The Extra 2% (23 page)

“The idea is, I buy a widget, sell a wodget, and I don’t care what happens long-term,” said Felix Salmon, a finance blogger for Reuters. “I’m betting the price of widgets will converge on wodgets, then I’ve made money and I unwind my trade.”

That term,
arbitrage
, has come to take on the broader meaning—especially in nonfinancial circles—of simply acquiring an asset for less than it’s worth, especially when coupled with selling an asset for more than it’s worth. Every team strives to make these kinds of advantageous moves; the Devil Rays had to be pathological
about it. When you take over a team that’s finished last almost every season and you’re the laughingstock of the league, one good move isn’t going to cut it. Friedman knew he’d have to harness all the bright analytical scouting minds he’d assembled, combine them with his own deal-making ability, and spend several years arbitraging toward a brighter future. And the challenge was doubly daunting given the competition from Boston and New York.

If you’re the Yankees, you’re not as motivated to trawl for cheap talent or invest precious time and effort cobbling together minor trades. Nor are you likely to entertain offers for superstar players, Salmon noted, even if they are overvalued and such a trade could pay off a few years down the road. “They’re trying to win the World Series every fucking year. If you’re the Yankees, you would never sell Derek Jeter, no matter what you were offered.”

In a sense, acquiring a baseball player at a discount, then holding on to him as his value appreciates, was a familiar process to someone with Friedman’s private equity background. The best time for a private equity investor to grab a piece of a company is often when it’s just getting off the ground. Likewise, the best time to invest in a player is often before he’s played a single major league game. At that stage, he’s likely to improve and will cost much less than when he’s a proven commodity—and far less than when he racks up six years of major league service time and becomes eligible for free agency. In both cases, the ideal holding period should be only as long as the asset maintains the right price-to-earnings ratio, whether those earnings take the form of dollars or wins. You might hold a little longer if shares of that company are throwing off dividends, or your player is helping you win championships.

If all of this sounds familiar, it should. Successful baseball executives have always excelled at identifying when to buy and when to sell players, even if no general manager in the game’s history has ever wielded a Wall Street background quite like Friedman’s. But where Friedman implemented a new-school approach in Tampa Bay, his methods also resembled those of one of baseball’s old-time greats, Branch Rickey. One of Rickey’s favorite expressions was,
“Trade a player a year too early rather than a year too late.” Tampa Bay’s disastrous 2007 season set the stage for a blockbuster trade, one so daring it would leave critics wondering if the Devil Rays had traded a player
five
years too early.

The 2007 season had just ended when Friedman first approached Twins GM Bill Smith with a question: would he be interested in Delmon Young?

Had Smith hung up the phone at that moment, Friedman wouldn’t have blamed him. Few prospects in recent history had been more vilified than Young. When things didn’t go his way, the number-one overall pick of the 2003 draft might melt down. Playing at Double A Montgomery in 2005, Young found himself on the losing end of a 13–0 game. After being called out on strikes for the third time that game, Young lashed out at the home plate umpire, earning an ejection. He got in the ump’s face, bumping him with his chest, then yelling at him some more in the runway leading to the clubhouse after the game. The dustup drew a three-game suspension. It would prove to be a mere warm-up act.

Promoted to Triple A Durham the next season, Young would be teamed once again with Elijah Dukes, another skilled outfielder with the talents of a future major league star. But while Young was pegged as a good kid and solid teammate who occasionally lost his temper, Dukes was a deeply troubled individual. He fathered five kids by four women from 2003 to 2006 alone. He would later be accused of impregnating a seventeen-year-old foster child living with one of his relatives. Dukes cemented his reputation as a big bowl of crazy in April 2007, when he barged into the middle school classroom where his wife taught. Fearing for her life, she ran to the principal, who banned Dukes from the building. She had reason to be afraid: Dukes had sent a photo of a handgun to her cell phone and, she said, left her a threatening voice mail. “You dead, dawg,” the message said. “I ain’t even bullshittin’. Your kids too.”

“Everyone in the clubhouse agreed, you had to keep one eye on
Dukes and one eye on your own stuff,” said
Baseball America
writer John Manuel, who covered most of Dukes’s games in Durham. “They knew that if Dukes wanted to fuck with you, there was nothing you could do about it, because he was so physical.”

Before “You dead, dawg” became a snarky Internet meme, Dukes’s influence poisoned the Durham clubhouse and infected his teammates. Though Young had lost his cool a few times coming up through the minors, none of those events compared to what happened on April 26, 2006. Playing in a game against Pawtucket, Young took a called third strike. No chest bump this time, but he did stare at the umpire, refusing to leave the batter’s box for a couple of seconds. What happened next became an Internet sensation for all the wrong reasons. The center-field camera caught Young, as he finally walked back to the bench, flinging his bat backward. The bat whipped toward the ump, then whacked him in the chest and arm. Young apologized the next day for the incident, but the damage was done. He got off lightly with just a fifty-game suspension.

For all the animus that incident provoked, Young’s youth, talent, and production still made him a hot commodity. He’d won the Southern League MVP in 2005, despite playing barely more than half the season at Double A;
Baseball America
named him its Minor League Player of the Year. The publication also chose him as its number-one prospect in 2006; he was the number-three prospect in 2004, 2005, and 2007. In his first full major league season, Young played in all 162 games, hit .288, and drove in 93 runs, all while turning twenty-two just before the end of the season. Players like Young, with a rare combination of youth, low salary, raw talent, and potential, almost never get traded. But where others saw a future superstar, Friedman saw an overvalued commodity. As a rookie in ’07, Young struck out 127 times and drew just 26 walks. He didn’t hit for the kind of power that the Devil Rays hoped to see, and despite impressive athleticism, he was a terrible defensive player with lousy instincts. Bat flings and chest bumps aside, the D-Rays saw a player whose perceived value might exceed his actual value.

