Wednesday, November 02, 2005

The Other Side of the Trade

In the stock market, traders sometimes talk about knowing who is on the other side of the trade. What do they know? What do they hope to accomplish?

The 'other side' of the Theo Epstein trade is Larry Lucchino and the power on the throne, John Henry. As they say in Hollywood, "what's my motivation?" As I wrote on the Dirt Dogs site, Lucchino would clearly come down as the Fall Guy if Theo Epstein walked. So far, it's played out that way.

Does anyone think that Larry Lucchino gives a rat's patootie about that? Lucchino runs the business side of the house, skillfully maneuvering among the politicians, contractors, and vendors to enhance the ballpark, expand revenues, and increase club value. From an ownership perspective, you care about widget sales, top and bottom line growth, cash flow, debt service, and ultimately market capitalization. If you're John Henry, the trend is good.

If you're Henry, do you care about fan reaction to the departure of the sentimental favorite son? You don't achieve Fortune 400 status (richest people on the planet) because of sentimentality. Do you think one less fan will cross through Fenway turnstiles because Theo Epstein isn't sitting behind home plate or in the owner's box? Your investment is about dollars. Will seats suddenly become vacant and fans abandon Red Sox paraphernalia? Don't bet on it.

Dollars aside, you can already point to three playoff appearances, two ALCS rounds, and a World Series title. How dare you say ownership doesn't care about winning, or committing resources to the process?

What fans have to ask is becomes is John Henry the next James Orthwein, a sports carpetbagger, or planning to sell out in the near future. If he and Lucchino continue to increase cashflow, especially by moving Manny Ramirez, by not signing Johnny Damon, by 'going young' and allowing other contracts (e.g. Schilling) to die of attrition, then cash flow could increase dramatically and increase the real (not theoretical) value of the investment. On Wall Street they call that good business.

We fans often become trapped in concepts of loyalty and tradition. Shrewd baseball owners don't suffer the same failings, as they increase their empire through all possible means. The Sox continue to increase ticket prices, and the payoff of farm system productivity is the option of decreasing 'overhead', that is, the cost of the product on the field.

I've discussed the distinction of decision-making by ego or by money. Theo Epstein rendered a decision based on ego, walking away from Megabucks. We must presume that intolerable working conditions contributed. The motivation for the other side of the trade remains unexplained. Did ownership consider Epstein too popular, expendable at this point before his status grew uncontrollable and a threat to their longer-term goals? What are their goals?

What we as fans must accept, like players who are fungible, is that the Theo Epsteins, Chris Correntis, and others are mere pawns on the chessboard of the baseball hierarchy. They are commodities, interchangeable with minimal perceived loss in valuation. You can almost hear the boardroom chatter, "look, we'll just get another guy. The fans won't even notice the difference. The king is dead, long live the king. It's just that simple."

Sentiment doesn't drive franchise value, cash flow does. Ownership retains control of one of thirty-two proprietary businesses, monopolistic, indestructible. Or so they think.

59 comments:

Clickbank Mall said...
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Anonymous said...

I love reading about the demise of the Red Sox. It's wonderful! You finally win a World Series after 86 years, but then it's back to the pathetic ways of the past.

Anonymous said...

It took me a moment to judge if this was parody or not. Unfortunetly it's not. Just a pompous gasbag restating the obvious.

Steve Squires said...

Nice post - I couldn't agree more. I think you got it right. At the end of the day, baseball now is about business (actually, wasn't it always?)

Anonymous said...

You don't need Theo to win a world series... You just need to out spend everyone else...Isn't that right Yankees fans?

Anonymous said...

I love watching the Yankees lose.

Anonymous said...

The demise of the Red Sox are grossly exaggerated.

Anonymous said...

THEO GREAT LOSS,SMART,YOUNG, HONEST,& CARING ABOUT "THE GAME" W/ MEANS CARING ABOUT THE PLAYERS & FANS. SOMEWHERE ALONG THE YEARS $$$$ HAVE BECOME #1. "RESPECT FOR THE GAME".....WHAT HAPPENED. OBVIOUSLY THEOS BEEN GOOD FOR BOSTON, WE HAVE THE RECORD TO PROVE THAT. IN ALL HONESTY, DOES REAL UPPER MANAGEMENT HAVE A CLUE ABOUT BASEBALL OR ARE THEY JUST OUT TO TAKE CARE OF THEMSELVES. MAYBE THEO DESERVED "MORE RESPECT".

