Russ Roberts

Leigh Steinberg on Sports, Agents, and Athletes

EconTalk Episode with Leigh Steinberg
Hosted by Russ Roberts
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Leigh Steinberg, legendary sports agent, talks with EconTalk host Russ Roberts about his career as a sports agent. He discusses the challenges of building a clientele, how sports agents spend their time, strategies for building a brand as an athlete, and safety issues currently affecting the National Football League.

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0:33Intro. [Recording date: February 26, 2013.] Russ: How did you get started in the business? It's a very competitive business that I think a lot of young people aspire to without thinking too much about how hard it is to bet that first client. How did that happen for you? Guest: I was living in the dorms as a dorm counselor at U.C. Berkeley, going to law school in the early 1970s, and they moved the freshman football team into the dorm. And one of my counselees was Steve Bartkowski, who in 1975 went on to be the very first selection in the National Football League (NFL) draft--the first pick in the first round, picked by the Atlanta Falcons. And I had graduated and then traveled for a year. When I got to Egypt I jumped into the Nile River, only to find out later that there were about 111 diseases endemic to the Nile River. And so I had a long stay in London at a hospital and couldn't take the jobs as a district attorney or as a corporate litigator that were offered. So what happened was that Steve had been drafted, and the draft was in January at that point, and he asked me to represent him. Well, there I was, brimming with legal experience, never having practiced law before, and I had the very first pick in the first round. The World Football League was competing against the NFL at that time. Teams that I know live in your memory, like the Shreveport Steamer and the Chicago Wind, which then became the Chicago Fire. And we were able to negotiate the largest rookie contract in NFL history, which eclipsed Joe Namath and O. J. Simpson, who were the previous standard bearers. So, we were going to fly in to Atlanta to sign the contract the next day, and we get to the airport and there are [?] lights flashing in the sky; a huge crowd is pressed up against the police line; and the first thing we heard was: We interrupt the Johnny Carson show to bring you a special news bulletin--Steve Bartkowski and his attorney Leigh Steinberg have just arrived at the Atlanta Airport; we switch you live for an in-depth interview. Russ: How old were you? Guest: I was 25. And so I looked at Steve probably the way that Dorothy looked at Toto when they got in Munchkinland and said: I guess we're not in Berkeley any more. Because I finally saw, for the very first time, the tremendous idol worship and veneration that athletes are held in across the country. They were the movie stars and they were the celebrities. The major challenge at that time was how to find a way to incorporate underlying beliefs and admonitions to make a difference in the world in a career. And I saw that athletes could serve as role models and trigger imitative behavior and make a profound impact on the times. Russ: We're going to get into all of that, but I want to stick with the nitty-gritty of starting a shop where one athlete's fabulous, that you happen to--Steve Bartkowski is lovely and just happened to be the first pick in the draft. That was fabulous. It just happened to be a year when there was a lot of competition, which meant there was a tremendous salary; and you had to do a good job, for sure. But you had to go on from there. How did you proceed? Guest: Well, I had glorious offices: I operated out of the card room in my parents' home in West Los Angeles. At that time--and I'm sure none of the younger listeners will recall such a time--there was a rotary phone, and if you dialed it and I was on the phone, it actually ran busy. I was my own secretary. I went and xeroxed things at Kinko's Copies and typed on my electric typewriter. And that was the situation for a number of years. I had no staff and no help; until 1981 I didn't even get a secretary. But I bought a home in Berkeley in 1979, and then in 1981 added a secretary. But all business was personal then. There were no cell phones, so phone booths became temporary offices everywhere. And with a roll of quarters or a number to charge those calls to-- Russ: Well, for our younger listeners, a phone booth is a place that used to be on a street corner or wall of a building where you could actually make a telephone call by depositing coins into a slot. There are no more any more! They don't exist. Guest: The problem is that Superman always changed in phone booths. So now he'd be in real trouble.
6:39Russ: So, seriously, though: you had this literally unimaginable success, and anyone who says that EconTalk is not practical now knows something very valuable about the Nile River. So you go from this hospital to incredible professional success. How did you get client number 2? Were you knocking on doors? Are you calling friends of friends of friends? Are you hanging out in certain places? How did that happen? Guest: The truth is that I made a series of mistakes that next year. My next client was Dave Hampton, who happened to be an All-Pro running back, who was a teammate of Bartkowski. And then Pat McInally, who was a wide receiver punter who had played with Steve with the Cincinnati Bengals. He played in the All Star games. But at that point I had no methodology because I hadn't really tried to get a first client. So I had to relearn an entire business. And I made a lot of mistakes. The first year I thought: Well, I'll send a series of people to All Star games, and we'll meet college seniors as they get ready to graduate and then be able to represent them in the draft. Russ: Stands to reason. Guest: But I spent way too much money and quickly found that notwithstanding the fact that Bartkowski was earning great revenue, that one player was an activity center that could spawn endorsements, financial planning for someone--not me--and tremendous activity. Which is a cardinal rule--that one key, cutting edge client spawns more activity than many, many, many, many average clients. But I'd spent all that money; and my dad came to me at one point and said: You know what? I'm a high school principal, and you've gone through all my credit cards. And I can't advance you any more. So, Steve Bartkowski in early 1977 bought me a plane ticket; I flew to Atlanta; there was a player named Joel "Cowboy" Parrish, who was an offensive guard from the U. of Georgia who was going to sign in the Canadian Football League. And Steve rented me a car and I drove down to Douglas, Georgia, in what then was the deep rural South, and signed this player. And he then signed in Canada prior to the NFL draft, and I was able to survive. And what I learned was that there was a profile of the type of player that I might attract--someone who was interested in being a role model, retracing their roots, who saw sports as a springboard. And if that was the type of player I was talking to, I had a real chance for great success. Anyone outside of that profile who looked at all the social engineering I was doing and the loftier goals would not be interested necessarily, and I'd have a very low chance of signing that player. So I developed a methodology that focused on a certain type of player, who I could research, who I could figure out from interviews and parental structure what was going to fit. And I also came up with the concept of regionality, which is that it costs so much money to fly around and to fly athletes in from across the country, so what made sense to me was to try to dominate southern California. Because I could get to schools like U.C.L.A. and S.C. and with a little extension to Cal and Stanford and Arizona-- Russ: It's a pretty fertile area. Guest: Well, we're a little country. But the point is that instead of traveling everywhere I made sure to focus on those athletes. And those athletes at the very top of the draft. And I also recognized quickly that in football the straw that stirred the drink was the quarterback position. And that player had many multiples more name recognition, endorsement potential, and higher contracts. So I had to concentrate on that position. And when I did those things, the practice grew rapidly.
