Danny’s Mediocre
After Mizzou’s football team laid an egg against UVA in the Gator Bowl, we got to talking in the office about Coach Drink’s recent contract extension. Not only does that deal pay him north of $10M per year with annual escalators, but it also automatically rolls forward year-after-year as long as the team wins at least eight games per season.
Danny-from-the-investing-team’s take was that while he was fine with the money, the rolling extension was absurd. That’s because the prospect of winning eight games every year, in his mind, wasn’t very exciting. Eight wins wouldn’t get Mizzou into the college football playoff (at least until they expand it again in search of a bigger payday), and it would leave the team hovering around the fringes of the top 25 like they are today.
In other words, he viewed the deal as designed to reward a perpetually mediocre football coach.
Our CEO Brent and I, however, pushed back. We pointed out that given the level of competition, winning 8 games consistently in the SEC wouldn’t be mediocre coaching at all. To do that year after year would mean that the staff was recruiting and developing well, devising good game plans, and perpetually a lucky break or two away from winning 10 or 11 games and competing for a championship.
I said it reminded me of my friend from a couple of years ago who also undervalued consistency. He was the one looking to buy a business and to think about how he might finance that transaction, modeled a pessimistic scenario in which the business grew just 2% per year. When he asked me to take a look, I pointed out that growing 2% per year wasn’t a pessimistic assumption at all. Because a business growing 2% per year is also one that never has a bad year. And consistency like that is incredibly valuable, because certainty is a platform.
Same thing here. If Drink is always at least winning eight games, it means that every season is at least at some point fun, the bottom never totally falls out, and there’s always hope for the future.
What’s that worth? Given Mizzou’s up and down history, you’d think a lot more than Danny apparently does.
– Tim
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