It's DFS winter sail time, which means one thing. We've got hundreds of savings on more sofas than you can shake a booty at. And with four years interest free credit on everything, there's no better time to let your bum find its thing. But hurry, shake on down to DFS or get online now. DFS Winter Sale. What's your thing?
Red Alert! At Matalan, the big sale has landed. There's up to 50% off across women's, men's and kids' fashion, plus homeware, and all things Christmas, too. Don't miss your chance to save big. Shop in your local store and online. And you didn't flush baby wipes? Dental floss? No. Cat litter? Ah, no, no. Hmm, I just can't understand what... Hang on a moment.
Yep, we'll get someone out to your tenant and get that looked at. With DirectLine's landlord emergency cover added to your landlord insurance, whether your tenants block the toilet or break a door lock, we'll get you from problem to solution as quickly as possible. DirectLine, we're on it. Hello, After Hours listeners. Felix here. After Hours is still on a break.
but we wanted to bring back an episode from the archives we think you'll still find relevant. Let us know what you think, and as always, thank you for listening. Okay, Felix, you've been following this hesitancy around TikTok, but now actually some outright bans of TikTok in India and for people who use U.S. government phones. What are your thoughts on what's happening with TikTok and why has this struck you as an especially...
interesting story to start 2023. Well, of course, if I'm totally honest, I will say I'm mostly worried about myself because I'm such an enthusiastic user of TikTok. But then, of course, it posts really all... kinds of interesting issues. The first one has to do with sharing data across national borders. You might remember this was such a big issue when EU privacy legislation first came along.
companies had to adopt in all kinds of ways to make sure that they were in compliance and then more lately there's sort of this security twist, any data that China can touch now seem very problematic to a group of lawmakers. Just a week ago, Brendan Carr, the leading Republican representative on the FCC, he said that...
India created the blueprint. You just cannot allow apps like TikTok to operate. And the argument is basically that one way or another, the Chinese government will be able to get access to US data. to observe what US users do on the app. And that is, at least in some circles, deemed irresponsible, deemed dangerous. And as a result, we need a TikTok ban.
And I'm curious, what do you make of it, Sarah? Is it going to work? Is it real? Will it happen? I think it's very interesting as part of a larger trend. TikTok is the most successful example of an app that really takes off with users that then later regulators and other people come along and say, oh, wait a minute, there are some security concerns there. So one example from a few years ago was an app called FaceApp.
which turned out to be a Russian app where you would upload photos and they would age them so you could get an early look of what you looked like as an old person. There have been other apps like this, too. More recently, last month, there was just Lensa AI, which was another app that altered your facial appearance. And after these images of people...
with the face of an astronaut or the face of a woodland fairy had sort of gone viral. People said, wait a minute. In an era where your face is often a password to get into your phone, maybe you don't want to have this. data just be shared in the cloud and you can't really ever be sure that it's fully deleted.
I think in the case of TikTok, there is this extra layer of the Chinese government and how the U.S. relationship with the Chinese government has evolved over the last few years. Yeah, I think that sounds exactly right. respect also. There are a little more than 300 apps now that are banned in India. It happened right after the military clashes between Chinese and Indian forces. All of this takes place in a geopolitical context. What strikes me as particularly interesting is when
People talk about the security concerns. It's always... incredibly vague. It's like, oh, somehow we have data and somehow the Chinese know something about US users. It's worth drilling down a little bit. What is it actually that you give away when you use apps like TikTok? the most obvious is what you watch, how long you watch, who you follow. In TikTok's case, maybe not such a big deal because the main mode of using the app is not that you actually follow people, but that
the app's algorithms figures out what you really like. And then as a result, we serve you lots and lots of content that is close to what you like. As I look through the data, the only one where I can imagine that there is some real concern is probably geolocation. So imagine a situation where someone's close to an abortion clinic, where someone is close to an embassy. Actually, knowing in real time where people are is more of a problem than many of us had spent a lot of time thinking about.
I think what you're also seeing is just a sort of increasing paranoia that is not necessarily tied to any specific use of data or articulated use of data. But that's coming from a sense that we can't always trust that these apps are just what they say that they are. Can we definitely know that there's not some kind of spyware or keystroke tracking or microphone manipulating or camera manipulating aspect of these different apps?
