249. The Longest Long Shot

When the uncelebrated Leicester City Football Club won the English Premier League, it wasn't just the biggest underdog story in recent history. It was a sign of changing economics — and that other impossible, wonderful events might be lurking just around the corner.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 0:43Stephen J. Dubner?

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• 1:25Stephen J. Dubner?

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• 2:05Stephen J. Dubner?

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• 2:33Speaker 01

  It's a town most people hadn't heard of and which many couldn't even pronounce. It's really the middle of nowhere. It's a nondescript, middle English town. Population about that of Wichita, Kansas. Its claims to fame? King Richard III was buried there, otherwise fairly sparse. It was once England's post-industrial leather centre, now the epicentre of the English potato chip industry. But in the last few months, it has become... It's become home to the greatest underdog story of all time. We are talking, of course, about... Leicester. This town has become the centre of the sporting world.

• 3:15Speaker 01

  That's Leicester, L-E-I-C-E-S-T-E-R. Centre of the sporting world, yes, but more specifically, the world of English football, or what we Americans call soccer. What this team have done, this innocuous little team, a team that were almost like an extra in a movie or a third cousin at a bar mitzvah, surprised to have been invited and just happy to be in the background of the photographs. They've gone from the very bottom of the Premier League to the very top in the course of 12 months. Today on Freakonomics Radio, how did this happen? Watching them, I can only describe it as like watching the miracle on ice.

• 3:57Speaker 01

  Happen over 36 games again and again.

• 4:00Speaker 02

  I think it's the biggest betting upset we've ever seen in the UK and around the world.

• 4:05Speaker 01

  But even more important, what does the Leicester City miracle mean for the rest of us? If Leicester City can win the Premier League, you can do anything.

• 4:36Speaker 03

  From WNYC Studios, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 4:51Stephen J. Dubner?

  So the last few years, I have been in the process of becoming a serious-ish soccer fan, mostly because of this guy.

• 4:58Speaker 04

  I'm Solomon Dubner.

• 4:59Stephen J. Dubner?

  And our relationship is?

• 5:01Speaker 04

  Father and son and co-podcast host on Footy for Two.

• 5:04Stephen J. Dubner?

  That is true. We do do a podcast together that's about football. We should say that just about everything that I've learned about footy in the last several years, you've taught me.

• 5:17Speaker 04

  Pretty much.

• 5:18Stephen J. Dubner?

  Solomon is 15. On Footy for Two, that's F-O-O-T-Y, if you want to look it up, he talks match results and tactics and transfer news, and I pretty much just try to keep up. Mostly, I fail. So how would you describe your level of interest or obsession with the sport?

• 5:38Speaker 04

  This might sound crazy, but I say I'm top 500 to 1,000 Americans in football knowledge, or at least for kids. You know, I know a lot. It's pretty much my whole life, sadly.

• 5:49Stephen J. Dubner?

  Now, let me ask you this. Why did or do you consider it your duty to school your father in football?

• 5:55Speaker 04

  Because you've taught me most things about life, so I think I should teach you something, right? I think that sounds fair.

• 6:02Stephen J. Dubner?

  Last year, Solomon and I went to Europe during spring break to see as many football matches as we could in person. One of them, it turns out, featured Leicester, more officially known as the Leicester City Football Club, playing away against Tottenham Hotspur in North London.

• 6:18Speaker 04

  We saw the game before the Great Escape, a thrilling 4-3 loss for Leicester at White Hart Lane.

• 6:23Stephen J. Dubner?

  That was the seven-goal filler that we saw at White Hart Lane? That was Leicester?

• 6:27Speaker 04

  Yeah, you know, Jamie Vardy scored then, of course. Then they won, I think, seven or eight out of the last nine games without losing one, and stayed up and finished in 14th place with 41 points. And then they sacked Pearson, the racist sex orgy, hired the Tinkerman, Claudio Ranieri.

• 6:45Stephen J. Dubner?

  Whoa, whoa, whoa, whoa, whoa. We're getting way ahead of the story here. We will get to all that, the great escape and what it means to stay up in the Premier League rather than getting demoted. Also, the sex orgy, the tinker man, everything. But first, a little background, especially if you are not familiar with how European soccer leagues work, because the Leicester City story is not just a Cinderella story. It's a story about income inequality, about paradigm shifting. It's a story that'll probably show up in business school case studies for years to come by every David who's looking to take down not just one Goliath, but a whole army of them.

• 7:26Speaker 01

  To really understand it, for your listeners, Stephen, you have to understand the reality of English football. It's not like American sport.

• 7:34Stephen J. Dubner?

  That's Roger Bennett. He and Michael Davies are co-hosts of Men in Blazers, a podcast and TV show. How to describe Men in Blazers?

• 7:44Speaker 01

  It is a very small beachhead for the growing, growing magnitude of Americans who are falling ever deeper under the spell of the Premier League.

