Big transfer fee or big wage?

Inflations have seen transfer fees on football players rise significantly. It was only 4 years in between Alan Shearer’s record transfer fee in 1992 from Southampton to Blackburn Rovers for £3.3 million and his next transfer to Newcastle United for £15 million in 1996. Within the next 3 years the transfer record had been broken again, Ronaldo from FC Barcelona to Inter Milan in 1997 for £19 million, Denilson from Sao Paulo to Real Betis for £21.5 million in 1998 and Christian Vieri from Lazio to Inter Milan for £32 million. And finally, after Figo and Zidane in 2000 and 2001, Real Madrid have been the record breaker of the first decade of 21^st century, the last had been the purchase of Cristiano Ronaldo from Manchester United for £80 million in 2009. That is more than 24 times multiplied in just 17 years.

Of course the inflation rate is less, since we get 2400% from combining with the rise of European football as an industry, which have increased its commercial value, both for the leagues, the continental competition and each of the club and player’s marketing rights.

Some people then start to value players from their transfer fees. From common spectators to journalists. This is not totally relevant.

The most relevant parameter would be the player’s wage, since football clubs spend most of its expenses on wages.

The wages have seen inflation too… Ronaldo and Del Piero, the world’s highest earners in the late 1990s were earning around £70-80k/week by then, about 1/3 of what Lionel Messi or Ronaldo earns these days, and about 1/5 of what Samuel Eto’o earns the past few months.

Nowadays top clubs can have many of this kind of high-earners, and even if they cost cheap or low in transfer fees they will still make the monthly and annual expense very high. On the contrary, some clubs who spend high on transfer fees but keeps wage structure not too high can recoup some of those early spending with the savings they make from monthly wage expense… and some others can still be recouped from resale value, if the player is still 30 or below, free from injury and have had good performance in the season.

While many spectators and journalists condemn Liverpool FC’s £100 million plus spending in 2011, they haven’t considered the amount of wage efficiency that has been made, and they also haven’t considered the potential resale value of these 9 new players, who are still 30 or below by 2015, except 3 players.

• Luis Suarez, bought for £22 million in January 2011. Current value has risen to at least £ 30 million (+ £8 million in less than 18 months). Would still be in his prime 28 by 2015 and has little chance to drop his value. His wage is around £90k/week or approximately £4.68 million/year.

• Andy Carroll, bought for £35 million in January 2011. Current value has probably dropped to £20 million (- £15 million in less than 18 months) but with proper development can return to his purchase value by 2015, when he will still be in his prime 26 years old. His wage is around £60k/week or approximately £3.12 million/year.

• Jordan Henderson, bought for £16 million in May 2011. Current value has probably dropped to £10 million (- £6 million in less than 12 months) but with proper development can grow over his purchase value. Would enter his prime 25 years by 2015 with a potential increase to £25 million in value (+ £9 million in 4 years). His wage is around £50k/week or £2.6 million/year.

• Charlie Adam, bought for £6 million in June 2011. Current value has probably risen to £8 million (+ £2 million in less than 12 months) and if he can overcome his disciplinary record and play more neatly may increase his value even more. Would still be 30 by 2015. His wage is around £50k/week or £2.6 million/year.

• Jose Enrique, bought for £6 million in July 2011. Current value has risen to at least £10 million (+ £4 million in less than 12 months) and if he can maintain his good form and improve his attacking flair may become a £18 – 20 million defender by 2015, when he will still be in his prime 29. His wage is around £60k/week or £3.12 million/year.

• Stewart Downing, bought for £20 million in July 2011. Current value may have dropped to £12.5 million (- £7.5 million in less than 12 months), would be 31 by 2015 and may have further dropped his value to £ 7.5 million by then (- £12.5 million in 4 years). His wage should be around £80k/week or £4.16 million/year.

• Doni, bought for free and earning around £50k/week or £2.6 million/year. With 2 years contract he will cost the club around £5.2 million in total.

• Craig Bellamy, bought for free and earning around £90k/week or £4.68 million/year. With 2 years contract he will cost the club around £9.36 million in total. If sold with 1 year contract remaining he may have a value around £3 million.

• Sebastian Coates, bought for £7 million in July 2011 and seems to have what it takes to become at least a £15 million defender by 2015, when he will enter his prime 25, though currently will remain at his purchase value. He may currently earn £30k/week or £1.56 million/year.

With these rough calculations, the total investments by Liverpool FC from January 2011 to June 2012 are…

• £107 million in transfer fees

• £7.02 million on Suarez’s wage, £4.68 million on Carroll’s wage, £5.2 million on Henderson and Adam’s wage, £3.12 million on Jose Enrique’s wage, £4.16 million on Downing’s wage, £7.28 million on Doni and Bellamy’s wage, and £1.56 million on Coates’ wage. The total wages of these 9 new players are £33.02 million.

