Golf: A Good Walk Spoiled [Revisionist History]

Malcolm Gladwell hates golf.

He views golf as a pastime largely engaged in by rich, white men running large companies, played on vast swaths of private land—accessible only to wealthy people—in urban areas that are park-poor. And subsidized by the very people who can’t use the golf courses.

He hates it for socio-economic reasons. In his opinion, we should all hate it.

Gladwell is a runner; one of his runs is around the Brentwood Country Club, “a luxurious private golf and tennis club” in west Los Angeles. He and fellow runners hug a narrow track outside the course, blocked by fencing; he gazes upon the lush green lawns mostly devoid of people.  He gets curious; then riled up.

According to Gladwell, golf isn’t a harmless habit impacting only the player. It has consequences: it’s a sport 1) with the potential to lower company profits, that 2) denies cities desperately needed tax dollars.

Gladwell’s podcast drills in on these issues, fleshing each one out, with political snark tossed in along the way.  It appears to be about golf; but it’s really about equity and fairness.

“Golf. Crack cocaine. For rich white guys.”

Gladwell starts with research done by Lee Biggerstaff, an economist at Miami University, that gathers golfers’ handicap data and matches it to CEO’s of top public companies.  According to Biggerstaff, golfers who are obsessed with golf can spend 5 weeks a year golfing. If they’re leaving the office to golf, they’re not on the job. His study suggests that,

“the more golf a CEO plays, the worse his firm does…and the more likely he is to be fired.”

The most obsessed golfer in the sample is a CEO who plays golf 148 times a year, an amount Gladwell calls an addiction. At that level, Gladwell considers golf a self-destructive habit; something that results in missed work, harms ones’ performance and puts ones’ career in jeopardy.  All while costing a lot to play and usually requiring membership at private golf clubs. From Gladwell’s perspective, it’s a hazardous sport for the individual and the company they oversee.  And yes, he takes a jab at Trump.

Property Taxes: Gift from God #1

Gladwell next hammers on the issue of golf course property taxes in California, using private Los Angeles courses to illustrate.

California generally collects property taxes on properties based on a “highest and best use” concept; if you want to grow corn on a one-acre plot in the heart of urban LA, California is going to tax that land “as if” it has something substantive built on it, something that’s considered the highest and best use of the land.

In 1960, this made golf clubs nervous. They banded together and proposed an amendment to CA’s State Constitution to “permanently exempt them from the highest and best use standard.“

“If you think about it, this is seriously audacious,” Gladwell asserts.  “Private golf courses are these massive, opulent, gated playgrounds and membership is often restricted.”

Despite the fact that, in 1960, a lot of these LA golf courses didn’t let in Jews or Blacks, they “wanted a constitutional exemption to ordinary property taxes, like they were some kind of public amenity.”

To pitch their case, they used Bob Hope, an obsessive golfer and popular entertainer, with a persona as an “everyman.”  He became the face for the Proposition, helping it pass. It was added to Article 13 of California’s Constitution, where it remains. Gladwell points out:

“In order to win a set of privileges for the very wealthy, California’s country clubs turn to a man who symbolizes the common man.”

Property Taxes: Gift from God #2

In 1978, another California Proposition affecting real estate taxation passed and was added to California’s Constitution: Proposition 13.  With that Proposition, property taxes were set at 1% of the value of the property when purchased; annual increases occur, but not based on increases in property value. Reassessment, and new rates, happen only after sale, transfer or construction.  For a sale to trigger reassessment, the ownership change must be greater than 50%.

For the golf courses, this is another gift, especially given the fact that CA property values have skyrocketed. Their property tax increases are kept in check as long as the property doesn’t change hands. Given that most of the LA golf courses were founded before 1978, and ownership is in the hands of the members, most courses benefit from this proposition, especially as there was a presumption that ownership didn’t change.