• 7:57Stephen J. Dubner?

  Bennett grew up in Liverpool.

• 7:59Speaker 01

  The jewel of the nation.

• 8:01Stephen J. Dubner?

  It is a lovely city.

• 8:02Speaker 01

  It's the Baltimore of England, Stephen.

• 8:04Stephen J. Dubner?

  The team that Bennett supports is not the legendary Liverpool Football Club, which has won many trophies, but rather the somewhat less legendary Everton, an even older club that also plays in the city of Liverpool. Why support Everton?

• 8:19Speaker 01

  Birth, father, grandfather. It's in my blood, and I do believe it's possibly the greatest way to bring up your children. It prepares them for the vicissitudes and ultimate misery of life. It really hardens them young.

• 8:32Stephen J. Dubner?

  Anyway, as Bennett said, to understand the Leicester story, you need to understand that English football leagues don't work at all like the typical American sports league.

• 8:43Speaker 01

  Which is bizarrely one of the only things in America which is actually communist in the way it's set up. In English sport, there's no draft, there's no salary cap, there's no revenue sharing, no parity, and the Premier League is every team for themselves. This is not a recent phenomenon.

• 9:01Stephen J. Dubner?

  And that is Stefan Shuminski.

• 9:03Speaker 05

  I'm a professor of sport management at the University of Michigan. I'm actually an economist by background and I've been writing about the economics and business of pro sports really for the last 25 years or so.

• 9:15Stephen J. Dubner?

  Shuminski's best-known book, co-authored with the journalist Simon Cooper, is called Soccernomics. One of its central questions is how much does money matter when it comes to winning soccer games?

• 9:27Speaker 05

  Well, the simple answer is that money buys success and that the big clubs generate far more money than anyone else and so they are able to buy the best new talent coming into the league and perpetuate that success. And this goes back 50 years or more in each of these leagues.

• 9:46Stephen J. Dubner?

  Each of these leagues, meaning the leagues throughout Europe. In Spain, for instance, it's La Liga. In Italy, Serie A. It's Ligue 1 in France, the Bundesliga in Germany. And in England, the Premier League, which is the most-watched football league in the world.

• 10:05Stephen J. Dubner?

  Each season, 20 clubs play 38 matches to determine a champion. Those 20 clubs are not constant, though, the way they are in American sports leagues. We'll get into that later. Each season, the league champion is simply the team that accumulates the most points over those 38 matches. You get three points for a win, one for a draw, none for a loss. There's no playoffs, no conferences or brackets, just one long march from August to May, designed to flush out pretenders and flukes.

• 10:38Speaker 05

  And the big teams, Arsenal's, Manchester United's, Manchester City's, they've owned the Premier League. Only five teams have won it in the in the previous 23 years. They just keep sharing it as if by right, by divine, God-given right.

• 10:54Speaker 05

  And the difference for particularly for American sports fans who aren't used to this system, the big difference to understand is that American leagues have instituted a series of restraints on the clubs, on the teams, in order to prevent this kind of dominance emerging. And you think of salary caps, you think of revenue sharing and all the myriad of measures that restrain competition in an American leagues, almost all of those measures are absent in Europe. So there's no restraint which prevents the big clubs from becoming dominant and then perpetuating that dominance through the power of the checkbook.

• 11:32Stephen J. Dubner?

  We're also used to in American team sports having a draft of the new round of amateur players, the new professional players, where the worst teams generally get the top picks. Nothing like that in these leagues, correct?

• 11:47Speaker 05

  There's no draft system. And indeed, the clubs now carry out a global search for the best young players. And when we talk about young, we're often talking about eight year olds that they're looking for. And of course, the big clubs with the big financial resources can trawl everywhere on the planet. And the small and medium sized clubs just don't have the resources to do that.

• 12:09Stephen J. Dubner?

  How would you best describe the predominance of repeat champions in Europe versus, let's say, Major League Baseball?

• 12:14Speaker 05

  So I wrote a paper on this with a couple of co-authors, Luigi Busacchi and Tommaso Valetti, a few years ago. And the way we put this was to talk about how many teams could possibly get into the top five places over a given period of time, the top five rankings, say, in win percentage for a season, and how many actually do. And if you look at something like Major League Baseball, over a period of 20, 30 years, maybe

• 12:44Speaker 05

  Sixty percent, seventy percent of all franchises end up getting into one of those top five slots if you just take this arbitrary measure of win percentage in the regular season. And then you make the same comparison in Europe and look at how many teams could get into those top five places over a period of twenty, thirty years and how many actually do. And the answer is it comes down to more like ten, fifteen percent. And the difference in that is is both in the numerator and in the denominator. So there are actually more teams get into those top places in the American leagues. But also, interestingly, there are many more teams that could get into those top places in the European leagues.

• 13:29Speaker 05

  And that's because of the system of promotion and relegation.

