It has been a hectic summer on the European transfer markets for the world’s most popular sport, football -- soccer as they say in some places in the world. Despite the economic crisis in Europe, the transfer window has broken world records. The English Premier League, the world’s most popular league, spent a world record of 630 million pounds (almost 1 billion dollars) on transfer fees this summer, a 30% increased compared to last year. Some clubs such as Tottenham have bought a whole new team of star players. Furthermore, the world record was broken of the most expensive transfer ever. British player Gareth Bale has been sold to Spanish giants Real Madrid for a staggering 130 million dollars. How is this possible in a country that currently is one of the poorest in Europe? Interesting, Real Madrid also held the previous world record of 120 million dollars for the Portuguese winger Cristiano Ronaldo. In fact, Real Madrid have a name for signing the big stars in football. They call themselves the Galacticos, the galactic.
The widespread belief is that bringing in star players guarantees star team performance. Yet the scientific evidence suggests that this is a myth, the talent myth. The talent myth suggests that adding more high status individuals (stars) to your team can in fact disrupt team performance, for three reasons. First, these global stars suddenly find themselves competing with each other for local status in their team. Thus, their egos might get in the way of them working well together and making good team contributions. Second, every effective team has a clear hierarchy whereby some individuals have more influence than others. Having a lot of stars disrupts the natural hierarchy in team. Finally, if they have the same expertise, say they are all forwards, they may even find themselves in direct competition with each other for places on the field.
Is there any evidence for this talent myth? The first piece of evidence comes from a study on Wall Street financial research analysts.1 Their customers are large scale institutional investors such as hedge fund or pension funds which they advise on which stocks and shares to buy. Each year the Institutional Investor magazine publishes a ranking of the top analysts. Some firms have many star analysts under contract and others not so many. The study looked at whether teams of star analysts gave better advice. The results are mixed. Adding star performers to a team increased team effectiveness but only up to a certain point. After having more than 65% of star analysts the marginal value of adding one more star performer drops off. This is even worse when analysts were fairly similar in their expertise. Then having more than 44% stars decreased the marginal utility of adding a star.
A similar result has been found in a study on the performance of NBA basketball where teams with a mixture of highly paid star players and ordinary players performed better than teams consisting of high numbers of star players.2
We already knew about the talent myth from the world of business. Enron used to organize so-called talent days where they would recruit the most competitive star performing graduates from the top business schools to their firm. Having all these competitive star performers in their business, there was little room for collaboration and much space for conflict and greed.
And does the talent myth operate in football? Unfortunately there are currently no hard data available so we have to rely on anecdotes . It is telling that Real Madrid, the team of the Galacticos, last won a European prize some thirteen years ago.
Despite all of this the talent myth persists in the world of sports, business, and now even in my own habitat, the university. Incredible sums of money are being spent on star players who in the end do little to raise the performance of their teams and organizations.
While Europe is still in the middle of a galactic economic crisis, the excessive fees for star football players is hard to swallow for many ordinary citizens.
1. Groysberg, Polzer, Elfenbein (2013). Too many cooks spoil the broth: How high status individuals decrease group effectiveness. Organization Science, 22, 722-737.
2. Halevy, Chou, Galinsky & Murnighan (2012). When hierarchy wins. Evidence from the National basketball Association. Social psychological and Personality Science, 3, 398-406.