Continuous Productivity

I Have a Few Thoughts on Theo Epstein

2011-12-15T13:03:40-06:00

Well, it's been an almost two-year hiatus since my last post. Although, I have been fairly active on Twitter (@ajroy).

Anyway, I recently connected with the owner and writer of a very successful Cubs oriented blog called Bleacher Nation. Brett Taylor, one of the smartest Cubs fans I have engaged with, was kind enough to let me write a guest post at Bleacher Nation. I publish it in its entirety below, but please do check out BN for excellent Cubs and baseball thoughts. Here's the post from BN:

Like all Cubs fans, I was ecstatic when the Cubs were able to pry Theo away from the cold dying hands of Larry Lucchino and John Henry. Well, maybe pry isn’t the right word. Either way, it was sheer joy and I remember texting all my fellow Cubs fans in celebration. Amongst the return celebratory texts, I received a reply from a jaded, old Cubs fan and friend. It read, simply, “I hate you.” That reply could have been him simply expressing his pent up emotion towards me, but I decided that he was really angry about my pleasure with the Theo hiring.

I pondered the text for a few days, and a thought kept gnawing at me. Maybe, I should hate me too. Maybe I was the dumbass for basking in the majesty that is Theo. So, the cynical, jilted Cubs fan that I am, I had to introspect. There’s quite a few of us out there now and the days of the “Lovable Losers” (god, I hated that) are long gone. As I delved deeper into the broken psyche of a Cubs fan, I realized that there are a number of reasons that left me uneasy about Theo.

1.) Look, I’m going to be very frank about my relationship with the Cubs. I’ll repeat, it’s jaded. I love them so much that I hate them. So, I realized really quickly that maybe I shouldn’t be elated by Theo. Wasn’t this the exact same feeling I had when Sweet Lou came out of the booth to the dugout? The man had won one World Series as a manager. One. And yet I thought he was the final piece. Wasn’t I one of the many yelling “In Dusty We Trusty”? The same Dusty that single-handedly cost the Giants the 2007 World Series? The man that was directly responsible for Dr. James Andrews’ wealth? How about when the Cubs hired the wunderkind, Andy MacPhail? Heck, we can go all the way back to Dallas Green and his “Building a New Tradition.” The point is, I’d been down this sadistic road before. It leads to nowhere. And my newfound awakening was asking if I wanted Theo to lead me there again.

2.) The jaded relationship could explain some of my apprehension, but it couldn’t explain all of it. No, there had to be something more. As I delved deeper, I realized that there was some intellectual jealousy. Look, I know some very smart people. In fact, I consider myself to be a very smart person. So, then, why should I put someone like Theo in such an exalted position? I mean, Theo’s very smart. But, there are thousands of very smart people out there. More narrowly, there are hundreds of people within MLB right now that are every bit as smart as Theo. Why should Theo get all this credit? Theo would be the first to tell you that randomness had more to do with his current life than any skill that he brought to the table. Would we even be talking about Theo had David Ortiz not hit the walk-off in Game 5? Randomness effects all walks of life, but even the most novice of sabremetricians can tell you, randomness is the silent siren of baseball. It draws in many a fan and owner without us even knowing. Could Theo be Theo because of sheer luck?

3.) Now we’re getting somewhere. This self diagnosed therapy session is really helping me out. So, I’ve begun to make sense of why my friend hates me, but there has to be more. And there is. It’s simple resentment. The more I thought about the Cubs winning the World Series, the more I realized that it will be every bit about Theo as it is about the Cubs. The man who brought world championships to two cursed (I curse at curses) franchises. The man who was able to conquer the Bambino and the Goat. You know what? I don’t want that. And I’m not afraid to say it. For as long as I have been a Cubs fan, and as long as we have suffered as Cubs fans, I don’t want our World Series to be about Theo. It’s about us, the Cubs. Look, Theo has every right to his legacy and I hope beyond hope he achieves part of it in Chicago with a Cubs World Series win, but I do not want it to overshadow how much more important it is to the Chicago Cubs and Cubs fans like us.

4.) Lest I start getting my Andy Rooney on, let me stop bitching. But, before I stop, I do have one more quibble. THEO? What has Theo done to deserve being called just Theo? He may have some accomplishments under his belt in Boston, but nothing in Chicago. So, why the honor of just being called by his first name? We are Chicago sports fans and we don’t just hand out that honor. There’s Michael, there’s Walter, and there will be Derek. Hell, even Ryne and Andre were called Ryno and the Hawk. So, I ask, is Theo already worthy of being just Theo?