• 13:32Speaker 01

  There's a thing called relegation.

• 13:33Stephen J. Dubner?

  Roger Bennett again.

• 13:35Speaker 01

  Which is like the the moon door in Game of Thrones through which teams, the bottom three teams every year are just callously chucked down. It's as if in Major League Baseball, you took the worst teams in the Major League every year and just discarded them into AAA.

• 13:50Speaker 06

  We have no execution in the Erie. Life is more elegant here. Open the moon door.

• 13:58Speaker 07

  Make the Batman fly!

• 14:02Stephen J. Dubner?

  That's right. In relegation, the three bottom teams are flushed out of the league into a lower league. It's a concept that does not exist in American sports, so I have to say I wish it did. Maybe in American politics as well.

• 14:15Speaker 01

  We can do Congress. I'm very hap- oh, I'd love to do Congress.

• 14:18Stephen J. Dubner?

  In any case, when you relegate the three worst clubs from the top football league, you have to replace them with the three best clubs from the lower league. This is called promotion. So every season, three clubs from the top league are sent down and three from the lower league are boosted up. Which brings us back to Leicester City Football Club.

• 14:41Stephen J. Dubner?

  It was founded in 1884 and since then has gone back and forth between the first and second leagues of English football with a brief descent just seven years ago into the third level league. There are many, many levels in English football and throughout Europe, from the rich and glamorous top leagues down through semi-pro and Sunday league amateurs. Freakonomics Radio, in fact, sponsors a Sunday league team called Dunkow Football Club, which plays in Shrewsbury. Its league is roughly 20 levels below the Premier League. But, good news. After finishing second in its league this season, Dunkow has just been promoted. So, only 19 more levels to go until the Premier League.

• 15:25Stephen J. Dubner?

  Leicester City, meanwhile, two years ago, finished atop the second division of English football and was therefore promoted to the Premier League. But toward the end of their first season back in the top league, it looked like they were bound for relegation again.

• 15:41Speaker 01

  As recently as April 17th, 2015, little Leicester, decrepit little Leicester, were bottom of the table, doomed. There were nine games to go. No one gets off the bottom of the table and manages to escape relegation. Somehow, they won seven of the last nine. They glenclosed it back to life. It was fantastic.

• 16:05Stephen J. Dubner?

  This was the great escape that Solomon was talking about. And the match that we saw Leicester lose in person to Spurs was the match just before they caught fire. So, by winning seven of their last nine matches, Leicester stayed up in the Premier League for another season, but their troubles were hardly over.

• 16:24Speaker 01

  They had a manager then, a man called Nigel Pearson, who was a stern authoritarian kind of despot. And he was willing to attack opposing players while the game was going on. He tried to strangle one of the opposing players. He toked out an opposing player, yeah.

• 16:39Stephen J. Dubner?

  It gets worse.

• 16:40Speaker 01

  Then, in the offseason, Leicester, owned by a Thai entrepreneur, went on a tour of Thailand. And terrible idea to take English footballers to Thailand. A video emerged of a couple of the footballers, one of whom was Nigel Pearson's son, engaged in a shameful tryst with a gaggle of Thai prostitutes, which brought shame to the Thai owners, shame to the club.

• 17:04Stephen J. Dubner?

  So even though Nigel Pearson led Leicester to the great escape from relegation.

• 17:09Speaker 01

  Nigel Pearson fell. He couldn't get over this video, which was social media catnip, and he was discarded, replaced with a gent, the anti-Nigel Pearson.

• 17:20Stephen J. Dubner?

  In comes a new manager, the gentlemanly Italian Claudio Ranieri, known as the Tinker Man for constantly tinkering with lineups. Although very well-liked, Ranieri has a reputation.

• 17:33Speaker 01

  Reputation as a loser. Twenty-nine years, he'd never won a title anywhere. The guy would lost everywhere. English journalists howled and said, "This team are hopeless." They were hopeless now. They are doomed. They are doomed to relegation. The bookmakers said they're 5,000 to 1 to win the Premier League title.

• 17:52Stephen J. Dubner?

  That's right. At the start of this season, British betting houses put Leicester's chances of winning the league at 5,000 to 1, which seemed, if anything, perhaps too generous. My son Solomon again.

• 18:03Speaker 04

  What would you say if I told you the Cleveland Browns are going to win the Super Bowl next season?

• 18:10Stephen J. Dubner?

  I would say that you started smoking marijuana.

• 18:12Speaker 04

  Exactly. And that's what you would have said if I said Leicester would win the league.

• 18:16Stephen J. Dubner?

  And yet, Leicester did win the league.

• 18:21Speaker 01

  It was like watching Mighty Ducks. It was like watching Major League with Charlie Sheen. It was like watching Karate Kid, but for real.

• 18:35Speaker 01

  A team chosen by no one, fancied by no one, respected by no one. Unbelievably, they'd clinched the Premier League title, and even the players that I've interviewed can't quite explain how they did it.

