Thursday, July 31, 2014

Praise Where It's Due

Trading Jon Lester was not a good idea in the long run for the Boston Red Sox. However, in the short-run, the team's management deserves congratulations for obtaining Yoenis Cespedes in return for Lester.

An actual breathing 2014 All-Star outfielder still under contract for about $10 million in 2015 is a far, far greater return than I ever expected the Sox to receive for Lester. Deadline trades of proven veterans usually get back prospects beloved by Baseball America whose worth cannot even start to be determined until the next spring training.

It's an especially high price coming from the Athletics, a franchise whose acquisition of Lester figures to be a pure late season rental play. If Oakland enters a competitive bid for free agent Lester come next winter, it'll be the most shocking development of the offseason.

So take a bow, Boston front office. It's as good a trade as it can be for the Red Sox. Of course, that's not nearly as good as this trade is for Jon Lester. The lefty will get to make his final free agency pitch by pitching in a pennant race and the playoffs for a team whose chance of winning the World Series is as good or better than any other team's. If he does well, as he has so far in 2014, this can only enhance Lester's bargaining position when November rolls around.

My praise for the Sox' management is genuine. But it is also tempered by the knowledge that well struck bad bargains seldom add up to genuine prosperity.

Tuesday, July 29, 2014

Nobody's Ever Been Smarter Than the Law of Supply and Demand

Peter Abraham's lead story in the Globe sports section this morning was that the Red Sox were looking seriously into trading Jon Lester because the team simply would not match or come close to matching the contract Lester believes could be his as a free agent come November.
Right underneath it, a second story, also by Abraham, reported that the Blue Jays nipped the Sox last night by a score of 14-1, mercilessly thrashing Sox starter Clay Buchholz and wanna-be starter Felix Doubront in the process.

This striking juxtaposition should win whoever was layout editor a Pulitzer nomination in the Commentary category. It used no words to make the most salient point possible about Lester's future, namely, that if it's not going to be in Boston, the Sox' near-term future is dimmer than December twilight.

The idea that Lester is headed elsewhere was hardly news in itself, although Abraham advanced the story by a considerable distance. The lefty's employment status has been a subject of discussion since spring training, a discussion that's become louder and louder as the Sox' 2014 chances have become more and more purely mathematical.

And every time the topic has arisen in my own mind (not that often, really), it has reinforced my awestruck wonder at one of the oldest mysteries of sports. What is it about games that cause the wildly successful and astute businessmen who own teams to forget the first principles of their previous businesses?

John Henry's game is finance. He must be very good at it. A very few people have made millions from dumb luck, but billions always require skill. Yet the Red Sox' treatment of Lester is a rejection of concepts of finance so elementary even I understand them.

Principle the first: There's no such thing as yield without risk. Those seeking higher returns, be they wins or dollars, must accept a higher possibility of losses.

Long-term contracts for starting pitchers are a riskier proposition than just about any derivative security you could name. The risk of lost seasons and tens of millions of bucks due to injury alone is frightening. The risk that according to reports that Sox are balking at in Lester's case, that a free agent pitcher's performance will decline due to age in the back end of a contract is in actuarial terms closer to a cinch.

But no baseball asset class offers a higher yield than superior starting pitching. It offers the closest thing the game offers to a guarantee that a team will be competitive in a game no matter what else happens.  So if a franchise expects to be a consistent winner, it has to have it. This is why Jon Lester will join the ranks of the One Percent by Christmas.

Stocks are riskier than bonds. But as Henry knows better than his home telephone number, if a portfolio is to grow, it should hold more stocks than bonds, because otherwise the rate of return won't cut the mustard. Missed gains are almost as much of a loss as are real losses.

It's even worse in baseball. Most of the time, an overly risk-averse financial portfolio won't lose money. A roster portfolio which avoids the risks of expensive starting pitching is close to a dead cert to be dead in the standings before the All-Star break, unless it has succeeded in acquiring and nurturing a flock of starters too young for free agency or has had unbelievable luck with journeyman vets turning in career seasons. Either of those events are longer shots than any bet Wall Street has to offer.

So if the Sox don't retain Lester's services, they will have to replace them or get worse. (in both finance and sports, things can always get worse). This is liable to cost as much or more in money, not to mention lost time, than just ponying up the going rate for a starter who is conveniently on hand.

Finance Principle the Second applicable to Lester's situation is a quotation attributed to countless persons. "The market can stay irrational longer than you can stay solvent." In baseball, substitute the phrase "above .500" for solvent.  The contracts being given superior starting pitchers these days are indeed irrational as a matter of cold accounting. Some of what Clayton Kershaw is scheduled to make will become dead money, a pure loss on the books of the Los Angeles Dodgers. Wins on the days Kershaw pitches, however, go into the NL West standings right now. The tickets sold because of the Dodgers' place in said standings go into the books immediately, not in 2020.

