In Defense of Lew Wolff and The Profit Motive

Lew Wolff, the Managing General Partner of the A’s, gave a radio interview on FM 95.7 a little more than a week ago. It wasn’t a great interview. Lew was clearly perturbed. Ric Bucher and Chris Townsend, the radio hosts, were trying to provoke him. They were trying to pit Lew against Giants CEO, Larry Baer (who had been interviewed the day before.) Their hope was for the radio equivalent of a UFC death match. Lew sounded annoyed by all that. He even chided the hosts for inviting him on the “Larry Baer” show. (Good line, Lew!)

Interestingly, his interview provoked an angry Fan Post from an Athletics Nation reader, David Rockwood. That post is here:

http://www.athleticsnation.com/2013/6/12/4423712/lew-wolfe-interview

I am being a little presumptuous. Lew Wolff does not need somebody like me to defend him. Nor do I intend this piece as a direct refutation of Rockwood’s Fan Post, except to correct the spelling of Wolff’s name. But Rockwood expresses sentiments that have surfaced many times on this website (and on FM95.7). He makes so many allegations regarding the Athletics' business management, I felt obligated to present an alternative perspective.

In the interest of full disclosure: I am not on the payroll of Lew Wolff or the Oakland Athletics. I live in San Jose, but I’m not on the City of San Jose payroll, either. (If that were so, I would have much better benefits.) Hell, I'm not even on the payroll of Athletics Nation. I have met Lew Wolff once, though I doubt he remembers the occasion.

It was in 1979. I was the fresh-faced General Manager of the San Jose Civic Light Opera. (And don’t ask me what “civic light opera” is. I didn’t know then and I am still not quite sure; somehow it involves show tunes.) I was confronting a need to attract new members (members with resources) to my Board of Directors. I arranged a reception and invited Lew Wolff who was the developer of Park Center Plaza in downtown San Jose. To my amazement, Lew accepted.

Even better, he actually showed up!

He entered the reception unobtrusively and set about introducing himself to the other folks. He worked the room like a pro. When I saw an opening, I introduced myself and thanked him for coming. I also mentioned how I would really like to have a follow-up opportunity to discuss the great work we were doing at the Civic Light Opera.

His smile told me everything. He saw right through me. He knew I was trying to hustle him onto the Board. He said, “Why wait? Tell me now.”

What ensued was five minutes of the most tongue-tied gibberish you can imagine. Lew listened politely, wished me luck, and disappeared out the door. He didn’t join my Board but he did give me a wonderful lesson on the value of preparation.

Does Lew Wolff like to make money? I hope so. Did he buy into the A’s in order to make more money? Maybe. Are the A’s just a business to him? If you think that, you haven’t been paying attention.

In his Fan Post, Rockwood contemptuously dismisses Wolff as “just a businessman talking about money.” Listen to the interview. Lew Wolff doesn’t mention the word, “money,” once. He alluded briefly to “franchise value” and “balance sheet.” He talked about “personal relationships” and how much fun he was having with the A’s. He conceded the A’s were profitable but he never mentioned money.

I’ve found many people who have earned fortunes don’t talk about money. They don’t carry money. They don’t worry about it because they already have it and they know how to make it. They worry about other things, like relationships and fun. You know who really talks about money? People like me. I talk about money all the time because I don’t have enough of it. I wish I had more of it.

I’m not a real estate guy. My eyes glaze over whenever I hear some developer discussing “internal rates of return.” I have no idea what the profit margin is in real estate development, but it has to be better than the Oakland A’s profit margin. (Not that I know what the A’s make, either.) Why would anyone used to making X amount of money get into a business that generates a return of X-minus?

Here’s a hint: It ain’t primarily for the money. Sports is Show Business. Smart people do not get into Show Biz in order to make a fortune. The old joke goes, the way to make a small fortune in show biz is to start out with a large fortune. And it is true. For every rock star and entertainment mogul flitting around in diamond-studded corporate jets, there are thousands and thousands of good people who have lost their net worth chasing the spotlight.

If I had to guess (and that’s all I’m doing here), I’d say Lew Wolff is like most people who make a pile in another business and then buy into the entertainment industry. He is drawn by the Bright Lights. How many real estate developers get to be on TV, or even the Bucher and Townie show? How many real estate developers get to hang with the famous, “sexy and cool” Billy Beane? Or Brad Pitt, for that matter? In practically every interview I have heard Lew give, he talks about how much fun he’s having and how much he loves baseball. He also talked about the “David and Goliath” challenge he faces with the A’s. You work all your life making money in real estate and suddenly Bud Selig gives you a chance to romp in the Toy Department of Life. Wouldn’t you do that?

