Sandy Alderson on the Modern Business of Baseball

Sandy-Alderson

Sandy Alderson was not in his “happy place” in the early 1980s. He had gotten a job at a well-regarded San Francisco law firm after graduating from Harvard Law School, but he felt stuck in his position in the real estate department.

“I didn’t particularly like real estate law,” Alderson, now general manager of the New York Mets, said during a recent Wharton Leadership Lecture. “But in terms of career advice, I have always said that the best and most important job is the one you have right now.

“I really did not like practicing law much, but I said I would become an expert,” he continued. “I was committed to a level of achievement as opposed to the subject matter. I found out early that it always leads to other, better things because people notice.”

Sure enough, a colleague’s father-in-law soon bought controlling interest in the Oakland Athletics baseball team and asked Alderson to do some of the legal work on the sale. Alderson became the organization’s general counsel in 1981. In 1983, the general manager of the team left and the owner, Walter A. Haas Jr. — who made his initial fortune as the scion of the Levi Strauss apparel company — asked Alderson to replace him. Alderson played two years of baseball during his undergraduate years at Dartmouth College, but he was hardly an expert in the ways of Major League Baseball. Still, Haas was one of the people who noticed Alderson’s work ethic, and Alderson was ready to pounce on the opportunity.

“Initially, it was just a matter of surviving,” Alderson recalled. “I had no credibility, but had to fall back on other things I had done. I got credit for being in the Marine Corps [including a tour of duty in Vietnam] and got some credit for having gone to Harvard Law School.”

Above all, however, Alderson knew how important it was to listen. “You don’t open your mouth to people with more wisdom; you listen,” he noted. “I developed my own personality separate from the game because I couldn’t develop a ‘baseball’ personality. My idea that the best job is the one you are doing at the moment helped me to learn and survive.”

“In terms of career advice, I have always said that the best and most important job is the one you have right now.”

Alderson came to the Mets in 2010, having left the A’s for the Major League Baseball Commissioner’s office in 1998, and then for a stint as CEO of the San Diego Padres from 2005 to 2009. At the time, the Mets were floundering and under financial constraints because the majority owners, the Wilpon family, had been burned in the Bernie Madoff Ponzi scheme scandal.

The ‘Moneyball’ Revolution

Alderson said the changes in the business of baseball — and, in fact, the whole sports business — make it unrecognizable from when he first started with the A’s three decades ago. At the time, Alderson was appointed general counsel of the A’s organization, he was the only one in the major leagues in that position. These days, the Mets alone have three, he said.

Back in the 1980s, analytics and technology were barely a thought in baseball; now they are vital in every organization and are further affected by the social media world, Alderson noted. When he was starting out with the A’s, other than a few advance scouts who traveled overseas (primarily to Latin America), player and fan development was mostly concentrated on the U.S. Now every sport has to think about fans and teams around the world — Alderson himself has interests in baseball schools in Australia and Italy.

According to Alderson, one of the harbingers of the revolution was the publication of Michael Lewis’s book, Moneyball, which focused on Billy Beane — Alderson’s successor as GM and a former A’s outfielder who Alderson had recruited to the front office — and his use of baseball analytics. Moneyball “disclosed this analytic approach in a coherent way that broke down the barrier between ‘baseball people’ and owners,” said Alderson. “Baseball people had always said that owners and people like me could not understand the game because we weren’t in it. It was a way of keeping people like me at arm’s length.

“When the owners read Moneyball, the whole façade broke down,” he added. “The rapid adoption of analytics in the game from the top down was the real byproduct of that book.”

When he started with the A’s, Alderson recalled, two of the most respected managers in the game, Earl Weaver and Gene Mauch, had divergent views about what kind of offense won games. Weaver was a proponent of getting a couple of players on base and hoping for a home run. Mauch played “small ball,” with the view that the best possible inning would include a base hit followed by a sacrifice bunt, a stolen base and a sacrifice fly.

Until analytics, Alderson noted, baseball people argued the point to no real conclusion. One day, though, Alderson was driving home and heard a National Public Radio segment with a stats guy named Eric Walker. After listening to Walker, Alderson realized that in Mauch’s scenario, it took four positive things to produce just one run. Weaver’s way required only three positive things and would, if successful, produce three runs.

