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What the NFL Taught Toto Wolff About the Business of Formula 1

In Part 2 of Boardroom’s conversation with the Mercedes F1 boss, we explore the current generation of young drivers, scouting a teenage Max Verstappen, and the state of the competition’s cost cap.

The Formula 1 summer break is officially over. The final 10-race push for glory begins on Aug. 27 in North Holland at the Dutch Grand Prix.

Mercedes enters the Circuit Park Zandvoort in second place in the 2023 Constructors’ standings, though rip-roaring Red Bull is more than doubling the German outfit’s 247 total points to date. Drivers Lewis Hamilton and George Russell respectively sit No. 4 and No. 6 in the Drivers’ Championship standings, well behind Red Bull’s Max Verstappen.

While the 38-year-old Hamilton is far and away the most successful Mercedes driver ever — and arguably the overall GOAT of F1 with seven world championships to his name — Russell is still new to the world of top-tier racing teams. The 25-year-old Brit is in just his second year with the Silver Arrows after spending his first three F1 campaigns with Williams, replacing a consistently successful Valtteri Bottas after the 2021 season.

In the first part of Boardroom’s wide-ranging conversation with Mercedes team principal, CEO, and co-owner Toto Wolff, we heard in detail about the decorated executive’s unique, ever-evolving relationship with Hamilton. The Austrian billionaire also discussed how he identifies racing talent — which, not surprisingly, outweighs all else even in the era of hit Netflix docuseries Drive To Survive, which promotes personality and off-track marketability to a booming, global, and decidedly casual audience.

“Only the skill as a driver counts over a long period,” Wolff told Boardroom in June at its offices in New York. “I think we take a boring driver that has the potential to be a world champion rather than a very exciting personality that’s not going to be a driver who will win. The personality development comes with success.”

L to R: Mercedes Driver Development Director. Jerome d’Ambrosio, Toto Wolff, and George Russell at the 2023 F1 Canadian Grand Prix in Montreal, Quebec. (Steve Etherington/Motorsport Images/Sipa USA)

Modern Formula 1 drivers represent an intriguing dynamic in sports. While the top racing prospects can often reach the F1 level in their early 20s — “fundamentally kids,” in Wolff’s eyes — they’ve also been driving competitively for 10-15 years at that point, necessarily growing up fast along the way with relatively few exceptions. Talent may eternally be the most important factor in determining which drivers on the come-up have championship potential, but timing and luck also come into play when scouting the next racing superstar.

Wolff identified the current generation of young drivers as including but not limited to Russell, Ferrari‘s Charles Leclerc, McLaren‘s Lando Norris, Alpine‘s Esteban Ocon, and, of course, the 25-year-old Verstappen.

“You see very early on in the driver’s career whether he has the potential, and you could see that it was a very strong generation,” Wolff said. “We all had them on the radar pretty early on.”

That includes a 17-year-old Verstappen back in 2014 when the young Dutch phenom was thriving in Formula 3. Wolff remembers speaking with him back then, but with Hamilton and Mercedes teammate Nico Rosberg finishing an overwhelming 1-2 in the Drivers’ Championship that year, the team wanted the future world champion to drive for a season in Formula 2 before onboarding him to the big leagues. Red Bull, meanwhile, had the massive advantage of being able to offer Verstappen an F1 seat on its sister team, Toro Rosso, now known as the organizationally independent AlphaTauri.

In large part due to that dynamic, Verstappen is well on his way to his third straight world title with Red Bull. We never got to see what kind of duo he and Hamilton would have made, a fascinating what-if for Wolff and the rest of the racing world.

Verstappen’s rise has happened to coincide with a huge rise in popularity and enthusiasm for F1 in emerging markets like the United States and others around the world — particularly, Wolff said, in terms of the live event experience. He singled out the Spanish Grand Prix in Barcelona selling out the last few years when it hadn’t in the past, as well as the United States Grand Prix in Austin that boasted record crowds last October.

However, with that success, Wolff warned that F1 always needs to be wary of precisely what kind of entertainment it means to provide. 

“Are we still giving our global audiences a product that they enjoy watching? And what does it mean to performance?” Wolff asked. “At the end of the day, it’s a meritocracy in our sport, and then entertainment for the sport, not the other way around. We have rules. And as long as you respect the sporting, technical, and financial regulations, you win on merit, and it’s for all of the other teams to just work more cleverly in order to catch up.”