Markets are often irrational. But they're often rational, too. The trick is determining which is which. Baseball history suggests that no matter the cost of starting pitching, it's an investment a team can't afford to pass up. Google is a very expensive stock. Doesn't mean it's a bad buy.

The price of quality free agent pitchers has never been higher than it is today. Coincidentally, neither has the overall price of stocks.

I'm going to assume Henry still buys the occasional stock.

Wednesday, July 23, 2014

Long Season Thwarts Short Attention Spans

The Red Sox haven't done much this season, but they do have one signal victory worth crowing about. They've wrecked the narrative.

The two week upswing in the Sox' fortunes that began shortly before the All-Star break has left the sports blah machine in an awkward position. After 100 games, Boston is not quite yet a contender. But neither is the team doomed to playing out the string. In the AL East this year, the '62 Mets would still have a postseason sniff in their nostrils.

So commentators cannot do what they obviously dearly wanted to back on the Fourth of July -- bury the Sox good and deep, limit topics to the assigning of blame and cries to blow up the team and start over in 2015, and mostly, drop baseball as a subject of conversation and turn to the NFL, where idle speculation will be as good as facts for the rest of the summer.

But neither can opinionators, professional or amateur, climb aboard the Sox bandwagon for a festival of "ain't no stoppin' us now" homerism. That would be rash verging on foolhardy. As of this morning, Boston remains in last place in the division. Its dismal first half of the season has left the Sox with what medicine calls a preexisting condition.  A 2-5 or 1-6 week that'd be a bad case of the summer sniffles for a real contender would put Boston back into the ICU.

So the Sox have become a far rarer and more valuable commodity in sports than just another boring winner. They are a team about whom one can't jump to conclusions. All we can do is wait and see -- at least for another couple of weeks.

In a society where conclusion jumping has become the real National Pastime, that makes the Sox something to cherish.

Wednesday, July 16, 2014

Everybody Is Uninterested in a Star

Fewer people watched the 2014 All-Star Game on TV last night than did in 2013. I didn't say stop me if you heard this one because you have. Tweak the dates, and that sentence has been true since about 1989.

All-star games are becoming to sports television what Tuesday night at 10 p.m. is to ABC. It's where audiences go (or don't go) to disappear. Fewer people watch the NHL and NBA All-Star Games than they used to as well. Much fewer, in fact, roughly half of what the audiences were two decades ago. As for the Pro Bowl, well, if it was a moneymaker, Roger Goodell wouldn't have threatened to abolish it a few seasons back.

So there's hope for American sports after all. The normal fan is not yet so far gone as to have lost the uses of their five senses plus common sense. Each of those has a simple explanation as to why All-Star games are losing viewers in droves. All-Star games suck. They are cruel clumsy parodies of the team sports in which the All-Stars themselves excel.

Older sports commentators will tell you that baseball has the "best" of the four All-Star games. That may have been true when Ted Williams and Stan Musial were the annual fixtures on the American and National League teams but not anymore. Now it's a more of a game show than a game, a contest to maximize the number of participants and an exercise in internal marketing, such as Cardinals manager making Cardinals pitcher Adam Wainwright the NL starter, or John Farrell yanking Felix Hernandez after one inning to trot John Lester out there. I'll bet that really helped ratings in Seattle.

Oh, I almost forgot. There's external marketing, to. Baseball used one of the very few times it has the stage to itself anymore to hawk dry goods. What I'll remember of the 2014 All-Star Game isn't Derek Jeter, it's the ghastly fashion war crimes they made the players wear on their heads. Way to stress the tradition of the Game, gang. Give everybody a hideous new cap.

The other three sports all have the same basic All-Star game issue. Since there's no reason to care who wins (meet any diehard AFC or Western Conference fans lately when you hit the bars, the players don't either. They go have fun, which is nice for them, but kind of counter to the idea of pro sports, which is both far better and much worse than mere fun.

Fans, being sometimes foolish but rarely fools, know all this perfectly well. So they don't watch all-stars -- with a few significant exceptions.

Ratings for the just-completed World Cup were very strong. They were for the Olympic hockey tournament, too. Those competitions are exclusively composed of all-star teams. What else is a national sports team?

National sports teams, however, are All-Star teams with the one element most such teams lack -- rooting interest. Patriotism makes fans from Shanghai to Stoughton care what happens to them, so they take the time and trouble to watch 'em on TV.

