Day eight of our look back without anger at the last ten years of blog posts. One of the most enjoyable projects I worked on was the Economic Theory explained by Football (you can read them all here) – I’ve picked one from the series that demonstrates the changing fortunes in football.
Back in 1997 DC United won the second ever MLS Cup, beating Colorado Rapids on home turf in Washington DC. Avid fan (probably) and Harvard Business School professor (definitely) Clayton Christensen was so compelled by DC United retaining their title that he sat down and and mused as to whether this could be the start of something beautiful for his side and US Soccer in general. Looking across the pond at the dominance of Manchester United plus the emergence of the Galacticos in Madrid he wondered if a new force from North America could emerge to take world football by storm. His theory on disruption theory has been called “one of the sexiest theories ever written” by The Lady magazine, high praise indeed and has since been adapted for wider economic models, but it should always be remembered that it’s humble beginnings were in the beautiful game (probably). So what’s all the fuss about?
Christensen’s theory is based around the principle that innovators with cheap solutions to a vexing market problem can unseat larger, more established rivals in the short term. So in the case of DC United’s squad, assembled at a fraction of the cost of United’s or Real’s, could their domestic dominance and momentum carry them across the pond and further in the global game? His theory was hailed as the answer to everything from making health care more efficient to reducing poverty by some of the world’s greatest thinkers, and Elton Welsby, and was the talk of the dressing and boardrooms from Rio to Rome.
Christensen wrote that disruptive innovations, such as Social Media networks, Rainbow Looms and Snoods tend to be produced by outsiders from their industry (a fact since backed up by organisations such as AirBnB, Uber and Tesla). The business environment of market leaders does not allow them to pursue disruption when they first arise, because they are not profitable enough at first and because their development can take scarce resources away from sustaining innovations (which are needed to compete against current competition). So when FC United won their first MLS Cup back in 1996, nobody outside of North America took them seriously – it was after all a small domestic league of aging imports and unproven domestic talent. But back to back wins, and two more final appearances in the next two seasons allowed them to pursue that disruption and potentially start eat the global giants breakfast.
Alas, DC United’s dominance didn’t last as long as that new fangled The Facebook although it did outlive the crazes of plastic bracelets made by our kids and neck scarves worn by hardy professional footballers. Christensen’s theory was debunked by some who pointed to Apple’s continued dominance in the device market, or Amazon’s in terms of online shopping and logistics. We’ve seen pretenders to the footballing global dominance throne very occasionally come forward but money talks in today’s game. There is no coincidence that the clubs with the deepest pockets in England, France, Holland, Spain, Germany and Italy walk away with the honours year after year. Despite salary caps, centralised contracts and no meritocracy structure, the US domestic game is no different today. In the US, DC United’s star briefly flickered again when Wayne Rooney arrived for a season and a bit, but no one team (or should I say, Franchise), has been able to dominate because of the false competitive environment in place in the MLS.
Christensen’s five minutes of fame may still resonate with some economic thinkers but in terms of the world of football it’s the same old story – money talks.
