REAL | perspectives DO THE RAYS EMPLOY WALL STREET TECHNIQUES TO OVER ACHIEVE? By William Henry, PhD
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hree decades ago after graduating from the University of Florida, I decided to return to grad school and study business administration. I had become enthralled with the career of my mentor John Portman, an architect/real estate developer in Atlanta who combined design ability with business acumen. This combination of innovative design coupled with market acceptance resulted in changed city skylines. It is a potent combination.
that a forecaster can throw into the mix and ‘iterate’ with outcomes, the greater the accuracy of the predictions. I employed this system to help secure over $500 million worth of new construction volume for a large company between 1978 and 1980. Therefore I know how well it can work.
If the art of design excellence can be instilled with the “The Art of the Business Deal” as Donald Trump might say, much can be accomplished. Portman and Trump, along with Steve Wynn, have proven that they somehow understand what the public truly wants and the three are successful at delivering it. Steve Wynn of course is Mr. Las Vegas, the designer and owner of such casinos as the Mirage and the Wynn Hotels; and Trump’s work needs no description.
What does any of this have to do with baseball and The Ray’s success? In spite of one of the lowest payrolls in baseball the Rays compete favorably with the Yankees and Red Sox. You can term it ‘Money Ball’. Where did Ray’s owner Mr. Stuart Steinberg earn the money to purchase and sustain the Rays? According to reports, the answer is Wall Street. Do you think that Mr. Steinberg and operational manager, Mr. Andrew Freedman might be relying on Wall Street techniques to predict the success of certain players in THEIR system?
What Does Steve Wynn and Donald Trump Have in Common with the Past Chairman of the Federal Reserve Agency?
How Can These Techniques be Used in Predicting Player Success and Situational Strategies in Baseball Games?
It is important to remember that the Rays have a certain approach and brand. They rely on solid pitching, great defense, speed, and agility in tinkering with lineups depending on the team that they oppose. In the old days, the lumbering established Yankees fielded a lineup that hardly ever changed. Remember Mickey Mantle and Roger Maris? How could Manager Casey Stengal tell Maris or Mantle that they would not be hitting cleanup? Today the Rays employ ‘situational players’. You never know who is going to be hitting cleanup and for that matter, who will be in Joe Maddon’s lineup.
Both are really good at being able to predict market acceptance and performance. Interestingly, both attended the Wharton School of Business. I completed much of my courses at Wharton on the way to receiving a PhD. In doing so, I stumbled upon a discipline known as ‘Econometrics’. This is the discipline Wall Street uses to predict market performance. In actuality, the Fed employs it as well to predict economic upturns and downturns. In addition, investors use it to predict stock performance. A critical part of econometrics is conducting something called My guess is that the Rays are employing ‘regression analysis’, which relies on computer modeling techniques similar to ‘econometrics’ by inputting countless numbers of predictive programming. factors. Examples may be the ability of batters to hit right or left handed pitching; and/or Wall Street Forecasters Employ the pitching success of one hitter vs. certain Econometric Modeling to Predict Stock pitchers in critical situations. Market Performance and Why I Know it Mostly Works. Moreover in the Rays organization if a player The best explanation of this practice is that becomes too good and commands too much it entails taking certain predictive factors money, they become ‘overqualified’ and are and correlating them with outcomes. In the traded e.g. Carl Crawford. The problem for building industry an example would be the potential ‘suitors’ of team talent is that while correlation between low building vacancies so called ‘super stars’ may perform well for the and the demand for new construction. Rays, there is little guarantee that they can for The greater the number of predictive factors other teams. Certainly former Rays players 32 | REAL EXCLUSIVE | GetRealExclusive.com
have struggled to meet the expectations that their new higher salary level warrants. In other words, they don’t succeed because they are not ‘iterated’ well with the teams that over paid! Employing Econometric Modeling is no Guarantee of Success BUT! Please don’t construe the above approach as the only secret to businesses or business success. Accurate forecasting is only one ingredient. Good judgment by seasoned management, as well as innovation, count. Clint Eastwood’s movie about an aging player scout echoes this point. But these ‘Wall Street’ techniques may constitute the equalizer and even the winning edge- the difference maker in many games. The Rays are the Small Business Start Up That Can Produce a Better Product for as Little as 25% of the Cost of Competitors! I am personally glad that Major League Baseball has no salary cap and that you can watch kids with pimples beat the teams with established stars. The Rays are the small business guys that are ‘lean and mean’ and are churning out wins against the more established teams. This technique can help foster fair competition and result in an improved product for a much lower cost! This is more interesting to me than watching two teams that are more evenly matched in terms of payroll expense. The National Football League employs a salary cap so that the wealth is evenly distributed. This reminds me of Socialism. Why shouldn’t teams with high payrolls have the freedom to over pay for the Ray’s over priced cast offs? Isn’t that capitalism?
William “Bill” Henry RGA-Design LLC DreamScapes LLC (813) 226.2220 ext. 204 whenry@rga-design.com