This strongly suggests that if  Bud Selig's successor wants to gin up July ratings, he should drop the All-Star Game and move a compressed version of  World Baseball Classic to that month. If the All-Star break lasted two weeks instead of three days, it'd be no loss at all. A Europe vs. North America NHL or U.S. vs. World NBA All-Star Game would also be more of a crowd pleaser than battles between conferences whose makeup changes frequently anyhow.  Patriotism may be the last refuge of a scoundrel, but it makes a dandy hideout for a desperate marketer.

The NFL lacks a significant foreign presence, so my thought won't help the Pro Bowl. Probably no amount of human imagination could.

Monday, July 07, 2014

Ashes Are Not the Best of Building Materials

The Red Sox aren't doing so well lately, if we define lately as "ever since early April." It's now July, which means that Boston baseball commentators and all too many fans are plunging into their favorite part of the season -- trade deadline time. The blending of the above two sentences makes for considerable entertainment for lovers of dark comedy.

Driving home from vacation this morning, Andy Gresh and Scott Zolak issued a fervent hour-long duet on the need for the Red Sox to give up, blow up the team, and of course, "play the kids." Only in this way, they argued, could the Sox maintain fan interest in a lost season before everybody stops caring in September because it's football season (Class, to what local outdoor franchise does 98.5 hold the radio rights?).

Barring a seven-game win streak prior to the All-Star break, we'll all have to scramble to avoid hearing or reading similar sentiments. There's nothing the commentariat likes better than advising that a sports team be completely deconstructed in pursuit of victory at some unspecified future date. There's no doubt they're talking their book  Discussing the same guys day after day gets boring. New players equal new things to write or say. But I want to be fair, and I believe that the commentators also sincerely believe that "out with the old, in with the new" is actually a sound midseason plan.

Like everything else in sports, it depends. Trade deadline subtractions do work. Aggressive youth movements do succeed. Just not as often as they don't, not nearly as often, in fact.

As the radio kept reminding me, the Red Sox have a relatively large number of young players considered to be bright prospects. Good for them. Mobilizing them en masse as the bulk of a starting lineup for a team going nowhere is about the most efficient way I can think of to dim those prospects.

The most difficult and dangerous stage in major league player development is the period when a player takes his first crack at being an everyday player. For Mike Trout, it was easy, but Top 20 of all time players are by definition rare. For most players, it's a daunting physical and psychological challenge. That goes for Hall of Famers, too. His first year as a starter, Mike Schmidt batted under .200. He subsequently got the hang of things, but for every Schmidt, or even every prospect who goes on to become a steady regular, there are two who fail the test. It's hard to be a major leaguer. That's why we admire them.

So when teams take the plunge of seeing if a prospect can be more than that, they try their best to set up situations which allow the prospect his best chance of success. Being part of four or five guys all undergoing the same traumatic horsehide med school boards almost surely is no prospect's best chance of success, especially if said prospects are being expected to do enough to partially transform a team already set in its losing ways for 2014.

Strikingly, neither Gresh nor Zo stated in my hearing that trading a few vets by July 31 and calling up the youth reserves would help the Sox win some more games. They didn't mention winning or losing at all. No, their contention was that a prospect-laden lineup would keep fans interested. Transposing their own business on the baseball business, they said in essence it'd be good for Red Sox ratings.

I cite the two Boston sports talk hosts not to single them out,  but as examples of a trend. Sports commentary now seems to run on the motto "it's not whether you win or lose, it's how many eyeballs you got while doing it."

In other words, sports is just like the media business. Generate public interest by any means possible, and you're a success. The U.S soccer team was a big story not because it made the elimination rounds of the World Cup, but because it got big TV numbers. The idea that the numbers resulted from the U.S. having a team good enough to care about got lost in the shuffle.

The "admit defeat-blow it up-play the kids" advice given struggling teams is a direct outgrowth of the audience uber alles mindset  It's a mindset that's not a product of foolishness, cynicism or cluelessness, but stems from plain old human nature.

Commentators would have to have rare insight and rarer self-confidence not to have their minds affected by their own professional experiences when discussing professional sports. And the professional experience of the 21st century media racket is not one conducive to taking the long point of view.

Is there a more blow it up and start over business than radio? Two down books in a row, and 98.5 could be broadcasting Korean pop. Is there a business more obsessed with attracting an audience by any means necessary than newspapers? I can testify that play the (cheaper) kids has been a newspaper personnel strategy for many, many years.

Transposing one's own business on the sports business is a major error. Team owners do it all the time, to their enormous regret and substantial revenue loss. I'm not a Red Sox fan, but it's my fervent wish that ownership and the front office don't much care if I watch or not, as long as they believe they're creating a product worth watching.

Because otherwise, they won't. Put the audience first, it usually gets smaller.