Wednesday, March 16, 2011

The extra 2 percent

Late night food for thought:
Q. A decade ago, Major League Baseball was still pretty hostile to basic economic thinking, like the idea that teams should use data to find undervalued players. But the success of the low-budget Oakland A’s and Michael Lewis’s best-selling book about them, “Moneyball,” helped change that. Today, some of the biggest-spending teams, like the Yankees and Red Sox, are infused with analytical thinking.

So how did the Rays (with a 2010 payroll of about $72 million) finish ahead of the Yankees (2010 payroll: $206 million) and Red Sox (2010 payroll: $162 million) in two of the last three seasons? What is their edge — the “extra 2 percent” in your title?

Mr. Keri: The Rays look for that extra 2 percent absolutely everywhere. There are all the basic baseball ideas, of course. They dream up ways to build an optimal lineup and they put relief pitchers in position to succeed against certain types of hitters, just like every other team does. But in the Rays’ case, they go much deeper. The manager, Joe Maddon, is more open-minded and intellectually curious than any other manager in baseball. He regularly meets with the “quant guys” in the organization, and is willing to make substantive, enduring changes based on their input.

One great example is something called the Danks Theory. It’s named after a left-handed pitcher named John Danks, a change-up specialist who’s often tougher against right-handed hitters than left-handers, which is unusual in baseball. Erik Neander, the team’s co-head of R.&D. (the fact that the Rays even have an R.&D. division, as if they’re Google or Apple, says a lot), met with Maddon and suggested that the Rays start same-handed hitters against pitchers like Danks. And it worked. Maybe strategies like these amount to two or three wins a season. But when you’re competing against the two biggest, baddest, richest teams in the sport in the Yankees and Red Sox, every little edge counts.

It’s really much more than an on-field idea, though. For instance, the Rays hold more postgame concerts than any other team in baseball. There are some fairly significant costs to staging a concert, but they’ve crunched the numbers and found that the attendance boost makes it well worth the added cost, and hassle. The Rays also offer free parking for carpools of a certain size; that has the double effect of enticing extra fans to the park and making sure the roads and parking lots around the stadium aren’t painfully crowded.

People have asked me, “What do the Rays do that absolutely no one else does?” It’s tough to pinpoint one thing. But it’s that collection of 2 percent edges that adds up to a lot — in this case, two AL East titles in the past three years, and a ball club whose franchise value has skyrocketed in the five-and-a-half years since Stuart Sternberg and his partners took over.