By Thomas Boswell
Thursday, January 22, 2009
Performance-enhancing drugs, especially in baseball, and performance-enhancing leverage on Wall Street may be akin under the skin.
I don't insist that the parallel holds. But I certainly suspect it. Trends in society, good and bad, seldom appear in just one place. Sport is sometimes an area that tips us off to what's coming. Perhaps something as large as a financial crisis shows itself in countless arenas and we each recognize some aspect of it in the places we understand best.
For me at least, it seems clear that baseball hit several of the same sad landmarks as the financial world, though baseball arrived at each juncture a few years earlier. At the risk of an iota of optimism, the national pastime seems to have passed the nadir of its crisis of public trust within the last year. If only banks could mend as fast.
Before the bosses of finance, already rich beyond imagination, took on too much risk and debt, baseball had broken fresh ground on greed, lax rules, indifference to risk and an anything-goes-if-it-makes- a-buck ethos. Yet it took the game a decade to slide into a sorry state. Rot is slow.
Starting in the late '80s, steroids made their way into the sport. But they were adopted slowly. Players, sensibly, viewed the drugs as risky, mysterious, not fully tested. By 1991, steroids were also specifically against baseball's rules. So, if you cared about your health, your ethics or the implications of getting caught, you had ample reason to look at "juiced" players and say, "Not for me."
The strike of '94 changed that. When the game came back in '95 after a canceled World Series, a sense of crisis was everywhere. Baseball's hierarchy, in management and the union, made no pretense that they cared what players did to jack up their performance. The game's popularity had to be saved. Nobody cared how. The ad slogan "Chicks love the long ball" sent a message.
A culture, whether in sport or business, changes a click at a time, not all at once. By '98, when Mark McGwire and Sammy Sosa finished their pursuit and demolition of Roger Maris's record 61 home runs, the shift in mores was in full swing. If you weren't using "whatever it takes," then you were at a competitive disadvantage. To be the greatest in the game, always the furious driving force behind seven-time MVP Barry Bonds and seven-time Cy Young Award winner Roger Clemens, wasn't the choice clear?
At that point, with the whole sport in a tacit agreement to remain silent (and set a new attendance record almost every year), who was going to blow the whistle? Nobody. The excessive behavior had to run its course until some unpredicted event -- like the FBI busting a drug lab in San Francisco -- sent the secrets and sins spewing out.
Only then could the long process of blame and recrimination, congressional outrage and public disgust, begin to take shape. Finally, attempts at reform, and a new attitude within the sport toward the problem, could emerge.
Now, even a president has said, "Wall Street got drunk and we got the hangover." But the process of inebriation took a long time, just like baseball's spiral into widespread steroid use. Many of the new "financial products" -- which could be used to gamble more -- arrived in the '90s.
But just as ballplayers were initially reluctant to try something as little known and dangerous as steroids, financial markets stuck one toe at a time into derivatives. Who knew that new concoctions, all too familiar now, like CDOs and credit default swaps, were on some math whiz's mind. Just as, perhaps, the "clear" and the "cream" were still just a Balco chemist's fantasy?
Steroids and human growth hormone never really took over baseball until an industry-wide trauma -- including a canceled World Series -- helped create an anything-goes ethos. The financial arena may have had a similar watershed crisis -- the popping of the Internet stock bubble.
After that devastation, the markets faced a problem like baseball's: How do we bring back the customers, juice the business? In that environment, derivatives and various types of leveraged strategies were big money makers. Who would blow the whistle on excessive risk? Some did. Not many.
Neither Commissioner Bud Selig nor union boss Don Fehr had motive to get tough on performance-enhancing drugs after the strike. And few at financial institutions, in Congress or at weak regulatory bodies, had compelling reason to speak out against such a wonderful party. Tape-measure home runs? Big profits? What could be bad?
At this point, let's note that (among plenty of dissimilarities), the new financial instruments that have exacerbated so many problems were legal. The way they were used may have been incredibly irresponsible and greedy. But the tools being used were not against the law.
Perhaps the most undeniable parallel between masters of the universe and elite athletes is that they are hyper-competitive to their core. That can lead to bad judgment as quickly as almost any trait. If players on another team suddenly arrive in spring training 20 pounds bigger, other teams see it. And the pressure to keep up is enormous. If Lehman Brothers came up with a complex new SIV that made $100 million, how likely is it that Bear Stearns would've said, "No, that's too risky." Actually, we know the answer; they're both defunct.
The lure of more muscle to an athlete, even when he's already a lock for the Hall of Fame, is not so different from the lure of a bigger bonus to an investment banker who already has more houses than he can live in.
In baseball's worst days, when Bonds was booed as he chased Hank Aaron's record, fans agreed that the game might lose the public's confidence. How could we ever again know who was cheating? How could modern records be considered authentic? Would the Hall of Fame be more of a mockery with McGwire or Rafael Palmeiro in it or out of it?
When it comes to sports, the public wants to believe. An almost childlike benefit of the doubt is provided to our games and those who play them. Given time and the least excuse, fans go back to old habits and affections with almost alarming speed. So as soon as a pretext was found to give baseball a fresh start ("better drug testing!"), that new confidence started to appear almost immediately.
How simple, almost innocent and costless, it seems to watch baseball begin to heal and return to our good graces. If only the parallels could continue. But fixing half the banks on earth may take a bit more time. Oh, and money.