Another good day on the slopes yesterday, carving up the last of the freshies for a while. But this aged body is feeling it, a concern with my nephew, formerly the 35th ranked mogul skier in the country, headed my way.
The Wedge Papers - Say you're the Saudi Crown Prince, and you've several billions dollars burning a hole in your abaya. You're looking for a safe investment vehicle, and that Bankman-Fried kid made a strong impression, but the guy running your Public Investment Fund has one word for you, plastics golf.
How do you make sense of it? You do what despots have done since time immemorial, you hire the nice folks at McKinsey. Via Geoff, you'll agree that it seems to be a perfect client-consultant fit:
NEW YORK TIMES BESTSELLER • An explosive, deeply reported exposé of McKinsey & Company, the international consulting firm that advises corporations and governments, that highlights the often drastic impact of its work on employees and citizens around the world
In one telling example, McKinsey advised a Chinese engineering company allied with the communist government which constructed artificial islands, now used as staging grounds for the Chinese Navy—while at the same time taking tens of millions of dollars from the Pentagon, whose chief aim is to counter Chinese aggression.
Shielded by NDAs, McKinsey has escaped public scrutiny despite its role in advising tobacco and vaping companies, purveyors of opioids, repressive governments, and oil companies. McKinsey helped insurance companies’ boost their profits by making it incredibly difficult for accident victims to get payments; worked its U.S. government contacts to let Wall Street firms evade scrutiny; enabled corruption in developing countries such as South Africa; undermined health-care programs in states across the country. And much more.
Unfortunately, out tour guides for today are the folks at Pravda, curious just because of their longstanding antipathy to the game of golf, not to mention their rather complicated coverage of Saudi Arabia over the years.
The Kingdom and McKinsey have longstanding ties:
Early in 2021, consultants working for Saudi Arabia’s sovereign wealth fund studied an audacious idea: The desert kingdom wanted to become the world leader in the hidebound realm
of men’s professional golf.
The proposal, code-named Project Wedge, came together as Saudi officials worked to repair the kingdom’s reputation abroad, which hit a low after the 2018 assassination of the Washington Post columnist Jamal Khashoggi by Saudi agents. The plan was the foundation for what became LIV Golf, the series whose debut this year provoked accusations that Saudi Arabia was trying to sanitize its human rights record with its deep pockets,
former President Donald J. Trump’s country clubs and a handful of big-name golfers. Some of those golfers have publicly played down Saudi abuses, as has Mr. Trump.
The documents represent the most complete account to date of the financial assumptions underpinning LIV Golf. One of the most significant was prepared by consultants with McKinsey & Company, which has advised the kingdom’s leaders since the 1970s. McKinsey, which has worked to
raise the stature of authoritarian governments around the world, was key to Vision 2030, Crown Prince Mohammed bin Salman’s plan to diversify the kingdom’s economy and turn it into a powerful global investor. Worldwide sports have become a pillar in that plan, with Saudi officials even discussing the
possibility of someday hosting the World Cup.
No opinions creeping into their factual reporting there, are there?
Do note the date, but here's the consultant's mandate:
McKinsey, which declined to comment, analyzed the finances of a potential golf league, but pointedly said in its report that it was not examining whether it was a strategically viable idea. And many of Saudi Arabia’s rosy assumptions, McKinsey added, “have been taken for granted and not been challenged in our assessment.”
Translated into English, I take that to mean we'll opine on the financial viability of your stolen business plan (remember, this was all originally a British project that the Saudis were going to finance), but not on the efficacy of it as a mode of sportswashing. Good thing too, because we've had at least two instances of mass beheadings, the last evocatively utilizing sword, and those are a turn-off for traditional golf fans.
The McKinsey reaction, at least in spots, is along the lines of my own, to wit, are you out of your f*****g minds?
The league’s promoters say they are trying to revitalize the sport and build a profitable league. But hundreds of pages of confidential documents obtained by The New York Times show that Saudi officials were told that they faced steep challenges. They were breaking into a sport with a dwindling, aging fan base — if one with plenty of wealthy and influential members — and even if they succeeded, the profits would be a relative pittance for one of the world’s richest sovereign wealth funds. Experts say that these make clear that Saudi Arabia, with a golf investment of least $2 billion, has aspirations beyond the financial.
That last sentence is profoundly important in the context of the antitrust lawsuit, because it potentially undermines their claim of lost profits due to the PGA Tour's anticompetitive actions. I put it more colloquially that, if you pay Phil $200 million, you're not running a business.
So, while they have language that they can hide behind in a few years, I'd argue that their financial modeling was designed to tell the client that which he wanted to hear:
The consultants detailed three possible outcomes for a franchise-driven league: languishing as a start-up; realizing a “coexistence” with the PGA Tour; or, most ambitiously, seizing the mantle of dominance.
In the most successful scenario, McKinsey predicted revenues of at least $1.4 billion a year in 2028, with earnings before interest and taxes of $320 million or more. (Federal records show that the PGA Tour, a tax-exempt nonprofit, logged about $1.5 billion in revenue and posted a net income of almost $73 million for 2019.)
