I’ve been following the markets recently with a sense of awe, wondering for the life of me how on Earth they’ve gone up through April. I don’t invest my money personally and I don’t proclaim to know a great deal about markets generally, but I hold the opinion that I suspect (hope) many people also hold, and that’s WTF! It’s fairly evident to me that central banks are the only reason markets haven’t plummeted to a level that would mirror even closely the economy, but there was something I picked up on which got me thinking about golf. It always comes back to golf with me. The markets have really only rallied off the back of a few, very large stocks. It’s not like every stock is trading up, far from it. It’s therefore becoming ever clearer that after this crisis, there will be a further concentration of wealth, both in terms of companies, and individuals. Amazon will come out of this stronger, while dozens of other retailers go bankrupt. The Pareto Principle is once again coming fully into effect.
When I think about what golf might look like after this Covid-19 crisis, and specifically how the European Tour might look, I’m left with the unshakable sense that time might be up. Golf at the professional level (I’m aware that doesn’t make up all of golf), has done a fairly brilliant job over the last decade or so of maintaining astonishing breadth relative to many other industries. It’s maybe frustrating to some who believe golf should become more like the ATP Tour in Tennis and look to concentrate the best much more often than it currently does. But I did think it was interesting to see Federer, Djokovic and Nadal apparently have discussions about helping lower ranked players financially through this time… this is what comes of an industry that concentrates wealth less liberally than others, or rather, leaves the competition to the forces of the market entirely, and thus therefore allowing the Pareto Principle to do its thing. I would generally be an advocate of this, when it’s say, Spotify, but it’s becoming clear in a crisis that actually checking these things occasionally can lead to less dislocation in dire times.
The reason I say time might be up then is because I think these remarkably strong forces are now upon us, and there isn’t much we can do that wouldn’t be politically sour. Sponsorship over the last decade or so has followed what I opined above, in that we’ve got fewer sponsors supporting the Tour, yet they give more than what sponsors on average gave 10/15 years ago or so. It therefore just takes one or two of these sponsors to withdraw, and the Tour goes from experiencing nice gains, to worrying losses. This lack of diversification probably isn’t anyone’s fault, but we cannot hide the fact that this is a precarious place to be. Also, and maybe this is more pertinent to the professional game as a whole, is that I think the veil will finally be lifted on what we perceive as ‘value’. There’s no way I provide the kind of value that warrants what I’ve been paid over the last few years, and I think that could be argued across the board. But because liquidity in some areas has been so readily available, it’s gone largely unnoticed. My inclination is that this is going to change though, not so much the liquidity part, more the actual solvency part, and so naturally I think big companies, especially in Europe, are going to have to rethink their investments. The PGA Tour might be a different story for awhile. For one thing, America tends to value individuals above all else, but more directly, while the PGA Tour has it’s NPO (Non Profit Organisation) status, it will never have to compete in the much harder, and realistic terrain that the European Tour has to. Forget Tiger for a moment, The PGA Tour continues to have politics as it’s number one asset.
I can see a scenario then whereby we have tremendous hardship, relative to our recent past, in Europe, and that we retrench back to resemble a time in the 90’s. Speaking objectively, I don’t think that’s all that terrible neccesarily. It will however create an ever larger gap between the two Tours and that’s what leads me to think the European Tour really would have no choice but to join forces with the PGA Tour. There is another possibility I suppose in that enough stimulus is provided by mum and dad, (Lagarde and Bailey), and that we can continue along the road we’ve been on. I just can’t help feeling though that like Frodo and the gang, if we stay on this road for too long, we will eventually get found out.