103: Comps
Private equity and coaching compensation comparisons.
There is an old Yiddish story about an unhappy man that lived with his wife, six children, and mother in a one-room hut. The man seeks advice from his Rabbi, and the Rabbi asks if the man has any animals.
The man answers that he has a goat. The Rabbi tells the man to bring the goat inside to live with the family. And while the man is skeptical, he is willing to try any advice from his Rabbi.
A few days later, the man was even more distraught. Everything was worse in the one-room hut. It was a mess. The family was miserable.
The man returned to the Rabbi to again plead for his advice. The Rabbi thought about it more, and told the man to remove the goat from the hut.
The man followed his advice, and the family slept great. It was quieter, more roomy, and peaceful1.
The kind of comparisons you make matter.
Alex Kirshner of Split Zone Duo interviewed Doomberg to explain private equity and college football last week. You can listen to the full conversation here.
Doomberg2 is an anonymous, independent publication that writes about the intersection of energy, finance, and geopolitics. And sometimes college football.
It’s an irritating and enlightening conversation. Doomberg paints a picture of a super league and the rich getting richer. He states leagues like the Big 12 and ACC are already destroyed.
It’s a provocative listen.
What jumped out at me most was the discussion around Texas football. Doomberg lays out how Texas and Texas A&M received a land grant that is enshrined in the state’s constitution in the late 1800s.
The Permanent University Fund has given Texas and Texas A&M 2.1 million acres over the years. This land is not used for grazing, but for oil and gas production. The land is worth lots of money.
Doomberg lays out his valuation of the Texas football program at $10 billion. Kirshner counters by sharing the Washington Commanders recent sale came at around $6 billion, and Doomberg volleys back that the Dallas Cowboys are likely the comp for Texas football. The Cowboys are probably worth $10-12 billion.
Sure. I’m not here to debate the true valuation of Texas football.
The following quote made me raise an eyebrow.
Yeah, look, the head football coach of the Longhorns makes more annual salary than every manager in the English Premier League, save one. It's a major franchise.
The table below uses 2024 coaching compensation data from frontofficesports.com from June for EPL managers and July for college football coaches. It shows every coach or manager that makes around $6.5 million or more per year.
While Pep Guardiola makes $20 million annually at Manchester City, there are 12 college football coaches that make ~$9 million or more compared to only three EPL managers.
The Premier League is not college football3. There is a promotion and relegation system. The league is fixed at 20 teams. Four out of 20 managers making over $6.5 million is 20 percent of the league’s coaches.
There are 134 FBS teams in college football. 23 out of 134 coaches making over $6.5 million or more is about 17 percent of all coaches.
A primary difference is the English Premier League pays players. The average annual salary of EPL players is estimated at $3.7 million4.
What do we think the average annual compensation is for a college football player?
We’re just starting to get comfortable with the idea of players being paid. The government and NCAA are actively trying to ignore the student athlete facade by removing scholarship limits and settling on a $2.78 billion pool of damages.
But we don’t know what the average compensation is for college football players.
Doomberg continues to share, “And, the Nick Saban's of the world will make 25 million a year soon.”
Maybe, but have we considered there needs to be a transfer in compensation from coaches to players?
Manchester City has two players that make around the same annual amount as manager Pep Guardiola (~$20 million). Manchester United’s Carlos Casimiro ($18.2 million) makes about double what his manager, Erik ten Hag ($9 million), makes per year.
Mohamed Salah of Liverpool ($18.2 million) makes about three times as much as first year manager Arne Slot ($6.85 million)5.
Maybe college football should pay its coaches less and its players more?
My guess is the majority of college football coaches6 are overvalued.
Private equity coming to college football feels inevitable. This snippet is below maddening and a narrow view.
You should be skeptical if someone shares that they don’t see a bad outcome in anything. There are usually a range of outcomes. It could be worse or better.
Private equity or venture capital seeks out high-risk, high-reward investments. I think it’s fair to say college football can fall into that category.
Venture capitalists are looking for a 10x return at minimum or want more like a 30x return. As Matt Brown wrote in Extra Points, venture capitalists are not investing as charity.
The bulk of investments exit through a sale or a merger and acquisition. Imagine if an athletic department is merged with another department or acquired by another company. I would say that could qualify as a bad outcome.
Diamond Baseball Holdings own 30-plus minor league baseball teams. And while I’m not sure there is any immediate bad outcomes, it would be foolish to think it won’t come with any negative consequences.
Private equity means maximizing profits and preparing for a return on the investment. It brings a formulaic approach to a business, which feels sterile or often too corporate. It’s sort of what has happened with the movie industry.
Do you think it will happen to college football too?
We determine value by comparing one thing to another.
The problem is there is more than one kind of comparison we can make in any given instance. We may value one thing more when we make one kind of comparison than if we make a different kind of comparison.
A one-room hut with multiple humans sounds undesirable.
It sounds even worse with a goat.
Check out the code for the chart in this post and any other posts here. And please subscribe if you haven’t already.
Lots of versions of this story, I think the origin is from It Could Always Be Worse: A Yiddish Folk Tale by Margot Zemach.
Doomberg charges $300/year for a subscription. The publication has a pro plan worth $1200/year too. It’s a large, successful publication. Also, it’s behind the avatar of a Green Chicken.
There are tons of similarities and we desperately want it to be the same. These are fundamentally different leagues with different systems in place.
According to statisa. NBA players make a ton, Isaiah Hartenstein catches an indirect insult in the conversation after signing a three-year $87 million deal with the Oklahoma City Thunder.
No, I don’t think Nick Saban was overvalued. If anything, there are a select few coaches that are worth every possible penny. Those are exceptions and not the rule though.