Wednesday, June 3rd, 2009
This past Memorial Day Weekend the Indianapolis 500 was run as normal, with a storybook ending as Helio Castroneves, fresh on the heels of his acquittal for tax evasion, took the checkered flag. 2009 marks the 100th anniversary of the founding of the Indianapolis Motor Speedway (the 500 Mile Race dates to 1911). This is definitely a year at the track with historical significance.
Shortly after the race, Speed TV reported that the IMS board, made up of members of the Hulman-George family, had ousted long time CEO Tony George. This caused me to return again to thoughts of the Speedway and what it teaches us about the future of the Midwest.
Think about some of the traits that are thought to hold back the Midwest and cause its decline in the 21st century. Near the top of any list would be excessive nostalgia and resistance to change. The Midwest all too often looks back to an imagined good ‘ol days and clings to its glory days. Any proposed change is met with not just resistance but outright hostility and venom in many quarters.
If ever an institution deserved to embody this attitude, it is the Speedway. The Indianapolis 500 is the most famous automobile race in the world. It is the only thing that associates with the city in most people’s minds around the globe. It has longstanding, cherished traditions such as the Borg-Warner Trophy, the singing of “Back Home Again in Indiana”, that first sip of milk by the winner and much more. The track drips with history at every step. If you ever take a trip there, you’ll first be awed by the sheer size of the place – reputably the Indy 500 is the largest attendance single day sporting event in the world – and also amazed at the specialness of it all.
But Tony George decided that all this success was not good enough and embarked on a series of, what were for the tradition bound Speedway, radical changes and innovations:
- He broke with the tradition of open wheeled racing only at the Speedway by inviting in Nascar to start the Brickyard 400 (now the Allstate 400 at the Brickyard), now one of Nascar’s top events. This brought in significant new revenue to fund more speculative ventures.
- He built a road track on part of the infield and hosted Formula 1 under the name of the United States Grand Prix. (Interestingly, years ago the Indianapolis 500 was part of the Formula 1 series).
- He brought in the MotoGP series of motorcycle races.
- He modernized the track in other ways, such as by replacing the main tower with a modern version of the old pagoda.
- Perhaps most controversially, he used the Indy 500 brand to start the Indy Racing League, a rival to the traditional US open wheeled series called CART. His idea was to make open wheeled racing more affordable through more standardized specs as well as other things. Perhaps not least of which was that he wanted to control all aspects the series himself. This led to a bitter fued that lasted untold years until CART finally folded and sold its assets to the IRL.
- To address the decline in open wheeled racing generally, he cut back Indy 500 preliminaries significantly. The once “month of May” is now more like the half month of May.
It is also worth nothing that this hasn’t been a one and done, flash in the pan type of change, but rather sustained commitment and continued innovation over many, many years.
This has not been without its setbacks and controversies. Among them:
- The IRL-CART split exacerbated a secular decline in open wheeled racing just as the formerly “red neck” Nascar became ascendant. Nascar is now the most popular racing series in America, and open wheeled racing’s future is, frankly, still questionable.
- Formula 1 is gone. A significant number of fans disappeared after a tire fiasco that saw only seven cars run in one US Grand Prix. When his contract was up, George elected not to renew a long term deal with Formula 1 on terms that would lose too much money.
- Interestingly, last year Nascar had a similar tire fiasco that marred their race.
- Attendance at the Indy 500 is way down. I’m not a kid, but not an old guy either. But 25 years ago all the Speedway had to do to sell out was to mail out renewal forms. The week before the race, driving back from Chicago, I saw a billboard in Lake County advertising the 500 saying, “Tickets Available” like some pathetic rental car company flogging car hire.
- While there is still a 500 Festival in Indianapolis, with events like the Mini-Marathon (the largest half marathon in America) and the parade, its own city no longer embraces the race as core to its identity. Rather, it’s treated almost with a certain degree of embarrassment in the way that a college freshman no longer wants to be seen wearing a high school letter jacket.
Yet despite this, I can’t help but think that Tony George is not just doing it the right way, but showing the way everybody ought to be doing it. The challenges facing open wheeled racing were in the air to be seen. Tony George didn’t wait around for them to crush him. He decided to act while he was still in a position of strength, using his franchise to fund a transformation while it still had top value. Does anyone really believe that if the Speedway had stayed with only the old school 500 Mile Race that it would be thriving today? There is no doubt in my mind that this would be one troubled enterprise, with problems not totally dissimilar to the ones faced right now, only without any other carefully cultivated revenue streams.
We just watched Chrysler and General Motors file for bankruptcy, and those companies, their employees, retirees, suppliers, dealers, communities and other stakeholders face a terrible period in the wake, and a long period of wrenching change. That’s a fate that frankly might have awaited the IMS had it not decided to adopt the “only the paranoid survive” mentality and actively embrace change.