11:38Russ: Now, you mentioned your desire to work with your clients toward some idealistic goals; and in that sense you developed a brand identity for yourself that made you stick out. What was your involvement with the movie Jerry Maguire, which captures a similar theme--an agent who wants to go against the grain and do things a little differently? And I know you were involved with that movie, so talk about that. Guest: The director of the film, who also wrote it, Cameron Crowe, called me up in 1993 and asked if he could follow me around, be a fly on the wall to pick up atmosphere, stories, and the whole milieu of sports agency. So, he had done a movie called Fast Times at Ridgemont High which I thought was hilarious. So I agreed, and he went with me to the 1993 League Meetings where all the teams assembled. And walked around, listened to conversations, saw the people ensconced in it. And that's a place where we took free agents to try to--players who didn't have current contracts--to show them off to teams. So he saw all that. Then I took him back to the draft in 1993--had Drew Bledsoe who was the first player picked. And he watched that process. And I would tell him stories: What was your greatest fear on draft day? Well, it would be if in reality Drew Bledsoe was signed with someone else and I woke up the next morning to find that I didn't have that player. And then he came up when we met with Bill Parcells and did the press conference; he came to pro scouting days at U.S.C., to Super Bowl parties, to a number of games. And all the while I kept telling him stories, about things I had done or heard or seen. And so he went off and wrote the script. My next role was to vet the script so there would be willing suspension of disbelief was not broken there. That's what's necessary to make sure you don't think the film is a spoof or unrealistic and stop focusing. Then I worked with actors. I took Cuba Gooding Jr. down with me to the Super Bowl in Arizona--and made him pretend he was the wide receiver for the whole week. Russ: How'd he do? Guest: He was great. There was one time when Cameron said: Now, look, he's an actor; these athletes are heavy drinkers; make sure that he's not somehow impaired. So, came a time when we're all late and night at a bar and every athlete is passed out and the whole world is running[?] down and Cuba's up on the bar tap dancing. Russ: I'd like to see that video. Guest: So at any rate--and I spent time with Tom Cruise and Regina King. I had to show Jerry O'Connell, who played the quarterback in the film, how to throw a football because he was from N.Y.U. and they didn't have football there. Russ: That would hurt the willing suspension of disbelief, wouldn't it? Can't throw a spiral. Guest: Exactly. And then we cast athletes in the film, which helped make it a big success. Russ: Yeah. Bledsoe's in it, I remember. Guest: There were Troy Aikman, and Warren Moon and a whole series of players were in that film. And it helped the open because it could be covered on the sports pages as well as the entertainment section. Then that led to working with Oliver Stone, Any Given Sunday, and Sam Raimi, For the Love of the Game. Russ: Must have been a lot of fun. Incredible adventure. How about the actual character of Jerry Maguire. Do you see yourself there? Some people say that's you. Is it you? Part of you? Little of you? Guest: Well, Cameron used to say that Jerry Maguire aspired to be Leigh Steinberg. So, that's not my total arc; so it's not strictly biographical. But there's a whole lot of stories that I told, things that happened, that show up in various ways on the screen.
16:39Russ: Let me ask you a technical question about the business. Do all agents earn the same commission from their clients? Is it roughly the same? Is there variation? How does that actually work? Guest: The Players' Associations set maximum fees that can be earned by an agent. So, in football it's 3% of the contract as the money comes to the players. In basketball it's now salary-capped, so the formula for a rookie is 4% of the differential between 80 and 120% of what that slot in the draft made over the last 3 years. So it's only the overage that you can bill on. You can bill later veterans 4%. In baseball it tends to be more like 5%. Now those are figures for contract negotiations. In endorsements, there are no such regulations and the norm tends to be 15-20% of the gross size of the compensation. Russ: And of course for a Troy Aikman, the endorsement is going to be a lot higher than a punter, the endorsement part of that deal, right? Guest: Well, the reality of the situation is that if one is careful and builds brand first, so that the athlete is able to time his breakthrough in the sport with when he signs those endorsements, they could be substantial. So for clients of ours like Steve Young and Troy Aikman, who between them won four straight Super Bowls, that was a great endorsement market. Or Ben Roethlisberger, who came in the league and won his first 14 games. And then different sports are different. I marketed Lennox Lewis for a series of years, and Oscar de la Hoya-- Russ: Boxers. Guest: And again, each of them were the champion of their weight class. And the key in each of those situations was to try to actually get them to start to be their own promoter. So that instead of paying a promoter 40%, they were empowered to run their own organization, of which they were the key. So in both those cases I pushed the athlete to take more charge over his own life and become the captain of his ship.
