To paraphrase Larry Summers: There are bad GMs. Look around. Our friend Brent at Eagles Rewind wrote about #BadGMTheory way back in 2013, and the evidence continues to accumulate. The 32 NFL teams, as a whole, seem to make decisions which are suboptimal. For example, Bucs GM Jason Licht, who is 27-53 (0.338), famously traded up to draft a kicker in the 2nd round, yet still enjoys a W-2 income. Giants GM Dave Gettleman ignored the data, mocked the nerds at their keyboards, and drafted a running back with the 2nd overall pick. Though an excellent player, the offensive rookie of the year has not proven to be worth either the high pick or the highest guaranteed salary for a running back in the NFL. Other GMs are adept at public relations while remaining cartoonishly inept at actual decision-making. Sam Bradford’s candidacy as a First Ballot Hall Of Fame Negotiator rests entirely on the exploitation of incompetent counterparties. I have found, previously, evidence that NFL GMs inefficiently prefer white candidates, to the detriment of playoff berths, when hiring coaches. All these decisions are examples of terrible ex ante process, regardless of ex post outcome.
Why is NFL decision-making so bad?
In an intensely competitive, testosterone-and-bravado-fueled meritocracy, why is NFL organizational stupidity so pervasive, persistent and pronounced?
I am always suspicious of monocausal reasoning, and my guess is that the answer is likely multivariate: NFL culture is dominated by “football guys” who are resistant to change, there is an old boy network that inhibits ideas from other domains from propagating, and of course there are idiots.
Ultimately, the crux of the principal-agent problem lies with the principals, rather than the agents. NFL owners are bad at setting the incentives for their employees. Dirk Koetter (as a coach, not a GM) admitted on the record that he made decisions in order to keep his job, even when he knew it would lose more games in the long run. But this answer merely begs the question.
Why are NFL owners so bad?
A key theoretical underpinning of the Efficient Market Hypothesis (EMH) is that “noise traders” (idiots) will have less influence over time than their more successful counterparties. Market forces impose a Hobbesian, Darwinian discipline, through losses (rather than profits): those that are unfit perish.
For NFL teams, relative profits (there are never losses) are not determined by a market. Each team shares a common pool of more than $8 billion in league-wide revenue which is derived from gate sales, merchandising, broadcast rights, etc. The NFL is a Marxian socialist’s paradise. You can be an incompetent charlatan who has committed fraud and racketeering and your NFL team will still make money because (a) the team has a franchise which effectively secures monopoly rents and (b) revenue sharing by the NFL creates the most generous social safety net the world has ever seen.
Simply put: the NFL lacks a mechanism for creative destruction.
Very few other domains of American life enjoy such coddled insulation from market forces. A hedge fund that defaults on a trade typically blows up. A dishwasher, housekeeper or middle class entrepreneur who behaves as incompetently as the Browns would face inevitable penury. Only Jed York is afforded the latitude to be as incompetent as Jed York.
The NFL’s socialist utopia is sanctioned by a Federally-mandated antitrust exemption. Never mind Alexandria Ocasio-Cortez – the most fervent big-government socialists in America are represented at 345 Park Ave. As a consequence, the relative absence of market discipline allows them to make decisions with the acuity of Soviet central planners. Incompetents of the world, unite!