The Age of Deflation

What can investors learn from “Deflategate”?

Gillette Stadium. Photo: Bernard Gagnon. Source: Wikipedia

Amid the investigation and charges and penalties and appeals associated with last year’s New England Patriots’ football air-pressure controversy, there are some lessons investors can learn. After all, sports are a microcosm of life. When we compete on the field, we strive to do our best physically, mentally, and emotionally. We have to cooperate with others in a highly stylized environment. The rough-and-tumble of football can help us understand some of the rough-and-tumble of the markets.

Without passing judgement on this controversy, Tom Brady, the Patriots’ organization, or investigator Ted Wells, here are some passing thoughts:

First, reputations are fragile. For many people now, Tom Brady won’t be remembered as one of the greatest quarterbacks ever, but as a cheater who pushed the limits and rules to his own advantage—and got caught. Warren Buffett has said, it takes 20 years to build a reputation and only five minutes to destroy it. Between Deflategate and the prior controversy of videotaped game signals, the whole organization has been tainted. Brady’s significant accomplishments may now have an asterisk next to them.

Second, rules matter. Without rules, there is no game. Even minor rules and violations are important since breaking them can undermine the contest itself. That may be why the proposed penalty seems so harsh. Ray Rice only got a two-game suspension for beating his wife, and Brady misses four games for being “generally aware” of Deflategate? But the NFL has worry the integrity of the game. That’s its job. That’s why it’s making an example of Brady and the team.

Finally, friends and associates matter. Brady was surrounded by admiring equipment managers who bragged to one another about getting the footballs in proper condition for the game. One of them even called himself “The Deflator.” Brady encouraged these folks by giving them signed game jerseys and other paraphernalia. But bad company can corrupt good morals. We often perform to the norms and expectations of our closest compatriots.

Some think the whole thing is silly, that there are more important things to worry about—in football and in life. But integrity, rules, and reputation are critical, especially if we want to avoid having an “asterisk” next to our names.

Shoeless Joe Jackson was one of the greatest baseball players ever, but his reputation was ruined when he was implicated in the Black Sox Scandal. Like the little kid who saw him after testifying, I want to say, “It ain’t true, is it?” But sometimes, it is.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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