What Financial Regulators Can Learn from FIFA World Cup
It seems as though both businesses, international soccer and international finance, would be on opposite ends of the spectrum. And they are, but that doesn’t mean the underlying fundamentals are really that different.
You might have heard all the ruckus about how poor the World Cup officiating might have been, from how many goals they stole from perfectly legal plays, or how bad they were at issuing yellow and red cards. Those comments may be very well deserved. However, when we look at the bigger picture, we can see that the referees actually got 96% of the calls correct.
Where are you going with this?
My point is very simple. While it seems that referees missed huge call after huge call, they actually did quite well. And we remember far more of the bigger missed calls than we do the smaller, less important decisions. There were more than a few failures of who got which throw in and where, but very few changed the game, and we didn’t even notice them. What we did notice, though, were the huge gaps in officiating, when some calls may have made the difference.
No really, where is this going?
You see, the solution to getting 100% of the calls correct is to slow down play, changing the game of soccer forever. Games would be subject to reviews by video, where officials would have to stop play, altering momentum just to get minute and relatively unimportant decisions settled. FIFA would have to change the whole sport from top to bottom just to get 4% of the missed calls correct, and quite frankly, that isn’t even worth it.
Financial regulators should realize the same. We are so quick to call for huge fundamental shifts in the financial world when a bank goes bankrupt, a company breaks the rules, or a huge fraud is exposed. But what we miss in that brief glimpse through time is how well the regulators actually perform. How well those who do commit frauds are actually tried and punished. We could slow down the game of business, insert new rules and regulations to keep the game more “fair,” but while the game may be fair the game would change from top to bottom. We’d have a whole new financial system. We’d throw out the 96% for the 4%.
What Regulators Need to Do
Regulators need to be there to punish, not prevent things from happening. Referees in the world cup matches didn’t run in to break up an illegal slide tackle before it happened, nor did they push players back onside to stop onsides calls. No, they made the call after the fact. Just like our courts systems should punish criminals after the fact. We can’t fundamentally change the way businesses is done, just like we can’t change soccer, and we certainly can’t do it just to correct a few errors.
Humans are only human, we make mistakes. But we can’t prevent mistakes, no, we can only do what is best and let the mistakes correct themselves. I hope Washington is listening.
