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PREFACE

Essential Message of the Book

The sports industry is a $620 billion global business,¹ as competitive and dynamic as any industry on the planet. To rise to the very pinnacle of this arena, as Real Madrid has done, is an extraordinary accomplishment. Generally unnoticed, in the space of fifteen years Real Madrid has gone from near bankruptcy to becoming the most valuable sports team on the planet. Their secret to success, revealed here, is a fascinating story, with implications for industries and organizations worldwide.

How the Book Came to Be

On a weekday morning in 2014, I passed through security at what is considered one of soccer’s cathedrals: Santiago Bernabéu Stadium in Madrid, Spain. It is the home of the celebrated Real Madrid soccer team, but I was not going to a game. Rather, I was headed to a meeting in the executive offices located inside the stadium.

When I arrived, Carlos Martínez de Albornoz, Real Madrid’s director and a key member of the executive team responsible for turning Real Madrid into an international powerhouse, warmly greeted me.² He looked distinguished, dressed in a conservative suit and tie, his silver hair parted to the side. When he shook my hand, he drew me closer, as if we were old friends. He walked me to his office, and as we talked he came across as levelheaded, thoughtful, and analytical, but he had the Latin warmth of a Spaniard and father of four.

I asked Carlos, “Did you grow up as a Real Madrid fan?”

He chuckled and replied, “Before this job, I didn’t even like soccer. My background is in engineering and managing engineering-related companies. The president of the club plus my wife and kids had to talk me into taking this job.”

What?!

One of the most important executives running one of the most important soccer teams in the world didn’t even like soccer and didn’t want the job! As I sat down, I thought to myself, This should be interesting.

After a few hours, we adjourned to my favorite restaurant in Madrid, El Landó, and continued the meeting over a traditional Spanish lunch. I was fascinated by what Carlos had to say about Real Madrid’s history, ownership structure, financial turnaround, investment in facilities and people, global fan base, style of play, and ability to attract the best players and get them to work together. Since he was a former engineer and now responsible for reporting Real Madrid’s financial performance, I expected that he would have talked about income statements or balance sheets or data analysis and performance metrics. However, what really stood out to me were the numerous times Carlos used the words community, passion, values, expectations, transparency, and culture.

Carlos explained that he had previously worked with Florentino Pérez in various executive and board positions at engineering-related companies. Florentino, a Spanish businessman, civil engineer, and former politician, is chief executive officer of Grupo ACS, the largest engineering and construction company in the world with €35 billion ($38.5 billion) in sales and 210,000 employees. In July 2000, he was also elected president of Real Madrid.

Florentino’s election was a surprise because the incumbent had won the UEFA³ Champions League titles in May 1998 and May 2000. At the time Florentino was elected, however, Real Madrid was close to bankruptcy. In the media, Florentino is most associated with lifting the debt-laden club to their current position as the most valuable sports team in the world and ushering in the period during which Real Madrid signed the best of the best players from around the globe. The term galácticos (“a galaxy of stars”) has been used in the media to describe Florentino’s signing of star players and also as a nickname for the team.⁴

After the club members elected Florentino to be president of Real Madrid in 2000, he asked Carlos to take the executive role of Director General and focus on selected day-to-day activities—in particular administration, finance, and legal. The fact that Carlos was neither a soccer aficionado nor a Real Madrid fan was precisely why Florentino wanted Carlos to join the executive team. Florentino wanted someone who wouldn’t be swayed by biases or swept up in the glamour or intimidated by the star power of the players. He wanted someone he knew and could trust to apply and execute their knowledge of what was needed to successfully run a global corporation.

Carlos has a son, Lorenzo, who, like me, had worked at Goldman Sachs. By coincidence, not knowing that his father and I would one day meet, Lorenzo had given Carlos a copy of my book, What Happened to Goldman Sachs? An Insider’s Story of Organizational Drift and Its Unintended Consequences (Brighton: Harvard Business Review Press, 2013), which was my dissertation for my PhD in sociology from Columbia University. Its focus is on organizational culture. During our meeting, when Carlos said he had enjoyed reading my book, I thought he was merely being polite. Then he walked across his office and pulled it off his bookshelf. When he opened the book, I could see pages he had marked and sentences he had underlined. I was stunned. Not only had he read my book, I now had a sense of how meticulous and curious he was.

As I got to know Carlos better, my inquisitiveness and fascination remained unabated. The more I learned, the more I wanted to know. During another visit to Madrid and lunch at El Landó, I told Carlos that I wanted to do a rigorous study of Real Madrid,⁵ taking an analytical and dispassionate approach similar to the one I used in researching and analyzing Goldman Sachs. Unlike any other book written about a sports team, I wanted to investigate both the on-field and business aspects of the club and see if, and how, the two were linked.