19:14Russ: Now when you have a client who--you often have the client before you know exactly where their draft is going to be in football. Right? Guest: Yes. Russ: You don't--typically a player in college doesn't get his agent after the draft, although I'm sure some do: they fire them, etc. But most of the time you are not sure who is going to be number one. Sometimes it's pretty obvious, but you are not sure. And when that comes through, though--according to Wikipedia, 8 times you've represented the number one overall pick in the draft--that's probably pretty exhilarating. What's that experience like, when you have the number one player in the draft with a General Manager [? GM] who "has to sign" that player? It's not literally true, of course. As economists we know that's not true. But has pressure to sign that player. What is that negotiation like? And, is it different every time? Does it kind of have a similar pattern? Is it fun? Is it scary? Did it get easier? Talk about that. Guest: Depends how the timing of that pick works out. The team with the very top player for example in the NFL can sign that player and therefore draft him any time after the Pro Bowl. And then if they were to do that then the number two team can do the same thing. So, if a team has locked in and made a choice prior, then that negotiation takes place prior. One of the dynamics is that the team can use the leverage of saying, as they did in 1989 with Troy Aikman: Look, if you don't take the package we're offering, then we're just going to go ahead and pick Tony Mandarich. We'll pick someone else and you won't be the first pick. So you have to get into each player's psyche to have them tell you what their real value system is and what their priorities are. How important is it to be the number one pick? How important is it to sign the biggest contract of all time? How important is it to be with a given team or a coach? Each player will be different. In most of those cases the pick is pretty obvious. So, in the case of Troy Aikman, I negotiated the contract prior to the draft. Or Jeff George or Russell Maryland. George was with Indianapolis and the other two were with Dallas. In other cases the team goes ahead and commits into the pick without signing. And in that case leverage is very heavily on the side of the player. Remember, the whole thing is an artificial construct because at the end of the day whatever the team offers a rookie who has been sitting on a college campus living on scholarship money--it's going to be massively more than what he could earn, for example, going back to campus for an additional year and developing a new theory of supercollider research or playing cello in the philharmonic. So, there's a balanced dynamic. The other side of the equation is that if a team, having publicly committed to the player, was not able to sign him in timely fashion, it incurs the wrath of fans; but moreover spoils the chance the player has of really making an impact the first year. So that's the dynamic. In almost every case, that situation is the most exhilarating type of negotiation other than free agency. It is exciting. In 7 cases I had the second pick in the draft and some of those, like 1999 Akili Smith and Tim Couch were both possibilities for the first pick of the Cleveland Browns, and we didn't know all night long; they were negotiating with both of us who they'd pick. And ultimately Couch got picked first and Smith went to Cincinnati on the third pick. But it's exhilarating. It's sitting on the cutting edge of football. And the draft itself, of course, is massively exciting because it's all the dreams and hopes of an extended family and a coaching group at the collegian level and everyone who has ever been close to the athlete, all rolled into a Christmas-morning type of experience--it's some wonderful present. But you don't know--sitting there, waiting for the draft, if you haven't accurately prognosticated what the player's going to do, is agonizing. Because national TV cameras are close to the face of the player and the family members. And it's not real time. It's like Chinese water torture time. Every second seems like a minute; every minute seems like an hour; and it really is important for me to prepare a player well. Russ: I'm curious about, when you interact with a General Manager. Of course there are many you interact with, year in and year out. You get to know them, you know what their style is. There's maybe one time, you get fired or you just don't have a client who works, who has been drafted by that General Manager. Talk about the different styles and what they--would some of them drive you crazy? Would some of them be not easy to work with? Or are they all fairly similar? Guest: No, they are not fairly similar. They have disparate personalities, backgrounds. When I began, first of all there was no right of representation. So for the first couple of years a team could just hang the phone up and say they didn't deal with agents. But then most of the General Managers had either played the sport, coached the sport, were somehow involved; and so their backgrounds weren't primarily business. Now, that evolved over time and people whose backgrounds were law school and business school came into it. So then at that point it was more like speaking to peers. The old guard especially was very reticent to allow an agent to talk about player talent. And would bristle. And really didn't love the whole concept of representation in the first place. It just was at odds with what they'd experienced. But over time that group became more mixed and had many people who were business professionals who didn't resent the process at all--in fact appreciated agents. Because it insulated them from having to deal directly with players or their parents, who could be much less businesslike and much more passionate. I remember the first time I ever told Steve Bartkowski, I said: 'Steve, I'm going to negotiate for you, and after each session, it's your life, so you are certainly entitled to hear whatever it is that you want to hear from the session. I can give you the bottom line or I can give you the blow-by-blow.' 'Oh, no, Leigh, I want to hear everything; it's all about me and I'd like to hear it!' So, when I went back to him and said, 'Steve, we haven't made much progress today.' 'Well, why? What did the team say about me?' 'You really want to hear?' 'Yes.' 'Well, they said that it was a poor quarterback year and they picked you because you were the best of a bad bunch. And you've got questionable knees; they don't know about your mobility or about the length of your career.' 'What, Leigh?! I never want to play for that team again!' Russ: That's exactly what the value of an agent is. You can hate--the GM can hate the agent instead of the player. Guest: But the reality is, we're in a closed system. And the only thing that's sure is the same people are going to negotiate over and over again. So, it keeps things civil. I'm always aware that that's not the last negotiation I'm ever going to do with the person, even for that player. So, the key is not to stick your foot on someone's neck when it's exposed; not to put them in an embarrassing situation. The key to negotiating is putting yourself in the other person's heart and mind, seeing yourself the way they see it, having carefully researched what their pressures are, what their economics are, and creating and crafting a win-win situation.