• 18:47Stephen J. Dubner?

  So how did they do it? It's a combination of many factors, surely. We should start with the players.

• 18:54Speaker 01

  That is part of Leicester's genius. They have scouted unbelievably well. They realised they didn't have the money. They were willing to look at certain statistics in a slight money-bore variation that the big teams just didn't value.

• 19:07Stephen J. Dubner?

  Jamie Vardy, for instance, who wound up tied for second in the Premier League for goals scored. Four years ago, he was playing in the fifth tier of English football. Playing at pub football, Sunday league, he was a factory worker. Another relatively obscure signing was Riyad Mahrez, who wound up fifth in the league in goals.

• 19:26Speaker 01

  A young Algerian with the face of a young Omar Sharif. A lot of big teams had looked at him, but all the big teams said he's too slight, he's a waif, he'll never survive the physicality of English football.

• 19:40Stephen J. Dubner?

  But Mahrez did survive, as did the rest of Leicester. They had a remarkably injury-free season, especially relative to other clubs. The players also got on with one another quite well.

• 19:50Speaker 01

  The players themselves all point to this unique spirit and team chemistry that exists at the club.

• 19:56Stephen J. Dubner?

  Plus, their underestimated manager, Claudio Ranieri, made some good decisions.

• 20:01Speaker 01

  What Ranieri did, he made their team incredibly quick and incredibly vertical. He played a high-velocity counter-attacking football in which they loved to attack space.

• 20:12Stephen J. Dubner?

  And, as it happened, there was room at the top of the table this season in the Premier League.

• 20:16Speaker 01

  The five big teams, Arsenal, Manchester United, Manchester City, Chelsea and Liverpool Football Club, they all blinked. Complacency at every level, managerial, recruitment, tactical, all of them have had seasons of flux, transition, disappointment.

• 20:31Stephen J. Dubner?

  There's at least one more factor you can't dismiss.

• 20:35Speaker 01

  They also had luck.

• 20:39Stephen J. Dubner?

  But there's no amount of luck, or team chemistry, or good scouting, that is supposed to be able to produce the result that happened this year. Low level clubs like Leicester City just do not win championships in top leagues. Here's Stefan Schmidsky again.

• 20:57Speaker 05

  So I estimated that the wage budget for Leicester in the current season would have ranked them about 12th in the Premier League. And they were competing against teams like Manchester City, whose budget would have been about four times as much as Leicester City's. And there's usually a pretty close correlation between the rank of your budget within the league and your league position at the end of the season.

• 21:27Stephen J. Dubner?

  So when is the last time that someone so relatively low ranked in budget won this or any other top league?

• 21:35Speaker 05

  Well, in England, the last time probably is 1979, when Nottingham Forest won the English Football League Championship, which is what the Premier League title would now be called. And there was a very distinctive manager, a man named Brian Clough, who clearly had the ability to take relatively low valued players and turn them into superstars. And that was the secret of his success. Brian Clough did it not only at Nottingham Forest in 79, but also with another small club, Derby County, in 1974. So he did it twice in a period of five or six years.

• 22:11Stephen J. Dubner?

  Now, would you say that that relationship between spending and success in American team sports is, whether necessarily less, but is significantly less strong because of the constraints, as you said, having to do with the way profit sharing happens, drafting happens and so on?

• 22:27Speaker 05

  Oh, that's quite certainly the case. Now, varies depending on which league you look at. So in Major League Baseball, there's still quite a significant correlation between spending and success. But if you look at something like the NFL, where really the difference in wage spending budget between the top team and the bottom team is negligible, well, there's almost no scope statistically for money to make a difference. So if you actually removed all of those restraints in the NFL. You would get the same phenomenon and maybe actually that's if you think about it, that's what college football is. That's a system where there are no restraints on recruitment and effectively you see huge dominance by relatively big colleges in the different conferences.

• 23:10Stephen J. Dubner?

  What do you think it says about the American system overall versus the European systems that we opt for sports leagues that have this built in quest for parity?

• 23:21Speaker 05

  Well, I've always been very surprised by this. I mean, so to me, thinking as an economist, I think of this as the difference between equality of opportunity and equality of outcomes. And when I think of Europeans in general, we tend to have strong systems of social services and safety nets which ensure really to a large extent equality of outcomes within the European system. But traditionally, we have a sense of limited equality of opportunity. We have class systems, we have big social gaps. And America, we've always think of as being the reverse, where there's equality of opportunity, but very

• 24:01Speaker 05

  limited safety net. And it seems to me the sports story is completely the opposite. In Europe, we have this incredibly hyper competitive capitalist system where they will take the hindmost. And we have a lot of financial failure in European football. That's also one thing that goes with this incredible amount of financial distress and failure. And yet in America, there's these leagues which are essentially closed societies, which don't allow any competition and then share out the resources equally in enormous sort of socialist fashion amongst the top teams. So it seems that, you know, the mental framework for sports is at odds with the mental framework about competition in society more broadly.

