The Extra 2% (24 page)

Following the trade, Howell pitched at Triple A, earning a promotion to Tampa Bay. Yet again, he appeared to struggle, posting a 5.10 ERA in ’06 and an unfathomable 7.59 mark in 2007. Still, the Rays remained patient. Howell had flashed excellent strikeout-to-walk ratios both seasons, a sign of good command. His fielding-independent numbers again pointed to a pitcher whose true ability suggested he could put up a much stronger ERA around 4.00 with
some better fortune. Still, management contributed to Howell’s fortune in 2008, shifting him to the bullpen … and everything came together: 89.1 innings, lots of strikeouts, very few home runs, great clutch performance, and a 2.22 ERA. He duplicated his success in 2009, this time as the team’s nominal closer. By changing Howell’s job description and the defense behind him—and showing the patience of Job—Tampa Bay had essentially created one of the best relief pitchers on the planet. It was a lesson in how changing circumstances can help people get the most out of their abilities, in baseball as in business.

“I couldn’t really handle those days off in between starts,” Howell said. “It was pretty bad. But once I knew I had to be ready every day, everything started to change.”

The hits kept coming. At the 2007 trade deadline, Tampa Bay dealt Seth McClung, a huge right-handed pitcher with a blazing fastball, to the Milwaukee Brewers for Australian reliever Grant Balfour. As if his name wasn’t unfortunate enough for a pitcher, Balfour’s career was plagued by shaky control that often earned him return trips to the minor leagues. Making matters worse was an array of injuries that would have prompted many pitchers to retire: five stints on the disabled list, with forearm, elbow, and shoulder injuries and surgeries. He lost the entire 2005 season and most of 2006. When Balfour was traded to the Rays, he was almost thirty, and it had been some time since he’d done anything promising in the majors.

But Friedman trusted his scouts—who saw Balfour regain his velocity after multiple injuries—and his cadre of analysts, who pointed to Balfour’s long track record of minor league success (more than a strikeout per inning) and suggested that some dormant skills might be on the verge of busting out. Friedman knew that Balfour’s upside far exceeded the minimal risk that came with a contract for just over the league minimum. Called up May 31, Balfour joined Howell in forming one of the most devastating bullpen combinations in the game that year. All told, he fanned 82 batters in 58.1 regular-season innings, with a 1.54 ERA.

Balfour’s signature moment that season came in Game 1 of the American League Division Series, the first playoff game in franchise history. With the bases loaded and two outs in a key spot, Balfour and White Sox shortstop Orlando Cabrera began yelling at each other, with Cabrera kicking dirt toward the mound and taunting Balfour to throw the ball over the plate. A fiery and animated competitor even in meaningless games, Balfour blew a fastball by Cabrera for strike three, pointed at him, then shouted, “Sit the fuck down!” The moment became so iconic that Rays blog DRaysBay quickly crafted a T-shirt with Balfour’s silhouette and the inscription “STFD.” Led by Balfour and Howell, the 2008 bullpen lopped more than two and a half runs off its ERA, dropping down to 3.55, fifth-best in the majors after finishing dead last a year earlier.

For all the success enjoyed by bullpen castoffs and other low-priced talent on the 2008 Rays, a commonly voiced knock was that management owed its success to a string of high draft picks, most of them made by the previous administration. There was something to this. The Rays picked in the top ten every year from 1999 through 2008. The list of first-rounders included several players who contributed to the ’08 AL pennant winners, either directly or indirectly: Evan Longoria, the number-three overall pick in 2006, won 2008 Rookie of the Year honors; David Price, the top pick of the 2007 draft, moonlighted as a fire-breathing closer in the ’08 playoffs before moving on to become a top starter in later seasons; and Delmon Young, the top pick of the ’03 draft, was parlayed by the Rays into Matt Garza and Jason Bartlett. Still, with Longoria and Price the only players to go directly from top draft picks to the ’08 team, and only Longoria spending the bulk of the season on the major league roster, it was clear that other factors played a bigger role in forging that team.

