192 replies to this topic

[pdac]

What occurs to me is that the teams have realised the natural upper limit of their valuation if further spots are available. Nobody is going to value their teams above what it takes to start up a team from scratch if it’s possible to do so. By enshrining their current number in the rules, they can continue to inflate their worth above the cost to build a new team.

 

Why do you say this? If I were considering entering, I could set up a team from scratch, which would have no experience and may not produce results for a very long time, or I could buy a team with a proven track record. The latter may well be more useful to me and so I would not be surprised if that were reflected in the valuation.

[Secretariat]

True, but if they reach the old limit of 13 teams, then the value of each team will rise as no new teams can be added at that point.

Unless a team is looking to sell, is it just bragging rights to have a huge valulation?

However, by then there would be no room for further expansion without other additional changes which might include tracks, hospitality, and whatever other complication of growth. In my view, by currently trying to ignore/delay playing by the current rules and agreements with the potential aim of limiting the grid, they can keep their slices of the pie, control supply (number of teams/future slots), and have at least 3 opportunities to goose their incomes without changing much to the above variables (tracks, etc.) as the capacity is already there.

[Clatter]

However, by then there would be no room for further expansion without other additional changes which might include tracks, hospitality, and whatever other complication of growth. In my view, by currently trying to ignore/delay playing by the current rules and agreements with the potential aim of limiting the grid, they can keep their slices of the pie, control supply (number of teams/future slots), and have at least 3 opportunities to goose their incomes without changing much to the above variables (tracks, etc.) as the capacity is already there.

 

What do you mean by no room for expansion? I don't think there is any grade 1 listed circuit that cannot cater for 13 teams, nor see that changing as there are other series that use these tracks with more cars.

[Secretariat]

What do you mean by no room for expansion? I don't think there is any grade 1 listed circuit that cannot cater for 13 teams, nor see that changing as there are other series that use these tracks with more cars.

I was referencing "if they reach the old limit of 13 teams". Once they go beyond that there are likely cascading things that would require some revisions. As it currently stands now (rules, capacity, etc.), I agree with you. However, this circles back to the on-going speculation/rumor that the teams want to limit the grid to 10, the valuations, potential expansions, income and by extension the FOM rejection of Andretti and rejection of other entrants. I have given a speculative opinion (link below) earlier regarding future plans, to which we will see if any aspects of it come to reality.

 

 https://forums.autos...ent/?p=10562060

[PayasYouRace]

True, but if they reach the old limit of 13 teams, then the value of each team will rise as no new teams can be added at that point.

Unless a team is looking to sell, is it just bragging rights to have a huge valulation?

Ideally there’s never a limit to entrants. Only to the number of race starters. That way, the cost of entry can remain competitive. I think it’s important that someone like Jordan, who entered when pre-qualifying was extant, can come in, produce a good car and become part of the grid without having to buy an existing team.

Of course it’s overall more expensive now, but that new entry option should always be available.

[PayasYouRace]

Why do you say this? If I were considering entering, I could set up a team from scratch, which would have no experience and may not produce results for a very long time, or I could buy a team with a proven track record. The latter may well be more useful to me and so I would not be surprised if that were reflected in the valuation.

This is just a fact. There’s a cost to building your own team, and that includes SQEP. Nobody would buy an existing team for more than it takes to build one.

[pdac]

This is just a fact. There’s a cost to building your own team, and that includes SQEP. Nobody would buy an existing team for more than it takes to build one.

 

I do not believe that. If you have evidence, show it.

[PayasYouRace]

I do not believe that. If you have evidence, show it.

Sorry, you’re right. There are people out there who pay over the odds for things they could get cheaper elsewhere. A fool and his money and all that.

[pdac]

Sorry, you’re right. There are people out there who pay over the odds for things they could get cheaper elsewhere. A fool and his money and all that.

