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The Business of Billy

The world continues to speculate about the Moneyball witchcraft of Billy Beane. What is his magic formula, on-base percentage? Fly-ball percentage? Eye of newt? Hardly. For 16 years, and counting, Billy has simply taken care of business.

Hey, anybody can make a mistake!
Hey, anybody can make a mistake!
Ezra Shaw

"When Beane introduced advanced analytics into Oakland's player evaluations in 2001, he was assessing players in a way they'd never been assessed before. He became famous for it when author Michael Lewis wrote a brilliant bestseller on the topic. "Moneyball" -- the name of his book and the movie in which Brad Pitt played Beane -- became the codeword for a school of thought that blew through front offices from coast to coast."

Richard Justice, of, 12-18-13

Billy Beane continues to confound people. Even when they praise him, they somehow screw it up, as Mr. Justice does. Billy did not introduce "advanced analytics" into the Oakland Athletics' player evaluations. Sandy Alderson did, and Michael Lewis made that quite clear. Mr. Justice, who probably needs to reread "Moneyball," one-upped himself by tweeting his support for Billy's admission into the Hall of Fame, "If the Hall of Fame is for baseball's transformative figures, then Billy Beane should be in. Slam dunk."

Few people elicit such a wide range of reactions as Billy does, everything from ill-tempered dismissal by the Old Guard to Hall of Fame boosterism from I suppose that's only natural since Billy's contradictions are so fascinating. He is a successful Romantic in a world of jocks and analysts. He swears he will not make decisions based on money yet he is the Master of "price-to-performance" management. He does not seek the spotlight but somehow it always finds him.

Billy himself may be a mystery but his record is not. His achievement as General Manager of the Oakland A's has been otherworldly good.

I never tire of reading the numbers because they are stupefying. Last season, the A's payroll budget was $62 million (Cot's Contracts). That was $20 million below the Kansas City Royals. The A's achieved 30% more wins than the Toronto Blue Jays for almost half the payroll expense. The A's had 13% more wins than the Yankees with a payroll $166 million lower!

Just let those comparisons roll around in your noggin for a moment. How valuable is Billy? In baseball terms, I believe the A's would now be in Memphis, or Sheboygan, if Billy hadn't been running the show. If he were to leave the A's, he would be unemployed for a nanosecond, tops. There would be more people in line to hire him than show up for Coco Crisp cereal bowls.

What kind of deal could Billy get now? I think the Angels would give him Newport Beach just to stop humiliating them.

The first time Billy became available the Red Sox offered him more money than any General Manager had ever earned. When Lew Wolff and John Fisher bought the team, they gave Billy a slice of the team itself. What kind of deal could he get now? I think the Angels would give him Newport Beach just to stop humiliating them.

That's just in baseball terms. If Billy were a Wall Street guy getting the kind of return on investment he gets for the A's, he wouldn't be making millions. He would be making billions.

There are still a lot of people reluctant to grant Billy his achievement. They often point to Minnesota and Tampa Bay as alternative small market success stories. See? Billy ain't so hot! True, the Twins were successful early in Billy's tenure and Tampa Bay is successful now. But Beane has been running the show for the better part of two decades. When you consider his work in that time frame, there isn't much to compare.

What was Tampa's record early in Beane's term? Well, it was historically awful. From 1998, Beane's first year as GM of the A's, to 2007, the most games the Rays won in a single season was 70. In that ten-season period, the Devil Rays won 645 games, fewer than 65 wins per season for ten years! Of course, in 2008, Tampa changed its mascot name to the Rays and promptly started winning 90-plus games per season. Ah, the power of nomenclature!

From 1998 to 2007, the A's under Billy won 901 games. I'll let the sabermetricians do the math. No, wait, that's more than 90 wins, average, per season. Holy Toledo!

What was the Twins' record during Billy's later term? From 2007 to 2013, seven seasons, the Minnesota Twins won 543 games. I'll do the math. Okay, 543 divided by 7, carry the 5, cipher the 9, add four...uh, I get an average of 77 wins per season. The A's during those seven seasons? 571 wins or a little less than 82 wins per season. In Beane's crappiest five years, his teams won 74, 76, 75, 75, and 74 games. The Twins and Rays, during Billy's tenure put up 14 sub-70 win seasons (Twins five, the Rays nine.)

I won't even mention the Pirates, Royals, Blue Jays, et al. Under Billy, the A's teams have won 1396 games. The Angels have won 1,388 games in those 16 seasons. The Yankees won only 153 more games in that period while outspending the A's on payroll by more than two billion dollars! In 113 years, the Athletics organization has been to the playoffs 25 times total. Seven of those occasions were under Billy Beane.