Young might eventually blossom into a franchise player. But the
newly dubbed Rays saw a chance to cash in that potential for a top-line starting pitcher, while making a quantum leap defensively at the same time. On November 28, 2007, the Rays dealt Young, Brendan Harris, and minor league outfielder Jason Pridie to the Twins. In return, they acquired right-handed starting pitcher Matt Garza, shortstop Jason Bartlett, and minor league pitcher Eduardo Morlan. The deal caught the baseball world by surprise. Rarely did two teams execute this kind of “challenge” trade, with two potential stars changing teams so early in their major league careers.

For Friedman and the Rays, this was a unique opportunity, one that transcended the usual protocols for low-revenue, rebuilding teams. Young’s attitude issues aside, the Rays were overloaded with young outfielders. What they sorely lacked were young starting pitchers with ace potential. Garza came with makeup questions of his own, with observers wondering if he could handle adversity, given the mound blowups he’d flashed over the years after giving up big hits. But Garza’s upside, combined with Bartlett’s slick glove, gave the Rays a chance to dramatically upgrade their run prevention with a single deal. The trade was so promising that rival executives cursed it.

“We were pissed!” said Jed Hoyer, former assistant GM for the Red Sox who became the man in charge in San Diego. “We’d always liked Garza, even with the makeup issues, and we had tried to get Bartlett also. Young for Garza you could start to understand, but then for them to get Bartlett too?”

Bumping Young out of the lineup gave the defense its first boost. The next one came by subtracting Brendan Harris (12 runs worse than the average shortstop in 2007, prorated over 150 games) and replacing him at shortstop with the fine-fielding Bartlett. (The Twins have fared well since doing the deal too, with Young enjoying his best season in 2010 and a slew of talented, homegrown players—plus a new, revenue-rich stadium—making Minnesota a perennial contender.)

The biggest changes to the Rays’ defense would come from players already in the organization. Soon after opening day, the Rays
called up third baseman and first-round draft pick Evan Longoria. Combining a potent bat with the best glove in the league at third base, Longoria became an instant star. Installing Longoria in the lineup shifted Akinori Iwamura to second base. Iwamura won six Gold Gloves playing third base in Japan but had virtually no experience playing second base at any professional level. Still, the Rays must have seen something they liked, and Iwamura teamed with Bartlett to form the best double-play combination in team history. Other, more subtle changes also helped. After they had jerked him across multiple positions coming up through the farm system and early in his big league career, the Rays finally slotted B. J. Upton in center field on opening day and left him there. The result was an 11-run defensive improvement there too.

Few people saw it coming, but the Rays were about to become a huge threat to the AL East hierarchy.

“We were annoyed by [the Young-Garza/Bartlett trade], but we didn’t think they were that close to being competitive—we didn’t think the bullpen was good enough,” mused Hoyer. “We’d always had this two-team division, and you knew the wild card could come out of our division every year. All of a sudden, that changed completely. It continues to this day, where you know one of the three best teams in baseball is not going to make the playoffs.”

The Rays would answer their rivals’ doubts—and their own fears—about their bullpen by finding value in unlikely places. Tampa Bay made twenty-two trades between the end of the 2005 season and opening day 2008, several of them for relief pitchers. Very few of those trades looked like much at the time. But several of the players became key cogs by the time the Rays fielded their first winning team in 2008.

On June 20, 2006, Tampa Bay shipped outfielder Joey Gathright and throw-in middle infielder Fernando Cortez to Kansas City for left-handed starting pitcher J. P. Howell. A first-round pick by the Royals out of the University of Texas, Howell immediately dominated
in professional ball, fanning 138 hitters in his first 128 minor league innings. Promoted to the majors on June 11, 2005, Howell excelled in his first big league start, tossing five innings of one-run ball against Arizona and striking out 8 batters. The rest of the season was awful. In his next 68 innings, Howell struck out 46 batters, walked 37, and surrendered 69 hits and 9 home runs. He finished with a 6.19 ERA. When a baseball player slumps, there’s a tendency for teams to fixate on the negatives. Those who watched Howell that year couldn’t help but notice his slight frame. Listed at 6 feet, 175 pounds, he looked closer to 5′ 10″ and 160. Where successful undersized pitchers like Pedro Martinez used whiplike actions to generate velocity on their fastball, Howell’s heater topped out below 90 miles per hour and never averaged even 87 miles per hour for a full season. The Royals couldn’t help but wonder if their number-one draft pick had been something of a mirage, able to get by with mediocre stuff against feckless minor league competition, but overmatched against the big boys in the majors.

The Devil Rays chose to focus on Howell’s positives. They noted the larger sample size of success in college and in the minors, compared to fifteen shaky starts for a twenty-three-year-old rookie in the majors. They saw flashes of impressive results, including his first start of the season, and also his second-to-last, in which he struck out seven Twins in five hitless innings. Sure, he couldn’t dent a slice of bread with his fastball. But his curveball was a dazzler. When Howell was on, he could spot his big curve anywhere he wanted in the strike zone, freezing not only left-handed hitters but also righties, thus fulfilling the crucial requirement that a pitcher have an out pitch against opposite-sided batters.