The rumors of head coach Charlie Strong’s demise were not greatly exaggerated. He's gone.
But like Freddy Krueger in A Nightmare on Elm Street, the hapless Strong does not appear to have fully perished. He has now become the gift that keeps on giving. Few focused on the flowery language in a statement issued by Texas athletic director Mike Perrin. Instead, all eyes fixated on the pre-negotiated $11.2 million handshake that sent him quietly into that good night.
He is one of a growing number of flailing gridiron gurus who have become preposterously expensive to fire.
The six-year, $30 million contract that Texas A&M head coach Kevin Sumlin (8-4) signed in late 2013 contains provisions that would result in Sumlin being paid an eyebrow-arching $15 million buyout if fired during this offseason. This doesn’t begin to address the cost of buying out his assistants.
The same $15 million would also deliver the head of UCLA coach Jim Mora (4-7) on a silver platter, although at that price, a 24-carat gold, jewel-encrusted platter would be more fitting.
A bargain, Tommy Tuberville (4-7) would cost the University of Cincinnati a mere $2 million to pry away.
To paraphrase billionaire investor Warren Buffett, "A million bucks here and a million there, and it can add up to real money." Meanwhile, television sports viewership is falling. You can bet that reductions in television contract revenues won’t be far behind.
A gaggle of search committee members, chancellors, regents, presidents, deans, athletic directors, counselors, seers, star-makers, EEOC savants, scribes and favored boosters will yank and pull on coach-hiring decisions. As they do, rest assured the following biases and fallacies, arranged as a power ranking (what else?), will ensure bloated contracts well into the future. Here is your official power ranking of the top ten college football coach negotiating fails.
10. They Were ‘Merely Acting’
Actor-observer bias is a self-delusional short-circuiting of the brain responsible for much of the run-up in coach salaries in recent years. It holds that when you do something, it’s due to the circumstances of the situation, but when somebody else does the same thing, it must be due to bad intentions. The actor-observer bias allows administrators to rationalize that they’re not part of a wider problem.
"Hey, we don’t like that we had to include a buyout clause," one regent might lament, "but thanks to previous contract decisions made elsewhere by others, that’s what you have to do to land a top coach."
The actor-observer bias is why government officials pay ransom to kidnappers knowing it will fund more kidnappings in the future.
9. ‘We Knew It All Along’
Hindsight bias is a self-enhancing brain kink that allows the human mind to avoid embarrassing truths by redefining past events, having the effect of masking past surprises and making them look as though they had been predictable.
For example, when a head coach is discovered to have a substance-abuse problem, selection committees at schools that were unsuccessful in hiring the coach may begin to believe they sensed the candidate’s flaws and acted correctly by not hiring him when, in fact, they were just as surprised at the time as anyone else.
8. Optimism Bias
Studies show that parties in everything from court trials to pork belly futures trading are vulnerable to the tendency to be overly optimistic. It’s why your dentist thinks he can pick stocks better than a professional fund manager. It’s what led Lloyd to think he had a chance with Mary Swanson. It’s why an assistant dean of athletics believes he can hold his own in negotiating with a professional sports agent.
To demonstrate the optimism bias even among purported experts in a given field, in 1997, investment bank JP Morgan studied predictions from transportation experts about the expected revenues from 14 newly constructed toll roads. Of the projects, only one exceeded its original revenue forecast. But three were overly optimistic by up to 25% and four were overly optimistic by more than 30%.
Being optimistic is hard-wired into humans as a survival mechanism. Astute negotiators take advantage of this. Don’t expect members of coach selection committees to have heard of the concept.
Studies show overconfidence plagues lawyers, scientists, academics and other professionals – just the type of dabblers who may wrest control of a negotiation.
In 2013, researchers at Duke and Ohio State universities asked chief financial officers of U.S. corporations to predict the returns of investing in the S&P 500 Index. The researchers asked these CFOs for ranges that would include the right answer about 80% of the time. Their predictions fell inside the range less than one-third of the time. If CFOs consistently get it wrong, you can bet bungling college administrators will do no better.
6. Sunk-Cost Fallacy
The sunk-cost fallacy is the mistaken belief that the market somehow cares how much you’ve already lost on an investment. Sunk-cost fallacy is what prompted a guy to shrug his shoulders and famously say, "In for a penny, in for a pound." It’s what keeps morons at car dealerships (I confess, I’m one of them) negotiating a sale all day long – "Hey, I’ve already spent three hours locked in this room. What’s a couple more?"
A flippant administrator may say, "If the buyout clause comes into play, we’ll be so far gone it won’t matter." (You can substitute "so far gone" with "adrift along a river of excrement in a craft of shallow-draft design without a system of propulsion.")
5. The Urgency of Now
Urgency is the enemy of due diligence and thoughtful decision-making and the best friend of the pushy salesman and the impulse buyer. It’s the basis of the infomercial mantra, "Act now. This is a limited-time offer."
In his article, "Creating Urgency without Being a Slimeball," advertising copywriter Joel Klettkewith cites a study that found a time-sensitive $100 savings incentive with an actual deadline increased enrollment in an online course by 992% in the three days following the promotion. The finding also showed that mentioning the quantity of product available (even without any mention that further stock would not be available) increased conversion rates by 508%. That urgency is used routinely as a tactic by sports agents to get counterparties to action. It’s also used by high-school coaches to great effect on college coaches to get them to offer promising players as early as their freshman year.
The following phrase, or a version of it, will be heard on the lips of at least one search committee member just prior to giving up due to fatigue: "We’re no match for [insert name of prominent sports agent here]. We’re getting played eight ways to Sunday. Let’s just admit defeat on points A, B and C, so we can move on."
3. Substitution Subversion
The theory of substitution holds that the value of a good or a service tends to be set by the cost of acquiring an equally desirable "substitute" good or service. This theory underlies the comparison approach relied upon to develop an estimate of market value of coaching salaries. Because market participants have been allowed to gum up the works with highly unique contracts that contain risk-concealing buyout clauses and all manner of inducements and incentives, comparability has been subverted by a few parties who stand to gain from the confusion.
2. Confirmation Bias
As shocking as it may sound, administrative bigwigs at colleges and universities are sometimes prone to miss signs of their own incompetence in contract negotiations. Incredulous to the possibility, such practitioners seek out information that supports their existing beliefs while they shun information that suggests their beliefs may be wrong. The wily counterparties in the negotiations, however, will not miss those signs of incompetence.
1. Moral Hazard
Drum roll please (or at least a couple of jazzy strokes with the wire brushes). At Number One in this power ranking is moral hazard, which occurs when a party to a transaction has an incentive to take unusual risks or incur unusual costs. Moral hazard explains why people order more expensive meals when using their company expense accounts. Moral hazard is why people drive rental cars more aggressively than they do their personal vehicles.
Moral hazard is why a person with a low deductible on his property insurance leaves his front door unlocked. It’s why banks deemed too big to fail act more recklessly than those that are small enough to fail. It’s why coaches with long contracts and fat buyout agreements are less concerned about winning. It’s why selection committees squander public money on extravagant contracts.