Great analysis from Josh, here. Added a jump, a new title, and a pic for presentation purposes. - ed.
In the fall of 2005, an investor who had accrued a fortune on Wall Street took over the more-or-less moribund Tampa Bay Devil Rays. Stuart Sternberg wanted to get away from qualitative analysis and the old scouting He sure can hit it a mile philosophy. He wanted a team that operated like his financial services firm. He wanted someone like himself running the team he now owned 48% of. After firing Chuck LaMar on October 6, 2005, he promoted his 28-year-old Director of Baseball Development, a former Bear Stearns analyst with a mindset for equity, to Executive Vice-President of Baseball Operations, aka General Manager.
Private equity firms function in a variety of ways, dealing with venture capital and growth capital. Venture capital is what’s used to start a successful business, get it off the ground. Growth capital is, in layman’s terms(not to be confused with Lehman’s terms), used "in order to finance a transformational event in [a business'] lifecycle." It is used in keeping the business off the ground, or in the ascension of the company. These are the terms that Sternberg, and more importantly, Friedman, are most familiar with.
After eight seasons of .400 baseball since the Devil Rays’ inception, the roster was still pretty barren, save for 23-year-olds Carl Crawford and Jorge Cantu and 21-year-old lefty Scott Kazmir. Friedman’s franchise was on the ground, floored, and the cupboard was bare. He needed venture capital. Capital in the form of players. He couldn’t afford to acquire any pricy free-agents. They wouldn’t be of use anyway. He couldn’t make any blockbuster trades. He didn’t have the talent. His option was the proverbial scrap heap — a collection of aging, troubled, or forgotten about players who lacked recent success but had a semblance of potential. For pennies on the dollar, Friedman broke out the checkbook.
From the fall of 2005 when he was promoted to the spring, he signed a bunch of these guys. Chad Harville, Sean Burroughs, Josh Paul, Darnell McDonald, Ty Wigginton, Mark Malaska, Dan Miceli, Justin Miller, Greg Norton, Shawn Camp, Luis Rivas, Russell Branyan, Travis Lee, Al Reyes, and more. Keep these names in mind. He also formulated an outlook on the draft. The Rays selected now-perennial MVP candidate Evan Longoria and 2011 ROY candidate Desmond Jennings.
During the season, Friedman was active on the trade market, eager to trade aging or ineffective players for players with potential. He traded Fernando Cortez and Joey "Too Bad You Can’t Steal First Base" Gathright to the Royals for eventual closer JP Howell. In one deal with LA, Friedman traded hot and cold closer Danys Baez for out-of-favor prospect Edwin Jackson. He later traded aging rocks Toby Hall and Mark Hendrickson to LA for 2008 All-Star catcher Dioner Navarro, Jae Seo, and Justin Ruggiano. He also traded Aubrey Huff for Mitch Talbot and a guy named Ben Zobrist.
He went back to his bag of tricks in 2007, again trying to create value from thin air. He signed Akinori Iwamura, an import from Japan, and purchased the contract of Brendan Harris from the Cincinnatti Reds. He extended an invite to first-baseman Carlos Pena. He also started to toy with some growth capital — he eyed bullpen help, trading the AL East allergic Seth McClung for an low-risk high-ceiling injury guy, Grant Balfour, and former scrap heap signee Ty Wigginton for the ever-reliable Dan Wheeler.
The growth capital stage continued. He traded Brendan Harris(purchased from CIN), Jason Pridie(scrap heap signee), and Delmon Young(high profile prospect) for Minnesota’s Jason Bartlett and Minor League Pitcher of the Year Matt Garza.
The team won the AL East in 2008 with 97 wins.
Friedman made smart bets at the beginning of his tenure, bringing in tons of scrap heap guys with the expectancy that some of them work out and turn into assets. They did. He then moved them for younger, cost-controlled assets. And now the wheels keep turning.
Bartlett and Garza, originally acquired together, provided the Rays with 7.4 and 7.9 WAR respectively from 2008-2010. With internal replacements for both, and both players getting costly through arbitration, the Rays flipped them for new prospects. More capital. They acquired Brandon Gomes, Cole Figueroa, Cesar Ramos, and Adam Russell for Jason Bartlett. They also went on a shopping spree through the Cubs organization, making off with Chris Archer, Brandon Guyer, Hak-Ju Lee, and Robinson Chirinos for Garza.
The Rays organization is pure and simple, a machine. The Garza trade is just the latest example of that. With capable replacements for both of them, they shaved roughly 12M(post 2011-arbitration) off their payroll, added eight minor leaguers with varying levels of potential, while not subtracting much, if any, talent.
The genius is apparent in more ways than just Garza and Bartlett, however. Here are some other instances of Friedman creating value out of thin air:
- Carlos Pena → 14 WAR (2007-2010)
- Akinori Iwamura → 6.1 WAR (2007-2009) → Jesse Chavez → Rafael Soriano 1.6 WAR (2010), Type-A Free Agent status
- Joaquin Benoit → 1.5 WAR (2010) and a supplemental draft pick in 2011
- Brad Hawpe → August acquisition cost team ~$77,000 → supplemental draft pick in 2011
- Edwin Jackson → 3.0 WAR (2006-2008) → Matt Joyce 1.8 WAR (2009-2010), still under first contract for 3 more years
With a low-budget in the hardest division in baseball, saying the Rays need to be shrewd is an understatement. They need to be steps ahead of everyone, and they are. Their relevance comes from this perpetual machine that turns today’s asset into tomorrow’s asset without any hiccups. Further, as long as non-saber minded teams like the Cubs are willing to pay such premiums for pitchers like Garza, the Rays machine will be that much more effective.