• Minus £11.5 million in current value fluctuation, but a potential £26.5 million increase on value of 7 players combined in 4 years (2015).

The total spending is £151.52 million, with a potential discount to £125.02 million if the predicted increase happens by 2015.

Now the players out since January 2011…

• Fernando Torres, around £110k/week or £5.72 million/year, sold for £50 million.

• Ryan Babel, around £60k/week or £3.12 million/year, sold for £8 million.

• Paul Konchesky, around £60k/week or £3.12 million/year, sold for £1.5 million.

• Christian Poulsen, around £60k/week or £3.12 million/year, sold for £800k.

• Milan Jovanovic, around £85k/week or £4.42 million/year, sold for £1 million.

• Joe Cole, around £100k/week or £5.2 million/year, loaned to Lille with 50% of wage paid by Liverpool (£2.6 million).

• Alberto Aquilani, around £90k/week or £4.68 million/year, loaned to Milan.

• Emiliano Insua, around £20k/week or £1.04 million/year, sold for £4 million.

• Sotirios Kyrgiakos, around £30k/week or £1.56 million/year, sold for free.

• Diego Cavalieri, around £30k/week or £1.56 million/year, sold for £500k.

• Philipp Degen, around £30k/week or £1.56 million/year, released.

• David N’Gog, around £20k/week or £1.04 million/year, sold for £4 million.

• Raul Meireles, around £30k/week or £1.56 million/year, sold for £12 million.

From these released players £35.2 million have been cleared out of the annual wage bill and £81.8 million received on transfer fees, making the total income £117 million, not including a potential resale value of Joe Cole and Alberto Aquilani at around £10 million combined and a further £2.6 million released obligation from paying 50% of Joe Cole’s wage.

Based on these calculations, the current net spend since January 2011 to June 2012 is… £34.52 million (£151.52 million – £117 million) with a potential discount to £21.92 million if Joe Cole and Alberto Aquilani are sold this summer, and with another potential discount to minus or a surplus of investment of £4.58 million by 2015 if we gain the potential £26.5 million increase in players value.

Whether they are the right players to invest in remains to be reviewed… but transfer fee amount alone doesn’t give sufficient solid ground to the current accusations to manager Kenny Dalglish, director of football Damien Comolli and the owner FSG by some spectators and journalists.

And though I was with a very heavy heart to see Meireles sold on August 2011 after an impressive season, I now have to accept that his sale was probably a key factor to make the book not red.

He was signed with a promise of an increase to £80k/week salary if performs well, which he did. And should the club decide to keep him, there’ll be an increase of £2.6 million (+ £50k/week from his £30k/week in his first year) in the new signings wages that would’ve made the total to £35.62 million, a few hundred thousand pounds more than the projected wage out of bill at £35.2 million. £12 million less income from transfer fee would’ve also increased the net spend to £46.52 million.

The price to pay has been losing his match-winning goals like the ones in the second half of last season, which often made a 0-1 down to 1-1 draw or 0-0 draw to 1-0 win. These narrow wins could’ve earned us more points and could’ve probably put us higher than our current 7^th position.

But for now, it may seem to have been a necessary sacrifice. After the previous ownership and business management disaster, what Liverpool FC need is stability—both in the dressing room and financially—as well as “realistic” numbers that won’t make the future difficult for ourselves like what Inter Milan, Chelsea and Manchester City have been doing to themselves. My only regret was the manner of Meireles’ exit… I think he deserved more appreciation for what he had given, and he deserved to be cleared from any potential negative reaction from fans for the transfer.

If the financial performance this season is good then we may have money to invest on a new player or two in the summer. But whatever the future will be, it’ll be better not to violate the healthy wage structure we’ve already designed. Since transfer fees are relative, but wages are absolute.

This one’s for the earth

The Nyepi holiday this year comes tomorrow, only about a week before Earth Hour on March 31. But actually the idea of having a moment of silence came thousands of years ago… knowing this year’s Nyepi is on 1934^th year of Çaka, the Balinese (and Hindu Indian) calendar.

While there have been controversies around the impact of Earth Hour towards global warming and energy saving—some said the impact is as little as 1.5% less electricity, others claimed otherwise, and some others turn off lights but light up candles, replacing one emission to another instead of reducing—the benefit of having a whole day off makes more sense.