Anonymous said...

we need to move on.... theo is gone... it happened... now lets worry about our free agents and who to bring back

Sal said...

Red Sox=huge potential

Yankees=depleted farm, colossal budget, growingly impatient fan base

Anonymous said...

Where are all the real Red Sox fans? When did we start caring about winning? Whatever happened to the good old days when we just loved our players no matter what? I miss Nomar. He was the heart and soul of the team. He was fun to watch, and was very talented. He had one bad year, we trade him, then luckily win a World Series. It had nothing to do with the trade of Nomar. With a payroll like the Sox have, a healthy Nomar would've done the same thing Cabrera did. Not resigning Pedro was another let down as a true sox fan. I like watching a team who has fun. Forget about winning World Series'. I want to see players having fun. Think about that game this year on the trading deadline when Manny didn't start and was thought to be going to another team. That was the most painful game to watch... slow, boring. To whoever the next GM is, realize that we don't care about winning. Don't trade Manny. If you do, expect a decrease in fan support. We need a GM who's a true Red Sox fan. Not some puppet who's there to do whatever the people in charge of the money tell him to.

Anonymous said...

Amen, brother. Amen.

Anonymous said...

Professional sports is all about business. The game is the product, the players the accessories or pieces of the game. The players insist on making top dollar for their services, the owners want to make a profit and the fans are the suckers in all of it. The Sox will have a huge problem charging high ticket prices with a bunch of "value" guys taking the field every day. And, when fans stop coming to the park the pain will be felt. 10,000 fans a game staying home means 800K empty seats which means about $20 million in lost revenue from tickets and watered down beer.

Anonymous said...

Do you think one less fan will cross through Fenway turnstiles because Theo Epstein isn't sitting behind home plate or in the owner's box?
Yes-If this is the first sign that the Sox are headed back to the bad old days, I'm done shelling out for a ticket I can barely afford.

Anonymous said...

It never should have come to this. The Red Sox should have come with their best offer before the season started instead of trying to low ball Theo and waiting until to the last minute to pressure him into a deal. How about showing a little loyalty and rewarding the guy for a job well done.

rocket roger clemens said...

The bottom line here is plain and simple: Theo did not want to work for an organization as complex as the Red Sox. The Boston Red Sox are an empire, not simply a baseball team. Their mission statement reads: maximize revenues and net income by winning on and off the field. Theo is more concerned with the baseball operations and what happens between the lines. I think that he was able to deal with all the baloney that come along with being GM as long as it didn't interfere with his principles and philosophies. When the it became personal during the negotiations and his self interests were at stake, he said: You know what, enough is enough. All the behind the scenes drama, semantics, relationships and connections were maginified 100 fold and became overbearing. Ultimately, he understood and accepted the challenges that came with being the GM and a member of the organization, but he didn't agree with it and said no thank you. Especially now that he has already accomplished what no other GM has been able to do in 86 years.

Kevin L. said...

red sox fans dont care about winning? we just want to see players have fun?

i thinkk you are confusing this with the fact that TRUE red sox fans love baseball. i would rather see a team like the angels team that won the world series with hit and runs timely singles agressive base running. id rather see a team diving for balls and legging out singles. i want my dirt dogs back. id rather see a team of jason veriteks and trot nixons john oleruds billy muellers and to an extent johnny damons. NOT TO SAY i dont like to see home runs but a team that sits back and waits for a big hit and ends up scoring 4 runs on 4 solo homers in 4 seperate innings is not a true baseball team. i want the 2003 red sox the 99 red sox the impossible dream. the 04 version was a hibred of the 03 team mentality and the 05 fuck everybody mentality that kevin millar identified with a tshirt. im sick of fans that dont watch the game $200 seats with picnic tables and needing to sing neil diamond in the 8th. how about staying the whole game knowing your players we cant become like the stereo typical bandwagon yankee fans. yes i do love winning but i love well played baseball more BE A BASEBALL FAN FIRST AND A RED SOX FAN SECOND

Anonymous said...

