Thursday, December 12, 2019

Racing's Cost-Benefit Choices are Pretty Clear

When we open the interwebs we can read much opinion on horse racing's current malaise when it comes to horse safety. In one area - whipping or not whipping - the opinion can reach a fever pitch. It's the #MAGA v old media, Cowboys versus Eagles, Pens versus Caps of this sport.

Why is it this way? I don't know; perhaps it's tradition, perhaps something else. But it's real. And I think it's much ado about nothing.

When any business or entity looks to make a decision on something - new investments, product changes, capex - they compute some form of Cost-Benefit analysis. We all know at its core this is fairly basic - costs are added to one side and they're analyzed against, or with, benefits on the other.

What are the dollar costs of whipping much less? Like most jurisdictions who have broached this topic and eliminated over-whipping, they aren't much of anything. Handle in Australia is up just fine, and in harness racing, the elimination of the striking of a horse was a big yawn.

What are the dollar benefits of underwhipping on business? Like most jurisdictions have shown here also, none really. It appears no one has said, "boy I really have to bet the third today because they will whip the horses six fewer times." Handle, entries, field size, all about the same.

Seeing the hard dollar benefits or costs are negligible on each side, then what's the big deal? Why change; why not just leave things the way they are?

I believe the biggest, most formidable cost to horse racing in the current climate (but perhaps since forever) has been the political risk component. This is a cost.

Entities use political risk all the time to make decisions, and at times, this risk can mean everything for pass/fail positions. The markets took a massive hit in Argentina last summer when the polls were wrong and the ruling party (partaking in reform) was surprise defeated in an election. Immediately, sovereign bonds fell 50% and business investment plummeted -  the political risk was far too high and it trumped just about everything.

In horse racing, political risk is in Spinal Tap eleven territory. When sitting senators or the governor of a state with a massive economy starts tweeting or dropping dimes about racing, it's true.

The problem with this risk - like the province of Ontario saw with slots, or Florida and others saw with dog racing - is with one strike of a pen, everything can go away. This is not incremental or something you can revisit and reverse course if you're wrong. It's not just a few barns, or one track, it's literally an entire industry going poof.

So yes, let's add up the costs, and add up the benefits with hard dollars on some of these issues like whipping. In the end we'll find the core, tangible costs are minor. We'll find the status quo very comfy cosy.

But when we add in the massive political risk, it's anything but comfy cosy. That's why, in my view, racing must move forward with many of these decisions. When the sport does nothing, the downside comes into play. And that downside is savage.

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