One of the things in the back of my mind was Michael Lewis’s bestselling 2003 book, Moneyball: The Art of Winning an Unfair Game (New York: W. W. Norton & Company, 2004), about the Oakland Athletics baseball team and its general manager, Billy Beane.⁶ The book describes how Beane, a former professional baseball player, uses an unconventional, analytical, evidence-based, sabermetric approach to assemble a competitive baseball team, despite the Athletics’s disadvantaged revenue situation compared to large-market teams like the New York Yankees. Lewis’s book, which is one of my favorites, captures the moment when baseball changed its player selection strategy from a reliance on instinct to data analysis of past performance, a shift that revolutionized baseball and sports management.

The enormous popularity of the book and then the 2011 film Moneyball (starring Brad Pitt and Jonah Hill) solidified the power of data-driven decision-making in the minds of the general public and corporate management teams around the world. While the power of data analysis is undeniable, I was interested in what and how large of a role it played in the overall success of Real Madrid.

Carlos described to me an equally dramatic shift in Real Madrid’s business model, but one that was utterly unlike Beane’s. Instead of being driven by data analytics, the Real Madrid revolution stemmed from an organizational culture centered on the shared values and expectations of the club’s fans. Also, while Beane was a baseball insider, Real Madrid’s revolution was being led largely by a bunch of outsiders! One of the things they had in common, however, was that both innovations were driven out of financial necessity and constraint. I was fascinated by the potential the Real Madrid way has beyond the sporting world—potential that I felt the need to explore and identify. Big money and glamorous stars tended to camouflage what the executives were really doing, and what they were doing can be appreciated far beyond the realm of soccer or Real Madrid.

Real Madrid provided me with unprecedented access, both to people and to data. Over two years, I conducted more than 100 hours of semi-structured interviews with more than twenty people associated with Real Madrid, from the president of the club to current and former players and coaches, to people who work in the stadium, academy, and practice facilities. My research included an entire week in Madrid during which I was given complete access to the club, including being allowed to meet with whomever or see whatever I wanted. Real Madrid staff also thoroughly and promptly responded to at least fifty or so very long information request lists from me. I was provided financial information and statistical data, some of which Real Madrid makes publicly available in its commitment to be transparent. (Real Madrid regularly issues annual reports of approximately 300 pages.)

In addition, I sought my own data and independently interviewed community members; soccer and sports experts; current and former executives and players at competing teams; academics who have studied Real Madrid, soccer, sports, or organizations; sports agents and legal advisors; data analysts; and members of the media. I agreed that I would keep all interviewees’ participation confidential and not quote them, unless the quote was already in the press. I also researched business school cases, news reports, and books about Real Madrid and other relevant teams. The purpose of going beyond what Real Madrid provided was to gain a broader picture and challenge, support, and illuminate my data, analysis, and conclusions.

It is not my intent to glorify or vilify any individual, group, or era, although I suspect parts will be interpreted or used to do so. I’ve tried not to be influenced by nostalgia, and I have tried to recognize that people I interviewed were looking back in hindsight and may have had agendas or other issues, something I tried to overcome by speaking to many different sources and balancing the interview data with other information and analysis. I’ve tried not to be affected by people’s passion for Real Madrid, their own favorite and rival soccer teams, the sport of soccer and sports generally, or recent events having too much weight simply because they are fresher in our minds. I have relied on publicly available data to confirm and disprove various claims and theories advanced by those I interviewed.

My primary reasons for writing this book were intellectual curiosity and academic contribution. Any money that I have received, or will receive, for writing the book from the publisher has been, and will be, donated to charity. I did not receive any compensation whatsoever from Real Madrid. For example, I did not ask for or receive one ticket to a game, nor did I ask for or receive a single player’s photograph or autograph. Before publication, as a matter of professional courtesy, I did show drafts of parts of the book to Real Madrid, as well as a few other teams and leagues mentioned, to see if any material facts were incorrect or misrepresented. However, Real Madrid was not involved in the editorial or analytical process and did not approve or authorize this book. Any mistakes and all of the judgments, conclusions, and analyses are my own.

The book is written in American-sports English primarily to make it easier to understand for most American readers. Therefore, I use American terms, such as soccer for football, team for club (except when referencing Real Madrid, the club, or other teams that are actually member-owned clubs), field for pitch, game for match, locker room for dressing room, jersey for shirt, cleats for boots, uniform for kit, speed for pace, etc. I sincerely apologize in advance if this causes any annoyance or confusion for non-American readers. In addition, I try to convert amounts of money discussed in the book to US dollars using the average exchange rate for the year.

There are sidebars at the end and throughout most of the sections. The sidebars are related topics that don’t fit the narrative on Real Madrid but shed light on the topic discussed in the chapter. Often the sidebars relate to American sports examples or an analysis of data or academic theories in order to illuminate an idea or help readers better understand the discussion.

