Sunday, January 05, 2014

Cup Double

With Charlton having already played Oxford at home then Huddersfield away in the opening rounds (for us) of the Capital One Cup this season, what are the ex ante chances (see Note 1) of the exact same thing happening in the FA Cup? 


Well if my maths is right, it can be estimated as follows:


- probability of Oxford reaching the Third Round: 0.25 (see Note 2)


- probability of Charlton drawing Oxford at home in the Third Round: 0.008 (see Note 3)


- probability of Huddersfield reaching the Fourth Round: 0.4 (see Note 4)


- probability of Charlton reaching the Fourth Round (having been drawn at home to Oxford): 0.73 (see Note 5)


- probability of Charlton drawing Huddersfield away in the Fourth Round: 0.016 (see Note 6)


Therefore a reasonable approximation of the probability of playing Oxford at home then Huddersfield away in the first two rounds of the FA Cup after it has already occurred in the Capital One Cup is:


0.25 x 0.008 x 0.4 x 0.73 x 0.016 = 0.00000934 or 107,065/1


To put this in perspective this is less probable than tossing a coin 16 times and getting consecutive heads, or less probable than selecting seven random cards from a shuffled pack and each card being from the same suit.


Indeed whilst the probabilities will obviously be different for any given three club combination, I wonder if it has ever happened before?



1.       ‘Ex ante’ in this context means the estimated probability before the First Round of the FA Cup (featuring Oxford) had been drawn.

2.       Given Oxford United are riding high in League Two, before the First Round draw is made (see Note 1), I estimate the probability of them winning their First and Second Round ties to be 50% respectively, and thus 50% x 50% = 25% or 0.25.

3.       There are 63 other teams in the FA Cup Third Round draw, and an equal chance of being drawn home or away to any of them ie. 1/(63 x 2) = 0.008.

4.       As a midtable Championship side, this is a simple estimate of Huddersfield’s ex ante probability of reaching the Fourth Round in any given season – given they were given a relatively straightforward tie (Grimsby away), their actual probability increased significantly but this is not relevant for the calculation which considers the position ex ante (see Note 1).

5.       Current bookmakers odds of approx 4/6 imply a 60% probability (ie. 6/10) that Charlton win the tie at the first time of asking, whilst draw odds of 14/5 imply a 26% probability (ie. 5/19) that the tie needs a replay.  If a replay is required, I estimate the odds that Charlton still win the tie from that position (possibly after penalties of course) to be 50%.  Thus the estimated probability that Charlton reach the Fourth Round is 60% + (50% x 26%) = 73% or 0.73.

6.       There are 31 other teams in the FA Cup Fourth Round draw, and an equal chance of being drawn home or away to any of them ie. 1/(31 x 2) = 0.016.

Friday, January 03, 2014

I'll Be Your Friend, Roland

"I'll be your friend, Roland." (Janet St. Clair, Grange Hill - circa 1985)

Perhaps the longest drawn out negotiation since the Louisiana Purchase in 1803 has finally been concluded.

The euphoria is such that I've been persuaded to post my own musings here for the first time in nearly a year. 

There are several reasons for my lack of blogs (many unrelated to the club), but it's fair to say that the approach of the previous owners was relevant also. 

They threatened to drain the club of its soul in much the same way as a succession of poor managerial appointments had done in the post-Curbishley era. 

However it had initially promised so much. 

As I espoused in a lengthy post in Jun 2011 ("CAFC: The Movie"), I think there was a viable and genuine plan to develop the club (which I loosely termed the 'Moneyball' approach). 

This plan was evidenced by an excellent set of summer 2011 signings (generally young, hungry and with potential resale value) combined with a continued investment in the Academy. 

I considered the appointment of Powell to be reckless but importantly it got the fans onside, a not insignificant consideration given what had come before. 

However as I wrote at the time, "We assume that the funder’s expectation is that this investment will make money at some stage and that means in real hard cash, not merely on paper.

Even a fool would surely understand that (barring a miraculous double promotion), an investment in a League One club would be loss-making on at least a 3-year view. 

Meaningful operational losses even at Championship level appear structural (for reasons admittedly I don't understand), and as perhaps they didn't fully appreciate at the time, the clubs we compete with aren't exactly standing still either. 

It's unclear whether the apparent breakdown in the relationship between owners and 'the funder' rested upon falsely presented assumptions at the outset. 

Either way with hindsight the plan was fundamentally unstable and liable to fail long before completion.

Tony Jimenez et al thus ended up akin to a homeowner with grand plans to extend and renovate a property, but with no means to finance said development amidst crippling outgoings. 

Meanwhile the garden doesn't drain properly. 

The plan thus having become untenable, a sale to what I might cynically describe as a 'greater fool' became unavoidable. 

Meanwhile the ridiculous lack of boardroom communication remained inexcusable - in a social media-driven world that seemingly can't stop talking, the owners remarkably never found their voice. 

Regardless of the challenges behind the scenes, this was illogical.

With a vicious cycle well under way (lack of investment in the squad leading to poor results), time increasingly became of the essence rather than price. 

In short they were trapped in a hole of their own making.

Mere fans like me are not privy to any implicit or explicit financial agreements that may exist between the owners and 'the funder' but today's announcement may well not signal the end of this saga for them (happily it's no longer our problem). 