By contrast, a league mired in start-up status — defined as attracting less than half of the world’s top 12 players, navigating a “lack of excitement from fans,” reeling from limited sponsorships and confronting “severe response from golf society” — stood to lose $355 million, before interest and taxes, in 2028.
Wouldn't you loves a peak behind the curtain at their financial modelling? So, how's it going on the ground?
Indeed, LIV Golf appears far from meeting the goals that the Project Wedge documents laid out. After an inaugural season that cost
in excess of $750 million, the league has not announced major broadcasting or sponsorship deals. And its hopes for a surrender by, or an armistice with, the PGA Tour have instead collapsed into an acrimonious
court battle.
So, Greggy, how's that TV contract coming along?
This is laugh-out-loud funny for a few very good reasons. You've hired McKinsey to analyze your entry in the golf economy, but did MBS and Yasir al-Rumayyan notice the howlers contained therein?
The funniest being this:
One document obtained by The Times shows that LIV organizers considered assembling an all-star board of business, sports, legal and political titans. But nine of the people who were identified as possible board members, including Ginni Rometty, the former IBM chief executive, and Randall Stephenson, the former AT&T chairman, said they had never been approached about joining.
“I didn’t know I was on the list, and I have never been approached,” Mr. Stephenson, who is a member of the PGA Tour’s board, said in an interview. If asked, he said, he would decline. “It would be a quick conversation,” he said.
Most others listed in the document, including the basketball legend Michael Jordan; former Secretary of State Condoleezza Rice; and Mark Parker, the executive chairman of Nike, did not respond to requests for comment. McKinsey did not appear to prepare the document, which carries the logo of Golf Saudi, which Mr. al-Rumayyan leads.
Seems like they got their hands on a membership list for Augusta National, which might not be fertile hunting grounds. Just sayin'.
Then there's the players they identified as being critical, although I haven't found their full list, but here's what we know:
Moreover, the league is nowhere near having signed all of the elite players who Saudi advisers said were required for success. In one presentation slide, as McKinsey projected one of its more optimistic financial forecasts, the participation of Tiger Woods, Phil Mickelson and Rory McIlroy — who have combined to win 25 major championships — was included under the headline “What you need to believe.”
Of the top 12 players on a roster in the McKinsey report, LIV has attracted four: Sergio Garcia, Dustin Johnson, Mr. Mickelson and Henrik Stenson.
According to these highly-paid consultants, what we needed to believe in early 2021 is that Sergio, Henrik and Phil are the future of golf. Are you done laughing?
I just can't resist throwing in this bit as well:
McKinsey’s work on the golf project is part of a longstanding pattern of
foreign consultants providing rationales for
Gulf States’ multibillion-dollar projects, some of which become white elephants. When the crown prince announced plans to build a futuristic city called Neom, McKinsey was among the companies that helped envision proposals for robotic dinosaurs, flying taxis and a ski resort that officials say will host the Asian Winter Games in 2029.
Some? Quite a fun peak behind the curtain at both McKinsey and the LIV project. I think is actually harmful to their antitrust case, but for now we can enjoy as comedy gold.
You know how I hold on to my favorite bits, but I can't help but wonder if McKinsey is aware of Sergio's prior behavior in the Kingdom? Quite frankly, his behavior everywhere....
Alan, Asked - He seems to be throwing these mailbags up more frequently, a good thing for your humble blogger. Shall we?
The Match is a very small sample size; we’ll know a bit more after this weekend’s Father-Son. Tiger certainly looked rusty under the lights, which makes sense because he hadn’t touched a club in the preceding 2 1/2 weeks, or so he said. But his ball speed with the driver was solid, and that to me was the biggest takeaway. I guess this question hinges on how we define “back.” Can Woods labor through the major championships, make a couple of cuts and remind us of his grit and guile? I think so. But even accounting for the fact he’s Tiger F’ing Woods, it’s increasingly clear there isn’t much magic left in his banged-up body.
Who exactly said that Tiger is back? More common from my observation is writers speculating that Tiger is now a ceremonial golfer, though I think that's slightly premature.
The predicate is Hogan, who had similar issues with walking after his encounter with that bus. He was able to prep himself and trudge 72 holes, a minor miracle given that they were still finishing with 36 holes on Saturday, not to mention him having to go an extra 18 at Merion and Olympic.
Tiger can still play golf at that level, we just can't know if he'll be able to walk the course for four days. There's a secondary issue as well, as we also wouldn't know whether he can practice enough to be on form when it matters, but unless he can walk he's a ceremonial golfer.
This deserves far more time than I have today:
With LIV disrupting, The Match gaining traction, and more and more talk of tweaks and variations to pro competitions, will the future be more variety in golf tournaments or will the old format (72-hole stroke play, etc.) ultimately prevail? @feralgolfer
My esteemed colleague Michael Bamberger made this point on our latest
Fire Drill podcast: The LIV challenge was the perfect moment for the Tour to rethink its model and get creative, but instead it continues to force-feed us 72-hole stroke-play events. So, unfortunately, I think that is the future, especially as LIV may wind up going to 72 holes to appease the World Ranking poobahs. It’s too bad, as non-traditional formats are a blast. (The better-ball team format saved the New Orleans tour stop.)
