Grappling with the Recession

Policy lessons from one of the few bright spots in the American economy

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If you're an economically-depressed city looking for such an economic jolt, there are few more attractive stimuli than the Ultimate Fighting Championship (UFC). The mixed martial arts league is a financial bonanza; a single UFC fight garners a staggering $2.8 million in gate revenues on average. Studies have indicated that a UFC event creates over a thousand local jobs and can stimulate as much as $10 million in economic growth in a given state.

As unemployment hits a 26 year high, the UFC's financial prowess has important lessons for policymakers looking for an economic boost.

What's the secret to their success?

The fire of competition

The story of the UFC began with the noble purpose of discovering the absolute best fighters on planet Earth. Toward this shamelessly Darwinian end, the idea was to sponsor cross-disciplinary fights between the best boxers, wrestlers, and martial artists alive. In this format, called "mixed martial arts", participants would fight until they knocked the other out, and the champion of this ecumenical pugilism would be justifiably crowned Ultimate Fighter.

At the time of UFC's founding, though, this was a radical idea. Contests between practitioners of different fighting methods never happened. Boxers, wrestlers, and martial artists were rigidly segregated into specific fighting disciplines, each developing their own proprietary methods, exclusive rules, and provincial attitudes, rarely if ever interacting in professional competition.

But the UFC broke down these barriers, facilitating competitive exchange between all these disciplines to discover the greatest fighting methods. In the UFC, you never see flashy ornate maneuvers such as spinning kicks, because they simply do not work in the sphere of raw hand-to-hand combat.

Unlike the UFC, however, American economic policy is an anti-competitive league. Our government bails out failed corporations, resuscitates outdated programs, and arbitrarily picks winners in a myriad of private industries. Why are we afraid to compete?

The Octagon: A global melting pot

From the UFC's founding, the organization has enjoyed an impressive international reach. The winner of the first UFC was one Royce Gracie, a practitioner and founder of the eponymous Gracie Ju-Jitsu, a creative blend of Japanese and Brazilian fighting influences. This multidisciplinary background allowed Gracie to adapt to a broad array of opponents, and his transnational fighting method has become one of the most popular and effective in UFC history.

Through its constant pursuit of the most efficient fighting methods on the planet, the UFC has become an international forum of martial arts excellence. Fighters from Eastern Europe to South America have infused the mixed martial arts world with new techniques and new fighting philosophies. Global supply chains produce cutting-edge training equipment and international exchange has served to further develop talent.

Just as the UFC has gained from globalization, so has America. Over half of Silicon Valley startups are run by immigrants, and immigrants statistically start businesses at a higher rate than natives.

Unfortunately, the current trend in American policy is to shun the benefits of globalization. A disturbing increase in trade barriers, import restrictions, and immigration inefficiencies have stifled entry of new talent and ideas into our country.

Anarchy, state, and fighting utopia

At its infancy, the UFC was an even rawer and more primitive sport than it is perceived as today. No gloves were used, head butts were permitted, there were no rounds, and basically the only real rule was fight-till-you-drop. Much like the early version of professional football - so violent that President Teddy Roosevelt threatened to ban it entirely - the sport was a bloody fracas nearing extinction.

Fashioning himself as the modern-day Roosevelt, Arizona senator John McCain called the UFC "human cock fighting", and set upon a personal campaign to ban the sport in its tracks. 36 states followed McCain's lead, banning mixed martial arts events within their jurisdiction.

Government even tried to dictate rules for the UFC, with atrocious results. A slew of court challenges before the 9th UFC championship in Detroit in 1996 resulted in the city banning closed-fist strikes for the event. Under such ridiculously neutered circumstances, the fights became unsurprisingly boring, anticlimactic, and lacking all of the excitement that made the UFC the popular and profitable tournament fight that it was. For the title fight, brawlers Dan Severn and Ken Shamrock meekly circled each other for about 20 minutes, with little or no meaningful contact. Offering more gladhanding collegiality than gladitorial combat, UFC 9 is widely regarded among fans as one of the worst mixed martial arts fights of all time.

Instead, the UFC self-regulated, voluntarily adopting the rules that worked for fighters and fans. The changes began with time limits on rounds and increases in referee authority. Later, various dangerous strikes like head butts were banned. Over time, various regulations - such as weight classes, gloves, and time limited rounds - were introduced. Now there are restrictions and regulations in place to preserve the best of competitive fighting with respecting basic standards of safety protection. The UFC's enhanced standards have even satisfied the great campaigner himself, Senator McCain.

The key wasn't that UFC needed more rules, it was that it needed the right rules.

This fact has important lessons today, as our leaders try to enact rules to prevent market carnage in the wake of the recent financial crisis. Too many rules can be worse than too few rules. Heavy-handed regulation doesn't work.