In Adam McKay’s The Big Short, the director uses the ‘hot hand’ fallacy to articulate how synthetic collateral debt obligations (CDOs) ultimately led to the 2008 financial collapse.
In the explanatory scene, Nobel Prize winner Richard H. Thaler, who sits alongside Selena Gomez at a blackjack table (genius, I know), says a “classic error” people make is “thinking whatever is happening now is going to continue to happen in the future.”
The ‘hot hand’ phenomenon, which was initially a theory established in basketball, is exactly what the Juventus hierarchy succumbed to during the club’s dominant reign over Calcio in the 2010s. As Massimiliano Allegri led the club to their fourth, fifth, sixth, seventh and eighth Serie A titles on the spin, the expectation was that it would continue indefinitely. There was no end in sight. Even Maurizio Sarri was able to win a title during Juventus’ imperious reign!
But, as was the case with mortgage brokers, bankers, ratings agencies, etc, etc in 2008, it all came crashing down on the Juve elite. For so long, short-term ideals had perpetuated the Bianconeri’s success, but the lack of long-term planning from the top meant a sudden crash was inevitable.
Now, Juve’s decline was more insidious than sudden. There had been signs of imminent collapse: the Champions League defeat to Ajax in 2019 then Lyon a season later and the rise of Antonio Conte’s Inter Milan amid their hiring of a novice coach being a few examples.
In the aftermath of the 2008 crash, the facilitators largely escaped without prosecution as immigrants and poor people were blamed. In fact, only one banker in the United States, Kareem Serageldin, was arrested and jailed as a result of the financial crisis. In comparison, the Juventus board, heavily responsible for the club’s demise, opted to take the denial route. Former director Fabio Paratici claimed that the suspected period of transition “doesn’t exist at Juventus”, a quote that summated the egotistical and borderline delusional attitude of the board.
Fortunately, seeing Conte, the man who ignited Juve’s period of dominance, bring their decade-long reign to a close and Allegri struggle on his return to Turin has humbled those at the top. There have been signs over the past few months of board members accepting and embracing the necessary rebuild that Juventus must undergo.
That rebuild begins in 2022, and here are the first three of six steps the club should follow to bring Juventus back to the promised land.
Steps begin on the next slide…