24 June 2008

ND Football 07 & Contract Failures

In economics,there is a topic called "contract theory." One particularly important result of Contract Theory states that when two parties enter into a contract (for example one firm hires the products or services of another firm), if the new relationship requires any relationship specific investment, then there is an optimal contract duration.

For example, if coal-mining firm enters in a contract to supply a coal-burning power plant with coal and the power plant will benefit from investment in its factory to tailor its coal-burning process for the type of coal its new partner is supplying, then the two parties would benefit from specifying that their relationship is guaranteed for some particular duration, and early termination by a party incurs a penalty.

To see why, imagine that the two parties agree to maintain their relationship only for a period of time less than the optimal duration. The power plant will not be incentivized to fully invest in the relationship specific assets needed to get the most from the coal. The power plant will therefore get less profit from each unit of coal and therefore not be willing to pay as much to the coal supplier as if they contracted for a longer duration.

There is still a problem. Suppose that the coal-provider and the power-plant contract for the optimal duration. If relationship specific assets depreciate at all, the second after the contract is initiated, from the power plant's perspective, the remaining duration no longer warrants the same degree of relationship specific investment. The power plant will choose not to invest in replacement of depreciated relationship specific assets.

How do the two parties perpetually stay on the margin, always keeping the optimal contract duration in the future. The answer is a continually self-renewing contract, the Evergreen contract. Instead of contracting for a fixed duration, the parties contract to remain in the relationship until one party calls for termination at which point, after a fixed length of time the contract is over. This way, a sufficient amount of duration always remains on the horizon to justify optimal investment in relationship specific assets.

There are many industries in which Evergreen contracts are prevalent and often the norm. Restaurants hiring wait staff generally require a 2-week termination notice. Some people think that the time is so that the restaurant can find and train replacement (which is partially true), but a major reason is so that the restaurant can be justified to provide the wait staff proper training, development of a special relationship specific, the wait staffs knowledge of the restaurant. Evergreen contracts have also become popular in oil and oil-service contracts.

Perhaps Notre Dame' s Athletic Director could benefit from practicing some contract theory. Kevin White's problem is not contracting for too short a time period, but for longer than optimal duration. Who can really blame Charlie Weiss for looking past the near term, either consciously or sub-consciously? When you are provided with a 10-year contract extension, over investment in relationship specific assets becomes a real problem in the near term. You begin to redecorate your office, make sure your child is in the right school district, you treat your staff more congenially, you revamp your recruitment travel process all because you know you will be benefitting from these actions for the next 10 years. Yeah, these actions should pay dividends in the future, but the near term performance is gonna suffer.

It would be nice if ND football could be awesome today, and awesome tomorrow. Maybe it could be if ND's AD offered Coach Weiss an Evergreen contract. We would be getting that type of season that we will be getting in 5 or 6 years today and every year onward. Let's just hope that our near-term suffering isn't bad enough to drive away recruits for the long-term. Luckily it hasn't appeared so yet. Since NBC doesn't Evergreen contract with ND, we're able to get recruits who want to be seen on tv for the next 5 years even though we were abysmal last year. Two wrongs can sometimes make a right.

There are plenty of other explanations for ND's season last year. Coach Weiss wasn't acclimated to the college scene and ran the program too much like a pro program the first year and never developed his youth… All are probably true, but I just wanted to lend an economic perspective to the discussion. There is a pattern of behavior there. Coach Willingham's contract didn't end up being optimal duration either.

17 June 2008

TBUF Recap

this past weekend, Bobbie and I traveled to Galveston to stay in our friend Dave Street's beach house, hang with a bunch of good buds, and play in the 2008 Galveston Island Beach Ultimate Tournament (TBUF)hosted by the Houston Ultimate Club (HUC).

Our team - Wannaleiya - used our skills, heart, and sweet jerseys to dazzle and amaze the other teams, up to the finals; which we won. that's right, we were 2008 TBUF champs.

Here's a player by player recap.

Sunshine, my brotha, tremendous d's all day, even up to the last game, just as the other team was trying to generate some momentum, you had a huge defensive stuff in the endzone. Need I mention the total sacrificial bid in the first game and the back scar? You owe yourself a nice big piece of ham.

J-Ron, watching you play is like a fairy-tale. You catch everything, then you use your magical gold slippers to gently land in the deep corner of the endzone. As soon as we stretched you out a little bit, wannaleiya won happily ever after.

Ginny, it was tough to hit a target a little smaller than J-Ron in those windy conditions, but you were relentless. I saw you getting a little tired after the first game, but then I couldn't believe it was the same person running like a track star in the last game, taking defender after defender with you. Plus, as soon as you got your hands dialed in, you were on-fire. I remember a sports-center highlight where you had a killer grab and perfect continue for score.

Jenn, you deserve an A on your test. Your handling was superb. You threw like there wasn't even any wind. Plus, your cuts were quite savvy. I remember a couple times being on a high-stall count, not having a lot of options, and then seeing you on the perfect cut for a big-bender score. Those aren't easy to catch either, but you made them look like a piece of cake, like a walk on the beach. Looked like a beach ulty veteran for your first beach tournie.

Uncle Spike, where do you keep those wings. I'm well familiar with layout d's, but wasn't aware of your catch&fly. Seems like you could catch, flap your wings a couple times, land just in the endzone across the rope in sandstorm of fury, and emerge with aviators intact. Damn fine.
Plus, nice downwind hammer pulls. And upwind pull-catches, oh, wait...

Oh what the heck, I'll give myself some props too.
My mark seemed effective. I started calibrating that downwind thumber pull. And, way to eat everything sunshine fed me in that front-corner. That's some chemistry. Step-off d.

Jeanne, you sure got an eye for talent. You pulled the whole successful venture together. Got us fired up after we started off slow, and then once we were hitting full speed, you just let the machine run. Wannaleiya CEO. Success and Fun. Nice work, mission accomplished.

Looking forward to unfolding my red tbuf champion chair at riverside practice on wed night,

16 June 2008

video from first year in austin

just a video made from a bunch of random video shots during Bobbie's and my first year in Austin.

much requested link

over the weekend, in addition to a lot of ridicule about the existence of my blog, it has been requested that i use the blog to post a link to this site to help out my single friends in their relocation decisions.

much thanks to Scott Macdonnell for orginally finding this site.
he said he was just looking for cities that had a good "view"


09 June 2008

Riverside Summer Classic

In light of the end of the academic year, i was able to participate in my club team's ultimate tournament this week here in Austin.

I play with the Riverside Club Team

we're a mens team in Austin.

J Leon (our Mark Cuban), hosted a tournament this weekend with 14 teams from around Texas and surrounding states.

hot, windy conditions, great fields, made for some long points and great play.

we won a tight game in the semis and lost a heartbraker in the finals.

comps, fine'

I have passed my Comprehensive Exams at the University of Texas in Economics.

A huge hurdle, now completed.

next hurdle, generating 3 papers to serve as chapters of my dissertation, in one year.

luckily, one is well underway.

time to keep pressing.