As I reread what I just wrote, it’s obvious that many of my points just sound bitter. Well, that’s because I am. I’ve been a Cubs fan since 1984 (great time to hop on the wagon – I never could have predicted the sustained pain that was to be inflicted on me). I’ve seen Garvey mash, I’ve seen Will the Thrill kill, and I’ve seen Alex Gonzalez bobble (I refuse to acknowledge that Bartman had even a minuscule role to play in 2003). So, forgive me if my initial elation has turned to apprehension. But, I’ll tell you this, Theo: you bring a World Series champion to Chicago and I will call you Daddy.

Benefit of Clergy

2010-02-15T19:38:08-06:00

I came across a fascinating little law called the "benefit of clergy" over at the Overcoming Bias blog. The basic idea of this wonderful law was that one could be tried in an ecclesiastical court as opposed to a secular court. The benefit, of course, of the ecclesiastical court was that one could seek a sentence of penance, as opposed to hanging.

I'm most intrigued by the political relationship between the king and the clergy:

Prior to the 12th century, traditional English law courts had been jointly presided over by a bishop and a local secular magistrate. In 1166, however, Henry II promulgated the Assize of Clarendon legislation that established a new system of courts that rendered decisions wholly by royal authority. The Assizes touched off a power struggle between the king and Thomas Becket, Archbishop of Canterbury. Becket asserted that these secular courts had no jurisdiction over clergymen because it was the privilege of clergy not to be accused or tried for crime except before an ecclesiastical court. After four of Henry's knights murdered Becket in 1170, public sentiment turned against the king and he was forced to make amends with the church. As part of the Compromise of Avranches, Henry was purged of any guilt in Becket's murder but he agreed that the secular courts, with few exceptions (high treason being one of them), had no jurisdiction over the clergy.

The best part about this was that you could show your clerical status by simply reading from the Bible:

At first, in order to plead the benefit of clergy, one had to appear before the court tonsured and otherwise wearing ecclesiastical dress. Over time, this proof of clergy-hood was replaced by a literacy test: defendants demonstrated their clerical status by reading from the Bible. This opened the door to literate lay defendants' also claiming the benefit of clergy. In 1351, under Edward III, this loophole was formalised in statute, and the benefit of clergy was officially extended to all who could read.

Alcohol is Inelastic!

2010-02-06T16:16:55-06:00

Why is it so difficult for many politicians to grasp the concept of elasticity? In London, some politicians believe that putting a minimum on the price of alcohol will lead to a reduction in the consumption of alcohol:

Sir Liam estimated that the pricing minimums would save more than 3,000 lives and result in 100,000 fewer hospital admissions per year.

The reality, which should be very clear with just a bit of intuition and common sense, is that consumers of alcohol do not adjust drinking down or up based on price. I don't believe it is completely inelastic, but nominal price floors and ceilings will only shift demand within those floors and ceilings.

The 80-hour Myth

2009-11-12T07:33:41-06:00

I haven't blogged in a while, but I came across this very interesting (and apparently, classic) post by Startup Boy called the The 80-hour Myth.

I have always found it comical when someone tells me that they work 80 or 100 hours a week. I can unabashedly say that has never been the case for me. Don't get me wrong, I've put in 80 hour work weeks in the office, but over 50% of that time was surfing the net, shooting the shit, and pretending to look busy.

Why is that so? Startup boy makes the salient points for me:

Even when you had to work eighty hours, you didn’t, really. In economic terms, there is lower diminishing marginal productivity beyond some point. This point hits differently for different problems (some, like software engineering, require a lot of startup time to load a complex problem into your working memory).

In fact, your best work was probably done in tremendous, focused bursts, surrounded by long periods of dullness and inactivity. So, let’s try to figure out how to maximize the probability and productivity of such a burst, rather than try and force it to be predictable and prolonged.

Everyone is different in terms of their productivity, but nobody can keep it going mentally for 80 hours at a time. For me, I have tremendous bursts of output followed by lulls that I would describe as a "hamster running on a treadmill" (with me being the hamster).

In my old days, this would frustrate the hell out of me. But, since I started running my own show, I was able to cater my company around when I felt most creative and productive. I use the times I don't feel creative for administrative or tedious tasks. It works and I believe this is how most smart startups are structured (video games, food, hanging-out atmosphere). I wonder how much more productive big corporations would be if they accepted and catered to this notion.