No one has been more critical of the PGA Tour's product than your humble blogger, but this suffers from quite a few fatal defects.
First, exactly what formats are we talking about? There are precious few, and they all come with issues.... For instance, we have that one match-play event, and it's...well, OK. But the reason we revert to 72-holes of stroke play is that it's really the only viable competitive format for a large-field event.
But the bigger issue Alan ignores is the pernicious effect of FedEx. That almost derailed the Zurich, but you're not gonna get your alphas at an event that doesn't award FedEx (and OWGR) points. So sure, do you want to tell the PGA Tour players to do without that pot o' gold?
The other bit that needs to be noted is, setting aside the team format which to me seems wildly oversold, what has LIV added on this issue. They're "force-feeding" us 54-hole stroke-play events with tiny field, rendering them both boring and competitively suspect.
Did #TheMatch actually happen? Was it that much of a dud? I get it’s going up against football and FUTBOL but serious crickets. @tadlehmann It’s all about perspective. Was The Match a riveting competition? No. Must-see TV? Nah. Was it a fun way to pass the time on an otherwise slow sports night? Definitely. That’s enough for me.
Kind of a low bar, no? I think for this to have any legs it needs to be far more entertaining, which is problem if you're building it around that Tiger guy.
This one is pretty great:
Since Tiger said Greg Norman must go as the face of LIV, I think I’ve Identified the perfect replacement – someone with the gravitas and tact to bring peace to pro golf. But I fear Club Pro Guy might not be willing to accept that largely ceremonial position. Thoughts? #AskAlan @HenriDeMarsay This war between LIV and the PGA Tour has gotten so overheated it’s almost laughable. It’s just golf, guys. I’m not sure if CPG is the right person for the job, but it would serve the entire ecosystem well if Norman’s replacement at least had a sense of humor and wasn’t fueled by vengeance.
Is he willing to give up that sweet gig at Three-Jack National?
But, Alan, do I have this right, you're asking for humor from the Saudis? I know I'm crossing the Sunni-Shia divide, but apparently Alan is unfamiliar with this pronouncement:
Of course, they hired Greg Norman.... While perhaps not exactly a joke, it is pretty damn funny.
Are there any good books about golf for Christmas gifts this year? @NickGoblirsch
There are not any December releases, so far as I can tell, but it was a good year for golf books. Stephen Proctor’s “The Long Golden Afternoon” is a very charming and richly detailed history of the game from 1864 until the start of World War I. I really enjoyed “The Cup They Couldn’t Lose,” Shane Ryan’s deep dive on the 2021 Ryder Cup and an all-time U.S. team. Bob Harig wrote a lively recap of two titans and a simpler era in golf with “Tiger & Phil.” Andrew Stelmak’s “Send In The Clowns” brings Moe Norman to life in a unique, stylized way. And I’ve heard a few things about a Mickelson biography… but it’s probably overrated.
It certainly left too much good stuff out, so where is that refund window?
I personally believe the Masters would be weakened without LIV golfers. Will Fred Ridley protect the PGA Tour and weaken the Masters by excluding the likes of DJ, Cam, etc.? @hpjagger No f’ing way. Ridley’s mandate is to put on the best possible tournament he can, not get caught up in a turf war between rival tours. There is zero chance the Masters will ban any players who are otherwise qualified, like Dustin Johnson, Cam Smith and sundry other LIV’ers. The question is will the green jackets do anything to remediate
Talor Gooch, Kevin Na, Jason Kokrak and Harold Varner III if they fall out of the top 50 before the end of 2022 and thus miss out on an automatic invitation to the Masters. (As it stands, these non-stars are all 40th to 47th in the OWGR.) My gut says not. The green jackets will just fall back on the existing criteria and let it ride until 2024, by which point LIV should be accruing World Ranking points.
Boo-friggin'-hoo. As an aside, in the McKinsey stuff above there was a reference to a risk of the majors excluding LIV players, but seemingly no understanding of the importance and requirements of those OWGR. I'm sure Condi would have been all over that once they got her on board.... but pretty lame, no?
It was kind of sad, and another reminder of all that he gave up to go LIV. And a made-for-TV spectacle is the least of it! It’s crazy to think Mickelson has also possibly forfeited a Ryder Cup captaincy, the 18th hole tower for whichever TV network he picked and perhaps a spot as a ceremonial Masters starter. But he loves money and he loves stirring the pot, so the LIV dalliance has been rewarding in various ways.
Leverage over legacy, no?
Who would you have rather seen paired with Tiger that would talk smack back to the “Brat Boys”? Rory was basically mute, with or without a club. #AskAlan @BobbyTeeitup
Yeah, McIlroy ain’t about that life; he’s simply too earnest for this kind of hit and giggle. But, really, how many top players are fun? The only guy who comes to mind is Max Homa. With a live mic, his droll musings could have greatly enlivened the proceedings.
This is their biggest problem, and also why I think they'd be better served focusing on the amateurs.
Gotta run at this point. I'll be back as circumstances indicate.