We always say trust, but verify. And I feel like the challenge here is with verifying how these things work. We're sort of entering, I think, a different phase of the internet. I used to think it was crazy that people put tape over the cameras of their computer. And then I saw a photo of Mark Zuckerberg with tape over the camera of his computer. And I was like, apparently I'm a chump if he's doing it. There are two interesting aspects to me.
From a company perspective, you don't want to give away the secret sauce. The way TikTok serves the videos and the way they use user information, that is part of what has made the app so enjoyable and what has invited all the creativity and the memes. What helps me is... To always think about, say, national security concerns is the data that a particular app has.
How unique is it? So say China at some point in time really decided that using geolocation of US users is something that they wanted to look into, maybe to have some sort of influence over people. That, I think, is often the scariest story that people will tell about the likely use of the data. And then when you think about it for two minutes, there is a huge marketplace for geo-information.
We know that the U.S. government buys geolocation data from private users. A little while back, there were two apps, Muslim Pro and Muslim Mingle, that sold app to a data broker called Xmode. sold it to defense contractors. And from these defense contractors, he then went to the government and the military. So the very fear that we have that we don't want our government and other governments to know.
There is a huge marketplace for this kind of information in the first place. And so I feel the current conversation... about the ban of TikTok is one of these performative acts in politics. It has nothing to do or almost nothing to do with A, keeping us safe. It has almost nothing to do with really being...
concerned for anyone's welfare. It's just you want to be known as the politician who stood up to China. You want to be known as the politician who's really tough on social media. It creates a... kind of superficial conversation that you look at and none of this really makes any sense. But of course, it serves political purposes first and foremost. Yeah.
I totally agree with politics. There's always an element of performance. You're always playing to the crowd. It's impossible to really separate the geopolitical context from this debate. feel like we're in a very different time. I was remembering 10, 15 years ago, there was all this hype about the BRICS and how these emerging markets were such a great opportunity for firms from wealthy countries to sell products and services to.
And now Russia and China have a very different relationship with the U.S. We're in a more paranoid time generally. There is grandstanding, but I'm also aware that there might also be real stakes here too. To me, what's so interesting about... this change that you allude to. Briggs is a great example. If you went to Washington and you were really critical of China, you'd be all by yourself.
Now you go to Washington, you say anything positive about the China-U.S. relationship, and you are all by yourself. And many people will look at you with great skepticism. And when you think about the relationship, not that much has changed. And many things have actually gotten much better over time. Think about... The likelihood of enforcing IP rights in China. Oh my God, we have made so much progress in a relatively short period of time.
China has recognized IP rights now not in a perfect way. I think no one would say that. But it's made much more progress in a much shorter time period than many countries have historically, including the U.S. It took forever to recognize, say, for instance, copyright of foreign authors. What worries me the most is it sometimes feels a little bit like an Iraq moment where we're talked into a paranoia that...
serves mostly domestic political purposes on both sides. It's all tangled up together. And I think it's something that I'm relieved is not my job to figure out. I think what I would find much better than... the way we're doing it right now, is that we had clear rules of what companies can and cannot do. So for instance, if you said...
geolocation data is just not something that should be available to government. And we have rules in the U.S. and those same rules we apply to any foreign government. And that would then imply that you shut down the market. geolocation information. It is no longer legal to sell geolocation information.
Because today, when every government can easily buy all the geolocation information you want on the open market, it's just not very credible to say we're shutting down that one way you might be able to get it. Be really sincere and be really open in what the rules are, what you can and what you cannot do. And then let the market play out within a set of guidelines that all companies have to follow.
The moment it's directed at particular companies from particular countries that we happen not to be so enamored with at this moment in time. things just get very murky. And I have a little more difficult to believe that it's really motivated by welfare considerations for everyone. That's a fair point. I feel sort of...
Obligated to also point out China has blocked a number of US technology companies and has the sort of great firewall of China limiting what you can have access to when you're in the country. And we in the US view that as also a terrible thing. Yeah, exactly. That's a fabulous point. And I think it should mean...