28:46Guest: There's one more thing: I've always had a different theory about this than most people who represent athletes. I don't think the real battle should be labor versus management for a sport like football or baseball or basketball. The real battle is with the (National Basketball Association) NBA and the (National Hockey League) NHL and Home Box Office and Walt Disney World and every other form of discretionary entertainment spending. Russ: Youtube. Guest: So what we're really doing is competing with every other form of entertainment in the world, every other way that people can spend money. So the proper role is to build the brand. So if I'm ever doing an acrimonious individual negotiation that spills into the press, it's going to push fans away from the sport and I'm going to hurt the player and his image. And I'm going to hurt every other part of it. To ever have a long-term acrimonious collective bargaining agreement where time is missed is self-destructive. The reality is that together, I would talk to owners about the fact: we should work together to explode television revenue, to think up new concepts like the NFL Network or Direct TV or Fantasy Sports or how we can use social media and the Internet or massive scoreboards. Our goal is to build a pie large enough that we won't be so worried about incremental dollars. And so that's been my approach. I think of owners, except in the limited case where I'm negotiating, as allies, and we've got to do our job together. Part of it is conceptualizing the role of an agent as being a steward of the sport, as opposed to simply just stacking one more dollar in the short term in bank books. Russ: That's great economics by the way, wonderful in the real sense of the word, not just the financial side of football. It's just a great insight into the fact that people can substitute activities and what really competes with what. That's great stuff. But of course ego plays a role. And it's such a small group of men, the owners, the GMs, and then the players. And they are really remarkably unusual people, the coaches and GMs, in their own way. They don't have the talent of the athletes, but they are at the top of a very small pyramid. And their intensity must be something else. Guest: Well, the mentality of billionaires is something else. Because these are men who by and large made their fortune in the rough-and-tumble free enterprise system, doing things that people told them weren't possible to do. And so you now catch them at a point where they've aggregated enough revenue to be able to afford the monstrous franchise price. And so these are major successes in another field who are generally elevated in age. So the key is to, again, see the world the way that they see it. And if I can help bring them role-model players who enhance the ability of the team and the market and generate revenue, and ultimately enhance the franchise value, then there's a consanguinity of goals that we can work towards. And so the goal is to see the needs of an owner and understand their position. And again, to bring them the type of player who they can rely on on the field, who will be a credit to their franchise, and together to create an environment where we are not pushing away fans, we are not destroying the ability of someone making $40,000 a year to relate to the whole thing. But we are carefully trying to be as creative as possible to develop every ancillary revenue flow and be creative and develop the next great thing. So I've got the need to think about it as a business and where the revenue comes from. Because ultimately, if the revenue is there, my clients will get paid. And if owners are ever experiencing economic difficulty, they won't.
33:50Russ: Let's talk about your relationship with the athletes, with your clients. You talked earlier about sitting down with them, trying to understand what they care about, what city they want to live in, their relationship with the coach. How much do you get involved with their lives, with their problems, with their crises? These are, as you said, 22-year old kids, young men, thrown into a world they've never experienced before. There's health issues, there's public image, their training. What role do you play in those experiences? Guest: Pretty central, with a younger athlete, who as you said is just making the transition. So, one of the first things we do is try to make sure they've got a teaching component and a safety net for financial planning, which is a service that I think should be done in a separate way, so they have another person in their life who will educate them, teach them the basics of how to live a financial life, and protect them from pitfalls and dangers. Part of it is preparing. As I said, the key is to understand and know a given client. How do they look at short-term economic gain and long-term economic security and family and geographical location and profile and the ability to be a starter and being on a winning team. Each player is going to have a different constellation of values, so I need to have them open up and tell me what's critically important to them. Then, it's preparation, so that I talk with players about the fact that they are playing, again, a discretionary entertainment; and if they expect to get all the largesse from it, then they are going to have to comport themselves in public in a controlled way. And so you talk about--drunk driving, and staying out of fights in bars, and the dangers of all sorts of things. And then, how to graciously interact with reporters, and how to graciously interact with teammates, and how to handle fame, and all of those issues. So we do the best we can to prepare them for the fact that if they don't want that role, then they can go play on a sandlot. But if they do, there are other parts of it that are involved that they have to observe. Russ: And who helps them with that? Those are all really subtle skills that all adults would like to have. Right? We'd like to comport ourselves well in public and stay out of fights in bars. We learn those lessons in different ways, but we don't have millions of dollars riding on those decisions and mistakes. Guest: No. So it's my job to prepare a player, as well as I can, for all of that. It's also my job to prepare a player for a second career, so that if they'll do the charitable foundations, that I talk about, if they'll retrace their roots in the high school, collegian, and professional community, set up a high school scholarship fund, re-bond with the alumns from their school at the collegian level, and then ultimately at the pro level set up a charity foundation that's got the leading business people, the leading politicians and community leaders from that area, then they'll--first of all, they learn how to stop being self-absorbed. And how to develop other skills. And second they bond with people throughout the community. So, if you have an athlete playing for the San Francisco '49ers, well guess what: Silicon Valley and the venture capital community and the high technology community all happy to be very proximate to where they train. And the reality is those men are football fans, too. Or women. So, you teach an athlete how to go out to banquets, go to meetings, collect business cards, write on the back of it exactly what the person looked like or what the common interest was, compile a rolodex, and start to cultivate relationships off the field that will help them. And you use those off-seasons to, whether it's media skills or business skills, to figure out internships and other associations that can very smoothly take someone to their second career. So, when I had Je'Rod Cherry, who played safety for the Kansas City Chiefs, he had the Cherry Foundation. He had a very high profile as somebody who cared about the community. And they granted[?] in him the Annheiser Busch distributorship when he finished playing. Which--Bud beer in Missouri is a license to [?] Russ: A great deal. Guest: And so next, we happen to introduce him to Wayne Weaver who is about to buy the Jacksonville Jaguars and he allowed Je'Rod to become an actual minority owner, a few years after he left pro football. Russ: Give me a little bit of logistics here. I interact with young people; they ask me for advice sometimes. I help my kids, try to give them ideas about what they should be doing with their lives. And I think most of our minds, most people when they think about a sports agent--you do the negotiation, you get the contract, and then you go off and find another client. But you are talking about a pretty heavy load of modeling, mentoring, instructing, etc. How