Jurgen Klopp and van Dijk: Football and Kirznerian Entrepreneurship

Yesterday, Sport Bible published the article by Josh Floss about the reaction of a Paolo Maldini fan to a post on Twitter that dared to compare Liverpool’s Virgil van Dijk to his idol and suggest that the former may be just as good a defender. Here is what exactly he had to say:

Who can argue with these figures, right? How can a player who has until the second half of the last season played for a second-rate club at the age of 27 compare to someone with Maldini’s achievements by the same stage of the latter’s career? Not so fast. What this overlooks is that football players cannot achieve their full potential by themselves. They need to be made part of a good team for that and that does not happen automatically through some kind of magic.

The key difference between Maldini and van Dijk is about where they started their football careers. Maldini had from the beginning been a product of the AC Milan youth system, at a time when the club was one of the European titans, unlike today. In contrast, van Dijk’s first professional club was Groningen. Then, his second one was Celtic, which, even if it has a higher stature, competes in a second-rate league and has not progressed far in the Champions League for some time. In addition to this, perhaps, unlike a good attacker, it may be intrinsically difficult for defenders of mediocre teams to shine in the same way forwards can.

It was Liverpool’s current coach Jurgen Klopp who finally recognized the full richness of van Dijk’s talent while observing him play for Southampton. Liverpool bought van Dijk for 75 million pounds making him the most expensive defender in football history so far. And the analysis done by Dan Kennett suggests that he had a great impact from the very start. Already in the second half of the 2017–18 season, Liverpool with van Dijk conceded 1.2 goals per match compared to 1.4 under Klopp’s management before signing him. Over the first half of this season, the defensive improvement has become astonishing, although part of it is probably attributable to upgrading the post of the goalkeeper.

The fact that van Dijk’s signing coincided with a large defensive improvement so fast strongly suggests that his great talent had been there all along, it was not created by Klopp. What did Klopp do then?

What he did is one of purest possible examples of what British-born economist Israel Kirzner called pure entrepreneurship. From Kirzner’s perspective, entrepreneurship consists in finding the resources that are employed in uses that produce a certain market value and redeploying them to uses that produce a higher one, deriving profit in the process. The predominant mode of economic theorizing has trouble incorporating entrepreneurship since it is based on the assumption of knowledge of all outcomes or at least possible outcomes and their probabilities. But almost no one noticed van Dijk at Groningen and surely probably no one expected him to become the colossus that he has become.

Of course, van Dijk probably has not brought to Liverpool more than 72 million pounds, yet, but he is probably well on the way to doing just that over the course of his time at Merseyside. In fact, Klopp has already produced several far more spectacular feats in the same genre. His signings of Alex Oxlade-Chamberlain, Xherdan Shakiri, Sadio Mane, and especially Andrew Robertson and Mohammed Salah have proven to be stunning successes. One has to hope that at some point in the future, he will feature as one of the greatest Kirznerian entrepreneurs in the good economic theory and entrepreneurship textbooks.

Few commentators and fans would think that something as mundane as football transfers that only they usually care about can actually illustrate some basic economic ideas but here we are.

Discoordinative entrepreneurship is also possible

Interestingly, the theory formulated by Kirzner implies that attempts at entrepreneurship can also turn out to be discoordinative. It may happen in three ways:

1) A resource may be diverted from one use to a use producing lower value;

2) A resource may be diverted to a higher-value use but it could have been employed even better;

3) A resource may be diverted to a potentially great use but a complementary factor of production may be lacking.

Recent football history arguably contains great examples of all the three cases. First, consider Barcelona’s purchase of Philippe Coutinho for 160 million euros. As reported by Bleacher Report, this season he ended up scoring six goals and five assists in 24 games. Compare that to his output in the last full season at Liverpool: 13 goals and 7 assists in 28 appearances in the Premier League only. He has also almost lost his place in Barcelona’s starting line-up, while he was indispensable at Liverpool.

Then, there is the combined case of Mbappe and Neymar. It is not easy to say who of them could have had greater impact at some other club than PSG but so far their combined presence in the already incredibly impressive (at least in terms of names) squad has brought only dominance in the French Ligue 1 that the club had had even before their arrival.

Finally, Paul Pogba is certainly one of the most talented footballers in the world but while Mourihno was the coach at Manchester United, he was performing well below his potential because he was not being used correctly. Then, under the temporary coach Solskjaer, his transformation could not have been more complete. As The Sun documents, he has so far averaged almost 4 times more goals and assists per game than under the Portuguese. He has even produced 20 more passes per game.

What the balance between coordinative and discoordinative entrepreneurship is in the real world is not easy to say, although the fact that the world has consistently been experiencing unprecedented economic growth for the last two hundred years suggests that at least the discoordinative entrepreneurship of the first two types is relatively rare.

One could also look at the cases of poor entrepreneurship in football and see that they probably tend to come from the clubs that are the least receptive to profit signals in one way or another. PSG, for instance, is famously a club heavily subsidized by its super-rich Quatari owner, whereas Barcelona is a fan-owned club prone to the politicization of management.

But why do players’ transfers cost so much?

A lot of fans and commentators would probably ask, though, how relatively successful entrepreneurship in football is compatible with the constantly rising transfer prices. Subsidized clubs like PSG aside, a large part of the answer lies in the labor intensity and talent scarcity of football combined with the increased preparedness of people to pay more for entertainment.

Let us start with the first element of the puzzle. As long as people value sport for human achievement, it is difficult to significantly improve football productivity through adding some kind of capital to human footballers, although, surely there has been some contributions from technology. Stadiums have become better, video recording and airing of matches has improved, coaches are even starting to use drones to assist with training. But the bulk of the end product still comes from the flesh-and-bone bodies and quick-thinking brains of players.

Secondly, given how long it takes to turn a potentially talented kid into a professional footballer, and that there are not a million of academies, the talent pool available to football clubs is rather limited. Finally, with constantly growing welfare, people are prepared to pay more and more for entertainment, of which football is an important element. Combined with the player scarcity, this tends to boost salaries over time. Other types of entertainment like cinema show similar trends.

To wrap it up, football is a surprisingly fruitful sphere for illuminating fundamental economic ideas and, hopefully, promoting them to a wider audience.

Written by

PhD, economics (2018) from Aix-Marseille University, independent blockchain adoption consultant based in Aix-en-Provence, France, Email: daniilgor2004@gmail.com

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