The biggest of those factors: Friedman’s uncanny knack for striking a deal in his favor.

“Andrew had a natural negotiating ability that was well beyond
his years,” said Wayne Clevinger, managing director at Friedman’s old private equity firm, MidMark Capital. “Half of life is negotiating, and he had a great gift for it. He had a feel for what could be done and what couldn’t. After that you could sense that there wasn’t too much you could give him that he couldn’t handle. The more balls he had in the air, the more invigorated he was.”

The single most important task on a general manager’s to-do list is the identification of talent that can push a team toward a championship. Many teams never make it past that first step. They overrate their own prospects, go after free agents well past their prime, and fail to spot statistical warning signs. The result is a string of losing seasons, followed by a stack of pink slips. Make it past that initial talent-vetting stage and you still need to sign your building-block players for a price and amount of time that fits the team’s needs, with enough money left over to address other needs. The Yankees could paper over player-evaluation mistakes by flexing their financial muscle on high-priced superstars. The Rays had no such wiggle room.

When Friedman left Wall Street for Tampa Bay in 2004, few players on the major league roster matched the profile of a worthy long-term keeper. Carl Crawford was an exception. A two-sport star from Houston, Crawford was just starting to convert his raw tools into major league skills. In ’04, Crawford’s third season with the Devil Rays, he hit .296, led the league in stolen bases and triples, and made his first All-Star Game. Advanced defensive metrics, though still in their infancy, suggested that Crawford was also an elite defender (an evaluation generally shared by scouts).

When Friedman signed on, he joined the D-Rays as director of player development. Nominally, Chuck LaMar remained the team’s GM and the man in charge of baseball operations. But from the start, Sternberg groomed Friedman to take the reins so that when the ownership change was complete, a capable new GM would already be in place. Until then, the D-Rays would separate into two cliques: LaMar and the old guard on one side, Friedman and a small but growing generation of business and baseball minds on the
other. When the time came to explore long-term contract possibilities with Crawford, it was Friedman, not LaMar, who took charge.

When Major League Baseball adopted free agency in the mid-1970s, it created a system in which players’ earning power would change dramatically over the course of their careers. The explosion of revenue over the ensuing three decades accelerated the skyrocketing of player salaries. More and more, teams’ incentives grew to acquire as many contributing players as possible with less than three years of service time. Why? Because nearly all of those players could (and still can today) be paid the major league minimum, as they were not yet eligible for salary arbitration and were still years away from free agency. As the revenue gaps between richer teams like the Yankees and poorer teams like the Devil Rays widened, many lower-revenue clubs began aggressively trading players before they reached free agency. Why risk losing a premium player for nothing more than the potential for compensation draft picks, when a proactive team could trade their free-agent-to-be for bigger hauls of young talent?

Friedman sought a different course. Crawford turned twenty-three near the end of his 2004 breakout season. Studies done by Bill James and other analysts confirmed that baseball players tend to peak in their mid- to late twenties. If Crawford didn’t sign a long-term contract, the D-Rays risked losing him at the height of his powers, just after his twenty-seventh birthday—or even earlier, if they traded him. To capture Crawford’s best seasons without breaking the bank, Friedman needed to find the right balance of risk and reward for both parties.

For Crawford, the best time to sign a lucrative contract would be immediately. Still a full year from becoming eligible for arbitration, and four years away from free agency, he risked losing major earning power if his performance tanked or he suffered a major injury before those milestones were reached. The Devil Rays could offer Crawford a big enough contract to leave him financially set for life. In exchange for that security, Tampa Bay would have a long-term commitment that could net the team a healthy profit if Crawford
developed as everyone hoped he would. This wasn’t an entirely new concept. In the 1990s, John Hart, then the Cleveland Indians’ general manager, popularized the practice of offering long-term deals to players on the brink of arbitration, thus assuring financial security for young stars Kenny Lofton, Albert Belle, and Jim Thome—and, more to the point for Hart, cost certainty for their employer.

