Jacopo and I were at Bocconi University in Milan in the Eighties. He was all rationality, I was all intuition. He went on a proper career managing important investment founds, I went sailing once my dad got cancer, sailing the medicine of all my problems at the time. Sailing was what I really wanted to do. He has left the banking imdustry and wants to sail now again. It is so interesting to see how from a totally different point of view, he ends up with very similar conclusions to the ones we share at devotiluca.com, but he is rational as ususal… It is a long article, but worth a lot in my opinion. Enjoy the reading (Luca D.)

Columbia vs Shamrock in the 1899 edition

Columbia vs Shamrock in the 1899 edition. Image public domain

When I first heard of the America’s Cup, as a young sailor more than 30 years ago, I saw in my mind a posh world made of exquisite wood boats, exclusive boat clubs, Sirs and Admirals sipping Lipton tea and throwing bets just to kill time. An old fashioned world where your honor and your world counted more than the plentiful million Pounds.  It was the nautical version of the world of Phileas Fogg. But I was a stupid kid then, and “times are a- changin’…”

Since then I spent most of the last 30 years analyzing markets and enterprises, and that is why Luca Devoti has challenged me to take a look at the sailing sport in general – and the America’s Cup in particular – with the cold eye of the financial analyst. And talking of challenges… one cannot resist them, can he? So here we go…

Disclaimer (as in any serious financial analysis):  Sorry for the wild approach.

24/07/16 - Portsmouth (UK) - 35th America's Cup 2017 - Louis Vuitton America's Cup World Series Portsmouth

24/07/16 – Portsmouth (UK) – 35th America’s Cup 2017 – Louis Vuitton America’s Cup World Series Portsmouth

America’s Cup: would you put your money there?

Let’s start with some broad definitions, before going into market judgements.


Sport and challenge are one and the same. Good old Nietzsche used to say we are moved by our Will to Power. Few understand he was not talking of the rat-race-like quest for power. He was talking about the use of power: the joy of exerting power in actions. Actions that define a relationship with nature and other men, i.e. competition. We are talking about will, action, fight, and (sorry for the politically correct) violence. Well, of course this was in the night of times… Under modern civilized circumstances violence is taboo and our competitiveness has to find other ways. This taboo has created two separated fields of human competition, each with its own rules, ethics and aesthetics.

For the vast majority of us challenge and violence have become abstract, non-physical. They are now basically made of numbers: audience, rankings, pegs in the corporate ladder, page-views, markets-share, votes, and the most ubiquitous “number” of all: money. The fight is practiced wearing expensive suits and ties. For most of us that is the daily battlefield.

But not for all. Some of us are not happy with all that abstraction. Some of us still feel the urge to get physical. Still need some degree of violence. Face to face, physical challenge with nature, with an opponent, or with both. Yes: it is still allowed, but only under the blessing of accepted rules that contain violence to a civilized limit. We call it sport.

Civilization can allow all-out competition only if it is not physical. And can allow physical competition only if it is not all-out. That is way the Rule is at the heart of Sport.

The market for sport

We have outlined sport as a human activity in its main traits. Now, human activities generate markets. And since we live in a society of representation, we will have two markets, reflecting our dual point of view: the athlete and the spectator. The market for athletes is basically a market of tools, venues and event organization. The market for spectators is through event media and operates mostly by sponsorship. Which in turn creates the all-visible market of professional athletes. In this environment sports can be seen as competing against each other for practicing athletes and for media visibility. That is why WS President Croce speaks of growth and opportunities.

I am not sure if this inter-sport competition for media and growth is healthy or meaningful for athletes… It is a consequence of “spectator” point of view and not the athlete’s, and I believe it plunge sports back into the mainstream of “suit and tie” competition, with little benefit for athletes, but that’s a different story… What is obvious is that each sport discipline is a Culture. And as such it will strive to keep alive and to spread its values.

A bit of wild theorization…

How is a specific sport born? Most are the evolution of martial arts or war training. Some are born out of health related practices. Some are extensions of daily chores. And a few are fruit of pure creativity.