That's exactly not something that we're going to do. We'll figure out a better way to regulate these companies. Maybe we'll see with some of the tech layoffs that have been happening in the U.S. tech sector. Maybe some of those really smart people can go.
help the government understand how all this technology really works. Because sometimes you have these Congress people standing up and railing about the new app or this or that phone thing. And I'm thinking, you probably don't really know much about this. Yeah, spend a little time on TikTok. I think that might be good advice for policymakers and for the rest of humanity. Well, I am a little bit less afraid than when we started. That is huge progress in just 15 minutes.
This January, the energy price cap is due to rise. But with Eon Next, you can start your year on the right track. Our next pledge tariff guarantees to keep your energy prices below the cap. So if the cap goes up or down, you're still winning. Beat the price cap and save with Eon Next. Switching is a breeze. Visit eonnext.com today.
Next pledge is a 12-month fixed-term tariff. Rates adjusted quarterly to stay below Ofgem's price cap. Your bill depends on usage. T's and C's apply. Pay my card. Earning points. It's as simple as it's what you can do with them that counts. Discoveries with friends. Calipino salmon? Memories with your taste buds. Or just one epic... Thank you. to status 18 plus T's and C's apply.
Hey it's Jake here from High Performance. We're currently sponsored by Octopus Electric Vehicles. Octopus is known as a market-leading energy supplier but you might not realize they offer electric cars too. With Octopus Electric Vehicles salary sacrifice scheme your team can save up to
40% on an electric car and get everything they need in one package. Your employees pay for the EV from their pre-tax salary so they save the tax they'd otherwise pay. And the best part, it's free for your business to set up and run. Head to OctopusEV.com to give your team a benefit they'll actually care about. college sports and making money as an amateur. What's going on?
It's a brave new world out there. As of 2021, athletes can sign endorsement deals. That started off with a slow trickle of seeing offensive linemen strike deals with barbecue restaurants where they would get like $200 worth of meat. And silly deals like that. And as the space has matured, we've seen the player signing with Nike or a bigger brand. But the biggest trend to come out of it is the redirection of money.
from boosters to colleges. Boosters are just anyone that's giving money to an athletic department. As of July 1st, 2021, the NCAA changed its rules to allow athletes to make money off of their name, image, and likeness. And we'll just call that NIL. add to the sports abbreviations which are so rare that we absolutely have to add a few more. We don't have enough of them. All right, NIL. Yes, NIL.
That often means that someone who might have a $10,000 donation to the school that they might previously have given to the athletic department, which the athletic department can then... designated their will, might be giving it directly and lining the pocket of a quarterback because they want a good recruit. And the thinking goes, the more money you have coming in, the better recruits you're going to get, the better recruits you get.
the better you are at the sport. You look at a school like Alabama and Clemson, the way that their football team's having success on the national stage, and that increased donations to the school, it increased out-of-state applications, it increased enrollment. So that's one thing I'm curious about. Are we going to see football teams better? Are we going to see other sports marginalized?
Yeah, I think this is completely fascinating, Lane. And as you laid out, it's a shift in the balance of power away from universities and tour athletes. Athletes historically were getting nothing out of this game, which was minting money for the institutions. I confess it's hard not to feel good about all that. But the second dynamic that you're highlighting, I think, is the shift of power towards donors.
Donors now can target things in ways they couldn't target things before. The swimming team was getting some of the football revenue and the left guard was getting some benefits that the quarterback would otherwise get. And all of that sharing. is under pressure the rewards go to the most visible the most celebrated the superstars i don't know felix what do you make of it
So I completely agree. The fairness argument is just super strong. And frankly, that implies that some sports completely disappear or get much smaller. In my view, that's not really terrible. We just see the market forces operating. It's just like the rest of the economy. If there isn't really much demand, if there isn't really much enthusiasm, why keep it up?
That's spot on. But the reason why there's pressure on keeping the fringe sports is the Olympics, because those are such a cash cow for NBC. But also the U.S. and other countries take some pride in topping the medal table. And you're not going to do that. you have some pretty good fencers. And because the US is unique in the way its amateur sports system is set up, pretty much every other country in the world has a state-funded development program for athletes. In the US, that doesn't exist.
college sports. Honestly, I'd never really thought about that. But it makes sense, which is the U.S. is unique in that we basically use college athletics to become a breeding ground for everything. Yeah. In one hand, I guess like... think that's better if it were outside of the college athletic system. That we are including fencing or swimming for the purposes of building Olympic strength seems like a contortion.
