Latest at Puck Daddy – Flames and the Endowment Effect



After a third straight season outside of the playoffs, even the most faithful Flames fans in Calgary are starting to ask the same question pundits and others outside of the city have been asking for several years:

Why don’t the Flames rebuild?

The organization hasn’t won a playoff series since 2004 despite boasting one of the most expensive rosters in the league. Calgary’s prospect pool is middling and its marquee players are aging. They remain competitive enough to routinely challenge for a playoff spot, but are as far away from elite now as they have ever been post-lockout. It’s a grim, uncertain future for the team. A clearing of the decks and reboot seems in order: trade the aging stars for kids and picks, up the club’s cap flexibility and prepare for a few rough years…

Read the rest here.

  • Mitch2

    While the psychological principles mentioned are certainly relevant, I’m not sure they are the primary ones Kent.

    When you look back what motivated teams to do the scorched earth rebuild?

    (1) Was it money, not wanting to spend it?

    (2) Was it money, being ready to spend it to stay middling?

    (3) Patience vs Right Now – I think most owners who have money will spend it for the right now.

    Other situations of middling teams are often similar to Calgary. The Canes. Why don’t they deal Eric Staal and Cam Ward and move on to a real rebuild instead of the rut they are in.

    I personally think market forces play a role. When fans in a market want to see a winner, owners will respond to that pressure IF they have the money.

    When fans don’t care, Owners may slice budgets and start looking at the Cap floor, rather than a conscious effort to rebuild. It happens naturally for lack of a better word.

    • loudogYYC

      I think the only team in the NHL who’s situation is remotely close to Calgary’s is San Jose. Aging core players and no serious improvement in sight, yet.

      The difference between Carolina and Calgary is that their stars were born in the 80’s, ours in the 70’s. Carolina could be in this same situation in about 5 to 7 years, if Rutherford comes down with Darryl Sutter syndrome.

      I think I speak on behalf of all sports fans in the world when I say that we all want to see a winner in our market, it just takes more than wanting. There’s a reason great franchises always have good teams and rarely ever find themselves in this situation. They’re “intellectually honest” (to quote Feaster), they’re clear on what they want to accomplish and how to get there, and they always respect their process.

      This article relates to the intellectual honesty part of the equation. Although there may be other non-psychological reasons the Flames haven’t started a rebuild, you can’t deny Flames management has seemed out of touch with reality for the past 3 years when it comes to how good they think the team is.

      Maybe these principles really are the primary reason the Flames haven’t started the change.

      Thanks for your insight, Kent.

      • Mitch2

        What about the Islanders? Is there a conscious decision not to spend and pursue top FA?

        The Oilers have an Owner who has cleared the scorched earth approach, obviously, but why not, he has a rock market of sell-outs year after year with a dead last team.

        I think everyone wants to win but I think there is a dynamic in the background as well and it centers around the nature of the Owners.

        The Blackhawks for decades sucked beyond belief. Why was that? Bill Wirtz was one of the cheapest owners in the NHL and sitting on a great hockey market and he was a billionaire. Ask any long time Hawks fan what they think of him.

        Until there was a change in ownership some simply didn’t spend. I am not sure if it was a conscious choice to “lose” to build a Cup team or merely a cheap owner. I am not sure if it has to do with loss aversion or simply not wanting to spend money for a winner.

        The Predators are also a great example of a team with excellent scouting, coaching and hockey operations who just may have cheap owners who will sabotage the team because they will not spend the money to keep the top players.

        I may be outside the tent here but the problem may be that the Flames owners want to win all the time and hence that is their problem…

        Who would have thought but maybe the problem is the Flames owners want to win all the time and spend to do it, that in and of itself is the problem.

        • RexLibris

          I think that it comes with balance. Wanting to win all the time does not mean that one is entitled or even able to win all the time. To think that a team can win every single year in the league today is an example of naivete, ignorance, or insanity.

          “The Flames owners wanted to win every year” – Let’s take that statement as a granted. They had a core and needed to flesh it out. Also, Kent has already outlined that financial interests may have blurred some of the lines around “winning” and “profiting”.

          While the ownership spent year after year to try and win, one has to wonder if it ever crossed their minds that, in spite of spending and trading to achieve they had never actually won and therefore a new strategy may have been in order.

          When Feaster introduced the term “intellectual honesty” to the Flames’ discussion landscape it raised the possibility of that same term coming back to haunt him and the ownership group.

          Intellectual honesty would have been to take a completely objective audit of the Flames roster and overall franchise position and make decisions based on the outcome of that review.

          The Flames had an aging core tied to high-cost contracts and with a significant number of NTC/NMCs. The prospect pool was almost unanimously regarded as one of the five weakest in the league. Attendance was solid, popularity high, and corporate sponsorship could have been tailored to some long-term contracts to provide steady income for the next few years.

