Via Index Universe:
Brian Cashman, general manager of the legendary New York Yankees for nearly 16 years, will be a featured speaker At Inside ETFs, the world’s largest ETF conference, to be held Feb. 10-Feb. 12 in Hollywood, Fla. Cashman recently spoke with IndexUniverse Editor-in-Chief Drew Voros about how the management techniques and tools he uses directing the Yankee’s baseball operation are similar to those used in business and investing.
You can read the entire Q&A here – and, I recommend it. Here are a few snips:
IndexUniverse: As you know, Inside ETFs is a financial conference. We’ll have a lot of hedge-fund types, institutional investors and a lot of discussion about hedging. How does a Major League Baseball general manager like yourself hedge risk when it comes to not just high-priced players, but players in general?
Brian Cashman: The thought process incorporates communication and information as the most important aspects. The more accurate information that you can obtain and dissect, the better informed you’ll be to make safe bets, safe investments. My investments are into players. As an industry, we have seen a radical change. “Moneyball” is a term that people repeat too often—the movie and the book—but essentially we have gotten to the point with technology that we can measure everything that takes place on the field. We’ve hired some really smart people to educate us on what statistics are more meaningful than others. This allows you to make safer bets and manage the risk in a much smarter way than I think the old-school regimes used to do.
IU: So you have essentially an analytic process, right?
Cashman: Big time. I’ve been with the team here about 15 years now, and going on my 16th year, and I have changed over time as a department head. One of the changes I’ve made is to take the Yankees into the 21st century. When you see things in the industry improve and change, you’ve got to keep up with the challenges. We have created a quantitative analysis department and hired a director of quantitative analysis. That department has grown to some 14 people who manage a number of different information streams. Not only do they pool that information, but then it is dissected and produced in a meaningful way about what is truly taking place on the field in present performance and then future predictable performance. That has certainly allowed us to make safer, more informed decisions.
You’ll never be perfect or right all the time, but I think I’m in a much better position to make decisions and be comfortable with those decisions if they are educated-based.
IU: With investments, a lot of times people have the right idea, but either the investment doesn’t click and they run out of money, or they give up on the idea only to see two days later their idea actually succeed. In that similar vein, in terms of trading players or keeping players, is there a player you would care to speak to that maybe you traded too early and then you saw him blossom on another team? And conversely, is there a player that maybe you held onto too long?
Cashman: Mike Lowell is a player that has now since retired, but he was a New York Yankee well before he was a World Champion Marlin and then eventually a World Champion Red Sox. Mike Lowell was a third baseman at our Columbus Clipper minor-league affiliate. We won the World Series in ’98 with Scott Brosius as our third baseman, and he was a World Series MVP, so we signed Scott Brosius to a three-year contract, which kind of put the nail in Mike Lowell’s coffin with the Yankees at that time.
So we took the depth of that position of strength for us at third base in Mike Lowell and we traded him to the Marlins for three young starting pitchers that would shore up an area of weakness for this franchise. And Mike really turned into a heck of a player over the next 10 to 15 years after that and helped the Marlins to a World Series title. He eventually got traded to the Red Sox and helped them to two World Series titles. And he is one of the game’s quality people and great players. Scott Brosius was a fantastic thrust for our championship runs and he was a world champion I don’t know how many times over, three times over probably, but that was a player we traded too early or I traded too early.
Which player did I trade too late? There are probably a number of them that I could name, and I say “a number of them” because when it’s too late, you can’t trade them. So, especially with the investment that we have in our players, once one of these guys with a big contract goes on the wrong side of the mountain, then it’s kind of too late to trade them, because no one is going to want them.
…we traded him to the Marlins for three young starting pitchers that would shore up an area of weakness for this franchise…
Todd Noel, Mark Johnson and Ed Yarnall “shore[d] up an area of weakness for [the Yankees] franchise”? Really?