It's interesting to think about how the Olympics might change in a world where college sport doesn't train athletes for the rest of the world. So I would predict sports at the margin. Maybe we don't quite see the performance that we would have seen in the olden days. Does that really matter so much? What I love about the Olympics is I watch all these sports that I barely know what it's all about. And frankly...
Is my enjoyment going to be impacted by stellar performances or performances that are 85% of what's possible? I don't really think so. I want to just return to one thing you asked at the beginning, Lane. You have athletes who are conceivably going to get distracted by the amount of dollars that they're going to be coming in. So the interesting outcome might also be that these supposedly winning sports, football, basketball at the collegiate level.
Will they get better or might they actually get worse? There is an interesting case study that I think is still unfolding, and that's Texas A&M. Jimbo Fisher is one of the highest paid coaches in college football, and Texas A&M as an alumni base is also one of the most well-endowed in terms of...
Money and also willingness to throw money at football. Put it that way. And they... had a recruiting class that was the top in the nation, which is the first time that the top school in a recruiting class has not been Alabama or Georgia in something like two decades. What was interesting is Texas A&M, famously this year, was quite bad at football. They did not even make a bowl game. That's just an abomination by...
Aggie standards. Additionally, they also had the largest percentage of their class transfer out of anyone in the country. I would have to think that some of that has to do with maybe the reason why you went to a school. is because of an NIL deal that was lured your way and you get there and you don't like it. Or maybe you realize this isn't the right place for me. And obviously kids pick schools for a zillion different reasons, money being one of them.
It's hard to turn down a million dollars when you're 17. And I got to think that that's something that's happening here. That's true. Yes. This was a really great topic, particularly because... Felix is in the middle of negotiating his own NIL deal right now, as I understand. Yes, maybe that's worth a conversation with the president. There you go.
So Mihir, you wanted to talk about the valuation of sports teams. Obviously, finance professor has got to talk about valuation. So let me just first ask you both. Okay, infinite resources. What team do you buy? Oh, gosh. I think you could look at a team that you know is going to appreciate in value. I would do a women's sport, either women's soccer because of the global appeal or women's basketball in the US.
Or if you're trying to buy a team that already has incredible brand reach and recognition around the globe, I might do the Yankees. I'd like the Yankees more than the Mets. i thought i liked you lane as a co-host but i'm questioning that right now but anyway go ahead felix who would you buy Well, of course, since I teach at a business school, my decisions are completely determined by nostalgia. I would buy the Philadelphia Eagles because I have such fond memories of moving to Philadelphia.
Philadelphia seeing American football for the first time live and I think somehow It's maybe like your undergrad experience. You will never forget that first life encounter that you have with an institution or with a sports team. Go Eagles. Wow. I thought I liked you too, but apparently not. How about you be here? I was going to go the Ryan Reynolds route.
buy some third-class Premier League team like the Wrexham team and build it. But the reason I ask all this is because the valuation of sports teams has just been amazing.
Up until about 20 years ago, the joke was, what's the easiest way to become a millionaire was you start a multimillionaire and then you buy a sports team and you lose your money. And of course, the last 25 years have been the exact opposite, which is what's the easiest way to become a billionaire, which is you start a multimillionaire.
and you buy sports teams. And we have never seen such rapid returns. Teams that have changed hands include Chelsea and Denver Broncos and the Phoenix Suns. And they're all changing hands at four or five billion dollars. That's remarkably high by most objective kinds of financial metrics. Just to give you one example, Chelsea, when it was owned by Romovich, a million dollars of losses per week were being funded by the owner.
There are lots of theories about why valuations have exploded. TV rights have just grown so massively in importance that they are getting remarkable amounts of revenue streams from that. Alternatively, it's quasi monopolistic. There's like huge barriers to coming in. Or the other view of the world is it's just a lot of crazy billionaires running around being little boys. buying their favorite sports teams. I'm curious, what do you make of those explanations and of these valuations?