          It seems obvious now that Murray Edwards would not have approved a rebuilding process last season, and perhaps only begrudgingly this season (we wait to see), and so perhaps Feaster will be sunk by words (IH) he uttered that ought to be thrown in the face of ownership instead.

          I have argued that the Oilers ownership, and later management, showed courage to face the fact that the team was awful and that it was largely the decisions of the past few years that had put them there. A change was needed, a new owner had just come aboard, and thus a difficult decision was made after honest consultation with fans about the direction of the team.

          The same clearing-of-the-air needs to happen in Calgary.

        • loudogYYC

          I don’t see the connection with the teams you bring up. The Islanders have a jack-ass owner that has tampered so much with the team that he’s ruined them. They have no blueprint.
          The Oilers were pretty much forced to rebuild with the ugly departures of Pronger and Smyth and the Blackhawks actually went through change before winning the cup.

          I’m glad you brought up the Predators, cuz that’s a team that practices intellectual honesty. They don’t have the deep pockets or corporate support we have here, so instead of of chasing big $$ free agents they went about business the slow and hard way, the draft. The majority of their active roster is self developed, they plugged other holes by signing inexpensive FA’s and when they seemed ready for a push, they made big trades. They finished the season with over $12M in cap space BTW.

          In a way, the Flames advantage of deep pockets and huge corporate support has become their disadvantage. They think money is the solution to every problem yet they never really solve problems, do they?

          • Mitch2

            The point I am trying to make is do teams become great accidentally through owners limits on spending, that are keeping them down or is it a conscious decision to rebuild?

            Are teams like Calgary and Toronto, paradoxically, more likely to spin their wheels because every year they are trying to spend, trade and get better often at the cost of picks and prospects.

            In the Flames case is the Owners willingness to spend and go after whatever is on the market to make the team marginally better lead to this slow decline situation?

            As far as history goes. Wang in New York was not always cheap. He gave that contract to DiPietro but if the Islanders suddenly rise and start winning, is it more accidental like Wirtz in Chicago than by design.

            The Oilers are a declared rebuild but many if not most owners look at money on a season to season basis. Big rebuilds start because the money is not being spent.

            The Preds have cheap owners, Phx no owner, the Penguins have been on the verge of bankruptcy a couple times.

            So my point is rather than risk aversion do strong teams simply rise accidentally from cheap owners who are not willing to spend to make their team stronger year to year.

            Not spending leads to finishing lower in the standings sometimes and hence higher draft picks and a stronger team eventually but that is a result of owners closing the cheque book.

  • RKD

    Great question, I don’t think we’ll ever get a real answer. Hopefully, maybe one day the ownership group will come out and state why.

    As long as Iginla and Kipper are putting butts in the seats at the dome and selling jerseys, they seem pretty content to remain status quo.

    Murray Edwards and Ken King are not hockey guys, they know how to make money and run a business. However, they are extremely unqualified to run operate a successful hockey team. Sure they can keep saying they are icing a competitive team, but chances are the team will get worse before it gets better.

    Either Feaster is not allowed to trade Iginla or he really believes Iginla is part of the solution. I would say both are true.

    The only thing that hasn’t been tried yet is a rebuild. No one on either side, Iginla or Feaster/King/Edwards wants to look like the bad guy in trading Jarome. This is like an endless tug of war. Jarome will not ask for a trade and ownership refuses to trade him. Back at square one. Ownership should stay out of hockey matters, even TSN’s Bob McKenzie stated no ownership group has as much say in hockey operations as in Calgary. This is a total failure, I agree Feaster has to be held accountable to the club and ownership, but he should not be held hostage to do his job.

  • First Name Unidentified

    Great read Kent!

    Actually I had planned to mention the Endowment bias last week on the Kipper vs Luongo thread.

    Along with the Loss aversion bias and endowment bias I think the Flames ownership exhibits few other emotional and cognitive biases:

    Conservatism bias – a cognitive bias where in the owners apply too much emphasis on the base case scenario, which is keeping the core intact.

    Regret aversion bias – an emotional bias along the same lines of loss aversion which involves taking or not taking a certain action, namely keeping or trading the core/star players.

    My 2 cents based on my Behavioral Finance experience.

    • Those are good ones as well.

      It’s funny, I’ve had a number of people mention finance classes to me after this article. My exposure was initially through psychology classes, but it’s interesting this stuff is being taught in biz school these days.

  • supra steve

    I see this effect whenever I have listed a vehicle for sale. Carefully scan the net to arrive at a “reasonable” price range, then set the price a little lower then most are asking…and I never get anywhere close to that asking price, because everyone else has their prices so damn high. If $25 seems fair when you compare to similar listings, you will probably be lucky to get an offer of $20, all because everyone overvalues what they have. Exactly the same when Regehr was traded. I wonder if we may all get a little shock if/when Iggy/Kipper go on the block. I do think we have to move them both, even if our preconceived guesstimates of their value are not realized. I mean, are either still worth a first (eg.#21 overall) + an A prospect (McNeill or Saad) + a roster player (Bolland)? Sounds too good to be true, time will tell (I hope).

