$200 million budget cap agreed?

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Pup
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Re: $200 million budget cap agreed?

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I think the small teams might agree to that, since they would get the most reward as a percentage of their budgets. But the larger teams would probably balk at the idea, since it's essentially a license for an unlimited budget, only with diminished returns. You could argue too that it makes the sport even less equitable, since it would allow the only rich teams to buy their way around the testing limits.

Maybe if instead of the money going into a pool, it went entirely to their closest competitor. Now that might stop spending in it's tracks. :lol:

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Shrieker
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Re: $200 million budget cap agreed?

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I don't -for the life of me- understand the logic behind a budget cap. A team with more money will always find a way of spending it for any benefit imaginable. Look what happened when they banned testing. For the teams who had spending power, that went right into simulators. They have poured tens of million of dollars into simulators, which could never fully fill the shoes of real life testing. But there's an upside to it nevertheless: I expect it's gonna be good for sim racers in the long run :lol:

I think the biggest flaw in the commercial structure of F1 right now is the distribution of prize money. Top teams get too much and smaller outfits too little. Balancing it a bit would be a start.
Last edited by Shrieker on 15 Feb 2014, 22:41, edited 1 time in total.
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JRalph
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Re: $200 million budget cap agreed?

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Pup wrote:You could argue too that it makes the sport even less equitable, since it would allow the only rich teams to buy their way around the testing limits.
I guess I would disagree with that statement. Assuming that the cap and cost for going above the cap is set in an effective manner, the rich teams would definitely have to think twice about if extra testing is really beneficial for the cost of doing that testing. And if they deemed the testing worth it, the teams that couldn't afford to do extra testing would still get a benefit, albeit monetary rather than data gathering.
Pup wrote:Maybe if instead of the money going into a pool, it went entirely to their closest competitor. Now that might stop spending in it's tracks. :lol:
Indeed that might be the best way to stop spending :wink:

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iotar__
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Re: $200 million budget cap agreed?

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turbof1 wrote:Accountancy has since then also massively developed. At present, we speak of Financial Technology; entreprises, especially big ones, construct their operations in such a way they often have to pay a tiny fraction of taxes they normally need to pay. And they ever get better and better at it. Every single university on this planet runs a wide accountancy education program dedicated to this.

Most companies behind F1 are very much capable of using these constructs to hide away budgets. The smallest teams will probably not have access to this. So they will be infact more disadvantaged in the long run.

Bringing in a budget cap will just result into another arms race, but this time off the track, hidden from everybody.

The only way, and really the only way, to level out the teams financially is to kill off the sport. And the only other option to level out the teams competitively is to allow innovation, which has been killed off long a long time ago.
How so? Smaller teams won't be affected by it because they'd be nowhere near budget cap, they won't spend a penny hiding income they don't possess. As for abilities to hide everything - owners of FOM are not that bad at it themselves, should make it easier to police it. Wait, bad example - sale of F1 for nothing...

Since it's that easy to hide budget why were Red Bull opposing it? They should get something in exchange and cheat away, only profits right? No - it's not easy to break the rules and get away with it 100%. At best it will take some effort and some risk. You'd need to calculate everything into cheating and this risk-reward is not straightforward especially when marketing/image/brand is involved. Ask McLaren if they'd go for Stepney data again, although it might not be the best example after tax-payers helped them with that burden.

Knowing no details about financial/legal tricks, even if they're untraceable at some point there has to be transition into physical gains for F1 team. There are only so many areas to put money into to be in front, and so much budget you can hide. I don't understand taxes comparison - either you break the law or you don't as candidate for F1 team owner G. Haas realised. I bet he had the smartest accountants, too. Of course counter-argument may be that he got away with much more but this goes back to cost/reward part (not only financial in F1).

Do you (not specifically you, anyone who thinks it'd be so easy to get away with) also think current restriction on CFD, wind tunnel usage, full scale models or summer break qualify for "if anyone wants to break the constraints they can do so" logic? Why no hidden "outsourcing" here? Now connect it with budget/personnel and it might work to some extent.

Even if it's another half-hearted attempt it's a start unless it's full of loopholes. How many teams qualify for 200+ upper limit of spending anyway, 2-3? If most teams can't afford it it would be so much easier to police it, no need to check everybody. I never bought it's impossible to police dismissal, police 90% then, leave remaining 10% for teams to put into risk/reward and resources to hide cheating area and we'll see if it's that easy.

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WhiteBlue
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Re: $200 million budget cap agreed?

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200 m surely is not a good level for a budget cap, but if it is the only starting point they can agree to it is better than no cap. Once they start they will improve the scheme every year. I'm not worried. The FiA have committed themselves to a budget cap and they will eventually sort out the problem. It took them five years to get fuel restricted race engines and now we are going to have them. Things are not perfect in the beginning, but if you start on the right way towards the objective you will eventually arrive. It only takes persistence. Bernie will not live forever. When he is in jail F1 can move towards a better distribution of the price money.
Formula One's fundamental ethos is about success coming to those with the most ingenious engineering and best .............................. organization, not to those with the biggest budget. (Dave Richards)

Pup
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Re: $200 million budget cap agreed?

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I don't know how much blame can be placed on Bernie for the distribution inequity. Probably a good bit of that goes to Ferrari, Red Bull, and McLaren. Bernie has an interest in keeping Ferrari competitive, but then so does Ferrari.

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hollus
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Re: $200 million budget cap agreed?

