One of my favorite sports events of the year has always been the NFL Draft, a love that only has deepened with my appreciation of economics. One of the big story lines going into tonight’s draft is how Cleveland will take advantage of the impressive bounty of draft picks they have amassed over the last few years, which includes five picks in the first two rounds (1, 4, 33, 35, and 52.)
As Warren Sharp noted last month, Browns entered this offseason with the most draft capital ever accumulated in the modern era. Even after making trades for players such as receiver Jarvis Landry and quarterback Tyrod Taylor, the Browns are still entering the night with a significant advantage over the rest of the league.
Via @SharpFootball on Twitter, April 25
While the Browns strong draft position may help dull some of the pain their fans suffered as a result of last year’s winless season, it also allows a teaching opportunity about capital and why economic success requires more than simply accumulating it.
To start, it’s worth recognizing how the Browns came to acquire the draft selections they have.
The first advantage is that the team was bad. Very, very bad. As a result of their 0-16 season, the Browns had the top selection in every round of this year’s draft. But yet they still finished the season with twice the amount of capital of the New York Giants, the next worse team in the league. How?
Well the Browns front office under former-VP Sashi Brown and Chief Strategy Office Paul DePodesta (a major character in the novel Moneyball) had a deliberate strategy of accumulating picks overtime so they could have the resources necessary to build a winning franchise. So the Browns lowered their time preference, trading back multiple times in the last two drafts in order to accumulate extra picks in the future. They also restructured their roster with younger (cheaper) players, going into last year’s season with the youngest roster in the league. The result was the Browns had cap space of over $80 million going into this season (even after spending $16 million in a trade to acquire the Texans’ 2nd round pick this year.)
Along with the desire to accumulate future picks, it’s also worth noting that Brown and DePodesta were guided by an almost Hayekian humility of appreciating the limited knowledge teams have during the draft evaluation process. For all the money and resources invested in evaluating talent, studies have shown that no team has proven to be able to consistently “beat the draft”. That’s why teams like the Patriots have routinely moved back in the draft to accumulate picks in later rounds, obtaining more than their standard seven draft selection in all but one draft since 2010. More selections in the draft = more chances to hit on a quality player.
Of course the question is if the Browns had this great blueprint for building an organization, why has the team been terrible and Sashi Brown dismissed? Simple. Accumulating capital isn’t enough; the question is how it is used. Collecting draft picks is great, but if those draft picks don’t become good players, front office executives are going to lose their jobs.
As Ludwig von Mises noted in Human Action, there is a difference between capital and capital goods, with the former being used to acquire the latter.
In application to the NFL, capital goods would be the players that produce for NFL teams on the field while capital is the means teams use to acquire them — in this case salary and draft selections. The Browns have been very successful at the accumulation of the latter, but have failed to acquire and employ their players in a way that translates into wins.
As I’ve noted before, NFL decision makers are entrepreneurs who take on risk by deploying their team’s capital in the face of great uncertainty. Sometimes inaction is as important as action. In the case of the Browns, Sashi Brown’s failure to invest in one of the successful young quarterbacks that have emerged in the league the last few years is one of the main reasons the team has a new general manager.1
The false assumption that capital accumulation alone is a guarantee of success actually plays an important role in some of the most frequent criticisms of capitalism.
For example, it is common to see leftist pundits advocate for confiscating inherences based on the notion that it is “unfair” for the inheritors to benefit from unjustly earned wealth. Of course these concerns are short-sighted — having money for the sake of having money means little if it is not put to use. A truly undeserving heir will consume their fortune until it no longer remains, as we’ve seen in the recent sad case of Lisa Marie Presley.
Similarly, the simple fact John Dorsey is now the benefactor of a tremendous inheritance does not mean that he will be a successful general manager. If his draft selections end up to be busts, if his free agent signees end up being more expensive than they are productive, and if he selects players that aren’t good fits for what his coaches want them to do — he too will find himself without a job.
So will John Dorsey be able to turn his capital into the goods necessary to make the Browns a respectable franchise? That’s the question that leads to the NFL being the most watched sporting event of the spring.
- 1Defenders of Sashi Brown, such as Evan Silva of Rotoworld, will argue that Sashi's record of drafting players was much better than he was given credit for and the Browns lack of success is the direct result of poor coaching. I'm sympathetic to this view, but that's a topic for a different article.