much time to you spend with those athletes day to day, outside of that negotiation part, the literal business part of the endorsements, the contract? Guest: Well, that's only a minor part of the relationship. The reality is, especially in the first year or so, a high draft pick or someone entering the sport needs a fair amount of focus. Now, it's not just me. I'll have a team around me of other folks that can answer questions and provide input. But the reality is that there is a whole area that we call client maintenance. So if you think of agents' roles, it's contract negotiation, client maintenance, and recruiting are three big roles. But in client maintenance, it can be anything from helping someone deal with the fact that they are not starting or they are injured. A lot of my time is spent dealing with athletic injury. It's why I became so much of a crusader on the concussion issue. Because players get hurt. Now, football has the most injuries. Baseball, where we had a fairly large practice with my partner Jeff Moorad has a little less. In baseball they tend to be things that happen to the body without contact. Pulls and overuse of muscles. And in basketball. In football, they are contact or collision injuries. And so getting second opinions; I would sit on a Sunday afternoon with a Physicians' Desk Reference (PDR), on my desk and really had to become a specialist in every joint in the human body. Especially on the issue of concussion. And players need advice. They need second opinions.
42:28Russ: Well, let's talk about concussions and then we're going to come back to that. Let me ask you an interim question first about crises. Let's take something that happens in baseball: Some report comes out linking an athlete of yours to something unattractive--steroids, or it could be an incident in a bar, whatever. How often are you the first person the athlete calls, and how often do you read about that in the paper and think: oh, my gosh, I'd better get onto this? Guest: It doesn't take that long because before it's in the paper, the athlete will call. Hopefully. Russ: Some reporters are going to call, too. Guest: So you have some lead time. Well, again, the incident has to happen before it breaks. And many times there's a lag time. So, the key to crisis control is in getting an athlete to find out all the facts that are relevant surrounding whatever it was that occurred. So when he says whatever he's going to say, he doesn't end up being contradicted later. And doesn't end up making statements that push the investigatory press that we have today, the 24-hour news cycle, into--for example, in Tiger Woods, finding more women. Or Michael Vick--finding an additional dog-fighting problems. So, one needs to be pretty clear that you've really looked at what it was and what the consequences were. And then, for athletes, where there is culpability, my advice to them is to take responsibility. Because normally whatever the legal consequence is, is much less than the damage to brand and role modeling. So the first key is to come out and take responsibility and say: I did whatever it was; I was wrong. And the second is to state the standard that's right. So let's say it's fighting in a bar. I know that being involved in being in fights in public is not something I should be doing. And third to state that you know you are a role model and an athlete and your behavior has imitative effects. So: I failed in that responsibility. And lastly to apologize to all the relevant constituencies that were impacted. It may be it's the team, the franchise, the teammates, the public, the fans, whoever it might be. And lastly, to state that you've taken steps to prevent a recurrence. So that: I'm going to go to alcohol classes; I'm going to do counseling in anger management. Whatever it is, so that people know that one is serious about the issue. And then the healing can being. Russ: But not every athlete takes your advice. And not every one of them thinks they are going to get caught. So, a lot of--I'm not talking about your clients in particular, but just in the sports world we constantly see a story say about steroid use or misbehavior just sort of slowly spiral into a deeper and deeper mess. Would you ever have client who you've made that speech to--and I'm sure you've made it many times--they ignore it? Because they are human. And we're hoping it would turn out in another way. And then you had to make a decision about how to handle that. What would you do in those cases? Did you ever drop a client, because you didn't want to deal with it? Guest: Here's the key. Agents have to have the backbone and sense of responsibility to confront their clients with the real world realities and consequences of their actions. And most agents won't do it. So, if a player--that's because they are afraid of getting fired. So if a player--I used to joke that if a player was standing on the ledge of a 90-story building and getting ready to jump, he'd have 20 sycophants and his agent say: A law of gravity doesn't apply to you. You can live out your dream; you can fly. And so the point is that no agent ever got fired for supporting the most insane activity of his client. They get fired for confronting them. And so that the reality is: that's my job. That's what I need to do. Someone in their life has to tell them. And most agents simply won't do it. So, yes, there have been situations--not very many, because we profile and prepare carefully. But there obviously have been situations where, depending on the circumstances, I just couldn't work with a client any more. Because--they were not facing reality. And they were being so self-destructive--my first impulse is always to help; but when it became clear that I simply wasn't having an impact, I wouldn't throw a young man on the trash heap of history, but I'd be clear that I can only be effective where someone's listening to my advice. Russ: Well, it starts to affect your brand as well, after a while.
48:28Russ: Now, we talked briefly about the health issues. Football--the National Football League is facing a particularly difficult issue with the concussion issue. It could end the game. I'm curious what you think is going to happen. Would you encourage a young person today, given what we now know about the health issues? Of course, it's imperfect; we don't have good knowledge; but we have more knowledge than we used to have. I think. What would be your advice to a young person who was thinking of being a football player? And how do you think the NFL is going to cope with this? Guest: I wrote a column this week called "The Death of the NFL" in which I suggested that the spectre of concussion, and the fact that I consider it a ticking time bomb and really an undiagnosed health epidemic, because we really only deal with those people who are knocked out lying on the field. The reality is low-level concussive events occur all the time. Matter of fact, the simple act of an offensive and defensive lineman hitting together, at the beginning of every play, creates a low-level concussive event. Now, a player, theoretically, playing high school, college, and professional football, and 70 offensive plays for a game, could retire having had 10,000 low-level concussive hits. None of which got registered as a concussion. So, what makes this issue different is that it's one thing to know because of aches and pains to different joints being broken down. An athlete will have a difficult time reaching over to pick up their