Andrew Friedman + Moneyball 2.0
WHY YOU SHOULD CARE
Andrew Friedman of the Tampa Bay Rays takes metrics to a whole new level.
You don’t hear the words “Bear Stearns” and “success” in the same sentence much these days. OK, you never do. But it was only seven years ago, when Bear Stearns (RIP) still had $350 billion in assets and was one of Fortune’s Most Admired securities firms, that the lowly Tampa Bay Devil Rays made a very risky investment in Andrew Friedman, a 28-year-old Bear Stearns-trained analyst with no pro baseball experience.
Employing financial principles like mark-to-market accounting and positive arbitrage, Friedman has revamped the Rays roster and its farm system.
Two years later, in 2008, Bear Stearns had collapsed, while the reborn and rechristened Tampa Rays were soaring to their first-ever World Series appearance. And now with the Rays knocking yet again on the door of the post-season — hoping to make their fourth trip in the past six seasons — it is a fitting time to reflect on what Friedman has accomplished.
Michael Lewis had profiled the Oakland A’s and its GM, Billy Beane, in the best seller Moneyball a few years before. Many front offices in baseball were beginning to employ statistical models and data mining from the financial markets to value players. But until Friedman & Co. took over the Rays, few practitioners had any real Wall Street experience.
By employing financial principles like mark-to-market accounting and positive arbitrage, Friedman has revamped the Rays roster and its farm system by using sophisticated (and top-secret) numerical measures – well beyond those profiled in Moneyball – to identify inefficiencies in the market for pro baseball players.When former Goldman Sachs colleagues Stuart Sternberg and Matthew Silverman took over the ailing Tampa Bay franchise in 2005, the ball club had finished dead last in its division almost every season since its founding in 1998. Most people considered it the laughingstock of professional baseball. But to Sternberg and Silverman, trained on Wall Street to recognize undervalued assets, the team represented the quintessential arbitrage opportunity. The duo bought the team in 2005 and a year later installed Friedman, a former Tulane outfielder and fantasy baseball player, as general manager.
Among other things, Friedman’s metrics have led the Rays to focus on undervalued areas of the game like injury prevention, base running and defense, including underappreciated talents like a catcher’s ability to frame a pitch. The cash-strapped Rays have also excelled at finding young, talented players such as Evan Longoria and Matt Moore and locking them into long-term contracts. Plus, it seems like just about every season, Friedman finds some gems buried in the pile of major league cast-offs, including James Loney and Kelly Johnson this season.
So, how have they done, the “smartest team in baseball” and its now 36-year-old “boy genius”? Well, let’s do what Friedman would do: crunch the numbers. Over the past six years, the Rays have made the playoffs three (maybe four) times, and despite a payroll that’s just a quarter that of its division rivals, the New York Yankees, the Rays have won only 14 fewer regular-season games in that time (through September 25). While the Yankees have paid about $2.17 million per victory during that time period, the Rays have paid just $626,000.
The Rays may still be chasing that elusive first championship, but if Hollywood decides to do a Moneyball sequel about another baseball GM, our money is on Andrew Friedman. And if the Rays encounter Beane and Oakland’s “real Moneyball team” this year in the playoffs, the plot will be that much more compelling. Let the best number cruncher win.