Title: The Extra 2%: How Wall Street Strategies Took A Major League Baseball Team From Worst To First
Author: Jonah Keri
Publisher: ESPN Books, Ballantine Books
ISBN: 978-0-345-51765-4
Copyright: 2011
Pages: 236
Quick Review: 4 stars (out of 5)
Why I Read It: It combined something I like, Major League Baseball (MLB), with something I love, statistical business analysis.
Where I Obtained the Book: I received an ARC from the publisher through the goodreads giveaway program.
Review: This is what you get when combining the math awesomeness that is statistical analysis with insider baseball – a great look into what it takes to put a winning baseball team on the field. Now if you got tons of cash you can just skip all of this nonsense and just buy the best talent at the top prices and have at it. At least that is what the Yankees do and even though that alone is pretty much a great reason to hate them, it is a winning formula.
Now if you don’t have the cash (i.e. just about the rest of MLB), but do have time; well there is plan B. Plan B is when you build a strong and loyal fan base and find local home grown product to put on the field. That is what my team, the Twinkies, does. Not as successful as the Yankees but they are competitive most years. Plus there is no shame in cheering for them.
If those first two aren’t available for you, then the old school method was to gamble using your gut. That means you put out the dollars based on instinct and hope for the best. Normally that would mean gambling on a plan, but our heroes, the Tampa Bay Devil Rays, never did formulate a plan; at least one they would follow for more than a season or two. Consequently they were the bottom dwellers of MLB and a perennial punch line.
To make his point, the author details just how bad things were for the Rays, laying just about all of the blame at the founding owner’s feet. While this gossipy evisceration of Vince Naimoli is a very entertaining demonstration of clueless brand management, it struck me as the weakest part of the book. It was mainly he said/she said, and clearly shows a man completely out of touch with the need for managing his public image, but at the same time it bordered on nasty for nastiness sake. It seemed like the author didn’t believe you the reader would get the point of the rest of the book without tearing down owner number one.
I would say the author didn’t have faith in the original concept of the book and added all this shallow stuff to suck in the readers. Unfortunately the people who read the book for this material are going to quit reading by chapter three. That said it is fun to read in a back-biting way. It is always good to remember that a alienating your fan base is never helpful when all your profits are based on said fan base. A good example is getting the local high school band to perform, but then not allowing them into the stadium unless they bought tickets.
The real strength of this book is the math. Taking something that seems as arbitrary as MLB and applying solid business analysis to it can show up a lot of flaws in the current business model. The title suggests that gaining that 2% edge over your competition will lead to substantial profits down the road. Think if you could guarantee winning at roulette 52% of the time. Played right you would soon be a millionaire. Could the same be true for winning baseball games? Three finance guys who had done extremely well on Wall Street and had a love of baseball picked up the Rays relatively cheap. Using their finance knowledge they began managing the team with a long term strategy of gaining that 2% edge.
This meant looking at the numbers to find underappreciated talent at under market value. Just as Warren Buffet scans to country for undervalued companies to add to Berkshire Hathaway, these guys scanned the minor leagues and the free agents trying to fill the holes they had in their roster. How do you find that information out – the numbers? For example there is a guy who can breakdown a pitches style down to when he releases the ball and from that give you a very accurate prediction of how far away they are from injury. Really cool stuff.
Also on a strictly business level, the lengths the new owners go to repair their brand is great. As anyone can tell you brand is everything, especially in a consumer driven business model. Some of the counter-intuitive arguments reminded me of Chris Anderson’s book “Free.” For example, allowing fans to bring in their own food actually leads to increased sales at the concessions. Coupling the games with concerts is another strategy while not original to the Rays, it is used to great effect.
Of course you can’t lead strictly lead by the numbers, you just have to respect them. Two problems are evident in this system though the Rays have been very successful following them. First is mentioned in the book and that is the big miss on Albert Pujols. The Rays has him in their sights since high school (they were “first” to see him) and no matter how they added the numbers up it kept showing a loss. Time and again they (and to be fair, almost everyone else too) passed on him. The second thing, and this I didn’t see mentioned, it is possible to be profitable financially as a team without winning. I would guess that is what would get you through the bad years but the model doesn’t require winning as part of the equation. Rather winning is seems to be the icing on the cake, and while that is good; it won’t keep your fans around forever. “We may not play well, but at least were profitable” is not brand tagline for the long run.
While I like insider baseball and cool analysis used in new and creative ways, I realize I might be in the minority. Plus the early negativity was done a little too much with an excessive zeal. But I do recommend this book for anyone interested in baseball and business. If you like both then you are sitting on a homerun right here.
Synopsis: What happens when three financial industry whiz kids and certified baseball nuts take over an ailing major league franchise and implement the same strategies that fueled their success on Wall Street? In the case of the 2008 Tampa Bay Rays, an American League championship happens—the culmination of one of the greatest turnarounds in baseball history.
In The Extra 2%, financial journalist and sportswriter Jonah Keri chronicles the remarkable story of one team’s Cinderella journey from divisional doormat to World Series contender. When former Goldman Sachs partners Stuart Sternberg and Matthew Silverman assumed control of the Tampa Bay Devil Rays in 2005, it looked as if they were buying the baseball equivalent of a penny stock. But the incoming regime came armed with a master plan: to leverage their skill at trading, valuation, and management to build a model twenty-first-century franchise that could compete with their bigger, stronger, richer rivals—and prevail.
Together with “boy genius” general manager Andrew Friedman, the new Rays owners jettisoned the old ways of doing things, substituting their own innovative ideas about employee development, marketing and public relations, and personnel management. They exorcized the “devil” from the team’s nickname, developed metrics that let them take advantage of undervalued aspects of the game, like defense, and hired a forward-thinking field manager as dedicated to unconventional strategy as they were. By quantifying the game’s intangibles—that extra 2% that separates a winning organization from a losing one—they were able to deliver to Tampa something that Billy Beane’s “Moneyball” had never brought to Oakland: an American League pennant.
A book about what happens when you apply your business skills to your life’s passion, The Extra 2% is an informative and entertaining case study for any organization that wants to go from worst to first.
Author Biography: Jonah Keri is a sports and stock market writer / journalist. His take on the issues is influenced by objective analysis and biased Canadianism.
His new book, “The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team from Worst to First” (ESPN Books/Ballantine), covers the Tampa Bay Rays, their journey from cellar dwellers to pennant winners and the methods they used to get there. You can pre-order “The Extra 2%” here.
Jonah’s sports writing has appeared at ESPN.com, The New York Times, The Wall Street Journal, Bloomberg Sports, FanGraphs, SI.com, Salon, Slate, Playboy, Penthouse, Baseball Prospectus, Baseball America, Street & Smith’s Sports Business Journal, and many other publications.
He is also the editor and co-author of Baseball Between the Numbers, and has contributed to many other books.
Since 1999, Jonah has covered the stock market for Investor’s Business Daily and IBD’s Web site, investors.com.
Other Reviews:
Fan Graphs
The Process Report
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