Did You Know?

2009-09-12T23:19:07-05:00

An awesome video that my cousin Amish introduced me to recently:

Vancouver Grizzlies

2009-08-03T12:38:07-05:00

I've been meaning to post this pretty awesome video we took while in Vancouver- some grizzlies playing around on Grouse Mountain:

Atheism is Grating?

2009-07-23T11:20:38-05:00

One of the things I most enjoy is listening in on arguments between believers and non-believers. Furthermore, some of the best discussions are within believer and non-believer debates. Last week, Andrew Sullivan had a series of posts that concluded with reader feedback. A reader comment so perfectly encapsulates this debate, that I just had to post it here:

Something I find annoying about this atheist-believer dispute is that it all depends on what you mean by "god". If you require the talking snake, then, yeah, Dennet rules, in my opinion. But if you are some sort of mystic or pantheist and you experience that as "faith," then the the naivete of Dennet's arguments is indeed grating. The exquisitely beautiful, scientific worldview is rife with chaos, weirdness, randomness, unknowns and chance. And chance is mystery, and mystery is at the heart of religion. And that's at the heart of this dispute. To be a scientific atheist and assert scientific certainty about the world when, in fact, the scientific model is so full of uncertainty is, yes, just as irritating as the arguments of naive religious fundamentalists. Both assert that they know in a way that denies the mystery.

Truth Serum and Michael Jackson

2009-07-07T20:28:40-05:00

A wonderful post at the Psychology Today blog rehashing some of the major gaps in the child molestation charges against Michael Jackson:

One of the two charges that received the most press coverage surfaced in 1993, when Evan Chandler filed a lawsuit against Jackson for sexually abusing his 13 year old son, Jordan. At the time, the news media reported widely that Jordan Chandler accused Jackson of performing oral sex on him, and that Chandler provided law enforcement authorities with a description of Jackson's genitalia. Eventually, Jackson settled this case out of court for $22 million; some have argued that this settlement is prima facie evidence of his guilt, whereas others have argued that Jackson understandably wanted to avoid a prolonged and emotionally grueling civil trial. I do not know which side is right, so I will withhold judgment on that issue here.

So what crucial fact has most of the press coverage omitted? It's that Jordan Chandler apparently never made any accusations against Jackson until his father, a registered dentist, gave him sodium amytal during a tooth extraction. Only then did Jackson's purported sexual abuse emerge; Jordan Chandler's reports became more elaborated and embellished during a later session with a psychiatrist.

Sodium amytal is a barbiturate and one of the most commonly used variants of what is popularly known as "truth serum," which is a spectacular misnomer. There's no scientific evidence that Sodium amytal or other supposed truth serums increase the accuracy of memories. To the contrary, as psychiatrist August Piper has observed, there's good reason to believe that truth serums merely lower the threshold for reporting virtually all information, both true and false. As a consequence, like other suggestive therapeutic procedures, such as guided imagery, repeated prompting, hypnosis, and journaling, truth serums can actually increase the risk of false memories - memories of events that never occurred, but are held with great conviction.

In fact, because the physiological actions of barbiturates are similar in many ways to that of alcohol, the effects of ingesting Sodium amytal are probably similar to those of imbibing a few stiff drinks. When we're rip-roaring drunk, we're more likely than when sober to say lots of things, only some of them accurate. Moreover, as Piper notes, there's overwhelming evidence that people can distort the truth or lie while under the influence of truth serum.

Whether Jackson molested children or not, it a minimum the case shows how easy it is to feed a media base dying for objectionable news.

Contagious Behavior

2009-06-14T13:21:17-05:00

Hat tip Kedrosky, awesome example of how humans are just looking for someone to follow.:

Trader's = Bad Leaders?

2009-06-12T07:36:20-05:00

I just started reading The Poker Face of Wall Street by Aaron Brown and read an interesting line:

Trader's know well: "Your first loss is your least loss." As you attack incalculable risks, you learn things that help you calculate. If the result of that calculation suggests that you are not getting sufficient odds to justify further investment, give up just as quickly and decisively as you began. By the way, being able to fold too soon rather than too late is one reason poker players sometimes make bad leaders. There are situations in which the leader should strive until all hope is gone, even dying on the battlefield or going down with the ship. That can be good for the cause, but it's bad poker and deadly sin for traders.