In short, the IMS is showing the way it ought to be done and exemplifying the best of what ought to be in the New Midwest. The 500 Mile Race is still there. The best of its traditions remain. The spirit is alive. But there is a lot of newness too to take that tradition forward into the future.
I’ve written about historic preservation before. The Indianapolis Motor Speedway is a National Historic Landmark, and one of the few that is still actively being used for its original purpose in a modern day setting. This is a rare place where history isn’t something far in the past, but where it is still being written.
There’s certainly a lot of risk. Success is not guaranteed for the IMS by any means. But if you never take any risks, defeat is almost certain in the modern age. I for one think that the IMS is as close to golden as they could hope to be. Finally with control of open wheeled racing after years of fighting, the IMS can focus on renewing the sport.
Its competition is now facing the problems that Tony George foresaw in his industry, only without the same foresight to have done something about it. The “Nascar bubble” has popped. Attendance and viewership is way down, particularly outside of their core base in the South. Their sponsor base is withdrawing, and the American car manufacturers who were always the base of their sport are in trouble and doubtless questioning whether the money is worth it, particularly when there is no longer any company content in the car. That’s the biggest problem. Nascar abandoned its roots in stock cars in favor of standardized kits and driver cults. But ultimately driver celebrity will never sustain the loyalty that the car brands did.
My Alabama father-in-law bleeds Ford blue. His garage is bigger than his house. He is a car nut and only will work on Fords. He’s got a old limited production run racing special from way back when that he still drag races as Nostalgia Super Stock. (He brags it would actually qualify for Nostalgia Stock, if there were such a thing). Every part on that car is properly date coded such that it could have possibly been originally installed on that car at the time of production. No matter how much someone likes Jeff Gordon today, personality will never generate that type of loyalty in any significant numbers again. With Nascar abandoning almost even the pretense that a “Ford” is actually a Ford, who is going to care for the long haul?
Formula 1 has its own challenges, with cheating scandals, its own internecine disputes, and much more. Interestingly, they are starting to look at ways to bring down the astronomical cost of entry through more standardization and/or “salary caps”. It makes me wonder if Tony George didn’t call the top of the Formula 1 bubble when he declined to renew his contract. Two historic events really pop out in my mind. The first was Sam Zell selling out his real estate portfolio and getting out of that business. The second was when, a way back, I remember reading an article in the Journal about some Taubman company mall somewhere was opening despite not having a Gap. Gap was at the height of their power and generally able to dictate to developers. Taubman was unwilling to agree to their terms. In retrospect, both of these events called the peak, in real estate and in Gap stock respectively. Did Tony George call the peak in Formula 1? Only time will tell. But I suspect after some events play out there, the Speedway will be back in the Formula 1 game – on vastly improved terms.
Frankly, all things considered, it’s hard to realistically imagine the Speedway being in a better place than it is today. Hey, they could go bankrupt tomorrow for all I know. They are a private company that is famously reticent to share information to the public. They don’t even officially release race attendance. But I’m very impressed with the moves they’ve made and the bets they’ve placed. Stay tuned to find out where they land.
Something else is very worthy of note. The Speedway is a 100% private entity that has never, to the best of my knowledge, asked for or received any public subsidies apart from public safety support for events. The Speedway is a 100% privately financed venue. It actually pays taxes. I’m not even aware that they’ve even received tax abatements on their investments. Truly remarkable and definitely noteworthy in the modern era.
A lot of Midwestern places and institutions could learn a lot from studying Tony George and the Speedway. Now that he’s been forced out, it will be interesting to see what happens to them.
So what next for the IMS? In my view, the kit car concept has its pluses, but ultimately isn’t the greatest. One of the things that the IMS is most proud of is that the Indy 500 pioneered technologies that ended up in production vehicles many of us drive today, like rear view mirrors. Can the Speedway recapture some of that spirit of technical competitiveness in way that a) ends up being directly consumer relevant in some instances and b) doesn’t bankrupt racing teams? That’s an interesting challenge.
Curiously, I already had this article cued up, but today I pick up the latest issue of Nuvo and discover that Tony George was honored with Cultural Vision Award. He talked a bit about the Speedway and green tech. The article notes:
George sees the IMS playing a significant role in the reinvention of the American automobile industry. “I think the hundred year history of the Motor Speedway has been closely aligned with the development of the automobile as part of our culture,” he says, adding that he believes this has important implications for the national and local economy.
The article talks about sustainable fuels among other things. Perhaps giving “sustainability credits” in the form of spending, horsepower allowances, or other things as a reward for creating various green aspects of the car could draw capital into the IRL, create racing drama, drive consumer innovation, and re-inject competitiveness and innovation into the teams. This would also align to the energy systems local economy development effort.
Whatever the future holds, I’ll be interested to see how it plays out.