 

Don't be ridiculous. People would buy an existing team because they get everything already set up, in place and proven. How many people go out and build their own house? No, they buy one that's already built, even though it would be cheaper to build one from scratch.

[PayasYouRace]

Don't be ridiculous. People would buy an existing team because they get everything already set up, in place and proven. How many people go out and build their own house? No, they buy one that's already built, even though it would be cheaper to build one from scratch.

 

The only ridiculous thing I'm seeing here is suggesting a savvy business owner would pay more to buy a team than to set one up from scratch.

 

This isn't like buying a house.

[Secretariat]

Don't be ridiculous. People would buy an existing team because they get everything already set up, in place and proven. How many people go out and build their own house? No, they buy one that's already built, even though it would be cheaper to build one from scratch.

I suppose this depends if the employees (which may include the very managers owners might rely on) think the new owners known what they are doing; which may or may not cause employees to seek employment elsewhere. We have watched Alpine, who are not under new ownership mismanage itself into a position that some thought not possible.

[Clatter]

Ideally there’s never a limit to entrants. Only to the number of race starters. That way, the cost of entry can remain competitive. I think it’s important that someone like Jordan, who entered when pre-qualifying was extant, can come in, produce a good car and become part of the grid without having to buy an existing team.

Of course it’s overall more expensive now, but that new entry option should always be available.

I agree, but I also think it's unlikely anyone is going to spend the amount required to build a car just on the off chance they might race. Either way, first step needs to be getting a full grid, but even that is looking more and more unlikely. They have already downgraded it from 13 to 12 teams, and are now looking to ensure no one else can join.

[Clatter]

I was referencing "if they reach the old limit of 13 teams". Once they go beyond that there are likely cascading things that would require some revisions. As it currently stands now (rules, capacity, etc.), I agree with you. However, this circles back to the on-going speculation/rumor that the teams want to limit the grid to 10, the valuations, potential expansions, income and by extension the FOM rejection of Andretti and rejection of other entrants. I have given a speculative opinion (link below) earlier regarding future plans, to which we will see if any aspects of it come to reality.

https://forums.autos...ent/?p=10562060

They won't go beyond 13,if they get their way they won't go beyond 10.

[Secretariat]

They won't go beyond 13,if they get their way they won't go beyond 10.

You could be right. However, if they want to grow in the future, which a lot businesses seem intent on doing, contriving an orderly expansion system will be the way. I suppose whether its beyond 10 or beyond 13 will be the benchmarks.

[PayasYouRace]

I agree, but I also think it's unlikely anyone is going to spend the amount required to build a car just on the off chance they might race. Either way, first step needs to be getting a full grid, but even that is looking more and more unlikely. They have already downgraded it from 13 to 12 teams, and are now looking to ensure no one else can join.

 

Seem Andretti is doing just that. If entries were open, then it wouldn't be an off-chance.

[pdac]

The only ridiculous thing I'm seeing here is suggesting a savvy business owner would pay more to buy a team than to set one up from scratch.

 

This isn't like buying a house.

 

So I guess the 'fact' was in your head because you have a blinkered view.

[PayasYouRace]

So I guess the 'fact' was in your head because you have a blinkered view.

Only blinkered in that I’m expecting people investing lots of money to want to use it sensibly, yes.

Amazing the lengths people go to to justify the cartel of F1 teams.

[New Britain]

Don't be ridiculous. People would buy an existing team because they get everything already set up, in place and proven. How many people go out and build their own house? No, they buy one that's already built, even though it would be cheaper to build one from scratch.

 

The only ridiculous thing I'm seeing here is suggesting a savvy business owner would pay more to buy a team than to set one up from scratch.

 

This isn't like buying a house.

 

It seems that you two reasonable people are taking opposite ends of the same stick and refusing to accept that there is a space between those two ends.

 

Why would you pay more for an existing team than it would cost to start your own team from scratch? You might want to:

- Start to get a return on your investment in Year 1, rather than having to wait the 2/3 years before there is any possible positive cash flow.