We will perhaps never know if they were ultimately 'made whole again' by the transaction, but our best hope of knowing lies in the 30 June 2014 accounts, unlikely to be filed before Q1 2015. 

Likewise we will have to wait to learn about other important issues, such as the treatment of the loans to the previous directors (who despite their position as 'fans', would have been well within their rights to play hardball regarding their debt seniority). 

As for Roland Duchatelet, we frankly don't know much about him but at least the source of his wealth seems clear whilst his political activism suggests someone unafraid of communication. 

Fans will be looking for evidence of his ambition in the January window yet with relegation a clear risk, he may well pull forward future investment, lulling us into a false sense of optimism.

 I can broadly identify four possible motives for the purchase: 

1. Ego or Fun:  He is probably too bright to do something crazy, but this potential motive is in my view the most dangerous scenario for the club. 

For every Tony Bloom or Steve Gibson, there's a Vincent Tan or an Assem Allam eager to create a different kind of legacy.

Premiership riches (and importantly the glamour) appear tantalisingly achievable yet we compete every year with similarly bankrolled clubs, some whose financial wheels are greased by parachute money.  

To give it some perspective Leicester City, Nottingham Forest and Sheffield Wednesday were last in the top flight 10, 14 and 13 seasons ago respectively. 

2. The 'multi-club' model: The concept isn't particularly new (for example ENIC owned stakes in multiple clubs), but it has been brought to the forefront again most notably by the Pozzo family which owns Watford, Udinese and Granada. 

The Watford experience would seem to suggest the potential use of effectively a large single pool of players, initially to benefit the 'junior' club in the arrangement (in this case Watford) for the longer-term benefit presumably of the two more senior clubs. 

Such an arrangement requires not only the judicious use of the loan system and 'fudged' permanent signings, but also a manager willing to agree to such an arrangement. 

In this sense Gianfranco Zola might have been considered a willing stooge (Powell might be less accommodating). 

However whether this model is preferable to utilising the existing loan/transfer system (albeit with a larger budget for fees and wages) is far from clear. 

Indeed it is notable that Udinese have fully 30 players out on loan, of which 24 are at 'non sister' clubs (including Matej Vydra now at WBA, having previously starred at Watford). 

In short maintaining such a large centralised squad is expensive, especially if some (like Vydra) are playing 'below their station' and demanding to be paid accordingly. 

Unfortunately for Charlton, with the exception of perhaps a few fringe Liege players, it's hard to imagine that any more of the players within Duchatelet's group would be playing 'below their station' at Charlton. 

Moreover the relative hierarchy of clubs within the club is by definition fluid - for example Watford get larger crowds than both Udinese and Granada, yet play in the second tier of its domestic league. 

The money available upon promotion however would dwarf both of their sister clubs. 

So the key therefore must be to understand the overall goal of the group owner - if it is to maximise group earnings then using the likes of Udinese/Granada/Liege to give Watford/Charlton a cheap way to be leapfrogged into the Premiership has some obvious merit. 

However what happens once they get there? A juggling act with each club's fans feeling entitled to special treatment no doubt. 

In terms of other potential synergies between group clubs, whilst I'm sure a management consultant would happily go wild with Powerpoint, in truth they are somewhat limited given cross-border complexity (despite the very high fixed costs of running a club). 

One might imagine the possibilities of say a centralised online operation for tickets/retail, or the benefits of a centralised scouting system for example. 

Negotiating power for commercial deals would be enhanced when representing several clubs, but it would hardly be formidable in the face of the type of global brands all owners crave. 

Yet if the owners wish to maintain the option to exit from any of the clubs if a suitable offer is received in short order, then does it make sense to make the clubs less independent operationally than they otherwise would be? 

3. Community: It is notable for example that Ujpest, Carl Zeiss Jena and now Charlton are clubs whose best days are in the past, yet they have a sufficiently proud history to tempt an old romantic like Duchatelet perhaps? 

His political activism and writings suggest he's a relatively cerebral type so perhaps he just loves football and will get a kick out of getting the respect from fans and the media for doing 'the right thing' (in this case putting each club on a stable footing in an inherently unstable industry). 

If so then this will most likely resemble the fondly remembered period roughly from the return to The Valley in 1992 to relegation from the Premiership in 2007, when Alwen/Murray/Simons et al pretty much did just that. 

This motive may be fanciful however - there are plenty more worthwhile causes for the philanthropic to support.

Then again children are demanding and stressful financial liabilities, yet it doesn't stop families from willingly accumulating several of them.  

4. A quick turnaround then sale: This was basically the Jimenez model until it was clear the promotion to the Premiership might take rather longer than expected. 

Given the 'structural' nature of the financial losses in the Championship, it is hard to see how even stabilising the club in midtable (which itself will require meaningful further investment), will suddenly make us an attractive proposition for the next potential buyer. 

The only way to engineer a profitable sale (ie. one in which the equity is valued materially above zero) is to achieve promotion but then immediately sell! 

As the extraordinary debts revealed at Bolton Wanderers demonstrate, being a supposedly well-run Premiership club for eleven consecutive seasons still rendered them a financial basket case. 

Richard Murray would probably concur (but he just never quite found the right moment to mention it).