Risk of Ruin
Audio documentaries about risk takers.
Risk of Ruin
Expected Goals
Preston Johnson and a group called WAGMI United had a novel idea to buy an English football club and then use NFT sales to fund player spending. Their goal was to take a club from League Two and gain eventual promotion to the Premier League.
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SPEAKER_01:I followed soccer in America as hero. I knew nothing about it. Um I made fun of the elitist football heads that like loved the game. I only bat American football and basketball primarily. And I mean, that includes, you know, like European college basketball WMBA. Like, you know, I dive into more of the weeds of the leagues and levels, but uh knew nothing about soccer. I had success doing uh a startup in the crypto NFT space prior. And I was at a dinner where uh I think there was like 16 of us at Nobu in Malibu in California, really nice dinner. And I only talked to the people on like my edge of the table. And at the very end, one of these random guys that was on the other side of the table, he's like, I know that everyone's going home. You don't even know who I am, but I know Jeff Ma already. I already know who you are anyway. Now I know what you're doing with this company you started. He's like, I have an idea for you. Can you just let's exchange numbers and talk tomorrow? Uh and this guy's name is Evan. And he called me the next day and he's like, Do you want to do real life Ted Lasso? But with there's like all these NFT communities that are building internationally, but there's not a there there. There's actual no purpose to the utility of the whole blockchain, which is the whole point of this in theory. All these like cartoon pictures are like nothing. What if we actually built a community of thousands and thousands of people around an English football club that otherwise these clubs lose in the lower levels a ton of money every year? There's another club five to ten miles away, so they're capped on how big their fan base can grow. And so, similar to what Rexham did with Ryan Reynolds and doing a TV show and getting international eyes on one of these small teams, if you're able to do that, you monetize it and then you spend efficiently enough. So like money equals winning over time in like all sports, like see Lakers, Yankees, Dodgers, whatever. Um, so that was the thesis he said. And then, like, can we do have this element of like craziness to a sport that otherwise like to get attention that otherwise is just old school, very mundane English football? Like, and I just like on the spot, I'd known the guy for like 12 minutes, and I said, Yeah, let's do it. And so that's how it started. And uh, it was his brainchild of You're listening to Risk of Ruin.
SPEAKER_00:I'm John Reeder. This is episode 47, Expected Goals. Sometimes at Blackjack, sometimes at sports, or sometimes in the stock market. However, I thought it might be useful to start this episode by pointing out that our guests have also endured more losing than you can probably imagine. Of course, we have heard stories about hedge fund losses in the billions of dollars, but most losses aren't the headline creating type, because if you are going to make a living in the world of variants, you're also going to have just regular and ordinary, although still depressingly depressing, losing. And I say it's depressingly depressing because dealing with losing is not as simple as just develop a stoic's mindset and never get too high and never get too low. You know, I think there is an idea that a successful gambler or investor would just perform an inception on themselves like in the movie, and they would trick themselves into believing that they are not on a dopamine roller coaster. But even if you could do that, it wouldn't prepare you for when the next loss is a bigger gut punch than you ever realized was possible, or for when an edge goes away, and the ego that had been built on top of that edge is suddenly in doubt. There are also a slew of problems created by variants which extend beyond one person's mental well-being. Like what if you're working on a team or in a fund or at a company? Okay, if you add losing to a group dynamic, look out. Everyone might have a different view as to whether you're running bad or making bad decisions, and the number of distinct opinions as to how to dig out of the hole you're in will be very close to the total number of people involved. Even long-term successful sports betters that go through losing streaks might get dropped by their betting partners because the partners don't know what's happening, except they know it's not good. It's like volatility drag, but the thing that is being weighed down is human cooperation. I'll leave it there for now because this episode is actually not all about losing. It is a story of an ambitious and off-consensus idea where some things went right and some things went wrong, and the end result is something like a bittersweet mix of highs and lows. I came to this episode the way I come to a lot of episodes. I was listening to another podcast, in this case, the Bet the Process podcast, hosted by Jeff Ma and Rufus Peabody, and I heard something that made me go, wait, what? If I hear that someone is a Mormon, slash poker player, slash sports better, slash NFT crypto enthusiast, slash chairman of a small English football club, okay, that is exactly the kind of odd thing I am looking for. This is Preston Johnson.
SPEAKER_01:The LDS background is unique for those that are less familiar, very religious, like really focused on um high morals, no drinking, gambling was one of those things that was looked down on pretty heavily, no drugs, no partying. I was in high school, I had just I think I had just graduated, and this was so in 2003 it was the big Chris Moneymaker poker boom. Uh I like fell in love with the game. A few years later, I graduated high school. Uh, I still would play occasionally once I turned 18 my senior year. There were Indian casinos in Southern California where I grew up, um, just outside of LA. And uh I would go play occasionally with friends, little tournaments here there. That's where I got my start outside of like$5 home games. And uh that summer while I was waiting for college to start, um, I had a job. One of my best friends, older brother, worked at Sabarro as a manager at Sabarro, like the pizza place and all the malls, like at least they used to be. I don't think they're there anymore. Uh, and I had, I remember clearly, uh, it was one of the few days I had a full eight-hour shift and I was going into work. Um, and I got there and uh I wasn't working that day. There was some miscommunication with the schedule. And so back in that time, I was like, oh, like my parents, again, really strict parents, household, religious household. They looked down on gambling. I was like hiding that I was even playing poker. Uh I'm like, this is a perfect time to drive to Chumash. I grew up in Valencia, which is near Magic Mountain, uh, closer to like Santa Barbara Ventura side for people that aren't familiar. A little over an hour, I'd drive that's where I would play. Like, I can go play 2-5 no limit. That was the game that was common back then. Only a$200 buy-in. Um, I had a few hundred bucks on me. I was like, I'm just gonna go drive and play it. They won't know where I am. I have eight hours at least.
SPEAKER_00:When I was talking to Preston, I asked him, isn't Chumash kind of a haul? I've actually never been to Valencia, but I have been to Chumash. And I know that first you have to get to Santa Barbara, which is a decent drive from most places in Southern California. Then you have to go up into the San Inez Valley. And Preston said, nah. It's like a little over an hour. Okay, I think that is still his 18-year-old poker motivated brain talking because I looked it up and it's an hour and 49 minutes on Google Maps. But if you are a young guy thinking about free money, just waiting to be picked up in the poker room, then almost two hours translates into a little over an hour.
SPEAKER_01:I sat down like I always do two five table, two hundred bucks. And this is like the era I just want to remind people to. Like this is gonna sound crazier than it is, but uh, I also ran hot, but like this is the era where I remember distinctively I had my first light bulb moment as an 18-year-old playing cards in person, a two-five game where I three bet with ace three suited someone, and these are like all a bunch of old guys playing at the tables generally. I three bet with ace three suited, and you know, this is even before people realize that's actually a really good one-to-four-bet and five-bet bluff with pre because you're blocking premier hands, it might be aces. It's like this is just like logic where these guys are old and they only call with premiums, or they go all in and then I just fold. And this guy like tanked forever, calls, flop, total rainbow width was like 10, 7, 4. I don't even remember anymore. And I just shove all in because we only have$200 to start, anyways, in a lot of these games. And he opened just like InstaMux or full uh open folds queens. And that's when I knew I was like, oh, like this game, like if you have any sort of idea of like basic, like if you have some aggressiveness and you have ideas of probability and aggression in like game three, you're fine. Like this game's solvable. So anyway, I went, I played this game, just relaxing. I I ran$200 up to$3,100. I remember the number. It was just like a heater, plus these guys are all terrible. And it only took like two or three hours. I was like, man, I have all this extra time, but like a 3K win for a kid that just graduated high school, has to go to college soon, uh, was working at Sabaro. Like, this is great. Like, I'm gonna just go to pocket it and go and I'm the way out. I'm like, man, but I just have so much more time, I could gamble. And I was walking by a blackjack table.