• 24:46Stephen J. Dubner?

  Here, the quest for parity creates something that's pretty close to a cartel, which is that if you're in, you will almost be guaranteed to do quite well, which again doesn't seem to be much the American political system. But do you know anything about how we evolved into this seemingly un-American cartel-ish league system?

• 25:08Speaker 05

  Well, there are a number of steps that were very interesting in this. So one of the things is this absolute matter of faith, I think, in the United States that parity is necessary for league success. And this is something that that really emerged all the way back in the 1880s when the National League in baseball started talking about the need to maintain parity and give equal chances to the weaker teams. And yet, the history of European soccer proves, I think, beyond any reasonable doubt, that parity is almost unimportant. I mean, so La Liga in Spain is currently, in many ways, the most successful, or certainly Barcelona and Real Madrid are two of the biggest clubs on the planet, and yet they have the most unequal league that you could imagine.

• 25:52Speaker 05

  And the Premier League, traditionally has been for many years a very unequal competition, and yet it generates phenomenal revenue. So, for example, the combined soccer leagues of Europe now generate an annual revenue of about $25 billion, which is equal to the combined annual revenues of the NFL, Major League Baseball, and the NBA. So it's not that this is economically unsuccessful, and there are plenty of people step forward who want to put money into these leagues. Indeed, there have been many American owners investing in English soccer. Many of the Premier League teams are now owned by Americans. So this system works terribly well, it seems to me.

• 26:35Speaker 05

  I think one of the problems is that that people have bought into this idea of parity, and that's been a cover for the leagues in order to really to cartelize the leagues and to ensure that they are very profitable for their owners.

• 26:53Stephen J. Dubner?

  Coming up on Freakonomics Radio, just how unlikely is a 5,000 to 1 bet?

• 26:58Speaker 08

  The risk of dying on a bicycle is about the same as the odds were of Leicester winning the championship.

• 27:04Stephen J. Dubner?

  We also hear from the man who every year bets on Leicester to win the league. Every year, except for this year.

• 27:10Speaker 09

  I foolishly moved to your country, and as a result of that, and not being in Britain in August, I somehow forgot to bet.

• 27:18Stephen J. Dubner?

  And if you want to further your football knowledge but don't have a live-in 15-year-old tutor like I do, you might want to check out an episode from our archives called Why America Doesn't Love Soccer Yet. You can find our entire archive on Freakonomics.com. You can also subscribe to this podcast on iTunes or wherever you get your podcasts.

• 27:47Stephen J. Dubner?

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• 28:30Stephen J. Dubner?

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• 28:51Stephen J. Dubner?

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• 29:24Stephen J. Dubner?

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• 30:00Speaker 09

  I rather famously used to always bet on them every year.

• 30:04Stephen J. Dubner?

  That is John Micklethwaite.

• 30:06Speaker 09

  And I'm the editor in chief at Bloomberg, and I was formerly the editor in chief of The Economist.

• 30:11Stephen J. Dubner?

  Which meant you lived in London?

• 30:13Speaker 09

  Which meant I lived in London.

• 30:14Stephen J. Dubner?

  Micklethwaite grew up close to the city of Leicester, still has a house there. For many years, he had a tradition.

• 30:20Speaker 09

  Pretty much since the sort of mid 1990s, I used to go and bet every year because the start of the soccer season was the same time as my birthday, which is August 11th. And it became a sort of ritual. And I did that throughout my long career at The Economist.

• 30:34Stephen J. Dubner?

  All right, so you're saying that every single year for the last roughly 20 years, you've made a season beginning bet on Leicester to win whatever league they were in, correct?

• 30:43Speaker 09

  Exactly. And for most of that period, for that 20 years, I look back and checked, I won nothing in most years.

• 30:50Stephen J. Dubner?

  And then this past year, when the British betting houses established Leicester as a 5,000 to one long shot for winning the Premier League?

• 30:59Speaker 09

  I foolishly moved to your country. And as a result of that, and not being in Britain in August, I somehow forgot to bet.

• 31:06Stephen J. Dubner?

  And you typically bet how much? 20, 20 pounds?

• 31:09Speaker 09

  20 pounds is what I bet recently.

• 31:10Stephen J. Dubner?

  Okay, so let me ask you a question. If you had made your customary bet this season, you would have won roughly 100,000 pounds?

• 31:19Speaker 09

  Right, 100,000 pounds, which is a disappointing thing to have missed.

• 31:25Stephen J. Dubner?

  Here's what I really want to know, John. Would you rather have won that money, which is not nothing, but it's not, you know, a new world? Or would you rather have this remarkable story of having never failed to place the bet, except for the one year in which this bet would have paid off?