It seems the point that Brown is trying to make is that leaders must fight for the cause, no matter the consequences, due to fact that they are the leader. In reality, though, I believe the best leaders know exactly when to walk away and steer towards a new direction. In fact the best CEO's often change strategy and change strategy often. The best presidents change policy and change policy often in the face of new data. Conversely, the worst presidents (read: George W. Bush) stick to their policies in the face of overwhelming data that indicates that they should change course.

Traders, just like leaders in any field, are constantly processing information and adjusting as necessary to make constant and incremental progress. The notion that traders are somehow insulated from the decisions that "actual" leaders make is patently false, and furthermore, methodologically impossible if they want to be successful. Although, I agree that traders might be leaders of few (sometimes only one - themselves), the traits and skills that they share with other leaders are probably more similar than different.

God and Intelligence

2009-05-31T14:56:12-05:00

Scientists have explored the relationship between intelligence and religiosity, as well as between education level attained and religiosity for many decades (see the following article that summarizes some of the relevant research). Unfortunately, for religious folks, the news is not good. IQ and religiosity are negatively correlated, at both the individual as well as national levels. Religiosity and educational attainment are also negatively correlated. Amongst the educated classes, professors are the least likely to be religious, and finally within the academe, the more eminent the professor is, the less he/she is likely to be religious. The evidence could not be any clearer. Please bear in mind that providing an instance wherein your uncle Joe is a physicist who is also a devout Christian does not falsify the latter evidence (see my previous post on using singular exemplars to attempt to falsify phenomena that hold true at the population level).

Very interesting post on the Psychology Today blog about the religiosity of intelligent folks. The basic premise of the post is that the more intelligent one is, the less likely he/she is to believe in God. Read the whole thing, but in case you don't it includes a wonderful quote:

The bottom line is that God is striking the following deal with us: "If you truly believe in me, I command you to refrain from using the brain that I have given you. Accept me by rejecting your brain."

America Leads in Bankruptcy

2009-05-19T13:52:18-05:00

Very good article by Megan McArdle explaining how the generous American bankruptcy laws actually facilitate risk-taking, entrepreneurship, and innovation:

Our leniency toward those with unsustainable debts helps not only profligate debtors, but the rest of us as well. Less onerous bankruptcy procedures boost rates of entrepreneurship: reduce the cost of failure, and people become more willing to take risks. America’s business environment is much more dynamic than that of Europe or Japan, for many reasons—and our generosity to capitalism’s losers is one of them.

The issue, as is often the case, is the perception of the general public versus what benefits society as a whole:

Americans’ public attitude toward the bankrupt, however, is not nearly as generous as our law. Every move to make things easier for debtors meets with fierce resistance, not merely from creditors, but from ordinary people who are making payments on time. As this article went to press, the Senate was scrambling to find a compromise on a long-stalled House proposal that would allow bankruptcy judges to reduce the principal of home loans where the value of the property has fallen below the mortgage’s outstanding balance. Known as a “cramdown,” the idea was popular with most congressional Democrats, but apparently not with the voting public, which was telling pollsters in ever higher numbers that they thought the whole housing-bailout package was unfair.

And isn’t it? Most people didn’t take out giant loans with tiny down payments or do repeated cash-out refinancings. Yet the cramdown plan would make the sober, steady majority foot the bill for other people’s mistakes. First they would pay as taxpayers by helping to subsidize troubled loans. Then, the next time they needed a mortgage, they’d be charged a higher interest rate to compensate for the risk that they might declare bankruptcy and ask a judge to cram down their loan. And maybe they’d have to pay a third time, again as taxpayers, by bailing out banks that got too many of their loans crammed down. Meanwhile, the guy down the street who took out a second mortgage he couldn’t afford, to remodel, would be sitting pretty in his $60,000 kitchen.

It isn’t fair. But by the time someone is in bankruptcy, the time for fairness is already long past. Bankruptcy is the legal recognition that someone lacks the resources to meet financial obligations. Our system works so well precisely because it mostly sets aside our instinct for just deserts, and instead focuses on minimizing the costs to everyone. It lays out clear and predictable rules for lenders and borrowers, so that they can plan for disaster, and escape as quickly as possible if it arrives. Still, it’s plain as day that, in the current crisis, a whole lot of people are getting help they haven’t earned. As a result, commentators, academics, and legislators presiding over hearings have diverted much time and energy away from hashing out the ugly details of rescue efforts and toward making the one point on which we can all agree: these relief measures don’t seem fair.