SPEAKER_00:The story that starts, and I was walking by a blackjack table, ends with, he won another$6,000, and he didn't see a reason to stop there. The Chumash gave him a food comp, so he went and had dinner. During this time, he was kind of stringing his parents along. The original eight-hour work shift had given him some room, but then he needed more excuses. So he told them he was going to the church to play basketball with his friends, but he was on a heater and headed back to the poker table. So he hooked up another story.
SPEAKER_01:I'm gonna tell him I'm spending the night at my friend's house. So I text him, but my phone's about to die, but I was like, all right, I'll let him know, I'll get it sorted. I'm at my friend Jameson's. I'll see you tomorrow morning. Um, and I go play 2-5. And and I remember distinctively just buying in for 200 again because that was the max. Uh and and I and I ran it up to 1300. And I'm like, this is a this is just like the greatest day of my life. I'm up 10,000, I'm gonna leave soon. And over the intercom, John, I hear, Preston Johnson, will you please come to the front desk? And my stomach drops because I know, I mean, secretly I'm hoping they're like, oh, they want to comp me more stuff, but I knew like there was something else going on here. Uh, I get there and like, hey, your dad's on the phone, he just wants to talk to you. And I was like, oh my gosh, okay. Um, and my phone had died, and like I had no way to charge it. And it look, he's like, look, we're really disappointed in you. It's late now. We don't want you to drive back on the highway for over an hour back home at night. Just stay there, get a room, and come back in the morning. I was like, all right, that's fine. And I did. Um, obviously, they're just well, what ended up happening is they just wanted, they texted me, say, Hey, can you pick up your sister from gymnastics at 10 a.m. before you come home? All I did I would have said yes, and that would have been it. It would have been fine.
SPEAKER_00:I haven't lived at home for close to 30 years and I didn't grow up Mormon, but I did grow up with a Catholic mother. You know, some might say an aggressively Catholic mother. And so bracing myself for a torrent of disappointment and guilt is hardwired into me. I'm having shame by association just thinking about the drive back from Chumash.
SPEAKER_01:I had way too much cash for an 18-year-old in that I'd ever had before. I deposited all but five hundred into the bank. Um, I don't know why I didn't just deposit all of it, to be honest. So uh you'll see why I say that in a second. Um, but I got back and like they, you know, my mom and dad pulled me aside and you know, just faith in general, whether it's you know, Mormonism or others, the essence of it in in theory, right, is like trying to teach good morals to kids and make them better people in life. And like it's all like in a lot of ways, um positive. And that's all my dad and mom were trying to teach me as a lesson. And um, I was pretty comfortable and my parents and family were pretty comfortable growing up, like but they also taught me really good lessons. Like I had to pay for my gas for my car, I had to pay for my car insurance. Um, they weren't charging me rent to live in the house before I went to college because I just always lived there. So like that was one, but suddenly like my dad was like, Hey, we're gonna charge you rent this month. Um, we're gonna uh, you know, make you pay half for the breaks, because this is like my dad's car that we like shared actually. It wasn't even and he worked from home, so it worked out. I could drive it when I needed. Um it suddenly added up to exactly like$500, which was the amount that I had left in my wallet that I didn't deposit into the bank. And so I owed them the$500. And um, my dad wanted to teach me a lesson. He's just like, hey, this I want you to understand like what money and greed means to me. And he he took the$500, he set it in the fireplace, and he lit it on fire.
SPEAKER_00:There's the part of me that took two religion classes in college that would love to digress at this point and get all into, you know, how should we think about the coexistence of the faithful and gambling? But today is your lucky day because I am going to resist that urge. I think we can just take it at face value that Preston's dad was very, very mad. And, you know, he wasn't off base.
SPEAKER_01:Again, they were just trying to teach me a lesson, and it was$500 that like to him probably didn't mean that much, but also it was money he wasn't gonna have anyway. So he was like free rolling the lesson in a way. Uh and like their intent was that this would stick with me, like there were more important things in life than money and greed. And they're actually right, it's the truth.
SPEAKER_00:You could make an entire podcast episode exploring the idea of what's the right amount of stubborn to become a professional gambler, because you definitely need some ability to stick with it in the face of just the difficulties involved. There are basic frictions that come from this path. Like Preston just said that gambling put him in conflict with the expectations of his family, but it's also not going to work that well if you're completely hard-headed. Because if you cannot change your mind and adapt, you are also not going to make it. So there's some Goldilocks amount of obstinence required.
SPEAKER_01:I think there was a subconscious moment there that I was like, look, this isn't gambling. Like there's like a real edge here. I can win. I want to prove you guys wrong. And I think that's what really triggered it for me moving forward, whether it was then sports bidding after poker or you know, eventually we'll get into some of the the English football team ownership stuff. But um, I think that's like the thing that was like, all right, I I I can do this, I promise, watch.
SPEAKER_00:I've heard actually from a former guest of this podcast that Mormons are the best pound-for-pound salesman in the world. Because Mormons go on these missions when they're young, and so a part of what they're doing is trying to cold convince people about their religion, which is a very difficult job. So I asked Preston, was this helpful at all when it came time to convince people to buy this English soccer club? He said basically, no. Even if some Mormons do become great salesmen and they start door-to-door pest control companies with employees who are fresh off mission. Preston said he is a terrible salesman. Although he did go on a mission. That part is right.
SPEAKER_01:You're you're going there to do it's basically two things. You're trying to teach people about the gospel of Jesus Christ and how it can maybe benefit their lives, and you're doing a lot of charity work and service. And it's a positive life experience. You're living on your own, you're younger, you're 19, 20, 21, learning how to cook for yourself, do your laundry, like all that stuff. Um, but you're also learning, and then you have to learn a new language. So it took me, I always tell people probably eight months before I felt really comfortable having conversations fluently in Portuguese. I ended up studying because after the mission, I I had originally uh majored at BYU in statistics. I did my mission and I'm like, oh, I want to help people and change the world. And and I was like, I'm gonna do psychology. So my undergrad was in psychology. Um, and then I loved sports so much growing up. I did sports psychology as a master's degree more specifically. Uh and because I had in state uh tuition pricing once I was already at BYU in the University of Utah, I was one of the few at the time universities that offered a master's in sports psychology. Uh, I just went up the road. I applied, I was the only place I applied to. And um, in order to do a master's degree, so I'm getting to the point, uh, you have to take the GRE. And this is the case when I did the SATs as well in high school or ACTs. Like I pretty much I get a perfect score on the math. I am so bad at like reading comprehension and English and everything. I remember after I did my GRE, I applied, I submitted, and I got um the notification. I think it was a letter in the mail that said you've been accepted to this master's program on scholarship as an international student. And I was like, what? And they thought I was international because my math score was so high and my English is just so, so bad. And obviously they corrected it with like in 72 hours. I remember someone got on the phone with me, like, actually, we made a mistake. You are accepted though, just you have to pay for your own tuition. So, anyways, that's just like a side story, but that's like my background, I think, just there. Just I was you know, born with whatever math ability or skill there and you know, thinking about probabilities and odds and um just general game theory.
SPEAKER_00:Preston actually thought he would need a PhD because he didn't see a way to make a living in sports psychology without one. But before he could do that, he got derailed. His gambling career started in poker, where he was grinding cash games and playing the weekly tournaments. Actually, his biggest poker win was third place in a tournament for an$83,000 cash. And that happened right before Black Friday killed most of online poker. But that meant he had a bankroll to try out sports betting.
SPEAKER_01:I think I was bidding a ton on Bet Online and uh Five Dimes in uh Bookmaker. Those are just like the classic three offshores that were like fairly attainable as an American to get money on and off. And uh yeah, it did pretty well. Ultimately had people that eventually they actually do this and really understood what they were doing because I was, again, I was betting like maybe three to four or five hundred a game and wish I had been betting more. But you have some people, I won't say names just for the sake because I know a lot of them are still working in the industry, but reached out, and that's one of the luckiest moments of my life of like, hey, we want to give you a free roll. We think your stuff's really good. We've actually been following you for a couple of years. Um, are you interested? Like, we can get down a lot more money. And I was like, I was like no-brainer. And then suddenly I was like on a 25% free roll on guys that were getting down, you know, five figures a game instead of me betting, you know. I I think I'd gotten on my own bankroll to betting more like a thousand to two thousand a game, like max on like a really big edge. But uh anyway, that would that was significant and and changed my life in a lot of ways.
SPEAKER_00:I think that when we get into the story of the English football club, it will be important to understand that having a completely off-consensus idea was not uncomfortable for Preston, the way it probably would be for most people. One of Preston's NFL bets hit big using exactly that kind of thinking. In 2016, Dak Prescott went into the season as the rookie backup quarterback for the Dallas Cowboys. For this reason, his rookie of the year odds were very long, right? Why would you bet a guy for rookie of the year when he's not going to play?
SPEAKER_01:I was just calculating like odds Tony Romo breaks his back again, and Dak Prescott, a quarterback, a quarterback of a team in the NFL is gonna have usually, you know, three, four, six, eight to one to win rookie of the year. Um, Ezekiel Elliott hurt because he was supposed to be the best running back coming out of the draft. And uh, but I was like, you know I got to take a shot. So like Max betted at 500, Max bet it at 375 after they moved it, Max bet it at 325 after they moved it, then 275. And then I think I posted it online because there were still a few spots when it was like 250, 225 to one, and I saw it move down to like 100 to 1. And then some PPHs had it like for a few more days 150, 175. Anyway, a bunch of people got down on it. Their next preseason game, which is the final preseason game. Game. A few days later, Romo gets injured. Uh, he breaks his back again, he retires. Prescott suddenly the next week like four to one. And then it it hits somehow because Elliott was actually a massive favorite before the ceremony or whatever, anyway, to win, and they went to Dak Prescott. So that was like a oh, like I'm pretty sure I had my average price was like$334 to one, and I ended up getting almost$1,500 down. So that was like a like almost half a million, I think.
SPEAKER_00:Preston also spent a little time at ESPN when the worldwide leader was trying to get involved in the newly respectable world of gambling. So he had this interesting background of having made a living at betting, and he had some visibility to the public, and then he was involved in NFTs. Actually, this is a good time to offer up some context about so-called non-fungible tokens in case you cannot remember the heady days of JPEG speculation. Okay, in August of 2021, there were about 700 million dollars in CryptoPunk sales, which you know, CryptoPunks are kind of the OG of NFTs and also the thing that has held up best over time. On a per-transaction basis, the average CryptoPunk sale that month was about half a million dollars. And then in the same month, there were also$300 million in board ape yacht club sales. So about a billion dollars in transactions in one month for just two of the more well-known NFTs. The crazy thing is that NFTs also have a super long tail. Pudgy Penguins sold$100 million that month, and NBA Topshot also had$30 million in sales. The bets on crypto collectibles even extended beyond JPEG art. Maybe the wildest indicator of NFT Froth was that the tokenized version of the very first tweet sent by Twitter founder Jack Dorsey sold for$2.9 million. And I have to say that you would have to pay me to read one of Jack Dorsey's tweets, so giving up almost$3 million to be the owner of one seems like a surefire sign that your brain has been replaced by hot dog water. I was not at all involved in NFTs, but I do try to understand things from the standpoint of the people who are excited about them. In the case of NFTs, my mental model is just that they are collectibles, sometimes called one of ones on the blockchain. Well, maybe the ultimate one of one is an actual sports team. You know, they have properties that make them hard to understand as actual businesses unless the buyer is principally interested in ownership benefits, like getting to make decisions and enjoying the prestige of the thing. Most sports teams are private, so we don't really know the full economics, but there are a few that are public. So if you look at the operating results for Manchester United or the Atlanta Braves, you will see organizations that are usually small money losers, but they are each worth multiple billions of dollars because there's a market for rich people to buy these teams. From that standpoint, the marriage of NFTs and sports makes complete sense.
SPEAKER_01:It was that we were in this NFT window where people were throwing money around incredibly, and we'll get more into those details, I think, some later. But like there were drops happening on these NFT projects of like pixel non pictures that had no purpose and looked terrible, making 90 to 100 million on the first day. That was, and there was all these people in our group that were uh exposed and had done well the prior 12 to 18 months in crypto and NFTs. And so that that was the only reason why it didn't take long to actually raise our initial amount to do the club. It was a lot of FOMO and oh, this thesis makes a ton of sense. Let's do it.
SPEAKER_00:The part of this idea that I could really see working is that crypto culture is very much about in-group signaling. I think that's why profile pictures like crypto punks have sold for millions of dollars. It's about signaling the ways that you are part of the group and also the ways that you are unique in the group. It went beyond mere appreciation of the art, because if someone on Twitter was found to be displaying a crypto punk or bored ape that they did not actually own, then harassment and ridicule would ensue. The point of displaying the NFT was to show appreciation and that you could afford it. Well, having the crypto NFT sports team would also be very valuable because fandom is about that same kind of signaling. You know, you're a Lakers fan and everyone else has a Kobe jersey, but you rock a throwback Kurt Rambus or James Worthy because you are so unique and interesting. Your group membership is solidified, but so is your individuality.
SPEAKER_01:There was 30-something people that ended up being in this group in some form or fashion. A good portion maybe ends up being about half and half were like some crypto NFT people. There was some sports business kind of VC types too that thought it was a really interesting idea and were hearing about NFTs and wanted to have some piece of the ideas that they thought made some sense in practicality. Um there were a couple friends and family members probably kind of rounded it off. Uh so it was a mix for sure. I think some of them thought the truth is like over there it's actually a little more straightforward because your asset value in theory appreciates like it does everywhere of the team or or franchise that you own. Uh but over there, if you get promoted, you're in a higher league, you get more distribution money from the Premier League or um the governing bodies over there. And like you're just worth more anyway on paper. And so winning equals the asset value over there. Whereas you can be um the Washington Wizards right now in the NBA, and your asset value didn't go down this year, even though you're the worst team in the league. And if you win the NBA finals, your asset value will probably go up because you're just like by nature, you're selling more jerseys and Shay's the MVP, and Thunder win it all, and people care more and you're on national TV more. But like it doesn't go up like 4X because you won the NBA championship. So that's like what you're looking at over there is look, can we turn this club that otherwise cost a couple million pounds into a championship-level club that has an international audience and is probably worth maybe 50, if not a hundred plus one day. And if you actually got to the Premier League, are we talking a billion-pound valuation? That that's like the high variance, high upside bet kind of moonshot of it.
SPEAKER_00:The easiest thing in the world is always to assume that nothing will work, right? Just bet against every idea that seems a little off. But remember that Preston had already done well at a career that most people think doesn't even exist. And then also at bets that sports books were willing to offer for very long odds. So the high variance nature of the idea is no big deal. I mean, it was a feature, not a bug.
SPEAKER_01:We were all realistic, at least um not meaning the whole world. I just meant like Evan and I and a couple others that were close on on this project in the early stages, in that like 98 to 99% of it was bullshit. Uh the reason being, oh, there's just nothing there. Eventually it's gonna collapse at some point. These don't just go, what do they say up only? It doesn't go up forever. Um but if you actually had a product and real use case utility for it, then there is a possibility that this could be a forever type thing in a use case for it. And uh, I'll give you an example. Like, so we did an NFT drop, and we'll get into more of the details of timing and certain specs of like the whole financial model. But um, part of it was like, look, if you have this NFT, this is your club in England. We're gonna go from League Two and try to make our way up to the Premier League. Uh, you're gonna get like a custom jersey or shirt, they call them over there. You're gonna have special access to like footage watching training practice live in real time. You're gonna have access to uh like interviews with like Preston or maybe a coach or a player. You're gonna be able to vote on a signing, which we ended up doing at some point too uh that first summer. So the idea was like you're gonna have access uh via, it was almost like a blockchain Patreon for a sports team that gave people real like ownership of their fandom and then trying to monetize that support system and those fans, which look, and we'll get into where Crawley is where we ended up being, is like 22 miles south of central London, not very well off. You know, most people are just like, you know, average to below average incomes, imagine, in the uh relative to the the country or a lot of the areas surrounding it. And the average NFT crypto bro or and or or female occasionally, like they were just they're gonna spend more in in on merch and other things and items than they would the average person in Crawley. And so our idea was if we just get a few thousand of the people internationally to a club that otherwise had like I think it was 700 season ticket holders when we first took over. Um, 712, I think was the number. Like this is like a no-brainer. So that's that was where it stemmed from. But yes, it was admitting, look, a lot of this isn't gonna work out, but this one might, and this is why.
SPEAKER_00:Preston and various of the investors came from the world of gambling. So they were very up on the use of things like analytics. I thought that, of course, that would be a big part of their thesis, the idea that they could moneyball their way to the Premier League. But Preston corrected me and pointed out that the effect size from making marginally better decisions than the other clubs wouldn't be enough. That was because they assumed that the low-hanging fruit had already been picked. Actually, there have been other gamblers that bought football clubs. The most well-known of them is Tony Bloom, who runs a massive betting syndicate, and also a team that continually makes surprising player transactions. When Bloom took over Brighton in 2009, they were playing in League One. Then in 2011, they gained promotion to the next level up called the Championship League, and then they got promoted again in 2017. So they've been playing in the Premier League ever since, where they've finished as high as sixth.
SPEAKER_01:A lot of it was like, let's really key in on data and analytics, but like we also understood like Tony Bloom and then Matthew uh Benham at Brentford, Tony Bloom's at Brighton. They both kind of did it around the same time. It took about 15 to 20 years to take a team from League Two to the Premier League for each of them. They had already done it and money ball had already happened. And like the market gets more efficient over time in like every industry, right? So we knew we couldn't just like moneyball our way up, which was part of the thesis where we're gonna have more money than all of our competitors were going up against. Just we'll have an outsized advantage because then if we spend just somewhat efficiently, which the more, John, the more we got there, we realized how soft like league two and even some of League One and like the National Leagues below the EFL and all the tiers are like incredibly like we actually maybe should have just gotten more Tony Bloom, Matthew Benham, like we realized right out of the gate because they just said, oh, trust the soccer experts or football experts. Like we were very careful early when there's like a ton of mistakes being made at these levels all the time, and it is a soft game to beat in theory. And then you need some positive variants just because the sport, football, and how much a goal is worth, and you play so few games per season. Like it's a really high variance game to begin with. Um but yeah, so that was part of it. It was like, let's focus in that way. But we also understood like we're never gonna be as good as them. They were also like full-time betting football internationally years and years prior to that. They were familiar with the sport. Evan and I didn't know anything about football, truthfully. We were but we knew a lot about like databases, analytics, stats, you know, probabilities and assessing uh edges and um game theory, expected value, all that stuff.
SPEAKER_00:Preston says that the group looked at a number of possibilities for teams to acquire, but there were two serious contenders.
SPEAKER_01:And we had agreed um as a group, although it was extremely close, like it really was almost split. Bradford had like 15,000 season ticket holders, huge stadium. They used to be a Premier League club. Um but it's in Bradford, really low-income area, not near London. Crawleytown, and and and also the price to get the club was like 2x the price of Crawleytown. Crawleytown had the geo geographical location. Didn't for us, it was like, well, our whole bet is international fans and monetizing those. We don't really care about 15,000 season ticket holders as much as three if our bet is right. And um sorry, Crawley Town didn't even have 3,000 season ticket holders. We we got a lot closer to that, so that's why I said three um over the three years, we we we got that number quite a bit higher. Uh so anyway, that was like part of our assessment was that, but we ultimately decided like let's do Bradford just because it has a lot more of the foundational, like typical football stuff. Um and we thought we were getting a pretty good deal on it, and it didn't lose that much per year, so the baked-in operational costs were lower. Uh ultimately it leaked. Fans started freaking out. If like we've learned anything the last few years, John, it's that English football fans are passionate. I tell people in America that don't understand it, it's like high school football in Texas, Friday night light style times 10. Like they work so they can eat, sleep, and support their club. And like that, and so when they found out some crypto bros were buying their club, they threw a fit and the owner was like, I don't want to leave my legacy with these guys that like might blow this thing up that my fans or my people already hate. He pulled out of the deal, which left us with Crawley Town, which actually extended that amount of time that it took us to eventually acquire a club.
SPEAKER_00:To give you a sense of timing, the cat was out of the bag on the effort to buy Bradford City in December of 2021. That's when the Washington Post ran their story. Then this group was announced as the owner of Carlytown in April of 2022. Keep in mind that during this time, the NFT market was peaking and then softening. By April, the volume for Crypto Punks was off about 90% from where it had been the previous fall. And to be clear, this investment was not reliant on crypto punks. I'm just using the example to give you a sense as to market sentiment.
SPEAKER_01:I think it was nearly six months and it went pretty quickly. I think in general, it would take longer for most people. We were in a rush because we wanted to hit and knew we needed to hit this NFT boom. And if we hit that window uh at the right time, then it could be extremely um financially beneficial for the club. Uh so we did visits in and out. There's like there's a ton of like lawyer stuff and contracts and diligence, and you're trying to do it. And we were about as fast as we could. There was one main hiccup where we, out of all of the clubs we looked at, which I think we looked at nine in the end, and like narrowed it down to like four League Two clubs. And then from there, there were two that were like out, like outsized, like it's nearly a 50-50 call with our group. Um and again, we raised the money pretty quickly, and I was like, let's give ourselves a few years' runway and then like try to do this this thesis.
SPEAKER_00:This episode is titled Expected Goals, which is a reference to both the unit of measurement for soccer analytics, as well as my small attempt at ironic foreshadowing, since things did not go as expected for Preston and his investors. After they took over the club, they were hit by an immediate scandal when the manager at that time was accused of racism. And this was not just like a, hey, this dude seems older, so we'll just assume he's probably more on the racist side and move on, kind of problem we might have in the US. It required an investigation by the Football Association and the club and the players association. The end result was that this former manager got a three-year ban from the sport. Then that cloud compounded another problem because it further pushed back the NFT drop, which was the big and only idea for being able to spend a lot on players. Preston says that when they did eventually release the NFT, it raised about$3 million. On one hand, that's pretty impressive, considering that no one had ever heard of this tiny English football club. On the other hand, it just wasn't enough. Definitely not enough for the long-term vision, and really not even enough for the short term. So just imagine that your entire business plan is in doubt and you have to go find a new manager for your club.
SPEAKER_01:You know, we were at least thought we were talking to the right people and trying to find people that could help us make optimal decisions. And so, for example, Lake, we utilized um some people that were um connected in the UK to make our first managerial hire, like who's gonna be our head coach? And we took a really high variance bet that I actually I don't even regret. I don't even think it was wrong. Um, and I'll give some context to people. Uh his name was Kevin Betsy. People can Google this stuff. I mean, it's public. Uh, and I'm not like I'm throwing him under the bus, like he did his best job. But he was an Arsenal under 21's academy coach. What we wanted to do, we didn't want to play like League Two, typical League One, League Two football, where they just like smash it long and boot it long back and forth, and it's an ugly physical game. Like if we're gonna have thousands of people watching on stream internationally, uh, we want to play beautiful football. It's built out of the back, kind of like Arsenal, or you'll see Man City or other top-tier clubs do Spain back in the day. And Betsy and Arsenal, like one of the best at it. But he had no experience coaching at EFL level. So for us, it was like, can we get an experienced EFL guy where our ceilings capped? Because like the best coaches in the world had to start somewhere and got their first shot at League Two or League One coaching like somewhere. I was fine embracing the variance of someone who hadn't coached at that level before and played a style that we had hoped for. What we've learned across like every coach we've ever talked with, or like they say all the things you want to hear in an interview, and they say they love data, and they're like, and then like they're just like not even close to in practice on on where they should they should be. And ultimately he was the wrong choice, but like we did think we did a lot of good process in trying to select him.
SPEAKER_00:At this point, the group was on a brutal run. It wasn't just that Preston and Evan were getting their bearings learning a new sport. They also weren't sure who they could trust to help make decisions. Eventually, they just realized that no one was coming to save them, and the only thing they could do was try to turn lemons into lemonade.
SPEAKER_01:I was more of the front facing, I was there on the ground, public, doing the media, doing interviews in the offices, talking to the fans, doing the forums. Um, in that first season, which we were struggling. We didn't, we weren't as good as people were hoping or expecting. The hype was crazy that summer before when we had bought the club. Um and the sticks to go from out of the EFL League Two, which is like the last level of the English football league as all down to the national leagues, is pretty bad. And for a club like Crowley that's small, it's really tough to get back up or ever get back up. And they had only been in the league for like 12 years, anyways, prior the prior 123-year history. There weren't even an EFL team. Um, and so the pressure was like it was pretty crazy. And like there was a lot uh that I was trying to deal with that was not football or analytically driven. And it was about halfway through the first season when we were told to trust soccer experts and uh, you know, football experts from America versus the UK versus the culmination. Like, these are the people like that's what we did the first season, and they weren't good enough. And so Evan's like, look, I'm just gonna like take this on our own. And like we made a pact. We're just gonna do it ourselves. We're gonna find a data scientist that we can build a model that makes sense. And he did a lot of research and identified someone that we thought we could build around this concept and this um model and theory. And uh, without him, I don't know if I would have had the time to figure out the learning curve because I was dealing with so much like off the pitch or off the court. Um and so he was able to really focus on that kind of that second half of the season of our first year. And we were battling relegation and we ended up staying up. And then that summer I was like, all right, we know how to do things, we're gonna stick to what this model says. Pretty much 98, 99%. Our manager at the time knew that's how we were gonna do things. And he also was, I'm like a softy, I'm like a pretty vulnerable, like emotional person when it comes to like social interactions. I actually like hate being in groups of people and like gives me anxiety. And like he is like negotiator, like this is how it has very blunt personality. So like it worked as a pretty good combo. Um, but without him, like there's no way I can solve that learning curve and put the time needed to get to the point where we were with a model that was 100% like evidentially good uh at that f level and levels around it. Um so credit to Ebon. And um going into it, we were like, look, we're gonna be doing like NFT stuff. We have to be in Discord and worry about what the community's saying, and we gotta do this. Like we were thinking more big picture, uh, and that's what Ebon was. Handling originally. And then when we got to the point where one, the club was struggling, but two, we realized the thesis of the NFT part was just not going to happen. It had been a few months like the window was over. Like we got to do this the old-fashioned way. And that's when Evan really tackled, like, all right, this is how we'll get it uh set up, and next year we'll be good to go.
SPEAKER_00:To get my bearings for this episode, I started reading some of the Crawley Town fan forums, which was helpful because it reminded me how inherent the fan issue would be to owning a sports team. On one hand, the fans are going to be kind of fickle and generally not thinking about much more than just the wins and losses, and probably carrying unhelpful biases that they have built up from a lifetime of watching the sport. But these are also the people that take time out of their lives and they buy the gear and they go to the matches and they do all of that in spite of the pain and disappointment they've endured over years. In other words, the exact same thing that would make them annoying would also make them passionate customers that any business would kill for.
SPEAKER_01:I think GTO would be just ignore the fans, lie to them, say what they want to hear, and like focus on the football, which like in some ways we probably went into it trying to maybe make the priority. Um, but we never wanted them to feel like this wasn't their club because it's always been their club. We didn't want them to think NFT holders were suddenly coming in and taking over. When we did that one vote on a player signing, it was 50% NFT holders, 50% season ticket holders. Um, you know, the first thing we did when I got there is I did a fans forum. I said, what is it that you guys think this club needs? And one of the first things they said is, look, it's too expensive. Like, especially in this town, tickets are too expensive. We looked, they had the most expensive ticket in league two. We reduced ticketing by over 30% that first season. A lot of them said, look, the players need to train on grass. They're getting too many injuries, training on 3G turf. We invested in training on grass from the very first year moving forward. We put a fan zone for the fan experience, you know, and built one there. We renovated the club shop to make like we're doing all these internet got better, the payment systems, you know, it's going cashless. Like we did all these things to make it less old school and like actually appease what the fans were asking for in a lot of ways while trying to still do all the other stuff. But the biggest thing you hit on, which is the tough thing to balance, is while the fans want all those things, those don't actually put them over the edge if you don't do them. What puts them over the edge is if their team is losing and they go to the games and they see bad performances and people that like don't care or aren't trying or this and that. Like they're putting in effort as a fan, they want to see the players and the coaches and the management and ownership put in effort too. And it needs to be on the football. And the rest is really just gravy. And so where I probably underestimated and Evan included in our ownership as a whole, whereas like in theory, the fans can't really impact football. That uh we were dead wrong. Like that first season, imagine being in a relegation fight where the supporters alliance and the group, the main group that um is like the fan like the dictator, like the official fan group or a supporter uh group for this club. Um this happened the first season and as well last season, that amidst relegation battles, they were trying to vote the chairman, which is myself and Evan. The last year was myself and this guy, Ben, uh, or try to get the club to sell or an ownership to sell to something like that. Like the atmosphere that is created by some of these fans, they're like, it's so bad here, we need the leaders out.
SPEAKER_00:I will just point out that if you're sitting there thinking, who cares? You could just grow thicker skin. It's not that simple. When Preston's group took over, they told the fans that if the club didn't get promoted in the first two years, the fans could vote them out as chairman. So the fans had been handed a loaded revolver with the promise that they might one day get to pull the trigger. Then the other thing is that the players feel the fan energy when it's positive and definitely when it's negative.
SPEAKER_01:What player wants to go sign and play for that? Like it was really hard in both of those windows to actually recruit. Now there's some guys that don't have a chance that they're thinking career-based long-term. I'm just gonna go, I'm gonna try my best. But there are a lot of agents that told us, like, hey, look, the atmosphere is kind of crazy. My guy's fine in League Two. He doesn't need to go play League One minutes. Like we'll work it out later down the road. Appreciate it. No, you know, but thanks. Like, and we're like, we ended up getting, I think we needed help defensively. Uh, and I know the first four, we had a list of like our top five center backs to bring in to help defensively. We ended up getting our fifth one. You know, we end up missing by a point. Like maybe if we were able to get the second or third one, we stay up. Like those margins, like that atmosphere and like toxicity, and like it's kind of happening again now as the transfer window's coming and they're all struggling again, and the fans are, you know, obviously uh upset about how things are going. I I also don't blame them. Like you said, you have to be empathetic. It's like, yeah, we're terrible. We're shit, as they would say. Like, what am I like? But I'm trying my best. I know that we are, and I'm gonna try my best. But like it's it's a really it's an impossible one to actually manage. That's why I started just like having like mental breakdowns, probably. But um, the truth is at the end of the day, if you can just get football right, like the fans are great and they're gonna appreciate you. And even if you're just like average, like that goes a long way. Just don't be bottom, you know, four to five on the table and where you know the state of like three of the last four seasons for this club at different levels has just been super roller coaster.
SPEAKER_00:So the first year involved, let's see, a failed attempt to buy Bradford City, uh, racism scandal, NFT markets disappearing, cycling through multiple managers. And then they ended up avoiding relegation to the lower league by one place in the standings. That sounds bad. I mean, it is bad. But in the second year, some things started to work. Carlytown started to play the roster like a hand of Jinrame. They discarded some players, kept the ones they liked, and signed others.
SPEAKER_01:People always wondered, oh, why are you bringing in 17 new players? We need continuity and synergy and like all like the BS, it doesn't actually really matter. And we're like, we could like 16 of the 17 were like, the model says they're good and we're getting them for this price. We have to do it. Like, and we'll get off this guy, and we'll get off this guy. And so, and then the same thing happened. We had we got promoted, and everyone was wondering why we were shuffling guys in and out. Some of them we wanted to stay and just couldn't afford them anymore because they overperformed their contract because we got them so cheap. That's just part of the business. And then some of it was we can do this all again, but at a higher level and get better in. Like we promise. And if you like look at the personnel of like our promotion squad and like the team we had at the end of last year in League One, where they got the levels those guys are playing versus the promotion level, like it's not even close. Like the team definitely got better over each window. Whereas the fans saw that as like, they're crazy. What are they gonna do? There's not gonna be synergy. Well, guess what? We got promoted on a team that had 17 new players. There was no synergy, and we got promoted. So, like, what are we talking about?
SPEAKER_00:This clip is from the match that Carly Tunn played at Wembley Stadium to cap the 2023-24 season. In that year, they finished seventh place in League Two, which put them in a playoff for the final promotion spot to League One. They won the first run of the playoff by a score of eight to one. And then they also won on this day at Wembley. It was a magical turnaround from the previous season. You might say it was the kind of run that sports movies are made of. Okay, and when I see the video from this day, it's very difficult not to be affected by it, because these squads usually play in front of 5,000 people or 10,000 people, but there were 33,000 in Wembley, and they are going crazy. I found this clip on YouTube, and in the comments below, someone says that it was one of the best days of their entire life. I think it is the impossible to fake sincerity of the thing that gets me like loading up on a train and making a pilgrimage to watch this team with thousands of other people from your town. Okay, and this win was a big deal for Preston and the investors as well. Because even if you sit down at a game and you realize you don't really have the bankroll you will need, you still want to know that you can play.
SPEAKER_01:I think we underestimated how soft it is and how many mistakes so many clubs and management offices are making. So much so that I would tell you that if you actually, even if you didn't do a good job or like 51st percentile or a better job at like your actual spending on like player recruiting, but you just avoided all the mistakes, you like just inherently by nature would have a chance to like, it's such a high variant sport anyway, be pretty good and like give yourself a chance.
SPEAKER_00:This all sounds really fun to me and also really awful. I mean, I would love the process of going through the rosters of other teams and trying to find diamonds in the rough, but I also know that to find real value, you're often going to look absolutely insane, right? If everyone agrees that your sleeper pick is awesome, then it ceases to be a sleeper pick. Well, when the contrarian moves just don't work out, as happens, I'm not sure I could deal with the public blowback. Also, good luck convincing me that the idiotic moves I did make were truly dumb. I mean, there's no way. So I would either end up crawling under my bed, never to return, or I would go full-blown super villain.
SPEAKER_01:That same January transfer window, there were three old players that we decided on limited data because we weren't even like fully in it yet. They're too old and they're not good enough. And the fans were like, How in the world are we playing younger guys over these old guys with experience? We need to battle relegation. We need to stay up, and you guys aren't playing these players. I'll leave their names out. Two of those three the following season had to sign with teams, the league below, which the market's the market. Like that alone, we were probably right. And that team got relegated to the tier below that. So like we were making process-oriented decisions that were gonna be, you know, evidence-based that were like gonna probably be right more often than not. But like I couldn't convince the fans that their favorite players weren't good anymore. Like it just is an impossibility. And I had so much like emotional, like mental torture from that that like I eventually had to learn how to cope with just to the stress level when I was like alone better. And oh, here's the plays, you guys handle it. You guys go get down and we'll you know swap whoever owes who in a week or two. Like it's just such a different uh atmosphere.
SPEAKER_00:Having a variant opinion worked well at first, but these guys also fell victim to the success they were having, which is you know, that's how markets evolve.
SPEAKER_01:That first summer when we were doing our model on the summer before we got promoted, we were getting anyone we wanted because like, oh, Carlytown, they're idiots. They almost got relegated last year. Then we got promoted that following summer before League One, it was, oh, Curlytown's calling. Suddenly, this guy we have, oh, he they must be pretty good. And like, oh, we love them. Like, like no one was willing to sell to us. So then, like, so how do you find your advantage.
SPEAKER_00:I want to be careful to frame what I see as the problem in the correct way. Okay, Preston and Evan had pretty much just done a crash course in English football. It's not the case that all of their decisions could have been the right ones. That's just not possible. So what follows is not me saying, oh, everything these guys were doing was right, you know, any fan or football person who might have objected was just being obtuse. The problem as I see it is that even if you're, let's say you're making the right call 55% of the time, you know, that would be pretty good in any kind of competitive game. Okay, if you're right 55% of the time, it would be nothing to go 0-3 or 1 for 6 sometimes. As in, you will have stretches where it looks like you're almost always wrong. And when you do that, it will be very difficult to explain things to people who are not aligned with your paradigm. I mean, it might not even be that easy for people who are aligned to agree that any given decision was correct. Doubt is just a natural reaction. Considering that a football club is an organization made up of humans, and these people are all supposed to be going in the same direction, this corrosive effect of variance is going to be very hard to overcome. This problem is obviously not unique to a sports club. The fund managers we have on this show deal with the exact same thing. They make the investments that they think are the right ones. Their investors claim to be aligned, and then the fund goes through a downswing, at which time the investors start sending in redemption requests. In fact, some fund managers eventually pack it in for this reason. After they've been managing money for long enough, they've gone through all of the cycles they can handle of trying to convince others that their bets are right, and so they send the investor money back and become a family office. All of our guests derive their living from the fact that it is difficult to separate observed outcomes from expected outcomes. The source of edge is being able to look at the chaos and see the hidden pattern. But this also creates a dynamic that makes implementing these strategies across organizations very, very difficult. The human communication layer is just as hard as the puzzle solving layer.
SPEAKER_01:Like if you're a lone better and you're trying to explain to people and convince people like observed outcomes versus expected. If you're a lone gambler, you're like, I have an edge, I'm gonna do this. Oh, I went two and nine on a college football Saturday. I know that those are probably good bets. I don't need to con I don't need to convince anyone else that those were good bets. When you own a team, it's all of the fans and they're really, really passionate, as I learned right away. The emotional stakes are at a level that I completely and utterly underestimated. You have all of your investors. We had the NFT holders, we had our own family and friends that were a part of it, or just like me having to travel back and forth. Like all of this stuff, and I'm trying, we're sitting there and we're not as good. And like, why did you hire a same example? Why did you hire Kevin Betts? He has no EFL experience. Well, and I break down why I thought it was a worthwhile bet and why we wanted to play football a certain way, and why we think he can be good, and it ends up being wrong. And then you're trying in and then in January we decided a first transfer window mid-season. This is the one where everyone's starting to freak out because we weren't performing well. Uh, we sold the best player, and I doing air quotes uh on the video between us, but like it was a striker that had been there for a few years, but was definitely like almost certainly like peak prime age for a striker, and we were selling the top, and we were no one else was going to pay us 150,000 pounds for this guy. And if we do it now, combined with we have another striker that we had invested in that we thought could be very good and be impactful, but he hadn't been performing well because they were both on the shorter side. And let's spend that to actually, you know, get more out of the other striker while um solidifying other positions. Or what we eventually did was actually used it to hire a whole new coaching staff that we had to poach from another club. So like that stuff, it was driving me crazy. And like I was like, I I mentioned on the Jeff and and Rufus's pod that like I started seeing a therapist for the first time. I was like, how do I cope with this? Like I'm letting all these people down, and like, but it was because I couldn't get people on my side and it seemed so clear to me. And because it's the opposite of you're loan better, and you don't need to convince anyone. It was you have all thousands of media. That was another one. I was doing interviews like the athletic and the local stuff. Like I'm trying to convince everyone, and like no one thinks we're right. And then that's why it I mean, fast-forwarding a little bit, but I just wanted to say it made that second season and actually getting promoted when we, and I didn't even say this yet, came out and said our goal was to get promoted in our first two seasons. So to actually do it, definitely some, you know, um validation.
SPEAKER_00:There's a phrase that I like, which is if this is where you want it to be, then you've done everything perfectly. I just think it's very effective at crystallizing things so that you know whether you should keep pursuing the same strategy or whether you should make an aggressive change. I think part of what Carlytown was doing would make sense using that framework. It's like if bouncing around League Two standings and maybe risking relegation every few years, if that's where you want to be, then you would just keep doing everything the same way. But if that's not where you want to be, then of course you would need to change your tactics. And data was supposed to be part of that change. The only problem was that Ebon's job was to deliver the data to Carlytown's manager, and the manager wasn't thrilled about this structure.
SPEAKER_01:But like after the fact, when like he was no longer working with Ebon and Ebon had stepped away himself, like he just said, like, I hated being being babysat. Like that was the way he viewed it. He's like, I'm I'm I've been in football for 50 something years. How do I know this? Like, I don't want to be babysat by some guy in LA that didn't follow the sport until a couple years ago. But like all Evan's doing is just relaying what data says. It's like literally the most like evidential thing we have. It's not like Evan's smart or I'm smart. It's literally just being able to, you know, do what you can with the information you have and trying to maximize your chances. And to us, it was like, look, if one or two percent of the things we tell Scott every week ends up being helpful, it's all worth it because that's one or two percent we have over someone else or versus this opponent this day or this or that. Um and so I have a lot of sympathy because I, you know, it's happened with the next manager. We, you know, after we got promoted, the manager at the time who's back now, but he actually got scooped by a club that was paying him twice as much money, and now he's back because he didn't do a very good job there, and they ended up firing him. But like the next manager that came in, it was similar. It's like they say their data this high, and then when you really try to like talk things through in practice and you want to be on them because you want to make sure you're seeing this too, right? Like they hate it. Like they don't want to be uh managed, micromanaged.
SPEAKER_00:I asked Preston about the fact that there was a permanence to this Crawley Town investment that he may not have experienced before. A sports better's rhythm is very episodic. You make a bet, it settles, and then you can decide whether to keep making bets. But these guys had taken money from investors who expected them to be good stewards of that money.
SPEAKER_01:It is tough, I would say, mid-season for people that don't know. These seasons are basically 46 of the 52 weeks. You get your six weeks off and you have preseason and friendlies, and the season's super long. You play 46 games plus some like FA Cup EFL trophy tournaments on the side. Like it's really lengthy. So there is no break. And those six weeks when all the players are off taking their vacations or holidays, you're trying to do all the work to recruit for the summer. It's like the transfer window. So it's even more um hard on management in some ways. So, like, yeah, there's no Yeah. So we got promoted. I actually stepped down. It was like pretty mentally draining, and I thought, look, I also was like, I should probably go like start making money again in my life instead of losing money on this. Like it was just like, okay, let's so uh I did, and it became pretty evident quickly that our ownership group was like not gonna have it. That's like a British saying, like, we're not gonna have it. Uh they're like, if we're gonna put money in and to like try to stay up in League One now, like it Preston, you gotta be doing this. And so uh ultimately I I returned pretty quickly. I always have never known the right answer, like a poker down swing, like you're losing for like two months straight, and you're like pretty sure you're a winning poker player at whatever 5'10 to limit stakes. Like, what are you supposed to do? Like, some people love to go take a few days off and like just reset and like you know, refresh mentally and then go play again. Some people would say, like, you have an edge, why are you giving up like three or four or five days a week of playing? Betting, same thing. I could take a Saturday off if I wanted. Also, there's only like 15 or 16 college football Saturdays in a whole season. Do I really want to give one up? Um, and I didn't ever know what the right answer is because I think there are some like qualitative attributes to like the psychology of just being a gambler and making sure you're like at like peak performance, um, which I would say random thought I didn't think of earlier as far as a background being LDS. You know, I'm not getting drunk and firing a bunch on the Hawaii game Saturday night because like you know, that's just what you do because it's like I don't know. That's probably helped as far as at least keeping a clean um mindset.
SPEAKER_00:The death of the original thesis around NFTs meant that actually getting this club promoted to the Premier League would probably require cumulative losses in the tens of millions of pounds. So eventually they had to throw in the towel.
SPEAKER_01:I think our loss last year ended up being uh 2.3 in League One. Uh, you get about an 800,000 pound reduction in distribution of Premier League media money uh in the downfall going to league two. So I think their loss, although I think they're the the players they've sold from last year this past summer, I don't know. I'm not in the thick of it anymore. They might have pocketed that, but in theory their loss was projected to be about three to three point one million, which is that 800k difference from where it was in league one. Like no one in our group, our thesis of the NFT thing in international fan base didn't work. Like that was over. Like there just weren't enough people that wanted to take on running an English football club that loses between 2.3 and 3.1 million pounds. And that's pounds. So multiply by one and a third or whatever it is now, and like we're talking four million dollars a year. Yeah, maybe some player trading that brings you some upside, but at that level, you're never really making enough to get break even. Maybe you hit on one or two. Um, even our promotion year, I don't think I think I'm allowed to say this, but like I think we ended up bringing in from some of the moves we made that summer um about 750K. And I think 675 of it came immediately. And then there was a postponement on one of the fee payments for like the following summer for 75. Um and we redeployed that and we thought we got the team better, which we we definitely did. Uh, but it wasn't like we were making millions on player trading. And that was a team that got promotion playing beautiful style football in League Two to League One, and it's not like the like they're just not worth that much. Unless you find some 18-year-old from like a different country that suddenly hits, and then like you'll have a Premier League club that wants to spend a few million, and that does happen, but it's rare. Um so anyway, that's kind of like the gist of it. And like from an ownership standpoint, look, they rode the roller coaster with us originally. A lot of people are like, you guys are doing it wrong. We need new people in charge. Oh, they did figure out the full, this is great. They all got to go to Wembley, this is amazing. Oh, now they need more money because we're doing League One, and like everyone, this is terrible. Why do we do this? Like it was it's just part of really any investment in any type of startup, I as my guess for as far as an ownership perspective, except they did have some bright spots as far as like a Wembley and a promotion and uh those types of things.
SPEAKER_00:In 2025, a new group took over ownership of Carlytown. At first, Preston stayed on to help with some of the analysis, but then it became apparent that his ideas were falling on deaf ears, and so he left again. Although and this is the real kicker. Preston has actually started to write up his thoughts on team moves, and he publishes them in Google Docs. So this guy who did not care at all for English football and four years ago could not have picked out Crawley on a map, and had tried to quietly exit the club one time before, and he has a chance to just wash his hands of the whole thing, but he can't leave it alone.
SPEAKER_01:Like, I just feel bad for some of these fans. The reason I started doing it originated a couple weeks ago. They had a really bad loss, they've been mounting up, and a lot of the fans, I had a few that started actually reaching out to me directly and be like, what are your thoughts on the squad and what's happening? And I would just try to share what I could. Then I started seeing comments on Twitter, and like when you're losing a lot, people the first instinct is either one of two things. One, January's coming up, we need to sign a bunch of players. I hope the owners have deep pockets. Or two, the manager needs to go, we need a change, there needs to be a shift, like something that just they're hoping and grasping for something that's gonna improve what they're seeing, right? Expected results versus observed, another classic example in some ways.
SPEAKER_00:If you've ever spent time around the kinds of people we have on this show, the fact that Preston can't just move on and forget about the football should not be surprising. Because upon taking a loss, our guests immediately start thinking about how much of the result was their bad call and how much was variance, and what should they do differently next time? And what if they made better decisions and also ran better? It's that basic loop that underlies everything we talk about.
SPEAKER_01:There are other clubs that don't lose like 2.3 to 3 million a year that maybe only lose one just because of either their location or whatever it may be, that then through player trading, you actually could probably get close to break-even per year, which is really interesting because then it's just asset appreciation. And if you're winning, then your asset goes up too because of that. Like that that so there's there's possibilities there. Are those ones for sale? Where um, you know, we've been kind of like looking into things in the background. Part of the reason I gave the whole context of why I started posting that stuff is mostly like fan interaction. And I just needed somewhere where I could actually lay it out concretely. Um, but like I'm also like, I haven't been doing it for a few months, like a little bit bored, a little bit crazy, but a little bit like want to make sure I can still like assess and analyze the data in like a logical way. And also like, hey, look, if there's like other teams that want like something to look at or at least see how we approached things and how I would approach things in this type of situation, it's out there for people to read if they want. And maybe it um gives me an opportunity to work with the club again someday that isn't um on the ownership side. So it's like a mix of those things for me there.
SPEAKER_00:Preston says that he has friends and family that lost money because of this failed experiment. And you can hear that he has really had to learn to deal with the emotions. But when I asked him if he ever thinks about how he would distill a lesson from the things he's done, the first thing he said was, if you have an edge, be sure to bet a lot.
SPEAKER_01:This isn't what I would tell people, but it gave me the thought because I don't want to tell people to bet bigger because I don't know if they have edges or not. And you know, it's hard to know. Back then, like if you had an edge, you probably did and it was working, and I should have just bet a lot bigger. Um, but a lot of people aren't afforded that cost. You're a single guy in your 20s and you don't have a second income. Like, what are you gonna do if you take some shots and fail? So uh it's really tough, but um, that kind of allowed me to get to where I am.
SPEAKER_00:Risk of Ruin is written and produced by me. Special thanks to Preston Johnson for doing this episode. I'll put a link in the show notes so you can follow him on Twitter. If you want to get in touch with the show, you can email us riskofruinpod at gmail.com. You can also follow us on Twitter at FKL, you can see that we're gonna be able to get the first time.