• 31:47Speaker 09

  Strangely, throughout this entire thing, although I've regretted not putting the money down, it's never made me not desperately want Leicester to win. Because if you've spent your life supporting this team, then you're intrinsically on that side of it. I think the other thing I should say, which is being honest, again, this doesn't reflect well on me, but at least for a couple of months of them being at the top, I miscalculated. I don't know why I did this. And I thought it was £20 against £10,000, which it would have been a lot of money, but not as much as £100,000. So I was sort of more kind of jokey about it. It was only when I did the proper maths, or in fact, one of my children did the proper maths, that I began to realise the seriousness of what I'd missed.

• 32:31Stephen J. Dubner?

  There's been quite a bit written about the astronomical payout that the bookies will have to make, but my assessment, and I'm just curious to know if you've seen any data on this, or just have any kind of intuition for it, is that there are relatively, relatively few payouts on Leicester winning, even at that very, very high rate, that there are many, many, many more people who bet the big clubs, and that it's in the interest of the bookmakers to act as if they're very aggrieved, but in fact, it's a wonderful advertisement for them, and they probably are doing just fine?

• 33:01Speaker 09

  You are a wonderfully shrewd man, and I think you're absolutely correct. In most things, numbers I've seen, bookmakers tend to lose out heavily when there's a favourite which is heavily backed, and where there's sort of odds of like, two to three to one. You see that a bit on racehorses, that happens quite a lot. The long shots, there typically aren't many people who bet on them, Leicester to win the premiership. But you're right, in terms of the economics of gambling, I suspect, actually, for the bookmakers, this has been a very good thing, because what has happened is it's excited everybody into the idea that long shots, you know, horses that are unfancied are worth putting money on, and the honest truth is they're usually not.

• 33:44Speaker 02

  In the end, we're looking at probably an industry loss of around 20 million for Britain's bookmakers, which is a big payout in one day to be given out.

• 33:52Stephen J. Dubner?

  And that is a British bookmaker, or at least a spokesman for one. John Hill is with Coral, one of the country's biggest betting shops. He's no relation to William Hill, which is the name of another big British bookmaker.

• 34:03Speaker 02

  We have just over 1,800 shops in the UK, but we also have a strong online business as well. And as a company, we take bets on football, horse racing, they're two of our core products. But we take bets on more or less everything, whether it's cricket, whether it's novelty betting, the British weather, that's one thing that the great British public love to bet on, the weather.

• 34:25Stephen J. Dubner?

  Hill says that 114 Coral customers bet on Leicester City to win the Premier League at odds of 1,000 to 1 or longer.

• 34:33Speaker 02

  I think it's the biggest betting upset we've ever seen in the UK and around the world.

• 34:38Stephen J. Dubner?

  No other event really compares.

• 34:40Speaker 02

  Just looking at some of the previous sporting achievements, Ben Curtis, the American, he won the 2003 Open Championship, he was 300 to 1 that year.

• 34:49Stephen J. Dubner?

  That's the American golfer, Ben Curtis, winning what the Brits call the Open Championship and what Americans call the British Open.

• 34:56Speaker 02

  We offer bets on horse racing. The biggest ever winner in horse racing in the UK is 250 to 1. So, you know, 5,000 to 1, that's far bigger than anything else which has been successful before in the world of sport.

• 35:09Stephen J. Dubner?

  How does a bookmaker establish the betting odds?

• 35:12Speaker 02

  So at the start of the season, we'll price up every single team, say, in the Premier League. You'll have a favourite, which normally is the side which won the Premier League the year before. So Leicester, obviously, as I say, were, you know, close to being relegated. So they were rightfully one of the outsiders. At 5,000 to 1, nobody would have said at the start of the season, well, that is the wrong price.

• 35:31Speaker 08

  Well, at some point, it's a bit arbitrary.

• 35:34Stephen J. Dubner?

  That's Charlie Whelan.

• 35:35Speaker 08

  I teach public policy at Dartmouth College, and I'm the author of the Naked Books, Naked Economics, Naked Statistics, and most recently Naked Money.

• 35:44Stephen J. Dubner?

  Whelan warns that we shouldn't take an oddsmaker's numbers too literally.

• 35:48Speaker 08

  When bookmakers make odds for football games or soccer games or anything of that Nature, it's really not a terribly scientific process. In contrast, if you go to Las Vegas, we know with precision what the likelihood is of spinning red or black when you're doing roulette, because we know how many holes there are on the wheel and so on. We know with precision what the likelihood is of drawing 21 when you're playing blackjack. Those are things that are essentially scientific, because we know the number of possibilities, and therefore, using probability, we can estimate how frequently different combinations will come up. That's one way of the most scientific and precise way of assessing the odds of something.