The 'stock trade' analogy make the incorrect assumption that this was also a 'trade'; that is, that both parties wanted this to happen. This was theo's decision, the management wanted him to stay. There is no factical analogue between this situation and a stock trade.

Bob Bergin said...

Ron, I agree that the seats will be just as hard as ever to get. $100 will become the norm. Maybe the expansion of luxury seats is the hidden agenda. Could Theo have actually asked for a box for personal and family use as part of his new contract. Could Theo wish to have seats that will allow him to enjoy the game, instead of seating behind Larry L.
When Larry Bird and Kevin McHale parted ways as immortal Celtics, I owned more Larry Bird memorabilia, than Kevin, but it is Kevin who has proven to be the better basketball mind. Larry Legend the greater of the 2, but Kevin did it his way. Theo Epstein will be taking the higher road, just the way Kevin did.....Predict Theo will be back in charge of the Red Soxs...

Anonymous said...

Enough with the demise of the Red Sox. They are a great team. They can back from 0-3 and won the World Series, they will come back from Theo too. Let's just get the players back & healthy. GO SOX.

Anonymous said...

I heard John Henry offered Theo a 2" X 3" piece of "Championship Sod" for 1/2 price as a going away present

Peter said...

lets hope they either sell the team, or change direction and stop raping my red sox by covering the stadium with ads and 100+ dollar seats for people who dont watch the game. i agree i want to see good baseball return to fenway, this years team limped into the playoffs dispite playing ugly baseball most of the way

i am excited to see young players comming up who hopefully have that "run through a wall" menality of trot nixon and billy mueller

Anonymous said...

Here's the reasons why this stinks
1. Farm system would have fed them for years. He was on the cusp of building this to the point where it would have been the best in baseball.
2. Posse - He was smart enough to surround himself with guys at least as smart as his is...find some other baseball guy other than Billy Beane that would do this. Their collective contribution was immeasurable
3. Free Agency - He can sell snow to an Eskimo. Players relate to him.
4. Willing to make the hard decision - See "Nomar"
5. Had the ownership's trust...stability in that position is critical otherwise you become Detroit and Texas
6. He is brighter than anyone that has preceded him or will follow him
7. Timing is awful. We have 6 position players to replace and need pitching. By time they sort this out, it will leave us with crumbs.
8. I can't sleep

Here's the reasons why this may be good
1. Theo's philosophy was too "run scoring" focused and not enough defense/pitching oriented
2. May end up getting Luchinno fired...I think he runs the team fine, but everyone in baseball hates the guy and that will come back to eventually haunt you.
3. Theo was building up a "smug" reputation among other GM's...not a good thing
4. Many of his moves were Plan B lucky...What would have happened if we signed A-Rod and Pavano?
5. There was something rotten on Yawkee Way. This will allow Henry (the smartest guy in the group) to fix it.
6. Theo was going anyway...it was only a matter of time. He was building up rock star status

All of the above considered, I have that same sick feeling I would if Bill Belichick left...
If I were an owner, I would hire Theo in a heartbeat!

Anonymous said...