What made the Devil Rays’ approach different was their affinity for club options.

A baseball player can sign a contract with three different types of options tacked on. A player option gives the player the right to opt out of the deal and test the free-agent waters, a move he’ll almost certainly make if he’s coming off a successful season and feels he can make more on the open market. A mutual option requires both parties to sign off, a scenario that almost never plays out that way: if a player’s likely to make more in free agency, he’ll opt out, and if the player struggles or gets hurt, the team is likely to let him go. But with a club option, the team wields all the power. Got a 40–home run hitter? Keep him. Did he turn into Mario Mendoza? Happy trails. As the stewards of a franchise that would probably always struggle with limited revenue streams, Sternberg and Friedman were as aggressive as possible in tacking club options on to long-term deals. Doing so gave them the possibility of risk-free profit at minimal cost. Baseball arbitrage.

The two sides consummated the deal in April 2005. Crawford would earn $15.25 million from 2005 through 2008, the four years before what would have been his free agency date. The contract then called for an $8.25 million salary in 2009, Crawford’s would-be first post–free agency season, and another $10 million in 2010 (with a chance to earn up to $11.5 million based on various escalator clauses). If Crawford maxed out his earnings, he would make $35 million over six years—one pre-arbitration season, three arbitration-eligible seasons, and two (would-be) free agency years. No one knew for sure how Crawford’s career would play out, and the D-Rays would be exposed if their promising young left fielder suffered a career-ending injury or an irreversible performance decline.
Still, the potential was there for the Devil Rays to make a gigantic profit. Which is exactly what they did.

Baseball analysis website FanGraphs shows every player’s earned value on a year-by-year basis, based on a formula that measures a player’s batting and defense (or a pitcher’s pitching), then scales it against the going rate for free-agent talent in a given season. Through the first four years of the contract, Crawford’s performance added up to $55.7 million in value—nearly four times what he was paid in those seasons. In 2009, Crawford’s production netted 5.5 wins for Tampa Bay, worth $24.9 million on the open market—triple his salary for the year. By late June 2010, Crawford’s earned value had easily surpassed that season’s salary too. All told, Crawford produced $108.9 million worth of value for the Rays over the life of his contract, compared with the deal’s maximum value of $35 million.

Friedman’s next big coup came in January 2008, when the Rays signed starting pitcher James Shields to a long-term contract. Having already seen some of Crawford’s profit potential pay off, Friedman took an even more aggressive approach with Shields. After just 52 major league starts (including an impressive 12-8 record and a 3.85 ERA on an awful 2007 team), Shields had shown the Rays enough to earn his own multi-year offer. From 2008 through 2011, Shields would be paid $11.25 million, already a potentially huge bargain for a Rays team that believed it had found a top-tier starter.

But the kicker would come at the end of those four seasons, with the Rays tacking on not one, not two, but
three
club options. No team in baseball had so completely embraced the idea of club options or lobbied for that much latitude at the end of a deal. But Shields had one less year of service time under his belt than Crawford did at the time of his signing. As a pitcher, Shields was also a riskier investment. The higher attrition rate carried by pitchers compared with position players was a concern. Even more worrying was the 2002 shoulder surgery Shields had to remove a benign tumor; the procedure dropped the velocity on his fastball and left him wondering if he’d ever pitch again. But Shields had proved
himself since then, developing one of the deadliest changeups in the game. If anything, those drawbacks gave the Rays more negotiating leverage. The deal to date has been a big success. Three years into the contract, Shields has been worth $44.4 million (market value) despite an erratic 2010 season. If he serves the contract’s entire seven-year term, including the club’s three option seasons, his maximum total salary would be $44 million. Less than halfway into the deal, the Rays have already made their money back.