McArdle goes on to explain why being harder on both companies and individuals when they get into debt they can't afford is actually worse on society:

Let’s start with the corporate side. Receivership, even as practiced in a relatively forgiving country like Britain, often results in liquidation, not reorganization. Sudden changes of the entire management are hard enough in normal times, but when they take place in bankruptcy, the difficulties are multiplied. Very few people want to go to work for a company that may be terminal, particularly if a tightfisted receiver refuses to pay a premium for their efforts.

Liquidations are very costly. Workers get fired, of course; suppliers lose business; local governments lose tax revenue. But they’re costly even for creditors. Picture what would happen if a receiver shut down GM’s assembly lines until they could be sold. The workers would scatter, and with them, painstakingly accumulated human capital. The value of the inventory would plummet. Who wants to buy a car with no warranty and no pipeline for replacement parts? The residual value that GM has built up over decades in marques like Cadillac would vanish. Thus, creditors are often better off accepting partial debt payments from a going concern than selling off the assets piecemeal.

But if corporate liquidation, Euro-pean-style, is so punitive, why does America encourage individuals to liquidate—letting them trade the assets they have on hand for a full discharge—rather than making them work off as much of their debt as possible? In theory, making bankruptcy harder should make us all better off: by discouraging people from taking on too much debt, by paying creditors as much as possible, and by delivering a little just retribution to debtors for their profligacy.

That was the reasoning behind the 2005 bankruptcy reform. Although filings spiked before the law took effect, immediately thereafter they fell off a cliff. In 2006, just 598,000 people filed for bankruptcy, the fewest since Ronald Reagan was president. Filings have increased since but are still well below the rates that prevailed in the relatively sunny economic climate of 2004.

Harsher bankruptcy rules are seemingly doing what we wanted them to do: discouraging excessive risk taking. The question, though, is Which risks?

Look at entrepreneurs. All of the business literature indicates that starting a business is a phenomenally stupid thing to do. Most new businesses fail, and not simply because most would-be entrepreneurs are actually no-hopers. Even people who have founded successful companies in the past still have a 70 percent chance of failing. All those business failures are costly—but the successes are the difference between us and Tanzania. We want people to take these kinds of risks, even if that means we write off a lot of bad debt.

Tougher bankruptcy laws don’t necessarily curb the kind of behavior we want to discourage: borrowing money you have no way to repay, in order to buy unnecessary consumer goods. The amount that households put on their credit cards didn’t fall after the 2005 reform; over the next two years, it rose 12 percent. According to Michelle J. White, an economist at the University of California at San Diego, many bankrupts are what economists call hyperbolic discounters—people who pay a lot of attention to current pleasures, and very little to future costs. That’s why a person’s debt, not unemployment or divorce, may be the best predictor of bankruptcy.

If you’re the kind of person who buys now and worries later, the idea that government is making your inevitable bankruptcy filing slightly more annoying won’t discourage you. Actually, a higher hurdle to bankruptcy will make things worse, because banks will offer to lend you more money if getting the debt discharged is harder for you—money that you will happily, and irresponsibly, borrow and spend. The people who are most likely to be deterred from borrowing are the people who are taking the rationally contemplated risk of starting a company or buying their first home.

Great stuff - read the whole thing.

Waterboarding Tested

2009-05-13T12:07:14-05:00

I think most people agree that waterboarding is torture based on what they have read about how the process works. Journalist Christopher Hitchens went one further and actually put himself through the process. This is a very powerful video:

Eat Longer, Be Less Obese

2009-05-06T07:31:49-05:00

Interesting graph, courtesy Marginal Revolution:

Swine Flu What?

2009-05-02T13:41:57-05:00

The other day I was looking for statistics to help me frame the actual risk of death via swine flu. I didn't find anything salient to post, but this post does the trick:

We overweigh new risks relative to comparable risks we are accustomed to. Around 100 people per day died in US roads in 2008, an enormous improvement over previous years but still. People obsessing about spending 5 minutes in elevators with others (an infinitesimal chance of contagion) will blithely cross the street against the light to have a artery-clogging triple cheeseburger with fries and then smoke a pack of cigarettes. These things have much higher risks, but because we have grown accustomed to them, we don’t think of the risks. They are not, in the technical term, salient; but they are much more dangerous. Still, their dangers are dry statistics and people are not good with statistics.

