Q&A: How Wall Street Whiz Kids Rebuilt a Major League Baseball Team
By Erik Malinowski
March 8, 2011
Baseball can be a two-faced sport. On one hand, you have megamarket teams like the New York Yankees and Boston Red Sox spending obscene amounts of money to lure the game’s biggest names to their lineups. Conversely, you also have this wave coming over many teams, small and large, to implement advanced systems of analytics to spend smarter and plan decades ahead.
And while the Red Sox enjoyed the most publicized of these successes, winning the 2004 World Series after an 86-year drought, an arguably greater turnaround was experienced four years later and 1,400 miles to the south, where the Tampa Bay Rays executed one of the most remarkable turnarounds in baseball history. Abruptly and seemingly from nowhere, these perennial doormats surprisingly went from perennial doormat to the 2008 World Series and back-to-back division championships.
Jonah Keri, a former writer for both Baseball Prospectus and Investor’s Business Daily, has spent the last two years chronicling how the Rays overhauled their organization from top to bottom, concentrating less on alluring big-name talent and more on investing millions in home-grown statistical databases, scouting techniques, and a better fan experience. In his new book, The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team From Worst to First, Keri examines how the Tampa Bay Rays — the last pro baseball team to offer employees e-mail — ultimately embraced the best ideas from Wall Street to become one of the sport’s most unlikely winners.
Wired.com: So you’re Canadian, grew up a huge Montreal Expos fan, and now you live in New Hampshire. How in the world did you end up writing a book that takes place almost entirely in central Florida?
Jonah Keri: Back in the mid-’90s, I used to post on this baseball site that’s long been become something else at this point, and I used the screen name joneseyjones. I had grown up reading Bill James and Rob Neyer and all those guys, and so I used to go on there and say things that really made no sense to anybody else. Either people thought Oh, this guy’s really interesting or would be like What the hell’s this guy talking about? But I definitely stood out from the rest of them — and no, I wasn’t trolling.
A few years later, some guy e-mails me out of the blue and says, “You don’t know me but I was AZbullpencoach on that message board you used to post on.” And he had gone to McGill University and was a huge Expos fan also. And so he says, “I loved your opinions back then and I’ve tracked your career over the ensuing years and now I’m an editor at Random House. Why don’t you come write a book for us?” And I’m thinking that it’s one of my friends playing a prank on me, but he was for real.
Wired.com: You were a staff writer for Investor’s Business Daily for about a decade. Were you excited about being to apply these two knowledge banks — baseball and business — you had built up?
Keri: Oh, definitely. Starting out of college, it was hard to find anything that was remotely in sports. To be a columnist or a beat writer, you’ve got to pay your dues and cover high school field hockey for 20 years. So I became a business writer by default, and I tried to present myself as a sports business writer. And nothing really came of it, but this was before Darren Rovell and other guys had really taken off with that. So I tried to go down that path and wasn’t really successful. But as I writing later for Baseball Prospectus, I started to meet other people that were into that. And then getting into this book, it was a great opportunity to get back into that and get a real insider’s look at a major league baseball team. And then when these guys for Tampa Bay are referring to things like positive arbitrage, it was a great feeling to be able to understand those concepts right away.
But when the Rays’ people were in the process of turning the team around, those were business concepts they’re using, not traditional baseball concepts.
Wired.com: The main premise of the book is how this new ownership group comes and totally changes the culture by bringing in all these Wall Street guys who hadn’t previously worked in the industry. And they came with a very “long view” perspective, which can be rare in baseball. But other teams were starting to dabble in this, like the Red Sox with Theo Epstein and Bill James, as well as the whole Moneyball approach with the Oakland A’s. How were the Rays different from other teams in that respect?
Keri: You mean, analytically? Well, the interesting thing about the Rays had all these guys that were straight from Wall Street, and that basically manifested itself in the statistical analysis. They had guys who were in charge of “baseball R&D” — guys like Erik Neander, Josh Kalk, and James Click — and we hadn’t really seen that before.
As far as how they ultimately executed it all, the thing that separated the Rays from everyone else was Joe Maddon, their manager. He was a guy who really into applying new ideas and was willing to work with the new system, and the Rays couldn’t have asked for a better guy to manage the club. He’s just naturally curious, and is always looking for new ways to win.
Wired.com: One of my favorite parts of the book is how the Rays were so resistant to elementary tech upgrades like company e-mail, which they didn’t get until 2003. (Until then, the Rays’ group ticket sales rep had to use the address DevilRaysDude99@aol.com for company business.) Something like that must have been indicative of such a deep, organizational problem. How did they overcome that?
Keri: It was emblematic of so many problems the Rays were facing at the same time. It really required a complete change in leadership from the top, and the new ownership group (led by businessman Stuart Sternberg) certainly remedied all that. But you had guys using AOL e-mail addresses to conduct official Rays business! That was a hard time for a lot of people there.
Wired.com: But all this change required a huge investment on the part of the new ownership. And one of the things you write about is the whole concept of their proprietary, custom-built databases. How challenging was that to report? Obviously, they don’t want to give away all their secrets.
Keri: The Rays were extremely not forthcoming, and I mean that in the nicest way. But let me clarify: The Rays were as cooperative as they possibly could be. They were very professional and I did get some access to what they were doing. But they have a job to do, and that’s to win baseball games and build the team. In the end, they were about as helpful as I had hoped they’d be going in.
Wired.com: The book, in some ways, ends on kind of a downer. A lot of The Extra 2% focuses on how much the Rays improved and ultimately went to the 2008 World Series and won back-to-back American League East division titles, but there is this air of uncertainty, primarily over whether they’ll ever get a new stadium. And for as much as the book is about analytics, it’s also about pure economics. Forbes ranks them 28th of 30 MLB teams in terms of value. Will the Rays ever be able to feel a sense of comfort, or is it always going to be a battle for them against high-revenue teams like the Red Sox and Yankees?
Keri: Well, I don’t think those things are mutually exclusive. You just can’t have 30 teams like the Yankees. But I will say that Rays are very good at battling tooth and nail with the Yankees and other teams. A lot of it also comes down to revenue sharing, which we don’t know a lot about because those records aren’t (usually) public knowledge. So when smaller-market teams like the Rays are claiming that they’re losing money hand over fist, it’s hard to really take them at their word.
But even whole concepts about revenue are changing. Fifty years ago, it was solely about how many butts were in the seats. It still matters to some extent, but now it’s about TV, MLB Advanced Media, development academies in other countries. There are so many other parts to the equation that that’s where teams like the Rays are trying to be smarter.
Wired.com: When I spoke with Jeff Ma, the former head of the MIT Blackjack Team, last fall, one of the things we talked about was the notion of the “stathead” and the stigma that’s sometimes applied by traditionalists. Where do you see that perception headed, say, five years from now?
Wired.com: Some people would call that ignorance.
Keri: But it’s not really that. You have George W. Bush, and people are always portraying him as dumb. The guy went to Yale! Now you can argue about how he got into Yale, but he went to Yale. He wasn’t dumb. But I just think, and bringing this back to baseball, there’s always going to be some segment of the population that’s going to be resistant to new ideas and “Oh, look at this new Moneyball book and that book.”
Wired.com: Well, it’s the Joe Morgan way of thinking.
Keri: Yeah, but look at that from the other side and think that if his way of thinking is so wrong, then why was he gainfully employed all these years? There’s just a general mistrust of new concepts and I’m not sure we’ll ever really see that go away completely.