The Extra 2% (13 page)

The problem was, the Devil Rays didn’t ask themselves those questions. But as the transition from the Naimoli/LaMar era to Sternberg’s new regime took place, they began to do exactly that. And fortunately for Tampa Bay denizens, they began to find and make their own advantages.

An example: in the franchise’s first few years, the Devil Rays faced a problem that remains common around baseball—what one baseball ops executive called “stereo teaching.” A pitcher coming up through the minor leagues might meet a pitching coach at A-ball who teaches the slider. At Double A, that same pitcher might be ordered to junk the slider and instead throw a curve. At Triple A, it’s back to the slider. The different noises coming out of all those
speakers can produce a player who hasn’t mastered either pitch and isn’t ready for the majors. Individual coaches, scouts, and roving instructors bring in their own expertise, with no guiding set of principles available to help convey a common message. Mitch Lukevics aimed to change all that. Lukevics ran the Yankees’ farm system for eight years. During that time, he learned the importance of balancing a structured approach with granting autonomy to coaches and instructors. The goal, said Yankees senior VP of baseball ops Mark Newman, was to make sure the organization wasn’t messing with top prospects’ minds, while still allowing enough autonomy “for great teachers to innovate.” When Lukevics signed on as the Rays’ director of minor league operations, he aimed to create the equivalent of “the Yankee Way,” a uniform, top-to-bottom approach that would produce topflight, major league–ready talent, the way he had with Derek Jeter, Mariano Rivera, Andy Pettitte, Jorge Posada, and other homegrown Yankees stars.

All those top-ten draft picks helped. So did a cadre of number crunchers. But the Rays needed more than raw talent, or even the ability to spot talent, to topple the Yankees and Red Sox. It took a player development system that could mold those draft picks, international signings, scrap-heap free agents, and trade targets into big league contributors. To that end, they employed two roving minor league instructors for the three biggest coaching specialties—two field coordinators, two hitting coordinators, two pitching coordinators—instead of the standard one per skill. “They’re throwing more resources at the minor leagues, emphasizing it more, than anyone else,” said
Baseball America
writer John Manuel.

The move to two pitching coordinators coincided with an organization-wide focus on developing young arms. Not that this was any kind of revolutionary strategy. But as the Devil Rays started to assemble young talent in the last days of Vince Naimoli and Chuck LaMar, most of that talent was on the position player side, especially in the outfield. The pitching cupboard was bare. In 2005, the final year for the old regime, the following pitchers made 130
of Tampa Bay’s 162 starts: Mark Hendrickson, Doug Waechter, Seth McClung, Casey Fossum, Dewon Brazelton, Rob Bell, Tim Corcoran, John Webb, and a washed-up Hideo Nomo.

Once the Wall Street trio assumed control, the team’s methodology changed. With LaMar in charge, Lukevics had watched old-fashioned pitching philosophies govern player development decisions. Some were excessively cautious, with no empirical evidence to back them up. When a pitcher recovers from an injury, for instance, the universal baseball rule is to make sure he rehabs by throwing long-toss from no more than 120 feet away. Somehow that untested practice became the norm for
all
long-toss for many old-fashioned teams, including the Devil Rays. That caution didn’t extend to pitch counts, though: for years, Tampa Bay farmhands were allowed to rack up heavy workloads, both game by game and over the course of a season, leading to the usual litany of pitching injuries. Lukevics and his right-hand man,
Baseball Prospectus
alum Chaim Bloom, favored a more empirical approach. With Lukevics and Bloom running the farm system, the focus shifted to an evidence-based player development process, one the Rays hoped would produce a healthier and more productive crop of pitching prospects.