At the risk of emulating Borge’s list of imaginary animals, I will try a grouping of sports ranging from “hotter” to “cooler” (as I will expand later). I am using here a very broad definition of sport (and the list is as arbitrary as it could be…)

1.       Self-enjoyment sports – Like surf or solo sailing. You do it because it is fun

2.       Self-improvement sports – Tai-chi-chuan. Jogging. Fitness in general

3.       Classical man-centered sports – emphasis on the athlete (no tools or standard tools)

4.       Chore extension – Common activities made agonistic, such as biking or Car rally

5.       Spectacular sports – Akin to circus, the emphasis is on the show

6.       All-out sports – Here the emphasis is the result, and therefore on tool. Speed records of various kind. F1 racing are placed here

7.       Radical sports – where Spectacular meets All-out with high doses of adrenaline and outright risk

In a sense, as we move down the list we see man engaged first with himself, then with a one to one competition on equal standing, and finally on an all-out competition where the human factor is no longer the key factor. We can say that while man focused competition is the stuff that forges human values (“hot”), the all-out competition is the place that creates innovation and technology (“cool”). Interestingly enough even in the “cool” arena we find sports that seems to go backwards, like racing events for classic cars, or regattas for wood-boats. I believe they do so because older tools are more difficult to master, demand more human engagement, and reward people with more identification and self-esteem. In a sense they go after the lost “hot” factor.

24/07/16 - Portsmouth (UK) - 35th America's Cup Bermuda 2017 - Louis Vuitton America's Cup World Series Portsmouth - Racing Day 2. Foto Pinto

Ben Ainslie after the Portsmouth win. 24/07/16 – Portsmouth (UK) – 35th America’s Cup Bermuda 2017 – Louis Vuitton America’s Cup World Series Portsmouth – Racing Day 2. Foto Pinto

Popular sports

And here we come with the key question: what makes a sport popular? Romans went regularly to the gym just as we do, but when they took the wife to the Circus Maximus they wanted to watch something more dramatic. And I am not talking just the usual bloody gladiator stuff. The most popular game was… the chariot races! People wanted the thrill of reckless speed. And speed seems to be the best representation of civilized competition. Smashing the opponents, of course, is actually the best representation of competition, but it is not as civilized. Be the last man standing or be the first past the post. The two basic forms of winning.

So there is little surprise that AC is moving towards speed. It seems to be the key to popularity and success. But is it really so simple? I think people will watch sports for several reasons. Some people watch if they feel identified. Either because you practice the sport yourself or because it is engrained in your culture. This is way “boring to watch” sports like biking or golf get lots of audience. Some people watch for the sheer spectacle; for the beautiful images, even they are not engaged. Spectacular or radical sports is stuff people see with pleasure. The Off channel on TV is made of this. The X Games. Gymnastics and dives in the olympics are about spectacle too. But other people – the real fans – like the competition itself: they want to see the fight, feel the challenge. They want the catharsis, the tragic drama that only seriously felt competition can bring about. And I think that what makes an activity a sport rather than a sheer spectacle is the conformity to a set of rules that are stable and familiar to the public. This set of rule is the basis for the competition to take place. This is what makes competition “serious” and hence perceived as meaningful by everyone involved (athletes and public). Tradition has a strong bearing on this.

“It is the audience, stupid…”

So you want people to watch? Give them a bit of each! I will not insult you guys with ridiculous graphs, but it is obvious that any sport that offers: (a) a true sense of competition, (b) rings a bell of familiar values, and (c) it is spectacular to watch will be popular. Because it will be engaging.

So back to America’s Cup. We live in a fast moving-fast changing world. All popular football/soccer itself has changed. From a regional based team system to an all-star team system that made it closer to an all-out competition activity where best players will team with the top dollars and top dollars will flow after the top players. But the human factor is still there. The old rules are still the same.

Change is part of the game, but the AC seems to have got a bit ahead of things: it has become the epitome of metamorphosis itself. Gone are the old fashioned yacht of yore. And that was inevitable. But gone – and quickly- are also their elegant modern mono-hull counterparts. Gone is the formula concept. Gone are most of the teams that people got familiar with. And the rules… the rules are changing faster than the weather in Cape Horn.

So, with all this changes, the question is “What is the AC nowadays?” An all-out challenge among millionaires? A high tech challenge among powerful corporations? Not exactly. A challenge between nations? Not anymore… A formula or a one design? A quasi-one-design… so that teams can compete in quasi-equal terms… It has become quite difficult even for people in the sailing world to know what it is about. Let alone the wide public.

Another problem I see is the instability and complexity of the rules. There are popular sports with very complex rules… but usually are popular among those populations which have played it at school (so the rules are familiar to them). And even in such cases, rules are stable and simple. Almost always disputes are set by the referee. On the spot. A sports with rules that ever so often demand lengthy judgements that may end up in regular courts of law…? Come on! This is starting to look too much like the “suit and tie” competition we know all too well.

