Extreme Makeover: IndyCar TEAM Edition

Roger Penske sells lots of cars. He purchases popular models from the factory, marks them up, and sells them to his customers. We assume that Mr. Penske does not pay much, if anything at all, for models his customers don't want.

Regrettably, the Indy Racing League does.

If you show up and race an IRL event with an IRL car, then the league will award you tens of thousands of dollars. Got a tomato can driving your Dallara? That's not a problem. You get paid the same appearance fee as everyone else.

Unveiled in October 2007 (transcript linked in title above), the Team Enhancement Allocation Matrix (TEAM) was conceived to ensure that enough teams show up for each IndyCar race. Admirably egalitarian, IndyCar TEAM promised an appearance reward of approximately $60,000 per race for full season entries.



Roggespierre, champion of equality for all citizens, was impressed. Danton, however, argued that much of TEAM is a colossal waste of much needed cash. After careful consideration, Roggespierre agrees that TEAM is a good candidate for an Extreme Makeover.


Danton's argument is simple: teams that show up with Danica Patrick, Paul Tracy and Helio Castroneves at the wheel are worth far more to the league than those that "hire" aristocrats who have no popular appeal. Why should the IRL compensate teams of both types equally? Teams are suppliers to the league, Danton argues, and they should be compensated according to the relative market value of the goods and services they supply. This seems reasonable.



We are talking about a "nudge" of the type that behavioral economists favor. The IRL should distribute a far, far greater percentage of appearance money to teams that employ drivers that fans want to see. Increased payments to marketable driver might also begin to address the confounding problem of homegrown IndyCar stars leaving for the riches of NASCAR (sans-culottes!)



Subjective evaluation of drivers' relative popularity would invite charges of corruption, nepotism, xenophobia, and worse. Therefore, the IRL must establish an objective mathematical TEAM compensation equation and publish it for all stakeholders. It might look something like the following.



(Kindly allow Roggespierre to really MBA this one:)


Assumptions

• Each Factor is indexed 1 to 10 according to proportionate value
• TEAM appearance money is accrued on a per race basis
• Does not include bonuses for 1st through 5th place finishers at each race

Factors
for each Team (X) per event employing Driver (Y)

1. Q = Driver (Y) Q-score per 3rd party market research firm = weight 35%
   
2. E = Driver (Y) % of Most Popular Driver Votes - at races only = weight 25%
   
3. W = Driver (Y) % of Most Popular Driver Votes - online (IndyCar, Versus) = weight 10%*
   
4. P = Championship Points earned by Team (X) with Driver (Y) = weight 30%
   

*ballot stuffing is easier online

The calculation



for each race that Team (X) employs Driver (Y)

.35Q+.25E+.1W+.3R = TEAM Points



The sum for each race would then be added together to arrive at the total TEAM Points for a given IndyCar team. Appearance fees would be distributed proportionately.


Drivers might have to adjust their community outreach activities in order to convince people to attend the races. Reading The Lorax to Mrs. Goulet's kindergarten class is a commendable and benevolent activity. However, those little derrieres are unlikely to be in the stands on race day, and even if they are, their parents will have been the ones who made the purchase decision.


Some argue that the top finishers should get more prize money, that it's unfair to reward popularity. For them, we have a saying here in the Republic: Tough Tuberculosis.

This is serious business - sex and violence and rock-n-roll and (legal) price discrimination.



The IRL needs revenue, for which it needs fans, for which it needs a product that people watch on TV when they're not watching it in person. The IRL must think of itself as a retailer, much like Target Stores or Penske Auto. Those firms require that their vendors' prices correlate with customer demand. Why should the IRL be any different?



Roggespierre