• 36:31Speaker 08

  The second way we can come up with probabilities or odds is we can just look at lots and lots of outcomes. When it comes to professional sports, we don't have thousands and thousands of examples of Leicester playing soccer games. We have, you know, 10 or 20 years of data. The players, by the way, are changing over that time period, so we have relatively few data points on which to make our assessment. And therefore, it's really much more of an opinion judgment as to the likelihood that they're going to win or lose a particular game. So it is a much less scientific process, is much less guided by past data, and therefore, we would expect these odds to be, at best, approximations of what is likely to happen.

• 37:12Stephen J. Dubner?

  What else is so unlikely to happen?

• 37:15Speaker 08

  The risk of dying on a bicycle is about the same as the odds were of Leicester winning the championship.

• 37:25Stephen J. Dubner?

  So what does it mean when a bookmaker sets the odds so high, at 5,000 to 1?

• 37:30Speaker 08

  One way to think about it is if you played this tournament or this season over and over again for 5,000 years, you know, once a year for 5,000 years, on average, you would expect Leicester to win once. 5,000 to 1 essentially suggests they're never, ever going to win.

• 37:49Stephen J. Dubner?

  That they are never, ever going to win. And yet, this year, they did win. And when something that's considered borderline impossible actually happens, what does that mean for the rest of us? What other sort of borderline impossible, potentially wonderful events might be lurking just around the corner? It's nice to think about, isn't it? Maybe that person you've been madly in love with for a few years, but who's never even looked your way, maybe that's all about to change.

• 38:20Stephen J. Dubner?

  I wanted to know Roger Bennett's thoughts on this. Obviously, humans like stories generally. We like happy endings generally, but we particularly like those underdog and Cinderella stories. And here, we really got one, and you've been following it and kind of breathing it in so intensely that I'm curious if it's changed the way you look at yourself, the world, your children, the future.

• 38:42Speaker 01

  Yeah, absolutely. We've got a lot of teachers from American classrooms showing us their whiteboards in the morning, and those whiteboards would say, "If Leicester City can win the Premier League, you can do anything." So to me, this story does transcend just football. It definitely transcends English football. Within English football, and the big takeaway, Leicester have shattered a long-cemented truth that money off the field directly correlates to Premier League success. That is gone. They showed that a football team can be beloved, can feel uplifting. I mean, football is a fairly flash. It can be a fairly repugnant beast, fairly dark, and professional sports in general, when you get involved in it, can be fairly cynical and negative, angry world.

• 39:26Speaker 01

  And this has been an unbelievably joyous, uplifting accomplishment that will make every single supporter of every single team in any sport in the world believe that when their team's next season starts, that why not us? Believe it could be us. Everyone in the world will feel that, apart from Cleveland Browns fans. It makes me feel that everything in life is possible. I guess you could summate it as saying Leicester City have officially spread false hope all around the globe.

• 39:58Stephen J. Dubner?

  In the meantime, back to the present, back to reality. There's no doubt the bookmakers will make the odds much differently next year. I'd be surprised if they were more than 100 to 1.

• 40:10Speaker 02

  Yeah, we've already opened betting for next season's Premier League title. In terms of Leicester, they're now 25 to 1 for next season's Premier League title.

• 40:19Stephen J. Dubner?

  I went back to John Micklethwaite from Bloomberg. Okay, John, next season, will you place your customary bet? Or, having failed to bet last year and seen Leicester win the league, will you refrain from betting on the chance that it was your failure to bet that somehow helped them win the league?

• 40:36Speaker 09

  You are sad because you have already acquired the deep pessimism and sense of, you know, personal responsibility that all football fans, including me, feel that you think that if you're sitting on the same sofa at the same time, watching NBC Sports Network, that that will definitely help Leicester. The answer is, I fully intend to go make the bet again. Because what happens if they won again? Then you'd feel an idiot to have done it twice.

• 41:03Stephen J. Dubner?

  I think they could actually challenge again next year. Solomon Dubner again. It's gonna be a good season.

• 41:10Stephen J. Dubner?

  What's your prediction right here, right now, for Leicester's finish next year?

• 41:15Stephen J. Dubner?

  Sixth. Really? Yeah.

• 41:17Speaker 04

  No, I'm gonna say fourth.

• 41:19Stephen J. Dubner?

  Fifth, fifth.

• 41:20Speaker 04

  Fifth is my final.

• 41:21Stephen J. Dubner?

  I'm not gonna make a prediction. It's my final prediction. All right. How Leicester does next season depends, of course, on many factors. Expectations will be higher, as will demands on their time and talent. They've now qualified to play for the Champions League trophy, which requires a whole other level of competitive intensity. And now that their players have proven themselves, richer clubs will try to snatch them up. Although Leicester will have more monetary ammunition than they're used to.

• 41:49Speaker 05

  They'll suddenly get a significant influx of cash as a result of this.

• 41:52Stephen J. Dubner?

  That, again, is the sports economist Stefan Schmatsky.

• 41:56Speaker 05

  So, the broadcast money in the Premier League is distributed partly on the basis of your success in the league. So you get a larger share of the broadcast revenue.