child once they turn 40. It's quite another matter to not be able to identify that child because of dementia and other symptomatology. I became so disturbed with this back in the 1990s that I started to hold concussion and safety seminars, and brought the leading neurologist around so they could answer the question: how many are too many? Which they didn't answer. So, we held that first series and asked that the head and neck be taken out of blocking and tackling; there would be a neurologist on the sideline; issued a white paper. Not much changed. And then, starting in 2006 started another series with the Concussion Institute, where we got neurologists finally who had done the studies and said that 3 or more appeared to be the magic number. And after that there was an exponential rise in the risk of Alzheimer's, premature senility, Amyotrophic Lateral Sclerosis (ALS), Parkinson's, and elevated rates of depression. And then the worst syndrome--Chronic traumatic encephalopathy (CTE). So, at that point we raised the alarm. The NFL finally convened a physicians' conference and later adopted baseline testing. But the reality of this is that, given the size, weight, and strength of players, which has dramatically changed from when I began back in 1975, these hits are going to occur. And you will start to have parents--as Tom Brady's father did--say: You know, I wouldn't let my son play football. And second of all you've got a series of lawsuits. The players who--as recently as 1994, Dr. Elliot Pellman, who was the league physician, said that there is no problem that we've been able to find with the long-term concussion effects: One doesn't seem to have much to do with another; nor does an impair phrasing [?] does the fact that you have them close together seem to indicate much. Well, how could players assume the risk of the sport if they didn't even know what concussions would do and we are told by the League not to worry about them? So, that lawsuit threatens the basic foundation, where it's not going to affect not only an award but insurance rates and future problems and everything else, if we don't take drastic action. Russ: Well, and it's going to take some of the fun out of watching it. It's one thing to enjoy a great tackle, that both players at least get up off the ground. But if you know that 20 years later they are unlikely to be able to recognize their child, even for fans who like violence and enjoy the gladiator aspect of the sport, I think it's not going to be so much fun. Obviously, there's a culture in a lot of sports--and you hear it constantly on talk shows: I know the risk; it's a man's game; it's not a kids' game; and we understand the risk and we choose it knowing that there's a riskiness. And some people literally will, I think, because-- Guest: Well, that's true when it comes to understanding that there's going to be pain in the knee and back and ankle and hip. This is the first time that it's been crystal clear, the last few years, to players--in the wake of the death of Junior Seau and Dave Duerson--what the real consequences can be. So we're now about to see what the reaction is. Look, anybody who says things like, what are they going to do, put a dress on the quarterback; it's a man's game, and all that; quarterbacks are becoming wusses--I challenge them to go out onto a collegian or professional practice field and take one hit. One direct hit. And see if they are able to get out of bed the next morning without assistance. I mean, you have no idea the automobile accident and train wreck that ensues on every play. As much sound as they do on football, we're completely screened off from just the basic and horrible force. I've stood on those sidelines. And yet, I couldn't stop my two high school sons from playing football. They played. Russ: Yeah. Well, I always think about it when I look at the--it's ironic, because I think you get the best feel for the violence of the game after the game's over and you see these people where it looks like they are trying to hurt each other. Of course, most of the time they are not. But they are doing violent things to each other. And after the game's over they embrace, and there's a cameraderie there that's for me quite moving. Guest: Yeah. The cameraderie you allude to is one of the reasons that a sport like football is so attractive. It creates a bonding that very few things in this society do. But the thing that people don't see is that when I gave the presenting speech for Warren Moon as he entered the Hall of Fame in Canton in 2006, they allowed the presenters to go to a private luncheon with all the living members of the Hall of Fame. And if you watched them move, and walk--it's appalling. They have a raised stage that some of the festivities are done on, and to watch some of those retired athletes try to climb the stage was agonizing. Russ: That's heartbreaking. Guest: And so what you are not seeing is how every joint in the human body gets broken down and how they have to live with that later. Russ: When I see them after the game--and you hear sports fans run their mouths on talk shows and on the Internet--those of us outside the game have no idea what it's really like on a Sunday when you are in pain and you are playing with pain and you are getting banged up. It's incredible. Guest: And those athletes have the adrenalin still flowing in them when you are seeing them post game or during the game. And they are not feeling it yet. The next morning, they feel it.
57:30Russ: Let me ask you a question about negotiation and what it's like to be on the same page as your client. We are taping this, February 2013. I think it was today or yesterday Tom Brady announced a new contract for the New England Patriots. And he's taking something of a pay cut, or at least not taking the maximum that he might get. And of course there are a lot of other people affected by that. He did this, supposedly, to help create more flexibility for the team in hiring and signing future players. And he has an image as a winner; and the public story that's come out of this is that Brady is interested in winning and not just the bottom line of maximizing his salary. Which could be true. None of us care only about money. But of course when he does that, he affects other quarterbacks negotiating some claim. He certainly affects what his agent takes home. And I'm curious. This issue comes up often with the so-called home town discount--a player becomes a free agent, the fans all think, oh, he'll take a pay cut to stay in St. Louis. Just to pick a player, my kids were big fans of [?]'s; people thought, he'll stay in St. Louis, he likes it there; what's the difference between x million and x+1 million. But often players want the highest salary. Sometimes they don't. I'm curious how you deal with that as an agent, when it affects you. Guest: Well, first of all, let me guarantee you, that players don't quantify money in the same way that you and I do. They are not looking at an extra $50,000 or million dollars in terms of what it can buy. They are not thinking: Oh, my goodness, if I could only get this, to have another Winnebago. They don't look at it like that. They are primarily focused with what similarly situated players are making. Russ: It's pride. Guest: It's a mark of pride. Russ: They are keeping score. Guest: They are so far beyond the ability to even spend all that money they are getting that that's not their consideration. It goes to Tom Brady. Tom Brady has one obligation: to do what's