Xavier Hernandez embraced the Rays’ new philosophy. Hired in 2002, the man most people call “X” spent three years as the pitching coach with Class A Charleston and two years at Double A Montgomery before landing at Triple A Durham in 2007. X found himself face-to-face with many of the best young players in the system, several of whom ended up on the Rays’ pennant-winning squad of ’08. One such pitcher was Jeff Niemann, the Rays’ first-round pick in 2004. Many teams preach uniformity in their prospects’ pitching and hitting mechanics. Hitches in swings are corrected, weird footfalls in pitchers are tweaked. The intentions are pure—get a hitter’s bat through the zone quicker, prevent movements that might lead to a pitching injury. But X recognized that often the best approach was to leave well enough alone.

At six-foot-nine, 200-and-a-lot, Niemann faced the same problems
most big pitchers face—having slight mechanical flaws magnified by the sheer size of his body. He was what X called a “jabber”: when Niemann took the ball out of his glove, there was no smooth backstroke into his forward motion. X emphasized what Niemann could do well, without overstressing what he didn’t. “Technically you want to clean that up, but really you can’t. So you just have to work around those flaws. You can be a jabber in back but still be able to make a clean delivery out front. Pitching and delivery is all about timing. As long as he had nice, smooth drive to the plate, it all worked.”

Pinpointing a pitcher’s success, let alone a team full of pitchers, creates a chicken-or-the-egg quandary. The increased focus on pitching in the draft, starting late in LaMar’s tenure and continuing under Andrew Friedman and scouting director R. J. Harrison, improved the quality and quantity of arms in the Rays system. But merely making more and better choices can’t account for the massive difference in the caliber of pitchers who cracked and stuck on the major league roster. Late-round picks such as James Shields and Andy Sonnanstine joined higher-pedigree picks like Niemann, David Price, and Wade Davis in turning the Rays’ major league pitching staff from the lowliest bunch in the majors to the backbone of one pennant-winning club and the foundation of future contenders.

The Rays’ new generation of pitchers wasn’t merely good. It was also extraordinarily healthy. From late 2005 to mid-2009, only one pitcher at any level of the organization, left-hander Jacob McGee, underwent Tommy John surgery; no team saw a lower rate during that stretch. From May 2008 to August 2010, only one Rays starter, Scott Kazmir, spent a single day on the disabled list, making Tampa Bay’s the healthiest pitching staff in baseball by a mile. (Niemann and Davis went on the DL in August 2010 with minor injuries; both returned quickly.) Meanwhile, the scarcity of healthy, homegrown pitching drove other teams to load up on veterans well past their prime, which in turn put them at greater risk for injury. Well past their 1990s glory years for young pitcher development, the 2008
Braves turned to ancient names like John Smoltz and Tom Glavine and DL regulars like Mike Hampton to shore up a shallow staff. Those three wounded warriors combined with expected ace Tim Hudson to log a total of seven DL trips. All told, the Braves staff notched 467 DL days, costing the team $37.9 million in lost workdays.

Either the Rays were extraordinarily lucky in their ability to keep their starters upright and effective, or their scouts and player development staff found a way to produce starting pitchers who could take the ball every fifth day and succeed. Probably a little of both. Once the Rays pitchers caught up to (and passed) their hitters, the result was a farm system that earned annual plaudits from
Baseball America
as one of the best in the game. Lukevics, Bloom, Hernandez, and company parlayed a player development pipeline already improving by the end of the old regime into a feeder system for the holy grail of baseball accomplishments.

“Win right now
and
maintain long-term excellence,” said Newman, the Yankees’ head of baseball ops. “It is really, really hard to do both those things at the same time.”

The Devil Rays showed that it would take a complete organizational overhaul—a new owner, a new GM, a new manager, a cadre of eager, young stat wizards, and a whole new way of thinking—to grow the seeds planted by the first Devil Rays regime into a winning baseball team.

They just needed the right people to lead the charge.

The most valuable skill an investor can possess is the ability to time the market. You can buy one hundred shares of Google, convinced the company’s going to take over the world. But if a bear market attacks, even the best stocks will probably crash. Time your purchase right, though, and even a company with mediocre fundamentals and iffy prospects can make you rich. The same holds true for traders of commodities or any other investment. The best investing strategies can blow up in your face if the market doesn’t cooperate.