It’s even a total silence, not just turning off the lights like the Earth Hour. So during Nyepi, people in Bali (and surely Hindu Balinese people all around the globe as well) turn off any lights, don’t make any sounds, and spends the day not going out of the house. Guests at hotels are encouraged to stay at the hotel since the beaches and streets will be empty, and the airport will have a day-off… so it also makes a pollution-free day, which is scientifically more relevant in reducing global warming since the warming comes from the carbon dioxide emission rather than just heat from electricity. After all, electricity was probably meant to be a more environment-friendly energy source than fossil fuels, that’s why automotive industry develop hybrid and fully-electric cars for the future.

Psychologically, people are made free from dependency to things, not just to lights, and the earth is made free from many human treatments (and mistreatments). A day when humans and the earth restore the respect of each other, and all wounds in between are healed. A day of hope… that this relationship between humans and the earth can still go on, symbiotically. The earth provides and humans labor for the benefits of both, not just for themselves.

Without being disrespectful to the effort of creating awareness and the nice images the Earth Hour movement has made, the true baby little step we can make to reduce global warming is to really start a green lifestyle… even with literally eating more green. Yes, vegetables and animal-free protein. We don’t all have to be vegan, but reducing won’t hurt, and it’s not that difficult. We can start by joining Paul McCartney’s cause, Meat-Free Monday, for example.

There are quite plenty other options we can take, like in this 40 Green Tips book I found at Aksara Bookstore in Jakarta, written by Gouri Mirpouri. Buying local food instead of imports is one of them, and I suppose it goes the same with other goods like clothes, which if comes in great scale will increase fossil fuel emissions from ships and airplanes significantly.

I suppose traveling around the globe—which is considered as a healthy lifestyle due to its stress-relieving benefit—is in danger to become an unhealthy one if done too often, since travelers will increase the number of flights, which won’t increase without the rise of demands.

In the end it will lead us to one line… which is to reduce (or control) the way we consume things. It’s in our animal instinct to consume, predate and take things for granted, especially having been able to afford, and having been comfortable to certain behaviors and facilities to find it difficult to change. But it’s also in our animal instinct to play a part in the ecosystem. And while other animals are eaten and dead before being useful for the ecosystem, we humans can be useful when alive… by doing something for the earth.

(I guess I’ll start with green journalism and green advertising.)

Time

A few months ago I met an old friend who spends quite some time traveling and living in other countries. He enjoys it while he’s abroad, but not when sometimes he needs to return to Jakarta. He finds the city dirty, noisy and messy compared to the cities he has ever lived and traveled to, so he is often clueless to decide what to do with his spare time here.

Anyway, one day we went eating to help him kill time.

From the restaurant, we went to the bookstore where in the end of our visit I bought the magazine he earlier wanted to kill… and he spared its life.

The age of distraction

In case you’ve experienced trouble on focusing because of many distractions around you, don’t worry, you are not alone. And don’t worry, it’s better to have distractions than not having any stimulus at all. The telecom boom is still something to be thankful for, rather than something to condemn. Imagine the old days when we have very limited access just to get to know something or someone. I don’t want to go back to those days.

What I want to go back to is doing some of the old analog things that can balance my life today. Something organic, hand-made, like sketching. Something kinetic like taking photos, where at least I’ll have a walk rather than just sitting. Maybe if I have more spare time in the future I’ll learn music and cooking, the two most ancient forms of art. As for cooking, I may start sooner by compiling my family’s recipes and taking some pictures of the preparing process and the end results… as well as tasting it, of course :-)

Thanks to my friend Gadis who gave me a very good advice, I’ve also started to turn off my phones again at night. It feels like an electronic detox therapy, which would help to overcome Electronic Insomnia Syndrome, restlessness caused by over-radiation from electronic devices. I’m still working on reducing my hours in front of the computer though, but the phone—along with the messenger groups and the timelines—is already a good start. As for my portable computer, I’ve already had it occasionally brought in my backpack for a year or two now, and have replaced it with the traditional plain notebook. I’ve begun to like the smell and the texture of paper again, my backpack becomes a lot lighter, and anytime I get bored of driving I can take the bus or ojek with less worry by having less precious belongings inside my bag.

I think the key to focus is not to blame or get rid of the technology (since it was first invented to make a better living), but to learn to detach from it. It’s pretty much similar with anything. Like food, if we can’t find rice than let’s settle with another carb, or no carb… or even if it’s always available let’s learn to occasionally not taking it. It should make our life lighter, and hopefully healthier.

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Illustration from Learning Fundamentals.

In relation to the (e)book Focus: A Simplicity Manifesto In The Age Of Distraction by Leo Babauta, founder of Zen Habits.

For more mind maps, click here.

Another New Year present

From my writer and group head.