right for himself under the circumstance. And to use his own value system, of which a value is the fact that he plays a team game, he needs a big offensive line to block for him; he needs well-paid, skilled position players; and he needs to do what's left for him. Because he's well beyond living on any money he'll make. He's already wealthy for life. And that's to win. And make no mistake: Those restructuring contracts in football have a definite benefit for the player. Because what he is doing is trading salary, all of which counts against the current cap, for signing bonus or guaranteed money, which gets amortized over the life of the contract. So, if you take a contract that has a $50 million signing bonus and it extends for 5 years, then $10 million a year counts against the cap, under that formula. The whole salary counts against the cap. So it's ridiculous for a player, who doesn't care because money is money and guarantee is better in a sport with a high risk of career-ending injury--so what Tom Brady is getting out of that is much more guaranteed money in exchange for something he doesn't care about, which is whether it is classified as salary or bonus. And making a rational choice. The difference between Tom Brady making the Super Bowl and any other player is millions of dollars in endorsements. Russ: For sure. Guest: It's quantifiable. Because the quarterback as Most Valuable Player (MVP) is going to be the biggest beneficiary. Watch how Joe Flacco's life changes now and what he's able to do because of playing on that center stage. And as for other agents and players? One would simply distinguish the fact that Tom Brady is negotiating with the Patriots at a certain point in his career, using his own priorities, and that another player needs to be treated individually as regards what his market is and what his situation is.
1:02:32Russ: Let me ask you another question. I agree with that; that's why I put a little question mark after that part of it; people like to talk about that; I'm not sure how important it is. But Tom Brady and the Patriots are famous for not saying the wrong thing. Brady always does the right thing; he's an exemplar in terms of the issues you've been talking about with respect to what he says in public, how he handles himself. A few years back he had a very mediocre receiving corps and I'm sure that bothered him. I'm curious, given your knowledge of the game: in situations like that, does a quarterback--he never complained publicly, ever, that he had second and third tier receivers. Did he complain to his coach? Was his coach comforting, saying, Don't worry; we'll get you something better in a year? Which they did: they got him Randy Moss and Wes Welker? Guest: See, that's the difference between public and private. Because in reality, he didn't even have to complain. His coaches are looking at every bit of game film. Russ: Yeah, they knew. It wasn't a secret. Guest: It's not a secret. But I'll tell you what's key, is that leadership role. Knowing that the quarterback will always protect his teammates publicly is part of what inspires people to follow a leader into hell and beyond on a football field. Russ: For sure. Guest: And so the writers sitting in a press box know the pass was good and it was dropped. If a quarterback comes out and says that, he's going to undercut his relationship with the wide receivers and everybody else. So that quite commonly I would talk to teams about enhancing the cast around the player. But those are never public discussions. Russ: Any athletes you particularly admire? Any General Managers, your peers in the agent business? You don't have to tell me the ones you don't like. And you probably wouldn't. But anybody that particularly stands out as people you respect? Guest: Well, first of all, the key is ownership in sports. So you take an owner like Robert Kraft, who, when he bought the team, I had Drew Bledsoe as a client, and I watched Bob very carefully ask questions of everyone around him as to what constituted the best General Manager, what constituted the right structure for an organization, the fundamentals of scouting. Instead of just coming and imposing his will, he researched every morsel he could get on how to build a winning organization, and took his own intuition and built a structure that will always win. And understood the importance of the coach and the General Manager. Now, the organization is critically important. It's why the same organizations win even though the draft and free agency are designed to break them down. It doesn't matter. They win anyway. The Pittsburgh Steelers find a formula, historically, to win. Because they've got stability, they've got the Rooneys as owners who understand the long term. And someone like Bob Kraft will win. It's why for years in a sport like baseball--George Steinbrenner and his group, for all the focus that was put on them, they actually produced winning teams. And for years the O'Malley family with the Dodgers produced winning teams. And Artie Moreno is the type who will do that. At the coaching level, you take a coach in pro football like Bill Belichick or you take--those coaches uniquely understand how to win. And they will take the same group of players and make them better. And they have an inherent sense for what makes things work. In terms of agency, there are many, many well-meaning agents who really care about their clients. But there are far too many agents who think their job is to put more dollars in the bankbook of the player; and they don't think about the player's reputation, the health of the sport, the fact that this contract negotiation is not about 'me.' It's about the player and the team. And my role is to facilitate that. But I'm not a--my role should never be such that it becomes a distraction in that. And so the problem-- Russ: It doesn't always turn out that way in your business. Guest: Well, the problem with agentry is there is so little collegiality in it that most agents can simply not operate as peers. So you get a best-selling author and he'll write scripts for other best-selling authors' books. Even though they are competition. You get a doctor and they will tell you that someone else has done a splendid piece of work or is an innovator in the field. It's almost unique to agentry, like a barrel of crabs, that agents seem to be constitutionally incapable of it. And so the whole process around agentry is very akin to the Republican primary where instead of the candidates emphasizing their own skills, they spent time denigrating other people's. I didn't want my wife to marry me, when I was married, because I convinced her that all of the men were horrible. So that's the point. Russ: So, this is your chance. Do you want to say something nice about another agent. Guest: Oh, there are a slew of agents that I've liked and respected over time. I think that David Falk did a very good job for his clients, was very innovative in terms of how he worked with Michael Jordan. I think in football some of the less well-known agents, whether they are Jack Mills or Tony Agnone or the Toners--there was a whole series of really decent people in it. The problem is that many of the industry leaders base their whole thing on negativity. And that's sort of difficult. I used to send notes to other agents complimenting them on great contracts. And then my partner sent a note to another agent complimenting him on a great contract and a player said that the other agent featured that in his recruiting book.