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That sounds awfully similar to the luxury tax implemented in the NBA, and guess what? It works rather well there.
JRalph wrote:As I am new to F1, only started watching this past year, please forgive me for my naivety on the inner workings of F1 teams, but assuming that a budget cap is needed to control costs and make it more competitive for smaller teams, a more objective measure of "cost" is needed than a team's budget which can easily be fudged.

My suggestion would be to create a soft cap on the number of hours that a team can test on the track, run in the wind tunnel or spend on their simulators. Teams would then be allowed to test on track, in the tunnel or virtually to their heart's content but for every hour above the cap that they test they would have to pay a set price into a pool. At the end of the year that pool of money would then be divided amongst the lower spending teams based on some criteria to be determined by people smarter than I.

So for example lets say there is a cap of 400 hours and any hour above that cost $50,000/hr. Then if a team like Red Bull had spent 600 hours testing during the year, they would have to pay $10,000,000 into this pool. At the end of the year that pool would then be divvied up based on the number of hours each team spent testing, with the team testing the least getting the most of that money.

Obviously those exact numbers would have to be fine tuned to make sure that it was actually helping to control costs as well as make it beneficial for the lower tiered teams, but at the same time if a team wanted to make that expenditure it can do so.
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bhall
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Re: $200 million budget cap agreed?

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WhiteBlue wrote:[...]
I'm not worried. The FiA have committed themselves to a budget cap and they will eventually sort out the problem. It took them five years to get fuel restricted race engines and now we are going to have them. Things are not perfect in the beginning, but if you start on the right way towards the objective you will eventually arrive. It only takes persistence.
[...]
The FIA got fuel-restricted race engines through the implementation of a standardized fuel-flow meter. Again, the standardization of components is the only way impose hard limits on anything. Everything else is subject to interpretation, and the teams are extraordinarily adept at interpreting the rules in their favor.

Now I suspect you're more interested in defending the FIA than trying to come up with a viable solution. But, to anyone else: how can the sport implement a standardized cash-flow meter?

Should the FIA assume the role of an ATM through which all funds spent on F1 must pass? If so, how can the FIA guarantee the efficacy of such a plan? Presumably, enforcement would require the authority and ability to comprehensively audit every entity involved in the sport, including suppliers and sponsors. How will that work? How can the FIA compel companies, many of whom are privately held and under no obligation to disclose financial statements of any kind for any reason, to nevertheless regularly submit complete, unabridged financial dossiers for "scrutineering" by a Charlie Whiting-of-accounting? Can that work?

Or...
hollus wrote:That sounds awfully similar to the luxury tax implemented in the NBA, and guess what? It works rather well there.
...do we construct an altogether new paradigm and somehow convince teams to relinquish all power and control, even over their own names, logos, trademarks, etc., to instead become franchises of a larger entity through which everything must pass? This is, after all, the model for three (NFL, MLB, and NBA) of the five most-profitable sports leagues in the world (F1 and EPL being the other two). It's not necessarily a bad idea, either, as those three leagues are considered non-profit organizations since all revenues from league-wide deals are disbursed equitably among their constituent franchises.

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iotar__
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Re: $200 million budget cap agreed?

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It's about 100 million related to rather extreme case - Marussia but you can scale it up to Sauber/FI and 200. Google translate but you can figure it out. http://translate.google.com/translate?h ... 36562.html P. Symonds:
How much narrower the field would lie together at a budget cap of 100 million euros?

PS: You would have to say: 100 million euros and new rules. That would shrink the advantage of the rich teams because they could then save less of their experience advantage with over. Then all would be much closer together. The consequence of such a reform would be enormous: the priorities would shift. To prohibit or restrict individual things brings nothing. As we have limited test drives, the money was invested in simulators or test benches. Now just tested at the factory. With a budget ceiling will not do. If the budget covered by sponsors and the income of the FOM-income, no one would have more budget worries. There would be no pay-Driver more. As would level off from the driver's side a bit.
One of the key numbers is the money for development. What kind of development?

Symonds: Clearly wind tunnel tests. Since the major advances come from. One percent more aerodynamic efficiency is one-tenth on the clock. Then the freedom to do many things simultaneously. We have many more ideas than what we can implement. Then the analysis. We can analyze only a limited amount of data. In the great team work for the next race starts on Sunday after the last Grand Prix. There, every detail is chewed. In practice, so many new ideas that we can investigate only a part of the big teams but 100 percent arise.
What progress will have to bring a new development, so you will blessed by you?

PS: We meet once a week to discuss new ideas. It is then determined whether we follow them or not. The process is not easy. It play because many factors play a role. At the start of the season our car was slightly over the weight limit, because we have installed for the first time KERS. It was clear that at first everything saves weight, had priority. Each kilogram less are 0.04 seconds in lap time. This is physics. We have achieved this within three races. At Silverstone, some new components came to the car, not only the 2013er 2014er but also the car help. This is also a criterion. For us it would be uneconomical to produce parts that only yield half a year benefit. It is more difficult with modifications to the fairing and the exhaust. Since the simulation tools are not perfect yet. I can say though, that my three points output bring a tenth, but do not know if these three points per arrive under all practicable conditions of the circuit. Many of the answers we will get only during test drives. Some of the changes might bring us only on certain routes an advantage. We have to consider then, if that makes any sense.
Red Bull and Ferrari do not have to take care of it.

PS: Right, but also they have a problem. Since so many programs running at once, that there is great danger of getting too involved. Sometimes the car is slower than faster.
It brings it back to the question: where can you put your money in F1? People, facilities, wind tunnel programs or alternatively simulations plus some fancy R&D. materials etc. like infamous flapping wings ;-) What else - I have no clue.

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