Continuing on the Real Estate Topic...

2009-05-02T10:43:19-05:00

In the 1980s, in the midst of New York's real estate boom, my parents' apartment complex, some 360 units in total, was bought by a developer who converted it into a co-op. As tenants, my parents had the option of staying and continuing to pay rent, or buying their apartment. Two bedroom apartments very much like theirs were offered to the public for $120,000. Tenants could buy at a discount—first $80,000, then $60,000, then less.

Much less. By the mid-'90s, the New York City real estate market had crashed. Apartments similar to my parents' could be had for under $30,000. On more marginal blocks, closer to the train line, beautiful old apartments could be had for even less. My parents did very well in the crash: Their landlord—a British real estate partnership hoping to cash in on the '80s boom—went belly up and they finally bought their apartment at auction in 1995 for $101. That's not a typo.

Remember, this was never a neighborhood in terminal decline. Over the years its makeup shifted with new waves of immigrants. (It is now the most notable Indian enclave in New York.) But none of it was ever burned out or abandoned. The local high school wasn't great (I went to a magnet high school in another part of the city), but my elementary school was excellent—much better than the private school I attended in first through third grades. But it was a neighborhood that was always just outside the edge of "fashionable," and so the real estate ups and downs of the broader market were magnified there-it joined booms late, and was hit by busts early.

A great article pointing out fallacies in the assumptions of many that real estate prices will rebound. I have been having this argument for as long as I can remember. Initially, it was that real estate prices were inflated and real estate was not a safe/necessary investment as most assumed. Recently, it's been against the false belief that real estate prices should rebound. Just because something sold at x previously does not mean that it will sell at x again. That is just absurd...ask pets.com about that pricing anomaly.

Just a Reminder...

2009-05-02T10:10:40-05:00

Contrary to popular opinion, housing prices will not necessarily rebound:

Moneyball Missed the Reserve Clause?

2009-05-02T09:54:50-05:00

Great article arguing that although baseball is an inefficient market, it is not a completely free market:

The problem with likening the market for baseball players to an equity market is that the former is not a genuinely free market. The reserve clause binds players to the team that drafted them for the first six years of their career; during this time they cannot become free agents and sell their services to the highest bidder. So the intrinsic value of a highly productive player will rise, but he will not necessarily be paid his market value until he has completed his “indentured servitude” (as Lewis termed it). Thus it is not surprising that while payroll cannot tell us anything about wins, it does a pretty good job of predicting a team’s average age: young players are much cheaper.

To understand how much the reserve clause matters, let’s look at the young talent on the Oakland squad Lewis chronicled. Shortstop Miguel Tejada hit 30 home runs for the low, low price of $290,000 in 2000. Two years later, when he won the American League MVP, he made only $3.5 million (I know, but it’s all relative). His free agent contract, which he signed with the Baltimore Orioles after the 2003 season, was for $72 million over six years. Eric Chavez (whom the A’s actually did sign to a long-term market-value contract in 2004) produced 32 home runs in 2001 for $625,000.

Mark Mulder, Tim Hudson, and Barry Zito, the A’s “big three” pitchers, led the team to the 3rd, 2nd, 1st, and 1st American League ERA ranking, respectively, from 2000 to 2003. In 2001, when the A’s won 101 games, the combined salary of Tejada, Chavez, MVP-runner up and all-star first baseman Jason Giambi, Mulder (21 wins), Hudson (18 wins), and Zito (17 wins) was under $8 million. In the first year after each player’s “indentured servitude” ended, the six made a total of $43 million. The A’s won even though they were poor because they did not have to pay their young players what they were worth.

Giambi, who won the MVP in 2000, epitomizes the economics of baseball. He joined the Yankees as a free agent after the 2001 season. In that first year with his new team, he made more in salary than in the seven years he spent in the A’s organization combined. This turned out to be some deal for Oakland. As the San Francisco Chronicle’s Vlae Kershner recently pointed out, Giambi produced about half of his career home runs and RBIs in an A’s uniform. For that output, the team paid about 9 percent of his career earnings (up to the end of last season).

Just as the A’s could not have afforded to compete without the reserve clause during their “moneyball” run, no small-market team could compete without it today.

Why Athletes Go Broke?

