David Murphy: Josh Harris' Sixers coronavirus pay-cut reversal shows power of collective actionThe Philadelphia Inquirer — By David Murphy The Philadelphia Inquirer
March 25-- PHILADELPHIA-It's a tough time to be a billionaire, so let's do the poor saps a favor and look at things from their perspective. They asked you to put up with four years of losing, and still you showed. They asked you to pay more for your tickets, and still you showed. They asked you to attend a meaningless home game in the early stages of a pandemic, and still you showed. In the world of big business, all of these decisions count as successful ones. Because, in the end, you showed.
That is what they will tell you, because that is what they believe. There are no such things as moral or immoral actions. The fundamental obligation of a corporation is to provide a receptacle for however much money the public is willing to give it. As soon as you give it, you forfeit your right to say how the company spends it. Not only that, but you also become a willing accomplice, your continued patronage an affirmation of all prior decisions. In future matters, the impact of your voice is limited to your purchasing power. There is no good. There is no bad. You weigh in with your wallet. The slope of the demand curve is the only arbiter that matters.
Within this context, there was a great deal of business sense that went into the decision that Josh Harris and David Blitzer made on Monday to cut the majority of their employees' pay by 20%. Likewise, there is a lesson for all of us in the reversal they made less than 24 hours later. By the time one transitioned into the other, I was nearly three-quarters of my way through writing this column. At first, I was not going to mention that fact, mostly because I don't know that anybody cares. Sportswriters have been scrapping fully written stories since Fred and Barney were playing dinosaur polo. Scattered throughout my home are four or five computers that together contain tens of thousands of words about events that never came to be. If published in a volume, they would make for a fascinating alternate history of the local sports scene. Phillies' loss in Game 4 gives Dodgers new life, etc.
But then I started to think about what would have happened if I'd finished my screed a couple of hours earlier, before the Sixers emailed a statement from their managing partner announcing that he'd reconsidered his decision to cut his employees' pay. I hesitate to refer to it as a call to arms because I fear that suggests that I drastically overestimate my power. But that is what it was-a reminder to the masses of the irrelevance of our ideals unless they are matched by the action necessary to affect change. When the Sixers and the NBA decided to scratch out a few more million bucks by hosting one more night of games before the coronavirus shut things down for good, the organization's defense was to more or less spread its arms before a crowd of 15,000-plus and note that not a single person had been forced into the building against their will.
To be clear: It was a specious argument. Most of the fans in the building had paid for their admission well before it was known that their attendance would require flouting the advice of public health officials. That they refused to write off their tickets as sunk costs is hardly evidence that there was demand for a game. But there is a reason we refer to economics as the dismal science, and in the artificially intelligent world in which many business people operate, every action is the result of a choice that the individual alone makes. As dubious as the organization's justification might have been, there was at least one sense in which it was correct. Multiple thousands of people could have decided not to attend the game. If they had done so, they might have made the sort of collective statement that far exceeded the value of the face price of a ticket. In the end, they decided otherwise, and the band played on.
Now, what if that statement had been made? What if the Sixers and Detroit Pistons showed up and nobody else did? In light of everything that happened henceforth-the cancellation in Oklahoma City, the quarantining of the Utah Jazz, the revelation that the Sixers had shared a court with a player who would soon test positive for COVID-19-might Harris's and Blitzer's thought process have changed? Would they still have acted so cavalierly about the optics of a couple of billionaires asking for a donation of a few million bucks from hundreds of middle-class employees who were already staring down the throat of a great recession? Would they have still acted with such brazen faith in the curve marked demand?
Maybe, maybe not. The point is that it is only through collective action, through a shared commitment to ideals, that the upper crust of a capitalistic society can be moved to change. That is what we saw happen with the reaction to the Sixers' decision to cut pay. To fully understand their estimation of their fan base, consider just how little was at stake.
The staff directory on the Sixers' website lists 345 employees beneath the ownership group. A substantial percentage of these work in basketball operations, where contract work is the norm. But let's assume, for the moment, that every single one of these men and women would be forfeiting 20% of their salary. Further, let's assume that the average salary for these 345 employees is $100,000, leaving the Sixers with a payroll of $34.5 million. The real is almost certainly lower, and dramatically so, for two reasons.
First, the total number of employees subject to the cut is much lower than 345, given the number of people who are working on contracts, and thus are protected by the terms of their deals, which are unlikely to allow for arbitrary pay decreases such as the one the Sixers are enacting (which is why their statement specified that the cuts applied only to "at-will" employees).
Second, the average salary of an at-will employee is almost certainly less than $100,000. You'll mostly have to grant me that assumption, but as someone who spent five years working in the administrative offices of a professional team, I can assure you that there are more people below that threshold than above it. In fact, it would not surprise me if the Sixers have more people below the $50,000 threshold than they do making six figures. Which, of course, would further diminish the actual payroll figure subject to the announced cuts.
But $100,000 is a nice, round number that allows for a gross sum that is easily multiplied or divided, which makes it easy for us to conceptualize the range of cost savings that the Sixers would have realized from the new policy. Our goal here is to establish an upper bound, i.e. the most money that Harris and Co. could possibly be saving. If the point in question stands even at the upper bound, then it stands for all potential totals in the range.
For instance ...
If we assume that the Sixers' at-will payroll is, at most, $35 million annually, then reducing that total by 20% would mean a savings of, at most, $7 million. According to the team, the reductions will begin on April 15 and run through June 30, for a total of 10 weeks of pay, or 20% of the year. Which would mean that the actual cost savings is 20% of $7 million, or $1.4 million.
Now, let's pause for a moment to let that number sink in.
That's roughly the amount the Sixers would pay Al Horford for four games. It's less than twice the amount that they will have paid Trey Burke not to play for them by the end of the regular season. It's roughly 1/15th of the amount that they spent this offseason on a new scoreboard.
According to the verbiage of our present time, this was to be an act of shared sacrifice. Harris and Blitzer might both be worth multiple billions of dollars, but liquidity is what matters for day-to-day business. With the Sixers no longer able to count on the multiple millions of dollars in revenue from each of eight postponed home games, the issue of cash flow is one that needed to be confronted. Each of those missing dollars is one that will no longer be in the pockets of the organization's shareholders. As stewards of a for-profit corporation, Harris and Blitzer had a responsibility to recoup as much of that loss as possible. At least, that is what they would tell you. Because that is what they believe.
Who knows what finally made them change their mind. It probably isn't a coincidence that they rescinded their edict shortly after Joel Embiid announced that he was donating $500,000 to those impacted by the coronavirus, including the organizational employees who were being asked to sacrifice their pay. Perhaps he realized the absurdity of a billionaire asking for a donation of a million or two or three while a player who is worth a fraction of a billion offers to donate the difference.
"After listening to our staff and players, it's clear that was the wrong decision," Harris said in a statement. "We have reversed it and will be paying these employees their full salaries. This is an extraordinary time in our world-unlike any most of us have ever lived through before-and ordinary business decisions are not enough to meet the moment. To our staff and fans, I apologize for getting this wrong."
Whatever the case, the lesson is one that I can only hope will resonate given the moment at hand. The people who will bear the brunt of the health and economic decisions that are currently being made are the people closest to the ground floor of the economy. They also happen to represent the vast majority of the population.
One thing we've learned over these last couple of weeks is our power as a collective. As impotent as the steps that we have taken might turn out to be, there is something powerful about the experience of walking past shuttered storefronts along vacant streets. The ethos this country instills in its citizens from an early age is one that scoffs at the power of mass, coordinated (de)mobilization. A rising tide lifts all boats, so rise or get out of the way. Dog eat dog, every man his own, survival of the financially fit. And yet, in the face of the gravest existential crisis that any of our income brackets have ever confronted, we're suddenly left with the realization that there are certain obstacles that we can only surmount if we agree to do it together.
At least, that's what they tell us, and if guys like Josh Harris and David Blitzer are not careful, a critical mass of the population is going to realize that it is they who are delivering the message. They are the ones who have the money, and thus the access, and thus the ability to control what the politicians tell us. Each individual one has the agency to determine where the relief goes, and when businesses restart, and what precautions are taken. In the meantime, brother, could you spare 20% of $75,000?
Our current moment has only begun to shine a light on the inequities that have grown like an invisible virus beneath the veneer of our first-world comfort. The more the current situation deteriorates, the more the ramifications of such unequal rationing will compress the 99% together. There is a lot of potential agency there, but it only exists in the collective. In terms of gross domestic product, the Sixers' reversal of course counts as a minuscule win. But for that midlevel worker in the ticket department, the impact is undoubtedly significant. For the rest of us, it should be a lesson in the unanimity required for action.
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