Yet few investors have mastered the art of timing the market. Market tops tend to occur when conditions look perfect. In March 2000, Internet stocks seemed like a sure thing. Dot-coms with the flimsiest business models and no hope for profitability were racking up triple-digit gains, often in a matter of months or even weeks. Few investors can resist the greed that kicks in when such gains become possible. Market bottoms tend to occur when conditions look
their worst. By October 2002, the NASDAQ had plummeted 78% from its peak two and a half years earlier. Few investors can resist the fear that takes hold when severe losses seem assured.

The same misconceptions prevail in baseball: dynasties look like they’ll never end, perennial losers like they’ll never turn it around. But where other prospective owners might have looked at the Tampa Bay Devil Rays and seen hopelessness, Stuart Sternberg saw a golden opportunity. The shrewdest equity investors understand that the stock market will often start to rebound several months, perhaps even a year or more, before the broader economy picks up and the hundreds of thousands of newly unemployed workers find new jobs. Sternberg could likewise close his eyes and imagine a Devil Rays franchise that could implement better business practices, connect to the community, and, with the help of new talent on and off the field, eventually field a winning ball club.

“We said, ‘This is horrible,’ and when I hear ‘horrible,’ I go ‘ooooooh,’ ” Sternberg told
The New York Times
. “I’m a buy-low guy, and if you pay the right price for something, I don’t care what it is, you can’t go very wrong.”

Sternberg bought a 48% share of the Devil Rays in May 2004 for $65 million, with Vince Naimoli retaining a 15% stake and a group of limited partners controlling 37%. Sternberg planned to wrest the title of managing partner from Naimoli in January 2007. Meanwhile, he watched Naimoli continue to alienate the team’s fan base and the Tampa Bay business community, running the franchise on the cheap and further damaging its local and national reputation. Eager to start his planned overhaul, Sternberg paid Naimoli a reported bonus of at least $5 million to take control earlier, consummating the deal in October 2005.

The deal was a bargain, a price barely higher, when prorated, than the $130 million expansion fee Naimoli and his partners had paid ten years earlier. Just a few months after Sternberg took over,
Forbes
magazine valued the Devil Rays at $209 million, with $116 million in 2005 revenue and healthy operating income of $20.3 million (thirteenth-best in MLB, thanks mostly to Naimoli’s
penny-pinching and baseball’s generous revenue-sharing program). Sternberg’s camp later disputed the
Forbes
valuation, noting that the team was in fact losing money and that the magazine’s figures didn’t account for capital improvements, deferred salary compensation, and other expenses. During the 2005 season, then-manager Lou Piniella told
Sports Illustrated
that he could take the D-Rays to the playoffs, if only player payroll could be raised by $20 million. Matt Silverman read the article and shook his head. If payroll rose by $20 million, he said, the team would go bankrupt.

Still, given the typically steep inflation rates for pro sports franchise values, Sternberg was clearly buying low. Throw in the impressive stable of young talent that Chuck LaMar and seven years of high draft picks yielded and the Devil Rays had perfectly timed the bottom of the market.

Given Sternberg’s track record, no one should have been surprised. His Wall Street career began in the late ’70s, when he traded equity options part-time on the American Stock Exchange (a much smaller pond than the New York Stock Exchange) while majoring in finance at St. John’s University in New York. He then landed a job at Spear, Leeds & Kellogg. The company was one of the leading market makers on Wall Street—despite its Jersey City headquarters. Market makers, also known as specialists, manage the sale of stocks on the floor of the exchange, matching up buyers and sellers at a fixed price, then taking a small cut off the top as commission. Specialists like SLK also buy stock when there’s an imbalance between buyers and sellers and perform other needed trading services.