Until 2010, when a newspaper questions that presumption. They dig and conclude that equity ownership—the membership by the individual owners—has in fact changed hands plenty of times, to the extent that the current ownership is more than 50% different than in 1978. An attempt is made to reassess the value of the golf courses and increase their taxes. It’s put to the city of LA to decide.

In June 2010, LA County’s Tax Court concluded that, while the golf courses have had small slices of individual ownership changes, no single 50% change occurred so the golf courses haven’t changed hands; no reassessment.

What’s the financial impact of these legal decisions? A back of the envelope estimate of the property taxes that would be due by just the private Los Angeles Country Club—based on current market values—is between $60 and $90 million a year. The amount they actually pay? $200,000.  That’s an $89,800,000 tax subsidy.

This conundrum prods Gladwell into exploring ancient philosophy, specifically Theseus’s paradox. Plutarch, in the late first century, wondered: If all the pieces of Theseus’s ship are replaced, is it the same ship?  It’s a 2,000-year-old paradox, with no bright-line answer.

The two arguments that tug in the paradox come to different conclusions:

1. If the change is gradual and a new form replaces the previous form, an object can maintain its identity: the ship is the same, even if boards needing replacement are replaced, as the form is the same. (Spatiotemporal Continuity Theory)
2. If you change the parts, one at a time, you change the thing: a ship in a museum is stolen one board at a time, all the stolen boards are moved to a new location, and reassembled into the “original” ship. The ship in the museum is a replica.

If all the members who own the golf club have been replaced, is the ownership still the same?  The courts, in Gladwell’s view, voted that, yes, ownership was still the same; identity was maintained.  Which leads to Gladwell discussing aristocracy, inherited rights, privileges, and fairness, and ultimately calling golf “an instrument of medieval privilege” and the golf clubs of LA “aristocratic institutions.”

Los Angeles is short of public parks. It lacks the equivalent of NY’s Central Park or San Francisco’s Golden Gate Park.  Yet there are these vast parklands that exist: the private golf courses of LA, played on by the rich, closed to the general public, yet subsidized by that public.  Given those subsidies, Gladwell pleads with the golf courses to give something back to the communities.  St. Andrews in Scotland, he argues, is open to the general public on Sundays, and private courses in Canada allow public access at identified times.

“Take down your barbed wire,” he cajoles, and open up the land to the people.

Random golf trivia from the podcast:

1. “A typical golf course is 200 acres, give or take.”
2. “When a fancy golf course rebuilds its bunkers, it typically takes 389 truckloads of sand.”
3. “A good, private course can handle no more than 72 golfers at once; that’s one golfer per 120,833 square feet.“  If basketball had the same population density requirements, a basketball court would be 30 acres.

 

• Podcast: Revisionist History
• Episode: A Good Walk Spoiled
• Host: Malcolm Gladwell
• Date: 6/14/17 (Season 2, Episode 1)
• Duration: 34 minutes

Revisionist History podcast “is Malcolm Gladwell’s journey through the overlooked and the misunderstood. Every episode re-examines something from the past—an event, a person, an idea, even a song—and asks whether we got it right the first time. From Panoply Media. Because sometimes the past deserves a second chance.”

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More Information:

1. 1 Surprising Activity That Bad CEOs Do the Most, Erik Sherman, , 8/9/16
2. Why You Should Care About Your CFO’s Golf Game, Michal Addady, Fortune, 12/21/15
3. We Should Raise Taxes on These 3 Things to Pay for Healthcare and Parks, Hillel Aron, LA Weekly, 7/5/17
4. Some Golf Clubs May be Reappraised for the First Time Since Prop. 13 Passed, Alexandra Zavis, Los Angeles Times, 1/16/10
5. CA Proposition 6: Assessment of Golf Courses—Constitutional Amendment, 1960
6. CA Proposition 13: Tax Limitation—Initiative Constitutional Amendment, 1978
7. California Constitution, Article XIII Taxation, Sec. 10: taxation of nonprofit golf courses, 10 or more acres.