- Start with a settled, established culture, people who are accustomed to working together, rather than having to spend many months putting together a team gathered from hither and yon and then waiting many more months before their gardening leaves have finished.

- Start with some sponsors under contract, another source of positive cash flow.

- Start with an existing fan base.

- Make the best of the team's history and legacy - intangible assets that take many years to build.

 

Why would you rather start your own team from scratch?

- You'll paying for only what you want; you'll not buy anything (tangible or intangible) that you don't want (or at least you think you don't want).

- There might have been a good (for the seller, bad for you) reason why the team was for sale - e.g., poor culture, people in the wrong jobs, crumbling infrastructure, poor location, controversial history, disadvantageous contracts.

- For you, the very experience of building something the way you think it should be done is part of the attraction of the project.

- Your backers may wish to receive the kudos and publicity for creating the team's success, rather than having merely bought it.

- Your technical people may genuinely believe that they could do a better job than the existing team could do.

- You wish to create a new paradigm, e.g. an 'American' F1 team.

 

There is no single answer.   

[pdac]

It seems that you two reasonable people are taking opposite ends of the same stick and refusing to accept that there is a space between those two ends.

 

Why would you pay more for an existing team than it would cost to start your own team from scratch? You might want to:

- Start to get a return on your investment in Year 1, rather than having to wait the 2/3 years before there is any possible positive cash flow.

- Start with a settled, established culture, people who are accustomed to working together, rather than having to spend many months putting together a team gathered from hither and yon and then waiting many more months before their gardening leaves have finished.

- Start with some sponsors under contract, another source of positive cash flow.

- Start with an existing fan base.

- Make the best of the team's history and legacy - intangible assets that take many years to build.

 

Why would you rather start your own team from scratch?

- You'll paying for only what you want; you'll not buy anything (tangible or intangible) that you don't want (or at least you think you don't want).

- There might have been a good (for the seller, bad for you) reason why the team was for sale - e.g., poor culture, people in the wrong jobs, crumbling infrastructure, poor location, controversial history, disadvantageous contracts.

- For you, the very experience of building something the way you think it should be done is part of the attraction of the project.

- Your backers may wish to receive the kudos and publicity for creating the team's success, rather than having merely bought it.

- Your technical people may genuinely believe that they could do a better job than the existing team could do.

- You wish to create a new paradigm, e.g. an 'American' F1 team.

 

There is no single answer. 

 

Thanks for this. I never said there was a single answer. I was merely replying to this suggestion:

 

This is just a fact. There’s a cost to building your own team, and that includes SQEP. Nobody would buy an existing team for more than it takes to build one.

[PayasYouRace]

And you don’t half persist, even after I revised my statement.

[pdac]

And you don’t half persist, even after I revised my statement.

 

I guess my sarcasm detector was faulty. Sorry.

[loki]

Starting a business is more than a comparison of sunk costs. There are the opportunity costs as well.  When one builds from scratch there are variables not accounted for with only the totals of equipment and people.  I’ve been involved in transactions where short term it was less expensive to build than buy but we paid a premium for a turnkey package.  The opportunity costs of getting a business operational from a Day 0 point may be less in the long term health of the business.  Direct cost comparisons don’t take into account the nuances of running a business.

[PayasYouRace]

Starting a business is more than a comparison of sunk costs. There are the opportunity costs as well. When one builds from scratch there are variables not accounted for with only the totals of equipment and people. I’ve been involved in transactions where short term it was less expensive to build than buy but we paid a premium for a turnkey package. The opportunity costs of getting a business operational from a Day 0 point may be less in the long term health of the business. Direct cost comparisons don’t take into account the nuances of running a business.

I guess the point that I’m trying to make is that even when you take into account the intangibles of buying an existing business having the option to start from scratch naturally keeps the costs of buying down. Even if the costs aren’t directly equivalent. By enforcing their little cartel, then that natural limit disappears.