COMMENTS (13 to date)
Trent Whitney writes:

Russ,

A great podcast, as usual - always insightful and entertaining when sports is involved. And in this case, very Hayekian as Steinberg described how the concept of sports agent emerged and evolved through the years.

A few thoughts:

* Agree completely with Steinberg's assertion that the NFL is competing not only with MLB and the NBA, but with movies, theater, concerts, and all other entertainment providers. I've said that for years, and think the logical extension is that it demonstrates that the NFL is not like 32 businesses competing with each other in the same industry, but more like an IBM with 32 corporate sites that is competing with other multi-national corporations.

* It's always seemed to me that in certain industries, like auto manufacturing, employees feel more like they're working for their union rather than the employer. I don't think sports is anywhere near that point yet, but I wonder what Steinberg would say about the trend in general. It has been a few years since Cal Ripken, Jr., had his own PR firm managing his own player access - not allowing the Orioles PR department to do it, as had always been the norm. And now, the Chicago Bulls have a situation with an injured player in Derrick Rose, whose agent and top sponsor (Adidas) are apparently advising Rose not to play this season, while the Bulls want him out on the court. I would think Rose's situation a logical extension of player salaries being capped in most leagues, while the sponsorship dollars are continuing to increase, per Steinberg's comments.

* It would be very, very interesting to hear you interview a team owner or longtime General Manager about Steinberg's comments about how agents actually help teams. And how agents should be viewed as allies in growing revenue. I wonder if he would share Steinberg's view....perhaps it might matter whether you interview an 'old guard' vs. a 'new breed' owner/GM.

Thanks for doing this podcast!

Sam Jackson writes:

sportsillustrated.cnn.com/2012/magazine/04/10/steinberg/index.html

Russ, I am a huge fan of Econtalk and have listened to every podcast. I enjoyed your talk with Leigh Steinberg and was a huge fan of his for many years.

I am curious as to why the conversation today focused on events from 20 to 38 years ago, and not to Leigh's activities in the last couple of years. The link to the Sports Illustrated article from last spring will give further details. I would find his comments fascinating on his situation now where he is no longer an NFL agent.

Kindest regards.

[broken html coding fixed--Econlib Ed.]

joel stroup writes:

Great podcast. Would have liked to hear your and Lee's thoughts about the monopoly power of major professional sports and whether that's good bad necessary or not. Also as an observation we often label chrony capitalism as a bad thing but listening to Lee Steinberg - that seems exactly how he's based his career - networking through friends and thats how he's counseling his athletes - is the old boy network always a negative?

cheers,

joel

John writes:

Interesting podcast.I don't agree however that the NFL will cease to exist because of the concussions.
People seem to forget that Boxing,MMA,Hockey and Soccer also have high rates of concussions yet no one is talking about them going away. I think the media(which is left leaning) perceives that football is in danger but in the real world people know the risk and want to participate anyway

David R. Henderson writes:

Great interview, Russ. I know that this was not the intended effect, but my wife doesn't like me watching football and I've been on the margin about it: now that I know how much damage it's doing, I'll probably watch it a lot less.

Dan writes:

I'm not a sports fan, but now that the long-term health issues have been widely publicized, put me squarely in the "they knew the risks" category. I find it difficult to feel sorry for someone who won the genetic lottery and then consciously chose to make millions at the expense of their health. Choices have consequences.

Raja writes:

Would have been interested in hearing more about how principal-agent issues come into play at different levels of the talent/agent spectrum.

drew writes:

During the the segment about concussions, Steinberg made reference to players to day being bigger, stronger, etc. I am surprised you did not follow up on this with questions regarding use of PED's in football and the effects on player safety. On the one hand, we are concerned about concussions; on the other, we love these big guys putting on the big hits. Inherited traits may play a part, but I suspect there's more to size and strength than genetic selection.

Russ Roberts writes:

Sam Jackson,

EconTalk is not a news show. It's a place to learn. I wanted to talk to Leigh Steinberg so you and I could get a glimpse of a part of the economy that most of us never get to see--high-powered sports and the people involved in that business.

I did a little research on him before the interview--I did discover he's had some serious challenges in recent years but didn't think them relevant for what I wanted to learn. Hadn't seen the Sports Illustrated article. I'll check it out.

Greg Dodge writes:
Dan writes: I'm not a sports fan, but now that the long-term health issues have been widely publicized, put me squarely in the "they knew the risks" category. I find it difficult to feel sorry for someone who won the genetic lottery and then consciously chose to make millions at the expense of their health. Choices have consequences.

I generally agree with you about professional athletes, but to me the vexing question are high school athletes. I didn't play sports in college (or graduate school, obviously) but I played many in high school, including football, and I still think it was one of the best experiences of my life and in many ways shaped who I am. That said, the idea that repeated, sub-concussive blows to the head could cause long term damage in high school kids is disturbing, to say the least, and I think that's the "threat" to football.

I don't have an answer but that's at least the question that interests me the most. I am a big fan of football (as well as EconTalk!), but this issue is troubling to me in the sense that I literally don't know what to think.

joe writes:

i am a frequent listener and though i enjoyed this podcast, i did not get the dose of "education" i was hoping for. in particular, i did not learn how one squares the notion of a "market price" for athletic talent with what agents like Mr Steinberg does. If an athlete is worth X, then a) paying him more is a rip-off or b) the market would have found X without Mr Steinberg. I don't see the added value he brings (except perhaps as a signalling device to the other side that the athlete is taking the negotiation seriously...but wouldn't that be assumed?)

Russ Roberts writes:

joe,

One thing to remember is that x--the market price--is not written down somewhere for people to look up via google, say. It's uncertain, especially when the market is as peculiar as that for elite athletes. One thing talking to Leigh Steinberg reminded me of is that the value of an athlete in the endorsement market easily outweighs his salary from his team. And that value is created in part by the behavior of the athlete. That "client maintenance" is the biggest part of his time as an agent was unknown to me. The other part I found particularly educational was the observation that the real competition isn't between players and management but between different sports and other forms of entertainment. Finally, agents in all areas can help the negotiation process by creating a buffer between the parties. See the interview for how Bartkowski reacted to knowing what his team's general manager was saying about him. It's nice to be insulated from that sometimes.

Bradley Ross writes:

By serendipity, I recently listened to a 60 Minutes episode about Drew Rosenhaus, another sports agent. The contrast between the two men and their approach was striking. Also interesting was that both men seemed to believe they were the inspiration for the movie Jerry Maguire.

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