Lance Armstrong Meets Wall Street

Lance Armstrong, a former sports icon and paragon of human resilience has been in the news lately.

It’s difficult to watch it without a sinking realization. Few wade through the sea of sworn affidavits from former teammates, legal testimony and other evidence within the infamous USADA report without reaching this same conclusion.  

Lance was a doper.

United Cycling Federation has decided to strip him of his record seven Tour de France titles, Nike has dropped his endorsement contract, and supporters of Livestrong want their money back.  Meanwhile, our former Wheaties athlete endures the flaming arrows of righteous indignants on CNN and across the blogosphere.

Lance Armstrong came to prominence after his Tour de France victory in 1999, and a nation revelled in his powerful biography It’s Not About The Bike, which tells the story of his troubled childhood, early racing glory, remarkable recovery from cancer and journey back to life and sport. He inspired millions, including me.

In high school, I was recreational cyclist with a bike best suited to the 1974 Tour de France.  I filled my mind with heady dreams of pelaton glory as I motored up the steep Ozark grades of home.  In my heart however, I knew better, and except for my ill-fated attempt to become the world record holder in pogo stick jumping (at the age of ten I was only about 141,500 jumps short of the mark) my sports dreams have stayed dreams.

I am not a Lance apologist, at the same time, I have found it hard to stomach the barbs of pundits who blame him for single handedly tarnishing a sport that was already rocked by doping scandals before this news broke.

I would rather state that the system was broken.

We have learned a lot about the nature of systemic problems in our study of the Wall Street financial crisis of 2008.   

At first glance, what appears to be work of greedy, competitive investors later proves more complex.  Greed had a lot to do with it, but so did altruistic desire to increase low income home ownership, by giving subprime mortgages for people who should not have qualified.

Big banks made foolish decisions, but they were aided by the lack of diligence by the SEC, who in 2004 loosened the Net Capital Rule, allowing these entities to become more overleveraged.

President Clinton talked a good game at the recent Democratic Convention, but he signed the Commodity Futures Modernization Act of 2000, which allowed the “self regulation” of over the counter credit default swaps, and indirectly caused the value debt of CDS to balloon one hundred-fold in the coming decade

The list goes on, but the bottom line is this.

A lot of people benefitted, from the investors who financed the loans all the way to the contractors who built the new houses. Though some were more culpable than others, it is hard to blame one group of people when there was plenty of guilt to go around.

Kind of like cycling.  Armstrong, regardless of how you feel about his bullying ways, operated in a transitional period of cycling where doping was endemic.

The one way they did it was with Erythropoietin (EPO).

EPO is a drug that boosts the blood’s oxygen carrying ability, and therefore the endurance of the athlete. It became widespread in the mid to late 1990s, and because tests were not developed until 2000, its use before was virtually unchecked. Even after that, most riders found they could easily evade detection by clever masking techniques.   Like complex derivatives, doping became more potent, dangerous and opaque. The ability to police this drugs, could not keep pace with innovation.

Tyler Hamilton, a former teammate of Armstrong, stated in a recent interview that he estimated that ninety percent of the fellow Tour de France riders of that time were doping.  He, and others have said that in order to compete on that level, riders had no choice but to use these kinds of drugs.  In a sport of hypercompetitive males where the difference between winning and being a footnote was sometimes seconds, is it realistic to expect someone like Armstrong to buck convention and sit out?  It’s like asking an unscrupulous Wall Street trader to stop dealing high yield toxic derivatives.

In cycling, like Wall Street you had to pay to play, and given the marginal enforcement in both arenas, most embraced a Faustian bargain to get that chance.

As fans of both the stock market and those yellow bracelets, not many of us were too concerned either.

It is telling that the UCI, the governing body that has chosen to revoke Armstrong’s titles, will not reassign the medals to his challengers. In fact, all of the runner ups to his seven victories have been either suspended or investigated for doping violations.

Unlike Wall Street traders, Lance will have to give back his prize money. While cycling may be getting clean, I am not sure that we are addressing the systemic issues that will likely lead to another financial crash.

In his book Not About the Bike, Armstrong tells of his nebulous future after cancer recovery, before he regained his cycling prowess.  Uncertain of what career to pursue, he thought he might be stockbroker.

Perhaps he has a future after all.