SYLVIE DOUGLIS, BYLINE: NPR.
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DARIAN WOODS, HOST:
Here on THE INDICATOR, we've been keeping a very close eye on the Olympic medal tables.
WAILIN WONG, HOST:
Yes, but a special type of medal table. Which city had the most expensive Summer Olympics ever? 'Cause we want to know why the Olympics are so costly and what can be done about it.
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WOODS: Look, this is a multinational competition for the ages. You've got Tokyo coming in third place. It's $14 billion. That's in 2022 dollars, which we'll use for the rest of the show. So, Tokyo, you have a bronze.
WONG: London 2012 was $17 billion. That's the silver.
WOODS: Congrats, London.
WONG: And for gold, Rio 2016 at $24 billion.
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WOODS: Womp, womp. It is a disastrous amount of money for that gold medal. It is $1 for every 8 that was earned in Rio de Janeiro that year. Costs were equivalent to roughly $1,800 for every adult and child living there. CBS covered this in 2016.
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UNIDENTIFIED JOURNALIST: Rio has cut spending on healthcare and education. The police have gone unpaid for weeks at a time, and 20% of the population here...
WONG: So you're telling me they spent so much on the Olympics they had to cut basic services?
WOODS: Yeah. And they were asking the Brazilian government for a bailout. It was a complete mess. Paris is also on the expensive side this year. It ranks fifth in Olympics Games expenses since 1960 - where data was available - $8.7 billion.
WONG: The Paris Games are also extremely over budget, more than double Paris' original bid. These costs are getting so high the International Olympic Committee is finding it harder to lock in host cities.
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WONG: This is THE INDICATOR FROM PLANET MONEY. I'm Wailin Wong.
WOODS: And I'm Darian Woods. Today on the show, why are the Olympics always over budget, often by billions? We crunch the numbers with a project management specialist. We ask whether it ever makes sense for a city to host an Olympic Games. And we learn what could be the Olympics' original economic sin.
If you're a city thinking about hosting the Olympics, first, you might want to read research by Professor Bent Flyvbjerg and his co-authors. That's what Rome's mayor did several years ago when the city was bidding for the 2024 Olympics.
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VIRGINIA RAGGI: (Speaking Italian).
BENT FLYVBJERG: The mayor of Rome met the world press, you know, and I couldn't believe it. She was holding our study in her hand and said, we are withdrawing from the bid process because I read this report, and Rome cannot afford this.
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RAGGI: (Speaking Italian).
WONG: She's saying it's irresponsible to say yes to this candidacy.
WOODS: So the way the Olympics works is this. Cities submit bids for their vision, plans and budget for a future Olympic Games. A city is then chosen. The International Olympic Committee pays for some operational costs, like the Games' broadcasting, but the host city is on the hook for pretty much everything else - the stadiums, the Olympic Village, security. And essentially, whatever the IOC asks for, the host city has to pay. Any cost overruns are the city's responsibility.
FLYVBJERG: We find that there's not one instance of an Olympics that were delivered to budgets, which is really unusual. We study a lot of other project types, so the Olympics are unique in this sense, that we cannot find one example of them being delivered to budget.
WOODS: You'd think after the second or third or fourth time of over budget, they might adjust their estimates.
FLYVBJERG: Well, yeah, but they don't.
WOODS: They don't (laughter).
WONG: Well, that's that. Case closed. It's like, we simply refuse (laughter). Bent says one big reason for this is something he calls eternal beginner syndrome. As in the host cities, or at least the people who run, them are always newbies.
FLYVBJERG: There is always a beginner who is planning and putting on the Olympics. And we know from other projects that you want experienced people to do things like this, not beginners.
WONG: Also, a lot of big projects delay their completion date when things go wrong. But being late is not an option for the Olympics. So instead, the costs get blown out.
WOODS: The big reason, perhaps the original economic sin of the Olympics, is the way those contracts are arranged, how the International Olympic Committee decides which city hosts and how much of the Games are going to be run, with the city paying for most of it and any extra costs.
FLYVBJERG: Just imagine if you're going to build a new house and you can write the specs and you don't have to pay the bill.
WOODS: That would be great. I'd have a swimming pool. I'd have maybe an elevator. Why not?
