Posts Tagged ‘Formula 1’
NASCAR, Scrutiny, and Success
There aren’t a lot of NASCAR fans in Portland, OR. I grew up in Rockingham County, Virginia, which is about four hours from Martinsville Speedway and within an hour’s drive of at least a dozen regional and local tracks. I enjoy the competition and, even though some races look like a bunch of guys going fast and turning left for three hours, there’s a lot of strategy and tactics to get right if you want to be successful.
I also enjoy Formula 1 racing, which sets designers and drivers an entirely different set of problems. In open wheel racing, touching another car often means irreparable damage to you, the car you touched, or both. In NASCAR, you can rub, bump, bang, and beat on each other a lot more without necessarily compromising your chances. Formula 1 and NASCAR cars (and drivers, for that matter) also have different weights, aerodynamics, and handling characteristics. Some drivers can race successfully in both types of cars, but most competitors specialize.
Car racing is also a male-dominated sport. There have been some successful female drivers, such as Janet Guthrie who raced competitively at the Indianapolis 500 (an open wheel race), but until recently there hasn’t been a marquee name moving from open wheel to NASCAR racing. All that changed when Danica Patrick, who raced successfully through the junior open wheel series in Europe and in Indy cars in the U.S., made the jump to NASCAR.
Patrick is a skilled racer who has paid her dues, but she’s had a rough transition to the Nationwide series (the second-tier NASCAR circuit) and the Sprint Cup. She’s also a marketer’s dream, with amazing good looks, a winning personality, and the discipline to balance racing and promotional duties effectively. Some commentators claim Patrick was hired for her appearance and not her abilities, but I don’t think that’s a valid criticism. NASCAR, like all major sports, is driven by media coverage. People (and I am a people) like looking at attractive individuals and studies show we remember their messages longer. With media coaches and mandatory sponsor mentions during interviews (“I thought the #666 Dogecoin Chevy SS team put me in a good position to win today…”), criticizing a driver for capitalizing on their appearance is nonsense.
As for racing results, Patrick has struggled. She led the Daytona 500 and finished well in a few races, but her average finish is in the low 20s (out of 40 or so drivers) and she has only a handful of top-10 finishes. Kyle Petty, a moderately successful NASCAR driver, son of driving legend Richard Petty, and media commentator, had an interesting take on Patrick. He was quoted in the USA Today as saying:
“She can go fast, but she can’t race. I think she’s come a long way, but she’s still not a race car driver. And I don’t think she’s ever going to be a race car driver.”
Asked by interviewer Matt Clark why Patrick wouldn’t ever be a race car driver in Petty’s eyes, the eight-time race winner said it was “too late to learn.”
Petty admitted that, even though he won eight top-tier NASCAR races, he never figured out what it took to be a great driver. Even so, he has a point. Drivers such as Tony Stewart and A. J. Foyt grew up running everything they could get their hands on, so they learned general racing skills as well as tactics for each type of car and track. Patrick spent her formative years concentrating on open wheel racing on road courses, so her development was more specific.
Even so, I’ve noticed her car control and race sense have improved. Rather than running consistently at the back of the pack and getting caught in (or causing) avoidable incidents, she’s obviously working hard, listening to feedback, and improving. Will she ever win? Hard to say. There are a lot of really good drivers out there. Will she challenge, especially at Sonoma and Watkins Glen? Probably. As long as she keeps improving and maintaining a positive image for her and her sponsors, she’s likely to have a ride. In the context of NASCAR and its surrounding media environment, that counts as success.
I can tell she wants to win, not just race. She won at every level moving up and, even if she doesn’t have the NASCAR-specific skills required to win consistently at the top level, she’ll keep giving it all she can.
Kyle Petty also characterized Patrick as a “marketing machine” rather than a racer. Her commercial success has certainly outpaced her results on the track, but there’s no public-facing industry where looks and talent don’t operate in tandem. We’re all working so we don’t have to work any more, so I offer Patrick the same advice Darrell Waltrip gives to drivers right before a late-race restart: “Go out there and getcha some.”
Perceived safety increases risk-taking
In many senses, life is a series of risk/reward calculations. Choosing which school to attend, buying a house, and choosing a spouse are all risky endeavors. According to the Peltzman effect, also known as risk compensation, people have a tendency to take greater risks when perceived safety increases.
I’m sure this conclusion comes as no surprise to you. Toddlers learning to walk soon start to run, or go down stairs, with the expected results. Teen drivers (particularly teen boys) get comfortable behind the wheel and dart off in a burst of testosterone, occasionally ending up in dire circumstances. This phenomenon was very common the Formula 2 racing series. Formula 2 is a development series for the global F1 competition, which is viewed as the pinnacle of motor racing. The problem is that the Formula 2 series was plagued with multiple accidents resulting from brash moves made by the young drivers. The reason? Analysts, including current F1 drivers, argued that Formula 2 racers were overly aggressive because their cars are so safe. Romain Grosjean, a Formula 2 driver who now competes for the Renault F1 team, was fined several times and sat out for an F1 race after being at fault in repeated incidents following his promotion.
Investors make similar risk/reward calculations. Wall Street investment bankers often take significant risks because their compensation schemes reward short-term success far more than they punish failure. Why would they take such risks? Because it’s part of their overall strategy. In the Wharton School’s corporate finance MOOC I’m taking on Coursera, Professor Franklin Allen argues that one’s sense of risk is inverted when you think of investing in a portfolio of stocks rather than in a single stock. For example, imagine that you buy stock in an oil company that finds oil in 1 out of 20 wells, and each producing well returns $100. You have a hit rate of 5% which, multiplied by the return of a good well, yields an expected value of $5. Now imagine that you have a separate investment in a research company that has a 1 in 50 chance of returning $250, otherwise gaining you nothing. This investment has a similar expected value to the previous example, because 2% (1 in 50) of $250 is $5.
Which of the two investments is less risky? If you look at the expected values, they’re equally risky. However, Professor Allen argues that, when considered as part of a portfolio, the latter investment is less risky because of its higher potential return. The crux of the argument is that a diversified portfolio with numerous independent risks will tend to have a higher return than a collection of pedestrian investments with relatively low risk. The end result is safety in numbers. Just as a fair coin flipped 1,000 times will tend to show heads in about 50% of the trials, investments with independent risks will tend to earn out at their expected rate, assuming you adjudged the risks correctly in the first place. Statistics on investment return since the year 1900 bear out his argument.
Improvisers can and should take risks to make great scenes. We can do it without fear because we know our fellow players will be there to make what we say and do the right thing. Similarly, businesses can take risks as part of a diversified portfolio of ideas. Just as you wouldn’t invest in a single stock such as, I don’t know…Enron, you shouldn’t discourage experimentation and risk. That said, you must understand that risks taken within a scene or business are dependent, not independent. There’s only so much we can do to fix things if you go too far overboard. If you can’t spread out your risk, you must moderate it to be successful.
Improspectives 