“As a fan, I was always a fan of the home run, the long pass, the three-point shot. It is the anticipation of something really good,” Alderson noted. He knew he had to find a definitive answer to the offense question and hired Walker to study the problem. It turned out that the home run was really the way to go. Walker proved that every time a team had one more home run than its opponent, the former won 75% of the time. Further, in the Mauch-bunt scenario, more runs were scored not from having a man on second base and one out, but from having one on first base with no outs, so a sacrifice bunt in that situation actually hurt the chances of scoring.

Through Walker, Alderson also learned that on-base percentage (walks, hit-by-pitch and hits divided by at bats) was a much greater predictor of scoring runs than the traditional measure, batting average (hits divided by at bats.) Walks were just as vital as hits. Fielding was not nearly as important as hitting — scoring runs was more vital than saving them. Strangely enough, Beane, a former player, was, as a hitter, just the opposite of that, said Alderson. He swung at everything and had no power at bat.

“I developed my own personality separate from the game because I couldn’t develop a ‘baseball’ personality.”

“I remember standing behind the batting cage when [Beane] played for [the A's] and asking, ‘Why did we trade for this guy?’” Alderson said. “But he was a very smart guy and passionate. He had some relevant experience, believe it or not, because he sold used cars in the off-season. He was a good advance scout and amazingly good at acquiring the players we wanted. He was relentless and could always get three of the four we wanted.”

Focusing on the Probabilities

Knowing what the team wants is a key part of Alderson’s strategy. He said that it may be difficult to predict any particular player’s upside, but if the team has a system, it will work out. “If you constantly react to each result, you will never focus on the probabilities,” Alderson noted, adding that bad decisions are inevitable. “If you make more good decisions than bad ones, you will succeed. You have to focus on the process. Great leaders develop systems, and ultimately you have to routinize to enhance probabilities of success.”

He is also a big proponent of questioning conventional wisdom. It is not that conventional wisdom is always wrong, Alderson stated, but that it never hurts to see what other probabilities might be. “As soon as someone says he has a ‘gut feeling’ about something, I start worrying,” he added.

The sports business itself is still expanding in myriad ways. For one thing, because of changes in traditional media and the advent of social media, most sports are now multinational, Alderson pointed out. For example, many soccer teams that were once intensely tied to countries or regions in Europe and South America are now owned by foreign businesspeople or entities. (Major League Baseball, he noted, is an anomaly in that regard, with only the former owner of one team — the Seattle Mariners — hailing from Japan.) Thanks to the Internet and social media, fans can follow and even watch games whether they are in town or traveling the world. But that means that teams have to be ready to sell those game feeds and memorabilia across the globe, Alderson said.

Dynamic ticket pricing is here to stay as well, Alderson noted. “It doesn’t necessarily have anything to do with the experience in the ball park, but it is important in managing inventory…. The secondary market for tickets is the same thing. If you are a good team, you can price higher. If it is a bad time [for the team], the price is a sale. From a marketing standpoint, there is a greater emphasis on the return on investment than there has ever been.”

Moneyball “disclosed this analytic approach in a coherent way that broke down the barrier between ‘baseball people’ and owners.”

Alderson said there may also be more room for using physical attributes in scouting. He recounted a story he had read suggesting that quarterbacks with bigger hands would play better in cold weather than those with smaller ones. Alderson noted that the A’s were early adopters in hiring psychologists to instill the right mindset for players, adding that he could foresee the day when regulating heart rates and cholesterol may also become a priority. “All this kind of thing still has to be proven, but I won’t rule it out,” he stated.

As far as on-field success, Alderson said the most important thing in an organization is the development of a farm system. “It may be wise for some teams to pay [Mariners second baseman] Robinson Cano $25 million, but if I can find five or six players who make $500,000 a year and develop them, I think I will have a 50% advantage over time.

“The systematic approach to player development is important,” he added. “Everyone says it, but can you actually do it? It is not that easy, but if we can take any player and make him 30% better, that is a good goal, and that will — over time — deliver a positive result.”

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