If Billy's success were contingent on a secret stat, however, he would have been reverse-engineered into oblivion by the other teams.

People even use Sandy Alderson, Billy's mentor and friend, as a means of minimizing the credit Billy deserves. The A's under Alderson went to the World Series three times, winning once. Sandy Alderson, A's GM from 1983 to 1997, 15 seasons, presided over 1200 wins, an average of 80 wins per season. And don't forget, in the late 80's to early 90's, the A's had the highest payroll in baseball. Think about that. Alderson has failed in San Diego and well, the Mets seem to be going nowhere fast. Beane's teams have won an average of 87 games a season with one of the lowest payrolls in baseball.

Sandy Alderson could never have done what Billy has done.

But how in the world has Billy done it? Is it magic? There has been a lot of speculation about Billy's secret Moneyball formula for selecting players. At various times, it was on-base percentage, and college pitchers. Now the magic stat appears to be fly-ball percentage. Sure, that's part of it. If Billy's success were contingent on a secret stat, however, he would have been reverse-engineered into oblivion by the other teams. J.P. Ricciardi and Paul DePodesta were great at stats but look what happened to them.

(Ironic, isn't it? Three key figures from Billy's career, Ricciardi, DePodesta, and Alderson, are all now with the Mets, attempting to recreate Beane's success. Remember, guys, eye of newt!)

By focusing on sabermetrics, and regression analyses, and his famous personality, Billy watchers overlook, even discredit, the true source of his success, his way of doing business. Billy Beane is a great businessman. He has an instinct for business that few people have. He adapts not only from failure but success as well. He may have a mercurial personality but he is resolute in his approach to business.

So what is Billy's approach to business? I can summarize it in a few maxims:

#1: Nobody knows anything, not even you.

In 1983, William Goldman, an accomplished novelist and Academy Award-winning screenwriter, wrote a book titled, "Adventures in the Screen Trade." In it, he created his famous postulate, "Nobody knows anything." Goldman had concluded, after studying box office results, the people who held the responsibility for green lighting Hollywood productions (and were paid many millions to do so) simply had no idea what made a successful movie.

Yes, many of the bigger budget, formulaic movies did appear at the top of the box office results but that was only because most of the movies made were the formulaic, bigger budget types. Every year two or three tiny independent movies landed in the Top Ten in box office results and made fortunes. Why couldn't movie executives, the experts, predict those movies and invest in those projects?

Because the experts weren't looking for them. They didn't have to because they knew the formula, and the formula was everything. Sounds a lot like baseball, doesn't it?

I believe Billy came to know Goldman's wisdom from his personal experience. After all, if the experts knew anything, he would have been a baseball star. He was drawn into the "Moneyball" approach because he sensed nobody knew anything. The expert minds of baseball were full of shit. Still are, in fact, and that is why Billy continues to embarrass them to this day.

Instead of capitalizing on the players' natural strengths, the Alderson approach sought to impose the qualities valued by the system. Semper Fi, baby!

Beyond that, Billy came to apply the "Nobody knows anything" rule to Sandy Alderson as well. Alderson, the Marine Master and Commander, imposed a rigid system of development and evaluation on the A's. It was the foundation for the success in Billy's early term but it also led to a lot of failure later on. Instead of capitalizing on the players' natural strengths, it sought to impose the qualities valued by the system. Semper Fi, baby!

It has been fascinating watching Billy evolve out of the Alderson system. (I believe Billy established himself for good with the Hudson and Mulder trades before the 2005 season.) For example, on-base percentage was the standard Alderson imposed on the A's players. That was fine, but the A's were nothing special in terms of team OBP, even when they were winning big in the early 2000's. In 2003, A's won 93 games with a .327 OBP and 898 strikeouts (2nd fewest strikeouts). In 2012, the A's had a .310 OBP, 1387 strikeouts (most) and 93 wins.

OBP, Schmoe BP, Billy's still getting the job done.

#2: Your ultimate leverage in any negotiation is your ability walk away from a bad deal.

Billy has made a few bad deals as General Manager. He stills gets a boatload of grief for the Gonzalez-Holliday and the Ethier-Bradley trades. The deals for Michael Ynoa and Hiro Nakajima ain't looking too good either but c'mon, folks! Brian Cashman (Yankees), Jerry DiPoto (Angels), and Brian Sabean (Giants) plunge into more dumb deals in a month than Billy does in a decade.