My sense is that it's mostly a vanity play. Everyone has a private jet. Everyone has yachts that cost hundreds of millions of dollars. And then how else are you going to stand out? And what's really attractive about... sports teams is the flip of the antitrust angle that you brought up, Mihir. We know the number of teams is...
in all likelihood completely fixed, or if it should ever expand, it's not going to expand so radically. If you're in a position to buy one of these teams, you know you have something that not many other people will have. For me, really, the big question is, Are there downsides to that kind of competition among super rich people? Is it somehow true that, say, ticket prices go up? Or is it somehow true that cities are forced in...
to transactions where they build really expensive stadiums. If there's no downsides, it's competition among the super wealthy. I'm not going to be part of it. And I don't know that I care all that much. Right. What do you make of it, Lane? It does strike me a little bit as like you're...
image of two kids arguing on the playground. Well, I have a million dollars. Well, I have a billion dollars. Well, I have a trillion. Everyone just assumes that this is an asset that will always appreciate. As we're in this era of cord cutting, live sports is one of the only draws that rely...
does get viewers and NFL is king of ratings. However, is there a tipping point with that? I don't know if this means that someone like Stan Cranky that owns a zillion franchises is ever going to sell, but you'd have to think that... At some point, there's diminishing returns. What's your take, Mihir? I think it's conceivable that these are vanity purchases and yet really smart.
opportunities as well. I actually think both of those things are possible. So the first piece is, obviously in the Premier League, we see sovereign nations coming in. And with large amounts of capital and they make any billionaire look small and they are willing to pay because they're not.
getting the boyish victory of like, oh, I own the team I rooted for. They're getting credibility on world stages. And that's worth a lot. And then I think the deepest point is your point, Felix, which is these folks are economic actors. And they will find ways. to get returns on their investment. And that could involve lots of different things. It's of course true that TV rights play a big role in the economic calculation. But why is it that these TV rights are so much more valuable?
Look at Pele's lifetime income. And then you look at Ronaldo's lifetime income. The fascinating comparison is on a per television basis, they're almost making the same amount of money. So my sense is the media rights are so much more valuable now because it's a global audience. Where do people watch Premier League? Well, we're paying so much attention to what happens in the stadium, but really we should look to Malaysia, Indonesia.
Asia, all of Asia. The TV rights have become so valuable because we have a really global audience for a subset of sports. And that, I think, by and large has played out. I don't believe the underlying forces will make teams ever more valuable. I'm going to take the opposite side. Okay. I don't think the globalization thing has played out. I don't think the Premier League is deeply penetrated in the U.S.
I mean, there's a lot of room to run on that, but we'll see. And I will alert the NFL that you folks are no longer interested and I'll have to go along. And we will talk to your banker to see if we can get that. Three and a half billion dollar credit line. Yeah, there we go. Felix, you had mentioned earlier that you were interested in the economics of tennis and how it's kind of skewed towards the top of the top.
Yes, it's so interesting and surprising to me also because tennis comes across as this really glamorous sport and you associate it with all of these luxury goods and the big deals. The reality of tennis for most professional tennis players is that it's basically unsustainable. If you're outside the top 200, there is no way you can even cover the cost of being a professional. So many of these tennis players struggle to hire a professional coach. And that is remarkably different from other sports.
If you take the NHL, for instance, there are 700 players. There's a minimum salary of $700,000. And the reality is that most players make more than a million. So the split between overall revenues and how much goes to the individual players is just radically different. When you look at what fraction of that total pool goes to the top players.
Unless you think you're going to break into the top 50 or the top 40, any sort of business logic would say you should stay away from tennis. And I'm curious. to think through what's good about the state of affairs in tennis, what's problematic, and then in particular, what could we do in order to create a better situation for those professional tennis players?
One thing that tennis does really well and almost better than any other sport is gender equity. Because of the efforts of Billie Jean King and her peers years ago, we have a point where the women's prize money is almost on the same foot as the men's.
But there's been such dominance at the top by the big three on the men's side and by Serena Williams on the women's side that I think that has contributed to this effect of concentrating the wealth in fewer hands. Maybe if there was more parity, there would be a little bit more money distribution. But that's probably still only amongst the top 10, 15 players. To your point, about 50 to 200, that's a whole different issue. And it's hard to think about...
How you would go about changing this because there's not a union in which they bargain these guarantees because it is an individual sport. And it also makes me wonder. When you have someone like Jessica Pagula, nothing against her athleticism. She's obviously a great tennis player, but she also is a scion of very wealthy people. And I wonder how much that's contributed to her ability to rise to that level.
