The Economics of Everyday Things – Episode 110: Formula 1 Teams
Host: Zachary Crockett, Freakonomics Network
Guest: Steve Cripps (CFO, Williams Racing)
Air Date: October 13, 2025
Overview: Inside the Business and Economics of Formula 1 Teams
This episode dives deep into the high-octane, high-stakes world of Formula 1 racing—not the races themselves, but the business model that keeps these global speed machines on track. Host Zachary Crockett speaks with Steve Cripps, CFO of Williams Racing, to explore what it takes to build, finance, and compete with a Formula 1 team in the 21st century.
Crockett unpacks how teams operate as R&D engines, why F1 is booming, and the surprising mechanics behind everything from car construction and logistics to sponsor deals and the role of regulations. Williams Racing serves as a window into the economics, innovation, and ambition that power the sport.
Key Discussion Points & Insights
1. Formula 1: The Pinnacle of Motorsport
- Spectacle and Scale:
- F1 draws 820 million+ fans worldwide, thanks in part to Netflix’s "Drive to Survive" and a Brad Pitt movie (03:16–03:41).
- Only 10 teams, fielding two cars each, travel to 24 races in 21 countries (03:57).
- Innovation and Engineering:
- Each car is a unique feat, with ~20,000 individual components (03:57).
- Downforce is key: “An F1 car has an upside down wing. It’s pushing the car down into the ground.” — Steve Cripps (08:06).
2. Williams Racing: An Independent Under Pressure
- History & Ownership:
- Williams has nine constructors’ and seven drivers’ championships (05:01).
- Team dominance faded after the 1990s; sold to Dorlton Capital for ~$200M in 2020 (05:43–06:01, 21:49).
- Business Model:
- "Williams is the only truly independently owned F1 team that goes racing as its core activity." — Steve Cripps (06:44).
3. Design, Development, and Regulations
- Rapid Development Cycles:
- Development for next year’s car starts midyear; only three days of preseason testing (09:47).
- “You never know how good a job you’ve really done until you’re up against your competitors.” — Steve Cripps (09:47).
- Cost Cap Impact:
- Spending capped at ~$170M for car-related R&D and operations (10:34–11:22).
- “Prior to 2020, the sport is littered with teams coming and going…The cost cap has really helped.” — Steve Cripps (10:53).
4. The Costs: From Parts to Logistics
- Car Construction:
- Building one car: ~£5M; but "the cost of car parts themselves" is ~£55M/year (~$75M) (12:01, 16:24).
- Spare parts are continually manufactured due to frequent damage/upgrades (16:48).
- "We have a pounds per millisecond metric" to weigh upgrade costs against lap time gain (17:20).
- Driver Salaries:
- Not subject to cost cap; range from $500K to $80M (11:47).
- Williams drivers reportedly make ~$8–10M (11:47).
- Crash Costs:
- 2024 was costly for Williams due to frequent crashes:
- “A front wing is £150,000…a set of front suspension is £200,000, a floor £150,000.” — Steve Cripps (15:52).
- 2024 was costly for Williams due to frequent crashes:
5. Technical Facilities and Partnerships
- Factory and R&D:
- Williams spends £10M/year on its factory, testing components, and pushing them “to destruction” (18:13).
- Aerodynamics developed using a wind tunnel—"a big building with a huge fan maybe 15, 20 ft across.” — Steve Cripps (18:36).
- Supplier Relationships:
- Engines, gearboxes sourced from Mercedes (19:25).
- "To develop a power unit...is a multiple billion dollar investment" — Steve Cripps (19:25).
6. The Logistics Challenge
- Global Operations:
- 30 tons of equipment shipped per race weekend at a total yearly logistics cost of ~£13M (20:37).
- Williams creatively maximizes costs by sea-freighting heavy, low-value items (21:26).
- Tight turnarounds: “As the cars are going across the finish line, the team are packing up the garage… ready to be used again on Friday.” — Steve Cripps (20:57).
7. Revenue Streams: Prize Money & Sponsorships
- Broadcasting & Licensing:
- F1 generated $3.5B in 2024; ~$2B profit, with 60% split among teams as prize money (23:03, 23:19).
- Sponsorships:
- Main income driver for most teams.
- Top car placements attract $60–80M per prominent sponsor logo (24:14).
- Clever branding examples: Duracell’s logo on Williams’ air intake (24:57).
8. The Future: New Regulations & New Opportunities
- 2026 Reset:
- Both power unit and fuel regulations will change—50% electric/50% combustion and fully sustainable fuel (26:24).
- Offers teams a chance to catch up: “It allows all the teams to start from the same position...” — Steve Cripps (26:24).
Notable Quotes & Memorable Moments
- On Investment and Competition:
- “Almost every decision we make is based on how do we add performance to the car.” — Steve Cripps (04:32)
- On Car Development Timelines:
- “If you compare that to a road car program...they would spend three to five years developing a car. So we do move pretty quickly.” — Steve Cripps (09:47)
- On Damage and Budgets:
- “A front wing is £150,000... a floor £150,000.” — Steve Cripps (15:52)
- On F1’s Transformation:
- “Liberty Media…has really invested in how the sport looks to the outside world and the commerciality of it, which has attracted a lot more partners, sponsors, fans…” — Steve Cripps (22:27)
- On Sponsorship Impact:
- “Sponsorship is one of the key revenue sources for teams, and there is a correlation between how successful a team is and the amount of revenue it can generate…” — Steve Cripps (24:03)
- On Fans:
- “Fans are what drives our sport.” — Steve Cripps (27:10)
Timestamps for Key Segments
- [03:08] — Steve Cripps introduces Formula 1’s scale & Williams Racing’s place in history
- [05:01] — Team’s history and championship wins
- [06:44] — Williams vs. other F1 team business models
- [08:06] — The physical science of downforce and car design
- [09:47] — Rapid R&D cycle and testing limitations
- [10:34] — Impact of the cost cap on competition
- [12:01] — Economics of building an F1 car
- [15:52] — The high cost of crash damage
- [16:24] — Managing spares and annual car part costs
- [18:13] — Inside the Williams R&D facilities
- [19:25] — The necessity of buying engines and other components
- [20:37] — The vast scale and cost of F1 team logistics
- [23:03] — How F1 profits are distributed, and the secretive prize money
- [24:14] — Why successful teams attract the top sponsorship dollars
- [26:24] — How major rule changes offer new opportunities
Final Thoughts
This episode reveals Formula 1—not just as a sporting spectacle, but as a business behemoth rooted in research, global logistics, and modern marketing. Williams Racing’s journey underlines both the challenges and opportunities facing “independent” teams, and the importance of strategic investment, relentless innovation, and spectacle in keeping the wheels (and money) spinning.
Best listened to if you’re curious what keeps the world’s fastest cars—and their billion-dollar teams—on track.