2009-04-01T07:29:22-05:00

An extremely irritating article that tries to tie in supposed athlete stupidity to the current financial mess:

Ismail played two years in Canada and 10 in the NFL, estimating that he earned $18 million to $20 million in salary alone. He made an abortive NFL comeback attempt in 2006, never getting beyond workouts with the Redskins, and then navigated the reality-TV circuit (Pros vs. Joes, Ty Murray's Celebrity Bull Riding Challenge). Today he does a Cowboys postgame show on Fox Sports Net. As cautionary tales go, Ismail's could've been worse: He has his Notre Dame degree, and he never filed for bankruptcy, had legal trouble or got divorced. Yet he lost several million dollars, he admits, through "total ignorance."

It began in the winter of 1991 when he sank $300,000 into the Rock N' Roll Café, a theme restaurant in New England designed to ride the wave of the Hard Rock Cafe and Planet Hollywood franchises. One of his advisers pitched the idea as "fail-proof, with no downsides," Ismail recalls. He never recouped his money and has no idea what became of the restaurant.

Lesson learned? If only. After that Ismail squandered a fortune funding not only that inspirational movie but also the music label COZ Records ("The guy was a real good talker," says Rocket); a cosmetics procedure whereby oxygen was absorbed into the skin ("We were not prepared for the sharks in the beauty industry"); a plan to create nationwide phone-card dispensers ("When I was in college, phone cards were a big deal"); and, recently, three shops dubbed It's in the Name, where tourists could buy framed calligraphy of names or proverbs of their choice ("The main store opened up in New Orleans, but doggone Hurricane Katrina came two months later"). The shops no longer exist.

You might say Ismail had a run of terrible luck, but the odds were never close to being in his favor. Industry experts estimate that only one in 30 of the highest-caliber private investment deals works out as advertised. "Chronic overallocation into real estate and bad private equity is the Number 1 problem [for athletes] in terms of a financial meltdown," Butowsky says. "And I've never seen more people come to me about raising money for those kinds of deals than athletes."

The article goes on to imply that the supposed higher rates of failure for athlete financial investments is that they are trying to hit a homerun:

Hunter, who in November 2007 signed a five-year, $90 million contract, has been able to absorb the loss. But innumerable other athletes have not been so lucky. Former (and perhaps future) NFL quarterback Michael Vick filed for Chapter 11 bankruptcy last July and recently put his mansion in suburban Atlanta on the market. That's partly because he is unable to repay about $6 million in bank loans that he put toward a car-rental franchise in Indiana, real estate in Canada and a wine shop in Georgia. "It's always so predictable," Butowsky says. "Everyone wants to be the next Magic Johnson."

But Johnson is the rare, luminous exception of tangibility gone right. In 1994 he started a chain of inner-city movie theaters and diligently built a business empire. Today Magic Johnson Enterprises includes partnerships with Starbucks, 24 Hour Fitness, Aetna and Best Buy, and its capital management division has invested over a billion dollars in urban communities.

And that's the theme of the entire article. The basic premise being that athlete's are too stupid to handle their own money and piss it all away due to the stupidity. I find this premise annoying for a couple of reasons:

The rate of failure for athletes in ventures is no higher, I'd bet, than the general rate of failure for all ventures. In fact, private equity pros (the funds that invest in everything from startup Google to bankrupt Newspapers) don't hit at a higher rate than athletes.
I know many "educated" professionals from healthcare, technology, and finance that have lost money on everything from real estate, to private equity, to even public markets and bonds. Does that make those guys idiots as well?

The purpose of this article is, basically, to paint athletes with the brush that they are stupid and the few that are successful are geniuses. It's no different, I suppose, than the majority of articles in the Financial Times profiling business luminaries that made money when the rest of the world was losing it.

There are some valid points about divorce and wasting money on tangible toys. But, again, this is no different than the 30-year old banker that makes a couple million bucks, gets divorced, and pisses away his fortune. The case of excess capital dissolving is common across all industries and types of people. The last decade is an example of excess capital (credit-driven, but still excess) that led to massively wrong investments and stupid decisions.

The author could have made a broader point that making money with new ventures and investments is hard. It's a rare skill with a whole lot of luck, and most of the world just can't do it. Instead, we have another "stupid" athlete article.

She is a Strikeout Queen

2009-03-30T08:25:15-05:00

A female baseball player that throws a nasty knuckleball: