en Vay”.

How does this apply to what you do? Are you committed to data gathering? Do you challenge conventional wisdom? Do you rely on quantitative analysis to help discover where value can truly be created for the enterprise? Or are you more like a football coach circa 1995, relying on the time-tested instincts on how to get the job done. If so, you should be worried about who is protecting your Blind Side.


When I was 14, I bought Steve Martin’s album “Let’s Get Small“.  I probably listened to in 50 times.  No exaggeration.  I still chuckle when I recollect some of the skits.  ”Let’s Get Small.”   “Excuuuusssse Me.”

A few years back, Steve Martin wrote in his autobiography “Born Standing Up”.  The book centers on the formulative years of his career–prior to when he achieved success.  It is well written and entertaining, but in a low-key way.  He is introspective and honest.  I enjoyed the read.

About two thirds the way through the book, he tells how he quit his main job as a TV writer for shows like the Smothers Brothers and Sonny and Cher and took to earning a living solely as a stand-up comedian.  He discussed how he would tape shows so that he could identify when he stumbled onto something that worked well.  He likened the good nights to drawing a good poker hand.   You play enough hands of cards and, through luck of the draw, aces flop your way.   Steve told how he would use the tapes from these lucky good nights to refine his routine.  This hard work, and not the luck, led to him being consistently good.

“I learned a lesson:  It was easy to be great.  Every entertainer has a night when everything is clicking.  These nights are accidental and statistical: Like lucky cards in poker, you can count on them occurring over time.  What was hard was to be good, consistently good, night after night, no matter what the abominable circumstances.”

I probably over-use the phase “blocking and tackling” as in “we want to be good at blocking and tackling”.   I use this to mean I want my organizations to do the little things consistently well.   To me, blocking and tackling is the foundation of any company.  Getting good at blocking and tackling requires commitment, dedication, and practice.   Luck will help at times, but being consistently good, day after day, is hard.   This is the lessor that the Wild and Crazy Man shared with us.

 

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