Writing a book is a lengthy process—as well as is editing it, translating it, designing it, producing it, and marketing it. In order to have the book published in English and Spanish at the same time, which I felt was important, and to come out by a certain date, I had to submit my final draft to the publisher before the conclusion of the 2015–16 Real Madrid season. Therefore, the book does not reflect the entire season, but the data does include that Real Madrid won their eleventh Champions League trophy, La Undécima, in Milan, Italy, on May 28, 2016.

Lastly, I anticipate that I will take criticism from many sides. Many people have very passionate opinions regarding Real Madrid, their own favorite and rival soccer teams, the sport of soccer, and sports generally. The passion is so great that even respected scholars sometimes seem to put aside objective or critical thinking when it comes to the topic. When I interviewed people, I discovered many of their opinions are based on experience or gut feelings or simply what they have read or heard in the media, rather than facts or data. I am not sure they realize it, but some of their opinions have both strong and subtle biases, sympathies, and prejudices, and sometimes motivations. I know I have some, too, but I take the steps of challenging them as best I can, as described in my methodology. I do think approaching this study essentially as an outsider without preconceived history, loyalty, or family ties to an European soccer team, not having really lived in Spain or Europe for a long time (but having spent enough time in Spain and Europe to understand some important nuances), and having limited experience-bias does help produce fresh and original ideas and research.⁷

La Undécima. A photo of the players and coach lifting the 2016 UEFA Champions League trophy in Milan on June 28, 2016, after defeating Atlético Madrid. It is Real Madrid’s eleventh European Cup. After extra time, the final finished with the score still tied 1-1, and Real Madrid won 5-3 in a penalty shootout. Lucas Vázquez, Marcelo, Bale, and Ramos scored their penalty kicks. Cristiano Ronaldo scored the decisive penalty kick after an Atlético Madrid player missed his. Sergio Ramos, the team’s captain who also scored Real Madrid’s goal, is seen lifting the trophy. The coach, Zinedine Zidane, is dressed in a suit and tie.

As you read the book, keep in mind that I am using my best efforts to draw on my academic training and to shed light on a fascinating topic via a scholarly framework. Readers may agree or disagree or even feel like other aspects should be mentioned or examined further. I genuinely welcome constructive feedback. As an academic and curious person, I am always learning and trying to get to the most reasonable conclusion.

If you have any thoughts or comments about the book, please feel free to email me at my Columbia Business School email: sgm2130@columbia.edu. I can’t promise that I will respond to every message, but I can promise you that I will read each one.

¹ A.T. Kearney White Paper, The Sports Market.

² Fabio López, a successful asset manager from Madrid that married a close family friend and then became a close friend himself, had set up the 2014 meeting with Carlos. Fabio knows Carlos because Fabio’s father, Pedro López Jímenez, is on the board of directors of Real Madrid. I am an adjunct professor at Columbia Business School, after having worked in finance for more than twenty years. Fabio and Pedro thought Carlos and I would enjoy speaking together and that Carlos would be a great guest speaker for a popular Columbia University Business School class that I teach in Madrid for one week each January.

³ The Union of European Football Associations (UEFA) is the administrative body for association football (soccer) in Europe and organizes the competition. It is one of six continental confederations of the world soccer’s governing body, Féderation Internationale de Football Association (FIFA).

⁴ I remember first hearing the word or idea of “galácticos” a few days after my seventh birthday in May 1977 when my soccer-loving father, who had immigrated to the United States from Greece, took my older brother Dean and me to Chicago’s Soldier Field to watch a North American Soccer League game between the Chicago Sting and the New York Cosmos with its star “galácticos” players: Brazilians Pelé, Carlos Alberto, and German Franz Beckenbauer.

⁵ My family and I had moved from New York to Madrid for approximately six months in 2013 to immerse ourselves in Spanish culture and improve our Spanish. While living in Madrid, we attended one Real Madrid regular season game together. I am a very enthusiastic fan of the city of Madrid, its people, and its culture, but no one would call me a hard-core Real Madrid fan. I don’t own any Real Madrid merchandise. I am equally delighted to see Real Madrid, Atlético Madrid, Getafe, or Rayo Vallecano win because my friends in Madrid typically root for one of the local teams.

⁶ Billy Beane is an advisor to Dutch professional soccer team AZ Alkmaar. He also is a part owner in MLS’s San Jose Earthquakes but does not advise the team.

⁷ In a 2014 interview with Sean Ingle of the Guardian, Billy Beane said, “I’ve got brilliant staff . . . One of my right-hand guys . . . has a PhD in behavioral economics from the University of California, Berkeley. He never played much baseball. Isn’t that a disadvantage? It would be hard to imagine many English clubs doing the same . . . but he has no experience-bias when he comes to my office, so he is able to question the obvious . . . A guy like myself, who has been in the game his entire life, may not be able to spot when the emperor is not wearing any clothes.”