Sox will land on their feet. Theo Epstein is replaceable. The SD people tell Theo that "they want Dave Roberts" during the WS last yr and he obliges by getting Ramon Vazquez who in 2004 had an OBP of .297, which incidentally was 63 points higher than his OBP in Boston in 2005. And Jay Payton who clearly did not want to be here. Not only was that evident in June when Payton was making a fuss but it was evident in March in spring training. Evident to me; some dude who reads the Globe sports page and sportsline.com. How was it not evident to Theo? But he had to help out his buddies in SD. And then he has no backup plan for M.Bellhorn who if you look at his career is and was wildly inconsistent and needed a backup plan. And how did he address the bullpen. Blaine Neal, Jeremi Gonzalez and John Halama. Oh and Matt Mantei. What did he do at the trading deadline to bolster the worst bullpen in the American League?? He trades Payton (who should have never been on the team in the first place, not for performance but b/c he did not want to be there) for Chad Bradford who had not even pitched a game in '05. Bradford was C+ material. Matt Perisho (infinite ERA), Mike Remlinger (14.85), Chad Harville (6.43), Jeremi Gonzalez (6.11), John Halama (6.18), Matt Mantei (6.49). There's some of Theo's moves for the bullpen both before and during the season. If he had concentrated more on his own team in the offseason and less on helping out old friends in SD he could have addressed two important needs on the team, a fourth outfielder and insurance for Mark Bellhorn/utility infielder. Instead we had to use in season resources to get Tony Graffanino and Alex Cora for the IF and to bring back Gabe Kapler for the OF. Perhaps those resources could have been used to get Kyle Farnsworth (1.98 w/ the Braves) from the Tigers who was given up to the Braves for not a large bounty.
And did Shaughnessy sign Edgar Renterria?? No that would be Theo. And Sox fans can thank Theo, and not Dan Shaugnessy, for the next three yrs with Edgar. People were descending on Fenway back in Winter '99 w/ torches and pitchforks looking for Dan Duquette after he signed Jose Offerman. People were angry about Edgar this yr and his pitiful defense and mediocre offense but remarkably the guns were not aimed at Theo for this, certainly not with the way they were at Duquette re Offerman. And Offerman's first season (.294 AVG, .391 OBP, .435 SLG) dwarfed Renterria's (.276 AVG, .335 OBP and .385 SLG). And that would be two more yrs of Matt Clement as well. Clement was 69-75 with a 4.34 ERA in his career. Poor signing by Theo.
People criticize Larry for stating that Manny asked to be traded. Manny did ask to be traded...several times. Players can stand in the locker room and pound their chest and shout about anything from sports to politics to culture and the people eat it up and think its quirky and cute regardless of how inane or irrelevant. But Larry states that Manny asked to be traded when Manny asked to be traded and Larry's a pariah. Larry has been a power broker in politics and sports since the early 70s. Theo's been at it for the last five or so years. If Theo wants to tangle with Larry and John Henry and the rest of the gang (and I am not suggesting he does) he will lose and lose badly.
Theo made some strong moves since he got here. He, along with Larry Lucchino and John Henry and many others, helped build a WS champion. I'm not overlooking that. (I say helped b/c Dan Duquette gets little credit for his hand in the WS win. Three of the four starters in the WS were Duquette's signs/trades. Three of the starting nine were Duquette's signs/trades....and one was Lou Gorman's) But Theo is replaceable. And the zero playoff wins that the Sox produced this yr can be improved upon. That I am sure about.

Ron Sen, MD said...

The point I tried to emphasize is the split between business operations and baseball operations. Ideally, like the Patriots, they would interact seamlessly.

The main actors in this drama have tried to put a good face on the divorce, but if everything's so great, why the divorce?

Anonymous said...

I agree w/ Ron Sen, MD. Like Young Flanigan said in Cocktail "everything ends badly, otherwise it wouldn't be ending."

garebear11 said...

There’s no denying the impact that Theo Epstein made with the Red Sox and their on-field product. However, let’s not forget that the Sox made numerous playoff appearances between 1986 and 1999, long before Epstein even came along. Where the Sox will go from here is anybodys guess. It’s tragic that Epstein had to leave the club, but make no mistake about it, the sun will still come out tomorrow. Will the Sox go back to the playoffs next year? Beats the hell outta me. Regardless of their status, I have always been a Red Sox fan and will continue to do so, no matter how good or bad they play. Sure, I’d like to see them win another world championship and more if they are able. The key to their success in 2004 was that everybody was happy in the clubhouse and that translated into success on the field. If they can find that same clubhouse chemistry again, then they’ll be very successful no matter who the general manager is. Ultimately, it’s the players themselves that decide the outcome of their season and it all comes down to attitude and desire to play the best baseball possible

Anonymous said...

Theo can be replaced. I just hope it's soon so the new GM can start assembling the 2006 team.

Anonymous said...

How can you talk so bad about Edgar? "Oh it was a bad signing.." look at his numbers. Don't be a moron. The guy was a gold glover who had solid offensive numbers with 25+ stolen bases a year. So he had a bad year, chill out. Without Edgar, Graf, and Wakefield in the last 2 weeks of the season we wouldn't have even made the playoffs. So relax, he had a bad year. Don't be like the new generation of Sox fans and vote him off because he didn't win MVP. The guy is solid. He'll bounce back next year and be a leader for this club. Watch, see, and shut your mouth.

