Lessons From NFL Free Agency: Examining the Good and the Bad Business Moves

As free agents dart between the league's 32 teams, some have made smart business moves, while others have dropped the ball.

Mar 14, 2014 at 9:13AM

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The frenetic opening days of NFL free agency are upon us, and with the league fresh off its "first billion-dollar day," at least according to Peter King's math, this may be the most active offseason ever. Whether it's Dallas' decision to release DeMarcus Ware or the surprising move of one Baltimore Raven, there are plenty of business lessons to observe -- here are three of the most important.

The good

1. The hometown discount is still a valid concept.
On Wednesday, the Ravens resigned Jacoby Jones with a four-year, $12 million deal. The wideout, who played an instrumental role in the 2013 Super Bowl, was reportedly also considering the New York Giants. On an annual basis, he now makes nearly 10% less than his previous contract, and as NFL Network's Ian Rapoport reveals, Jones "turned down more money elsewhere."

Hometown discounts aren't exactly plentiful these days -- take Golden Tate's move from Seattle as a recent antithetical example -- but at least Jones clearly still believes in the concept. 

As one, now widely cited study from a '90s-era World Development Report shows, income and happiness are positively related, but exhibit diminishing marginal returns. Once income hits a certain point, quality of life tapers off, and even falls in some cases. In other words, "mo money, mo problems." In the business world -- football or not -- some employees are willing to take less money to remain in an environment they enjoy.

2. Top talent sometimes deserves a change of scenery. 
According to a Harris poll conducted last year, more than 50% of American workers want to switch careers. While NFL players can't leave football without retiring, changing teams sometimes allows them to attack that itch only a scenery change can scratch. Take DeMarcus Ware, for example.

The defensive end, whom ESPN just called a "sure-fire Hall of Famer," played nine seasons with the Dallas Cowboys before the team let him go this week. The Broncos promptly snatched him up with $20 million in guaranteed money, illustrating that sometimes the best employees deserve -- and get -- a change of scenery. After Ware declined to take a salary cut, his longtime team had no other choice. 

But it's ultimately a win for both sides. Ware can make a run at the Super Bowl in the backend of his career, and the Cowboys can use their resources to address more pressing needs.

The bad

3. Some businesses ignore experience entirely.
Steve Smith has played wide receiver for the Carolina Panthers since 2001, and in that time, he's amassed more than 12,000 yards -- 19th all-time. So when he signed a four-year, $30 million contract extension in 2012, most assumed he'd end his career there. But as unfortunate as it is, some businesses ignore experience entirely.


First image (above initial text) via Bradley P Johnson, Flickr. Second image (directly above) via Parker Anderson, Flickr.

Carolina has cut the 34-year old, not long after Smith's agent shared his thoughts with the Associated Press earlier this week. "Where we are disappointed is the fact he signed an extension to stay loyal to the club and complete his career as a Panther," he said, adding, "now we are at a crossroads where the [team doesn't] want him anymore."

As fans on social media point out, Carolina's remaining six rostered receivers had a combined zero catches last year -- they were not in a position to lose the talented wideout. And while rumors suggest he may not see eye to eye with his bosses, it's not smart to leave your leader, whether it's a quarterback or a CEO, with no experienced help.

What's next?

Looking toward the draft
In a little less than two months, a period that's arguably more important than free agency will begin: the NFL draft. Heavily hyped players like Johnny Manziel and Jadeveon Clowney will be taken in the first few picks, and after they're gone, front offices will look to prove who's done their research in the later rounds. 

Just like this week's roster moves, I expect some teams will exhibit examples all businesses can follow, while others will likely make a mistake or two.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

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The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

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KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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