Think about the panic trades by Jon Daniels of the Rangers last season to acquire Matt Garza (The Cool Collected One) and Alex Rios. Don't forget the deals Alex Anthopoulos dove into last off-season to build the 2013 Blue Jays juggernaut. All he managed to do was make the Marlins look smart. You can have more statistical analysis than the Federal Reserve, but you are going to be toast if you can't walk away from a bad deal. The Yankees have two dozen analysts in their front office yet they still traded for Vernon Wells.

The Yankees have two dozen analysts in their front office yet they still traded for Vernon Wells.

Billy is emotional but he never panics. He rarely gets pressured into a bad deal. The negotiation for Adrian Beltre is a perfect example of his work. Billy made a quick, bold opening offer hoping to strike before anybody figured out what was going on. That didn't work. The negotiation slowed down, the bidding rose, and Billy backed off.

That must have been tough for him. Beltre was the player he needed, a great-fielding third baseman who was also a right-handed power bat. And the deal was right there, so close, so tantalizing. For just a few million more, and maybe six seasons rather than five, Billy could have had himself a shiny new Beltre.

But Billy didn't chase. (I believe the A's never had a chance at Beltre; the Rangers would have kept outbidding the A's, if only to keep Beltre out of Oakland.) Ultimately, Beltre proved to be a good player and a good deal for the Rangers. Suppose Billy had taken the Beltre numbers higher, though, and actually landed him for, say, six years. That would have been not have been a good deal for the A's. Too much payroll in too few assets.

Billy knows there is a huge difference between a good player and a good deal. Billy always goes for the deal and always wrings the most value out of a player's tenure in Oakland. This off-season he walked away early from the temptations of Bartolo Colon and Grant Balfour. Those were masterful moves.

Often, your best deals are the deals you don't make.

#3: Small budgets can be an advantage.

The limitations on his budget have empowered Beane, just the way the limitations of a proscenium stage empower a great playwright. His limited budget probably saved him from the excesses that eventually got Theo Epstein run out of Boston. Because he has less money to spend, Beane gets to concentrate on a few areas while ignoring the mine field of Big Money free agentry.

Even if Beane had more money, he would be foolish to compete for the A-list free agents. Even if he had a new stadium, a big TV contract and Coco Crisp's Rolls Royce, he'd be crazy to take on this burden. In Boston, Theo fell into the Arte Moreno trap. Just because you have money doesn't mean you can afford to blow your bankroll.

The best deals are elsewhere, and Billy's strength is finding them.

#4: Cut your losses early.

As we all know, Billy needed a replacement for departed shortstop Stephen Drew. (Drew left for Boston because Billy wouldn't bite on the bad deal Drew wanted.) Billy signed the best shortstop in Japan, Hiroyuki Nakajima, a charming guy who apparently is incapable of playing shortstop in the major leagues. Well, say goodbye to Hiro and $5.25 million.

Billy always cuts his losses early and, by doing so, he is forced to focus on a solution. He never stands around, hoping for a better result. When Billy recognized his Nakajima screw up, he jumped on the Jed Lowrie deal. Matt Holliday cost the A's a lot but Billy didn't hesitate. When Holliday failed to ignite the team's performance, Billy dumped him quickly and kept looking. The only exception to this practice was Bob Geren. For a lot of reasons (including the fact that Bob Melvin was not yet available) Billy stuck with his friend too long. Well, he ain't perfect.

A great businessman is never right all the time, but he is always working on the right problem.

#5: Do NOT bet everything on one roll of the dice.

Modern portfolio management theory is fairly simple. The best way to make a return on your investment is to spread your bets widely, then re-balance the distribution after you learn what's working and what's not. This is what Billy does. He learned from the Eric Chavez deal how risky long-term, big-dollar contracts can be. (I think the Yankees finally learned this lesson with ARod.)

In business, flexibility is everything. You can't adapt rapidly if your payroll is all tied up in, say, four infielders who are decomposing or entering free agency. (Just to use the Yankees as an example.) So Billy zealously spreads his bets and limits his liabilities. Yoenis Cespedes and Eric O'Flaherty are the only free agents with deals beyond 2014, and the money is pretty well distributed over this year's 25-man roster.

Except for the Cespedes contract ($10.5 million). Cespedes represents approximately 15% of the 2014 payroll and that's a bigger risk than Billy likes. I think there is a very good chance that, following this season, Billy will "re-balance" Cespedes out of his portfolio in order to re-stock the minors.

There is more, of course, but this piece is running long as it is so I'll get to the point. Billy making the Hall of Fame may be a fanciful notion, but he is as good at what he does as anyone has ever been. The only thing missing from his career is winning the Big One. To date, the dice have been cold for Billy. But the way Billy does business, not witchcraft or secret stats, will always keep him in the game. His luck could change when we least expect it.

After all, nobody knows anything.