• 42:06Stephen J. Dubner?

  As I understand it, there are two forms of, or two streams of revenue sharing for football clubs in England. There's the domestic money, which is, you get a larger share of that money if you're more successful on the pitch. But then the international money, which is growing much faster than domestic TV rights money, is split more equally. Is that correct?

• 42:29Speaker 05

  Right. So strictly, it's like this. The domestic money is divided into three parts. Half of it is divided on completely equal shares. Twenty five percent of it is decided upon your rank in the league and you get it's divided into twentieths and you get twenty twentieths if you come first, nineteen twentieths if you come second, eighteen, seventeen, twentieths and so on down to one. And then finally, a quarter of it is divided on the basis of how many times you appear on television, because not all the games are shown on TV and the more successful clubs tend to be have their games televised more often and therefore you get a larger share.

• 43:13Speaker 05

  You get an appearance fee every time you appear on TV. And then, as you say, the international broadcast revenue is divided on a strictly equal basis. Now, the big difference here is this, so this contract, this contract, this sharing rule was actually devised in nineteen ninety-two when the Premier League was created. Back then, the overseas broadcast rights constituted, I don't know, one or two percent of the total broadcast revenue of the Premier League. So when they were in the negotiations, the big club said, no, we have to have a bigger share of the broadcast money and that's how they negotiated this three-part deal. And then apparently what happened is the international money, because it was, it's never, nobody thought about it and they just, oh, well, let's just share that equally and nobody argued.

• 43:58Speaker 05

  In the last ten years, the international part is forty percent of the total broadcast revenue and it could actually go over fifty percent in years to come.

• 44:07Stephen J. Dubner?

  So presumably, this is very good news for traditionally smaller or less rich teams, yes?

• 44:15Speaker 05

  Absolutely.

• 44:16Stephen J. Dubner?

  So does this mean potentially at least, or theoretically at least, I should say, more Leicester-like victories in the future?

• 44:23Speaker 05

  I think that's absolutely right. I think it's perfectly possible that we could see an increasing number of small teams being competitive in the Championship.

• 44:32Stephen J. Dubner?

  I'm curious, which team do you support, Stefan?

• 44:35Speaker 05

  So I support a third-tier English club called Scunthorpe United, which are hopeless.

• 44:42Stephen J. Dubner?

  I'm sorry, I don't mean to laugh.

• 44:46Speaker 05

  Most people do.

• 44:48Stephen J. Dubner?

  So you're saying your primary team that you support is not Premier League, not even the league below, but the third tier. So that'd be like me being a double A baseball team would be my first team, yes?

• 44:59Speaker 05

  Right, so it's like being a supporter of the Toledo Mud Hens or something worse than that, something even... But here's the thing, the Toledo Mud Hens could not win the World Series in seven years' time. Leicester was a third-tier team like Scunthorpe United seven years ago, so I have hope that Scunthorpe United can do exactly what Leicester City have done.

• 45:19Stephen J. Dubner?

  Oh, I can't wait until that happens, only because it will be so much fun to phone you up and chat again about it.

• 45:26Speaker 05

  Well, you'd have to wait till I got sober, I think.

• 45:45Stephen J. Dubner?

  Coming up next time on Freakonomics Radio, it is nearly summertime, which probably means that you and just about everybody you know will soon be getting on an airplane, which means that you and just about everybody you know will rack up a lot of questions and even more complaints.

• 46:00Speaker 10

  Never underestimate the contempt people have for airlines. People hate carriers and the airlines are out to either steal your money or get you killed or both. So as part of this, let me apologize in advance for sounding frustrated.

• 46:16Stephen J. Dubner?

  A pilot for a major US airline answers all my questions and yours.

• 46:21Speaker 11

  Is it true that pilots can see you through a camera that's in the bathroom?

• 46:26Stephen J. Dubner?

  Have you ever come close to a crash?

• 46:28Speaker 12

  Is there anything that you have seen on a flight that you couldn't explain?

• 46:33Stephen J. Dubner?

  Can the pilot really fly faster? And if so, why don't they fly faster normally is the normal matter of course? That's next time on Freakonomics Radio.

• 46:46Stephen J. Dubner?

  Freakonomics Radio is produced by WNYC Studios and Dubner Productions. This episode was produced by Irvan Gunja in the goal every week. Our staff also includes Jake Howitt and Merritt Jacob in the defensive backfield. In the midfield, Christopher Wirth, Greg Rosalsky, Kasia Mahalovich, playing a rover. And up front, Alison Hockenberry and Caroline English. You can and should subscribe to this podcast on iTunes or wherever you get your podcasts. And come visit Freakonomics.com, where you can find our entire podcast archive, as well as a complete transcript of every episode, along with music credits and lots of extras. Thanks for listening.

• 47:44Stephen J. Dubner?

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• 48:16Stephen J. Dubner?

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