AC45 Turbo training in Bermuda, the "stadium race" for the 35th AC

AC45 Turbo training in Bermuda, the “stadium race” for the 35th AC

Let us try and apply our three criteria…

(a)    Is there a clearly identified competitor or team? Someone we can cheer for and identify with? Can we see him and “feel him” in the challenge?

(b)    Is the regatta fun to watch?

(c)     Do people identify with the basic set of value at play here?

Sailing is a niche sport that has a tremendous appeal to those who can relate to it. But regattas are not fun to watch. Never were. Actions is too distant from the shore, and even with cameras and drones, the course is too spread out, and it is always hard to tell who is in the lead. The “overtake” may happen from miles away. You need on screen graphs and simulations. So this is quite of a handicap. And yet… AC was a huge success a few years ago. How comes?

First, because, even with its handicap as a spectator’s sport, sailing has a deeply rooted charm. It is the charm of the sea, and the sea is always a mystery to man, at once luring and frightening him. The sea is one of the classical field of human challenge and self-superation, since the first boats were made. Going to sea alone -and coming back- is a feat, a rite of passage, beginning with the first canoes, though the times of the big discoveries, and now in sailing.

Second, because technology helped, as it was the first time the spectator was able to be closer to the action. It was a feast of colorful sails, elegant prows cutting the water and masts crossing at different angles. Just beautiful. And a glimpse of the onboard excitement.

Third, because it was clearly perceived as a challenge. Not exactly a sport in the most traditional sense, but a challenge, i.e. an all-out competition where everything counted: money, technology, and men: the teams. Each team had to decide how to make the best of the mix. And means were not spared in any sense. From the best design, the best materials, the best sailors, the best strategy. That’s why each team was identified with a strong sponsor. It was a clash of titans! The logos of each team quickly became a familiar and vivid flag that fans could identify with.

Fourth: Tradition. Actually a nice mix of new state of the art tech within the rules of an old, traditional and charming challenge. Emotion and tradition (so rarely seen together nowadays).

So I would conclude that the AC compensated the classical sailing media handicap by offering the public an epic battle among well identified teams, each strong and with its own set of characteristics, in an epic setting, the sea, and with a connection both to the future of technology and the past of a lofty tradition.

Why is the charm gone?

Well… have you noted that so far I have not mentioned speed? It is after all a speed based event, isn’t it? Yes, of course, just like the 100 meters run or freestyle swimming. But just like those, it is (or rather was) based on relative speed. Swimmers can go faster with fins, and actually there are a few events for finned swimming. But guess what: nobody cares for them. The excitement is in the challenge itself, not in the absolute speed. Even F1 car are not the fastest cars around. The right cocktail mix is enough speed for excitement, but with plenty of engagement. The key is the relative movement. And this can only be perceived when competitors are close to each other.

"The Yacht 'America' Winning the International Race," oil on canvas, by the American artist Fitz Hugh Lane. Courtesy of the Peabody Collection. Image public domain

“The Yacht ‘America’ Winning the International Race,” oil on canvas, by the American artist Fitz Hugh Lane. Courtesy of the Peabody Collection. Image public domain

The new AC is now all focused on spectacle and speed. But contenders are usually very far away, killing the excitement. The role of the crew seems a bit debased too, since all is now hydraulic and man is just a source of sheer muscle power. No skill or body-mind interactivity. The flying boats are still a surprising view: they are spectacular to watch (even though with a general loss in poise and elegance in maneuvers). But watching a AC regatta feels like watching the Off channel. Basically a spectacular stunt to entertain you while you sip your beer at the bar or in front of a TV. Is it a race? A challenge? Well… who cares!

Obviously there is a public for that. And plenty of competition from other spectacular imagery. All sorts of flying, sliding, flowing, jumping jack stuff… The market will tell if the game will pay off. Since AC is a fairly expensive circus, it will need plenty of sponsor money. Will it return? At the moment the sponsors of highly spectacular “sports” have a different profile from sailing sponsors. And they seem interested in a different public: young energy drink consumers fairly disconnected with the notion of competition in the real world.

I see a huge marketing challenge here. The AC patrons seem to be changing strategy too fast, while having lost the focus of their product. Like a company that does too much rebranding well before having set a solid foot in the market. In short: as a businessman, I would not put my money in the AC business. As a sailor, I feel we have lost a cool top event which represented well the spirit of sailing. But then again, “ times are a-changin’…” Room for opportunity! Ideas anyone?