    • RexLibris

      Good points.

      I always ask (myself when considering an Oilers trade) “what would I give up to get player x”? Would Flames fans give up some of the prospects and players being discussed to land Iginla for one season or less?

      Hometown bias can be difficult to overcome, and for some even to recognize.

      I know that the arguments are always made that in trade A this team received a certain amount for such player (Dustin Penner as an example, most Flames fans would be physically ill if Iginla were traded for less than Penner). However, those trades are all done between other teams and different times in their respective life-cycles.

      And between different GMs.

      I stated here on FN when Feaster was hired that I didn’t think he would be the best GM for the job simply because I could see that a rebuild was coming and almost certainly Feaster is the second-last person that a fan should want trading away a star player.

  • RexLibris

    “merely a symptom of cowardice”

    This sums up the Flames front office and ownership perfectly. Willing to do nothing rather than risk something. Huddled in a foxhole hoping not to get hit than doing something that could impact their futures. Standing pat is death, you have to keep moving to survive. Right now the Flames need to go big or go home. Either embrace youth and speed the process up by trading aging star assets, or commit to going for the playoffs right now and spending the future to bring in players that can help to win now. Give up draft picks, prospects, young uncertain players and bring in established players (like Carter and Richards that were traded) and do everything possible to win now. Instead they are the cowardly lion (along with the brainless tin can) and try to avoid doing either.

    Paul Holmgren is maybe the best general manager in the NHL right now because he can clearly evaluate his team. He can make hard decisions. And he is not afraid of making changes. He just wants to win, and being right or wrong at least he is going to try something. That is what made Cliff Fletcher successful with the Flames. Have some balls and step up to the plate and at least try to make something happen. Sitting in the dugout being to afraid to try because you are afraid of being out is crap. And that is the fertilizer that the Flames front office is spreading around.

  • RexLibris


    If you were to break down franchises into their relative groups based on market size, ownership strength and continuity, corporate and popular support, as well as the recent and early history of each franchise in the NHL (depending on the franchise) then I think the sample size for each situation would be too small from which to glean any considerable insight.

    Calgary and Toronto, as you stated, seem to spin their wheels because they want to win immediately. They have vastly different corporate ownership and yet, more or less, have achieved largely the same result.

    Bill Wirtz, despite his financial resources, refused to spend more on the Hawks roster and seemed to eschew local corporate and television deals. It could be argued that his approach was conservative to a fault in that he was so worried about losing money that he was afraid to spend any.

    The Predators have owners that are having to balance their books in order to maintain the franchise. That franchise has already been perilously close to relocation once and has gone through dramatic ownership changes once already. I wouldn’t classify them necessarily as cheap but rather having to raise the team’s roster payroll in accordance with their gradual increase in fan and corporate support.

    Even St. Louis was recently on the proverbial razor’s edge financially speaking a season or two ago. I think Canadian fans can often take the financial support in a gate-driven league like the NHL for granted when we see teams like Colorado, Florida, or Nashville work within a payroll budget far under the salary cap.

    I don’t think there is a direct correlation between a team spending to the cap, or not, and finding success. Each era in which a team experiences that decline in player spending is different and will yield different results. Drafting high and acquiring those prized prospects is only one step, assuming that the right drafting decisions are made at that time. Development is still key. And one need not necessarily follow the other. A team that can effectively scout and then develop their prospects need not draft in the top of the order to improve (Detroit is the easy example, but Washington, New York, and New Jersey are other organizations that have managed this reasonably well).

    A team that decides to rebuild, as well, will often arrive at that decision by it’s own means. For Chicago it was largely as a result of perpetual losing due to constantly selling off assets. In Pittsburgh it was largely the same thing but due to extreme fiscal restraints that prevented the team from even considering the financial cost of improvement by any other means than internal, cost-controlled development. L.A.’s decision to rebuild had virtually nothing to do with finances but rather was a concerted effort to build a winning team through patience and drafting. Edmonton’s was the result of repeated failed attempts through other “shortcut” means of improvement, arguably the same may be said of Toronto in a year’s time.

    When Calgary comes to their eventual rebuild I doubt financial concerns will be mentioned. I suspect that mismanagement, stubborn refusal to objectively assess the franchise’s situation with regards to system depth, poor drafting and sub-par development, as well as several ill-advised trades will all be mentioned. Misguided and arrogant ownership ought also to enter the discussion, but given that the ownership group is unlikely to change between now and then I doubt the finger will be pointed, publicly, at themselves.

    This raises the question: do fans want the managment of the Flames to pursue key free agent signings this summer in an effort to improve the team?