I am not a gambler. I don’t enjoy most games of chance because I don’t like the lack of control. No matter how savvy a bettor you are, lady luck still holds all the cards. I hear guys talk all the time about being great at blackjack or poker, but, let’s be honest. If they were that good, they’d be the weirdos in the hoodies and dark sunglasses twitchin across the table at the World Series of Poker. Eating a free buffet at the Horseshoe because of a lucky table run doesn’t make you a great gambler.
What’s always been interesting to me, is that regardless of the odds, guys get pretty fired up about gambling, and specifically, sports betting. Just for reference, in 2009, the sports betting market was valued at $20 billion. By 2016, it was valued at $40 billion. With a present market cap of between $60-73 billion, the market has easily grown at a rate of $10 billion per year. These numbers don’t include unlicensed betting, fantasy football, office pools or March Madness brackets. Those numbers also don’t take into consideration the billions spent on sports betting media.
It’s a fact. People love losing their money to outcomes they have absolutely no control over.
One of the easiest and most popular ways to bet sports is to bet on the total score, popularly referred to as Over/Under. With an Over/Under, the bettor is simply choosing whether the total number of points scored by both teams will be over or under the listed total of points to be scored. That’s it. The winner and loser of the game don’t matter in a totals bet. The only thing that matters with this kind of bet is the number of points (runs, goals, etc.) scored. So, for example, if the anticipated point total of a football game is 54, then the bettors who wager on the Over need at least 55 total points scored. Anything under 53 will be a winner for Under bettors.
Ok, so what on earth does sports gambling have to do with Architects?
Well, let me introduce you all to the Architecture Billings Index and more importantly, what it means for upcoming construction trends. The long, formal definition goes like this. The Architecture Billings Index (ABI) is a diffusion index derived from the monthly Work-on-the-Boards survey, conducted by the AIA Economics & Market Research Group. The ABI serves as a leading economic indicator that leads nonresidential construction activity by approximately 9-12 months. The survey panel asks participating architecture firms whether their billings increased, decreased, or stayed the same in the month that just ended. According to the proportion of respondents choosing each option, a score is generated, which represents an index value for each month (1).
Now, let’s break it down a little more simply. A diffusion index is much like an Over/Under bet. For the ABI, the Total Score is always 50. So, when the survey is completed, an index score of 50 represents no change in firm billings from the previous month, a score above 50 indicates an increase in firm billings from the previous month, and a score below 50 indicates a decline in firm billings from the previous month. Anything above 50 is considered positive growth for the architecture industry.
For contractors, this number represents a vitally important market trend because construction logically follows architecture design. Thus, the ABI is a great leading indicator of where our industry is headed. When the architects are billing, historically, more construction projects are in the pipeline.
As of the start of 2019, the ABI was up over 5 points with future billings up almost 4 points. That means that architects are both billing and contracting an increasing amount of work month over month. This is great news for contractors and a great sign of current economic health. For all the talk of an upcoming recession, the numbers in our industry aren’t showing it. The architects are currently betting the over.
We probably should, too.
1 Source: AIA Economics & Market Research Group