FLYVBJERG: Exactly, and gold handles. And that's exactly what the Olympics look like.
WONG: The IOC is aware of this issue of high costs. Rome pulling out of 2016 is just one example. In response, the IOC has tried to make the Games cheaper to host. And the first initiative is learning.
FLYVBJERG: Around Sydney, 2000, they did something they called a knowledge-sharing program.
WOODS: So the host of the next Olympics can sit on meetings and planning for the current Olympics.
FLYVBJERG: And it's a good idea, you know, so that we don't have to make the same mistakes over and over.
WONG: Unfortunately, though, Bent and his colleagues' research concludes that it didn't really reduce costs.
WOODS: Another thing the IOC is trying - modular designs. This means blueprints for stadiums that any country can pick up and use.
WONG: Bent supports this, but he hasn't seen evidence that it's really been pushed to host cities in a way that can make the Olympics cheaper and easier to plan.
WOODS: Another tactic the IOC is using to try to lower costs - renovating existing buildings. That's something you're seeing a lot with the Paris Olympics - fencing and taekwondo in the epic glass and steel Grand Palais. You've got equestrian at the Versaille Palace Gardens.
WONG: Versaille, famous for being a symbol of thriftiness, but is renovating really cheaper than building from scratch?
WOODS: Well, Bent's view - and maybe you're noticing a theme now - is that renovation is nice in theory, but it's hard to see a step change in practice.
FLYVBJERG: It looks great, I think, when you watch the Olympics in Paris. These are Olympics that are much more integrated in the city than others. So in that sense, you know, you can say that it works aesthetically, and it works in the sense of the experience that people get and so on. But when we look, you know, hard at the numbers, we can't actually see that it's that big of a saving.
WONG: Ultimately, Bent sees these reforms is not driving down the cost of the Olympics because of that original economic sin - misaligned incentives.
FLYVBJERG: The IOC doesn't really have the incentive because they're not paying the bills, so there's lacking a real drive behind this, like somebody really hungry who needs to save that money and therefore drives the change.
WONG: OK. So those are the huge costs, always bigger than expected, and giving cities like Rio buyer's remorse. But what about the benefits? Like, Paris used the Olympics as a target date to add a new metro line connecting some of its suburbs.
WOODS: Do you think that a big event like the Olympics could be a galvanizing event to build infrastructure that might be needed anyway?
FLYVBJERG: I don't only think that. I mean, that's what happens. I mean, cities are deliberately using an event like this to fast-track things, and they get a focus. The really smart cities do what Barcelona did, is to use the Olympics as a generator for a more wide development scheme for the city.
WOODS: One example in Barcelona was the city decontaminating an industrial port for the sailing competitions. Now that area has beaches that are popular with locals and tourists.
WONG: Often politicians will take this potential economic flashpoint to the extreme, arguing that big sports events, like the Olympics or World Cups, are justified on the basis that there'll be a ton of economic benefits that may outweigh the costs.
WOODS: Could it be that despite the high cost, the Olympics could still be worth it for the hosting city?
FLYVBJERG: Theoretically, it could be, yes, and we do have colleagues who have studied this. They have asked the question, did the benefits actually justify the cost? And on average, they don't. So my advice is that if you're considering hosting the Olympics, you shouldn't do it for business reasons. You should do it for - you know, for what it is. It's a great party. It's a spectacular event, you know, and if you are rich enough that you can afford an event like that, by all means, go ahead and do it. But don't do it because you think it's good business.
WOODS: We want to have a gigantic party and invite the world. But let's not kid ourselves that the tourism benefits and the economic development benefits are going to outweigh that and it's going to pay for itself.
FLYVBJERG: Exactly. And this is very basic human. We all have parties, you know, privately in our families and so on, all the time. And they don't think about cost-benefit analysis like, are the benefits bigger than the cost of the party? We just want to have a party, and we pay for it.
WOODS: Yes. But we could have a less expensive party if we follow more project management principles.
FLYVBJERG: For sure.
WONG: This show was produced by Corey Bridges, with engineering by Neal Rauch. It was fact-checked by Sierra Juarez, with editing by Paddy Hirsch. Kate Concannon edits the show. THE INDICATOR is a production of NPR.
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