[pdac]

I guess the point that I’m trying to make is that even when you take into account the intangibles of buying an existing business having the option to start from scratch naturally keeps the costs of buying down. Even if the costs aren’t directly equivalent. By enforcing their little cartel, then that natural limit disappears.

 

But it's about cost vs benefit and that does not always equate to the lowest cost being the best.

[PayasYouRace]

But it's about cost vs benefit and that does not always equate to the lowest cost being the best.

There is little benefit to the sport of raising the barrier of entry too high though.

[pdac]

There is little benefit to the sport of raising the barrier of entry too high though.

 

Agreed. But this is not about sport, is it. If the FIA sign up, then they will have truly sold the sport. But, hey, money talks and the FIA is made up of individuals.

Edited by pdac, 20 April 2024 - 08:58.

[New Britain]

Agreed. But this is not about sport, is it. If the FIA sign up, then they will have truly sold the sport. But, hey, money talks and the FIA is made up of individuals.

There have been real reasons to criticise MBS but, if he stands up to the teams and FOM in this, that would go a long way towards balancing out his previous mistakes.

[HistoryFan]

only 10 teams in Concorde Agreement is a big shame for all F1 fans.

[Clatter]

You could be right. However, if they want to grow in the future, which a lot businesses seem intent on doing, contriving an orderly expansion system will be the way. I suppose whether its beyond 10 or beyond 13 will be the benchmarks.

Expanding the calender is where they make the money. Adding teams is more a sporting thing than money making.

[Clatter]

Seem Andretti is doing just that. If entries were open, then it wouldn't be an off-chance.

In theory they can go racing, just not share in the money. They would only need to make the 107%.

[Secretariat]

Expanding the calender is where they make the money. Adding teams is more a sporting thing than money making.

I think they have reached the upper limit of what is possible with expanding the race calendar. It would seem hosting fee changes is an avenue but can not see more races to the calendar. I worded my post a bit poorly. Expansion fees is a way, not "the" way. Still, having better control of how teams enter the sport (fees) is part of the equation; as is how future TV contracts are structured/renegotiated.

[pdac]

I think they have reached the upper limit of what is possible with expanding the race calendar. It would seem hosting fee changes is an avenue but can not see more races to the calendar. I worded my post a bit poorly. Expansion fees is a way, not "the" way. Still, having better control of how teams enter the sport (fees) is part of the equation; as is how future TV contracts are structured/renegotiated.

 

Why would it not be possible (in theory) to have a race every week - 52 in a season? Obviously it would be totally exhausting for all concerned, but to say they have reached the upper limit now is just a matter of opinion, not fact. Personally, I think there is the possibility to add more and I think we will see more in the future.

[FullThrottleF1]

Why would it not be possible (in theory) to have a race every week - 52 in a season? Obviously it would be totally exhausting for all concerned, but to say they have reached the upper limit now is just a matter of opinion, not fact. Personally, I think there is the possibility to add more and I think we will see more in the future.

 

yeah, lets make those already hardworking mechanics and personnel work even more. Do they even need time off or to see their families???

[Secretariat]

Why would it not be possible (in theory) to have a race every week - 52 in a season? Obviously it would be totally exhausting for all concerned, but to say they have reached the upper limit now is just a matter of opinion, not fact. Personally, I think there is the possibility to add more and I think we will see more in the future.

Of course it is my opinion. I still say "I think" or "in my opinion" to avoid confusion even when it is obvious, but apparently still not obvious. Nevertheless, you give the reason why "I think" it has reached the upper limits...it becomes unsustainable from a workforce point of view. You run the risk of completely burning out your employees and have to replace them with new employees who will presumably have less experience. Run that cycle a few times and all of sudden you no longer have the best minds engineering "the best" cars.

[pdac]

yeah, lets make those already hardworking mechanics and personnel work even more. Do they even need time off or to see their families???