I would, in a heartbeat. But I still think Lew missed his Big Break with the Civic Light Opera.

Lew Wolff was the guy who offered both Billy Beane and Mike Crowley (the business guy!) a piece of the ownership action just to keep them around. I’m not aware of any other owner who has done that. Does that sound like the action of a tightfisted, fast buck artist? Or does that sound smart? Does retaining two gifted managers at great expense sound like short-term exploitation, or is it the action somebody who’s thinking about the long run?

As an A’s fan, I am grateful he did that. Remember, too, the A’s are a franchise of MLB but the team itself is simply a regional micro-business. Here’s a big guess, because I haven’t seen the A’s books, but the A’s gross annual revenue (excluding MLB's revenue-sharing subsidy) probably equals the yearly revenue generated by just two Apple stores. (Apple stores average about $51 million per store.) I may be low-balling the numbers a bit, but figure it out! Subtract the cost of 130 staff members, the player payroll, travel costs, stadium rent, the cost of bobbleheads, fireworks, and who knows what else? There can’t be too much left over, at least, on a percentage basis.

Ultimately, Lew wants to grow the Athletics franchise but, first and foremost, he wants to safeguard what he already has. You may not care about that, but he does. There are few ways to make a profit in this world, but there are a zillion ways to lose your shirt. Sports and show business are two very reliable roads to ruin. Major league baseball has had a pretty good run, but think of all the soccer franchises that have gone under in this country. Don’t forget about all those football teams in the AFL, USFL, and the UFL.

I can’t understand why some A’s fans hold Lew Wolff to a higher standard than other owners. Are the Giants’ owners in the game for warm fuzzies, panda hats aside? You may want the A’s to operate as a community entertainment service, but that’s already been tried by Walter Haas Jr. The annual losses the A’s incurred drove the Haas family out of the game.

And that brings me to the larger issue in Rockwood’s comments, the profit motive. It has been fashionable for centuries to dismiss business people like Lew Wolff as money-grubbing bourgeoisie. There’s nothing I can do about that historical condescension. But I would like to point out that making a profit is hard, difficult, risky work, especially when you are artificially restricted from pursuing legitimate business opportunities, as the A’s are. Tyler Bleszinski, the founder of this website, is currently trying to make his fortune with SB Nation. Is he some evil profiteer with a cash register for a heart? Just ask him how hard it is to make a profit.

Lew Wolff may be a guy trying to make a buck, but he is not a buccaneer. He heads a well-run, efficient franchise. His staff seems to be a happy, hustling group. Remember, Lew can’t force you to buy A’s tickets or merchandise. He must motivate and seduce you with the benefits of his product before he can pocket a single dime. He has supplied his customers with one of the best teams in baseball this year. Last season, the glorious Year of the Misfits, was the entertainment bargain of the century! And Lew Wolff made less money than Arte Moreno made with the overrated Angels─a lot less.

The A’s absolutely need to make a profit in order to build a championship team. The more profit they make, the better their odds of doing so. Without a profit, the A’s will have no flexibility in acquiring talent. Without profit, it will be really tough to do creative, constructive things, like building championship baseball teams. Why? When you lose money, you become preoccupied with borrowing more money, hiding from bill collectors, or both. Just look at the erstwhile owner of the Dodgers, Frank McCourt. He was so buried (his own fault, incidentally) he was laying off parking lot security guys just to pay his debt service.

Lew Wolff, a business guy, also knows that annual profit can be ephemeral. The A’s attendance is up this year but what will happen next year if half the team gets hurt and the A’s nosedive into last place? A responsible owner manages for the long run; unfortunately, the long run includes lean years. Without profit, you deplete cash reserves and then, wham! An earthquake hits, or the world economic system implodes, or Stomper goes on strike. Then, where are you?

There is no glory in losing money. The Province of Quebec was nearly destroyed by the “privilege” of hosting the Montreal Olympics. The enormous losses Greece endured for the Athens Olympics contributed to the pathetic state of the country these days. The money-losing Oakland-Alameda County Coliseum Authority hosts three successful sports franchises (at least, from a business standpoint) and can’t even afford to fix the plumbing.

I don’t know about you, but I prefer to see Lew Wolff pumping profits up rather than pumping sewage out of the locker rooms.