The Rise of the Tournament Effect

Photo: Elle Neill, Rome, 2014.

The Tournament Effect is the tendency over time for the gains to the winners to increase disproportionately to those of the more moderately successful. And there seems to be overwhelming anecdotal empirical evidence that this has been happening.

Let’s look at how this works in sports:

• In tennis, the top 5 male players in 2014 earned USD 33.6M on average (including sponsorships) versus earnings for the 100th male player on the planet (Igor Slijsling,) of just USD 528,44o. We are assuming, of course, that Igor is not getting sponsorship in the same league.
• In basketball, the Top NBA salary in 2019-2020 was Stephen Curry’s USD 40M,¹⁾NBA player salaries 2019-2020, ESPN. Accessed July 18, 2020. while in Euroleague Basketball (often considered by American players as a second alternative to playing in the NBA) top players are earning ‘only’ up to USD 5.4M and most players much, much less.²⁾Euroleague Top Salaries 2019-2020 at EUROHOOPS. Accessed July 18, 2020.
• In F1,  Lewis Hamilton made a salary of roughly USD 54.8M in 2020,³⁾GP Fans Accessed July 17, 2020. whereas bottom-ranked drivers earn only around USD 1M.⁴⁾Race Fans Accessed July 18, 2020.
• Among football clubs in Premier League,⁵⁾Unlike the NFL, soccer in general and the Premier League in particular allows huge disparities in club resources. the 2020 value of Manchester United, Manchester City, Arsenal, and Liverpool is collectively GBP 10.9bn⁶⁾Soccer team Valuations 2020, Forbes. Accessed July 18, 2020. versus, for example, GBP 324M collectively for Premier League perennials Stoke City, Sunderland and West Ham, United.⁷⁾At Transfer Market. Accessed July 18, 2020.

Why is this happening in sports? The most common explanation is that the advent of television and the Internet have allowed everyone the opportunity to watch the very best players in the world. Whereas in the past you might have gone to the stadium and watched your local (and mediocre) team live, today you can find Liverpool on every corner of the globe. 

When the Tournament Effect is strong, success begets success, and those who have some success can build on it to amass very strong positions in relation to other players in the field.

The rise of the Tournament Effect might not matter that much if it were restricted to the realm of sports. After all, people generally want to see the best, and the huge prizes for being absolutely number one draw forth huge efforts from wannabees. While the vast majority fail to make the pinnacle, participation was their choice and, in fact, their efforts create competition that helps make the winner the winner.

The problem for flourishing is that the Tournament Effect seems to be invading more and more aspects of business and life:

• Income distribution – it’s well known that in many countries incomes of the rich (the “1%”) have been growing exponentially faster than those of the middle class and poor.⁸⁾Inequality: OECD Accessed July 18, 2020.
• Educational attainment – the race starts early, with parents trying to get children into the right preschool, so they can get into the right school  so they can get into the right colleges, so they can get into the right professional programs.⁹⁾Oxford University researchers recently published findings that better GSCE grades actually do correspond with better preschool education, and lead to higher wages. Better GSCE Grades for Children Who Had Preschool Education. Accessed July 18, 2020. Recently, we have seen that it is common for the rich to cheat the system in seeking these advantages for their offspring, as in the College Admissions Scandal of 2019.¹⁰⁾There is a long history of examples of this, but the 2019 College Admissions Scandal in the US brought it into focus at a critical time. Among the cheaters were several celebrities caught paying large sums to have their meritless children admitted to good post-secondary institutions. Some (actor, Felicity Huffman) paid to have test scores and answers altered, some (actor, Lori Loughlin and her husband, Mossimo Giannulli) paid half a million per child and set up fake sports photos to have their children admitted as athletes for sports they had never played. See anywhere on the Internet, in general, or, perhaps, Tyler Kingkade’s article, “How the College Admissions Scandal Is Different From the Other Ways Rich Parents Help Their Kids Get Into School,” in Town and Country. March 13, 2019: College Admissions Scandal: Town and Country. Kingkade explains how the college admissions scandal is different to other ways in which the rich privilege their children and in doing so, illuminates other ways in which the rich get ahead without merit. Accessed July 18, 2020. These criminals have also attempted to mitigate the consequences they face by purchasing the services of doctors (for letters) and consultants (for strategies) to try to reduce their jail time. See Kate Taylor, “Parents Paid to Open College Doors. Now They’re Spending to Limit Prison Time,” in The New York Times. October 3, 2019: New York Times: College Admissions Scandal. Accessed July 18, 2020.
• Digital Economy – A reflection of the problem of income distribution in a system shaped by the tournament effect, and so not properly a separate category, access to the Internet is now a significant part of economic and social function, but not all Canadians have access to this forum either for business or for social purposes and this makes it worth noting. Covid-19 has brought this into relief, as all who could were asked to work from home, and education was brought online, as well; governments via school boards were scrapping to get the requirements of home learning into the homes of the least advantaged. And this doesn’t begin to address the fact that social life, especially for teens and the elderly, has an increasingly significant online component, rendering access integral to connection and cultural engagement toward a flourishing life. Additionally, with respect to the internet and the “tournament,” a number of web-based businesses are, as we all know, “winner-take-all.” Services such as TripAdvisor, for example, become more valuable when everyone uses the same one; the economies of scale are so effective that there is eventually only one player that controls the market. Facebook, Google, Alibaba, Uber, and Airbnb are all examples of what orthodox economics calls “natural monopoly.”¹¹⁾Definition of Natural Monopoly. Accessed July 18, 2020.

This matters. The goal of equal flourishing is incommensurable with more and more of the rewards going to just a few. In his terrific (but largely forgotten) book, Spheres of Justice: A Defense of Pluralism and Equality,¹²⁾Walzer, Michael. Spheres of Justice: A Defense of Pluralism and Equality. Basic Books; Revised ed. edition (Sept. 25 1984). Michael Walzer demonstrates that being the best at putting a basketball in a hoop shouldn’t mean you get all the fame, all the money, and all the sex. Other players are working equally consistently to produce opportunities for the “star” to land the ball. This is as true in other workplaces as it is in sports. It’s just not fair. 

Unfortunately, this is the world we have ended up in.

But we can change it. With developments in technology and communications, and other factors that enhance the tournament effect, it makes sense to construct policies that change the dimensions of competition, given the rise of that effect. We must restructure the competition itself, constraining it by specifying rules and policies that lead to fair, balanced, and flourishing outcomes for all.

In Optimized Competition, we discussed how we put constraints on the dimensions of competition both to have good outcomes and to have the competition itself occur in certain ways. The alternative – unrestrained competition – doesn’t work. In fact, those who advocate for unconstrained competition are those who stand to lose the most – they have often gained power, fame, and wealth through their intelligence. But in a world of truly unconstrained competition, they would lose out quickly to those who were physically stronger, an implication they seem not to understand.

So, with developments in technology and communications, and other factors that enhance the Tournament Effect, it makes sense to think through policies that change the dimensions of competition given the rise of that effect. We need to turn the tables on the tournament effect. See our forthcoming book, Flourishing in Canada: How to Be Capable of Living the Good Life, to learn just how we can do that.