 

If you can't stand the heat ...

 

But seriously, as the FIA already get involved in the budgets of teams, they could easily impose restrictions regarding how many hours certain staff members were allowed to work and move teams to a rota system where the same staff were not doing 100% of the workload.

[pdac]

Of course it is my opinion. I still say "I think" or "in my opinion" to avoid confusion even when it is obvious, but apparently still not obvious. Nevertheless, you give the reason why "I think" it has reached the upper limits...it becomes unsustainable from a workforce point of view. You run the risk of completely burning out your employees and have to replace them with new employees who will presumably have less experience. Run that cycle a few times and all of sudden you no longer have the best minds engineering "the best" cars.

 

That's what happens in any business that expands. Eventually, the existing staff cannot handle the workload on their own and extra staff members need to be added and/or some manual processes need to be automated. Always, people think how it is now is how it has to be going forward.

Edited by pdac, 21 April 2024 - 14:08.

[Secretariat]

That's what happens in any business that expands. Eventually, the existing staff cannot handle the workload on their own and extra staff members need to be added and/or some manual processes need to be automated. Always, people think how it is now is how it has to be going forward.

Business expansion is not infinite and business activities that involve humans are not perpetual. At some point it no longer becomes expansion but simply cannibalization and recycling under the disguise of expansion. There are natural and artificial limits (rules/budgets) to what is practical; particularly as it relates to sporting endeavors.

 

However, to extend what I understand to be the logic (feel free to correct me) to it's hyperbolic conclusion is we should just have F1 be an autonomous AI racing series. I suppose you can use AI and other machine learning technologies to replace all the humans and let them engineer AI drivers.

[Clatter]

I think they have reached the upper limit of what is possible with expanding the race calendar. It would seem hosting fee changes is an avenue but can not see more races to the calendar. I worded my post a bit poorly. Expansion fees is a way, not "the" way. Still, having better control of how teams enter the sport (fees) is part of the equation; as is how future TV contracts are structured/renegotiated.

25 is their current target, but I wouldn't be surprised if they add more in the future. They would need to get that sorted in the next CA.

[Secretariat]

25 is their current target, but I wouldn't be surprised if they add more in the future. They would need to get that sorted in the next CA.

In putting more thought to this and considering pdac's position, the only viable way in my opinion to add more races is via the sprint format. I would not be surprised if teams and Liberty/FOM currently see the race calendar as 30 races for how they divide the money. I can envision true double header events at a GP location instead of more different locations. So called sprint races can be expanded to more laps to be more of an event in and of itself. How they would distribute income based on this possible race expansion is a workable money problem to solve in my opinion.

Edited by Secretariat, 21 April 2024 - 16:17.

[pdac]

Business expansion is not infinite and business activities that involve humans are not perpetual. At some point it no longer becomes expansion but simply cannibalization and recycling under the disguise of expansion. There are natural and artificial limits (rules/budgets) to what is practical; particularly as it relates to sporting endeavors.

 

However, to extend what I understand to be the logic (feel free to correct me) to it's hyperbolic conclusion is we should just have F1 be an autonomous AI racing series. I suppose you can use AI and other machine learning technologies to replace all the humans and let them engineer AI drivers.

 

Business activities are curbed by the limits of the market or the limits on available resources (including human resources). Neither of these seem to apply here.

[Secretariat]

Business activities are curbed by the limits of the market or the limits on available resources (including human resources). Neither of these seem to apply here.

Judging by what I just read, we are partial in agreement, except on what is applicable. Limits on available resources and "the market" is finite.

[pdac]

Judging by what I just read, we are partial in agreement, except on what is applicable. Limits on available resources and "the market" is finite.

 

Yes. I think we just disagree as to where F1 is in their growth curve (event-wise)

[absinthedude]

Since cars are too big and there aren't enough of them, can't you just cut them in two?

 

Who do you think you are, Mick Schumacher?