Paul L. Caron

Sunday, April 22, 2007

Moneyball Redux: The Tax Prof Exchange

MoneyballAs regular readers of this blog know, my tax career took an unexpected turn after reading Michael Lewis's best-selling book Moneyball:  The Art of Winning an Unfair Game.  After reading the book, I

Michael Lewis has a fascinating article in the May issue of CondéNast's  The Jock Exchange:

Wall Street is about to launch a new way to trade professional athletes the way you trade stocks. A piece of Tiger, anyone?

When financial historians look back and ask why it took Wall Street so long to create the first public stock market that trades in professional athletes, they will see ours as an age of creative ferment. They’ll see a new, extremely well-financed company in Silicon Valley that, for the moment, sells itself as a fantasy sports site but aims to become, as its co-founder Mike Kerns puts it, “the first real stock market in athletes.” And they’ll find, in the bowels of the U.S. Patent and Trademark Office, an application from a cryptic entity called A.S.A. Sports Exchange containing a description of a design for just such a market: The athlete would sell 20% of all future on-field or on-court earnings to a trust, which would, in turn, sell securities to the public. ...

As a number of smart people seem to have noticed at once, professional athletes have all the traits of successful publicly traded stocks, beginning with enormous speculative interest in them. Americans wager somewhere between $200 billion and $400 billion a year on sports, and between 15 million and 25 million of them play in fantasy leagues—which is to say that a shadow stock market in athletes already exists. That market may not know everything there is to know about the athletes it values, but it probably knows more than New York Stock Exchange investors know about the N.Y.S.E.’s public corporations. ...

A jock stock’s price is driven not directly by the athlete’s performance, but indirectly by supply and demand for the stock (just as in the real stock market). An athlete’s performance is important, of course. It’s the equivalent of corporate earnings. But the price of the stock is set by the market. A bet on the future dollar value of a player isn’t really based on the player’s performance, but on the market’s perception of that performance. The successful investor will need to predict who will play well and how play in general is understood. ...

What about a Tax Prof Exchange?  What criteria should we use -- reputation, publications, citations, downloads, teaching evaluations?   Which Tax Profs do you think are undervalued by the market and would like to buy a piece of?  Which Tax Profs do you think are overvalued by the market and would like to short-sell?  (Hat Tip:  Charles Stern.)

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