What do you think of me here? Yeah, that's fascinating, Lane. I mean, I'm harkening back, Felix, to our conversation about unpaid labor a little bit, about who gets to succeed in some of these markets. But, you know, to me, it feels okay. I confess, I don't really see a problem in the following sense. First off, it feels like just inherently the nature of individual sports as opposed to team sports. And it kind of harkens back to our NIL conversation, which is...
Part of what happens is you share the rents in these team sports. So like Tom Brady is great and the left tackle gets paid a little bit more because Tom Brady is part of the team. And that feels like something that happens in team sports. I can't imagine the dynamic that would allow that to persist into individual sports. So tennis to me feels like golf, which I think I would imagine would have a very similar distribution of.
You know, again, being the 75th player on the golf circuit, I think it's hard. So I don't see it as a problem. And if anything, I think of tennis as a great success story over the last 30 years for reasons you mentioned, Lane, about gender equity. Maybe because of the power of the talent, because of who Serena is and Roger Federer and all these really remarkable people, I think of tennis as a success. Is it a hard situation for the folks who are 75th on the circuit? Yeah, maybe.
But I don't know if that's a problem. I don't know. What do you think, Felix? I do think there's an interesting organizational angle to this story. So if you look at the ATP, the main representative body for players, one of the really... big issues is that it's split between the tournaments and the players who are both represented by the same organization. And that of course is a conflict of interest right there because the tournaments obviously have every interest.
to keep the player share small and have most of the benefits go to the very top players because that's what creates the excitement, the audience, the high ticket prices. That strikes me as not a natural outcome and actually not having really to do with the fact that tennis is an individual sport.
It does strike me that there is a lot of untangling of conflicts of interest that there could be done in tennis. And whether that's through some sort of organization of players or just some intermediate body that's deciding, not the ITA, but... something that's deciding okay u.s open this is the cut for operations this is the cut for players and not the operating body that does seem like that should be
healthy. I don't know how you go about convincing the U.S. Open to relinquish that because who wants to give up power and money when they have it? Yeah. One element that strikes me were thinking about is what this means for young people who think about a potential career in sports. About 2% of college athletes make it into the pro leagues. The probabilities are really, really...
low. You shouldn't really think by playing college football you have a reasonable chance. And what's troubling about this is that The expectations when you look at surveys of young people are completely misguided. It's worse than... basketball and in ice hockey, where 75% of college players say it's somewhat likely that they will have a pro career. And of course, spreading money around and making it easier to sustain some sort of a professional life would only further misguide the kids.
to think that this is an actual career and that this would actually be a way to make a living. It's not. Yeah, that's fascinating. I got to say the final piece of this story that I love is that...
Bill Ackman, hedge fund icon, has decided to take on the cause of organizing the players and has started, I think it's going to be a for-profit winners alliance or something like that. And just the irony of... A hedge fund titan going to the streets and saying workers of the world unite is, I think, pretty fantastic.
Look at him go. He's a quality striker. No, not him. The electrician fixing those lights. Wow. Is he? Yes, he uses QuickBooks to prepare for self-assessment. This is truly game-changing. Use QuickBooks year-round to ensure your income tax return is shock-free. That's how you business differently. Intuit QuickBooks.
Hey it's Jake here from High Performance. We're currently sponsored by Octopus Electric Vehicles. Octopus is known as a market-leading energy supplier but you might not realize they offer electric cars too. With Octopus Electric Vehicles salary sacrifice scheme your team can save up to
40% on an electric car and get everything they need in one package. Your employees pay for the EV from their pre-tax salary so they save the tax they'd otherwise pay. And the best part, it's free for your business to set up and run. Head to OctopusEV.com to give your team a benefit they'll actually care about. This January, the energy price cap is due to rise. But with Eon Next, you can start your year on the right track.
Our next pledge tariff guarantees to keep your energy prices below the cap. So if the cap goes up or down, you're still winning. Beat the price cap and save with Eon Next. Switching is a breeze. Visit eonnext.com today. Next pledges a 12-month fixed-term tariff. Rates adjusted quarterly to stay below Ofgem's price cap. Your bill depends on usage. T's and C's apply.