Anonymous said...

Typical of an organization that was not prepared to deal with "winning".

After all, the wild card was the only real savior for this team, and nobody told Babe Ruth about a second place team that couldn't beat the Yankees over 162 games getting into the playoffs...

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Mo Vaughn said...

The collapse of the Red Sox happened when the front office let me go to Anaheim. It was bad for the team and also bad for me. The strip clubs were not even remotely close to the greatness of the foxy lady. And amongst the stars of hollywood I was just an ordinary person. I love being in the spotlight.

Anonymous said...

THE COLLAPSE OF THE RED SOX BEGAN THE DAY THEY PISSED ON PEDRO MARTINEZ!!

The Boston Globe, led by Theo's lapdog, Peter Gammons, smeared up Pedro and made him look bad, and told us that Matt Clement was just as good.

Well, now the Red Sox are finding out that a Dominican is a lot easier to smear than a white kid who plays guitar.

THE RED SOX DEMISE BEGAN LAST YEAR WHEN THEY PISSED ON PEDRO!!

DO NOT FORGET THAT!!

Anonymous said...

PEDRO WAS TREATED LIKE GARBAGE BY YOU RACIST UNGRATEFUL RED SOX FANS!!

YOU DESERVE THE OWNERS STRIPPING THIS CLUB!!

Anonymous said...

give up your season tickets ,morons ,if you are so upset.i will be there to buy them. The real villan is Theo and his ego. good riddence you ungratefull idiot. Did everyone forget the shea hillebrand trade zand signing BJ Kim?

Nomar said...

Hey pal, why don't you learn to spell before you come up here and talk about things you aren't old enough to understand, idiot.

Anonymous said...

trading hillenbrand cleared room for ortiz to play. So yes I agree with the previous comment. You are an idiot!

JB said...

The other side of the trade is that Theo's chances of having a prolonged career are much greater anywhere but Boston or New York. He struck gold in his years with the Red Sox. Mueller, Millar, Todd Walker, ect. all having career years, in the SAME year Theo signed them, lucky. He added tremendous value to himself. He's leaving the Sox at just the right time, if he signs on, he's running a very large risk of leaving town like Duquette, with no value. Now he can head off to a situation somewhere else where it isn't Do or Die. Can't say I blame the guy for cashing in his chips while he's way up, but for the team's sake I hate to see him go.

Anonymous said...

I find it somewhat amusing that amidst all the turmoil and in-fighting amongst Sox fans and their team, you can always find the cold comfort of solidarity against the Yankees. Two words... Grow Up...

TB said...

Sure, in John Henry's world, it is all about the money, but you are a little off when you try to analogize Wall Street's lack of sentimentality with the Sox ownership's goal of maximizing profits. The Sox are ultimately a service business, and while World Series titles are rare, the Sox about 500 games above .500 since divisional play began in 1969, better than probably every other team except maybe the Yanks and Braves. Sox Nation is sentimental, but Sox Nation expects to win. And winning takes money, and an ability to balance player cost with expected (i.e., probable, or most likely) player production over the life of a contract. Theo excelled at this aspect of the job---sure, he made moves that did not play out well (BK Kim), but, overall, he leveraged large financial resources with adept player evaluation and valuation (Ortiz has been a steal, both in terms of on field production, and cost) to give the Sox 3 great opportunities to win it all, one of which they converted. Henry, et al, will be hard pressed to find someone with Theo's aptitude for finding value all across the player spectrum, but the good news for Sox fans, who at their core, really just want to win, Sox management has shown a willingness to spend $$$ to be competitive. Theo will be missed, but the Sox will remain competitive, but likely at a far larger absolute and relative cost, given the loss of Theo's ability to identify valuable players to fill in around the team's core of stars. . .

seabeachfred said...

I'm beginning to understand what long time Red Sox fans have told me about the dreary past. However, we just came off a World Series Title a year ago and we shouldn't in this miserable spot right now. How Henry could sit on his rear end and let Epstein flee is beyond me. He is either one very ignorant owner or is so enamored with that cancer Lucchino that he allows him to be his pied piper. Either way, they have made all of us Red Sox fans very sick.

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