One of the teams that’s caught up this year is Aston Martin. New signing and former world champion Fernando Alonso went from ninth in last year’s Drivers’ Championship standings as a member of Alpine to third as of this writing in 2023, and the returning Lance Stroll rose from 15th to ninth himself, helping the team catapult to an impressive No. 3 in the constructor race. Wolff credited team owner Lawrence Stroll — Lance’s father — with designing an ambitious plan and putting building blocks in place, including the intentional pursuit of Alonso and hiring longtime former Red Bull head of aerodynamics Dan Fellows as technical director.

Through these incremental changes, Aston Martin is on pace for its best F1 season yet.

“It’s a people business,” Wolff said. “There’s never a silver bullet where one guy comes and says ‘this is the rear wing you need to have on the car.’ because the cars are all different. It’s the group of people that collectively understand what they should be targeting and then working to achieve that target.”

Bringing in the right personnel is now more important than ever before now that we’re in the third season under the F1 cost cap, the league’s attempt to level the playing field and make races more competitive, a rule change Wolff considers seismic for the sport. In the past, he said, Mercedes would buy raw materials like aluminum or carbon, machine-design car components to a certain specification, put them onto a test car, and then decide whether on-track success correlates with its simulations. It either works or it ends up in the trash.

Today, there’s less room for swings and misses.

“We basically calculated the raw material and then the overheads of the development side,” Wolff said. “Today, we very much need to decide at the beginning when we purchase the raw material, where we think it’s going to yield some results at the end of its cycle. That’s a totally different approach to what it was in the past.”

Wolff said it’s most important that teams support the FIA, global motorsport’s governing body, in crafting, implementing, and enforcing these cost cap rules. If you violate them, he said it’s no different than cheating or gaming the system in the tech world. Formula 1’s 10 teams are now huge institutions with multiple divisions and different methods of accounting, which makes it even more important, per Wolff, that the FIA has a structure the teams can support so it can police the cost cap in the right way and the business of F1 can remain sustainable.

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Away from the racing grind, Wolff said he likes to watch skiing in his spare time and additionally follows sports in which he has personal relationships or simply respect for individuals or competitions he thinks F1 can take and learn from. In Europe, that’s soccer. It’s NFL in the US.

Wolff is intrigued by how the NFL socialized itself through revenue-sharing measures; in order for the league to be successful, it needed to make the sport and its teams sustainable. For years, that was in opposition to the prevailing approach in F1, where he said big teams routinely outspent the have-nots tens of millions of dollars per year for a 0.1-second advantage on the track.

F1 parent company Liberty Media then introduced a cost cap to, as Wolff put it, protecting the teams from themselves.

“That was a fundamental change for our businesses, but also for the competitive order in the future,” he said, “because the small teams will slowly but surely become level with the bigger teams. More variability, more unpredictability.”

So, was the cost cap literally inspired by the NFL’s salary cap paradigm?

“A little bit,” Wolff said. “Absolutely.”

In order to improve its business top-to-bottom, pro football reserves specific opportunities for less-successful teams, including favorable pick positions in the NFL Draft. The F1 cost cap promotes parity in a spirit that’s not entirely disimilar, Wolff said, with all 10 teams operating within the same engineering limits.

Of course, there are still ways to leverage people power to get ahead.

“Working with the same budgets already gives an opportunity to hire the best engineers,” Wolff said, “because if you can provide them with a compelling ambition, they may join you.”

Like any sport with a salary cap, Formula 1 teams now have to decide much more carefully what percentage of their allotment makes sense to go to a certain engineer, technical director, or car component in order to maximize a competitive edge on the track in a given season and off the track for the long haul.

“How much do you value one player or the rest of the sport? How much of a difference can one player or group of players make to the rest of the sport?” Wolff said of other salary-capped competitions. “The same now applies in Formula 1. We need to decide very early in our development cycle which part of the car is going to yield more performance than another one, and I think the future will show whether it was the right direction.”

While Red Bull will inevitably run away with both the Drivers’ and Constructors’ titles this season, F1 as a whole is largely more competitive than in past eras. In 2022, the difference between third-place Mercedes and fourth-place Alpine was nearly 350 points, with a 450-point gap between Merc and No. 6 Alfa Romeo. With 10 races remaining, fewer than 200 points separate No. 2 Mercedes from No. 6 place Alpine.

Whether that trend holds throughout the rest of the season depends on how things shake out in the Netherlands as the racing returns — but no matter how the drama shakes out, Wolff believes strongly that a more competitive F1 landscape as a whole will only be good for business in the long run.

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