Thinking About Thinking

Since it’s the dog days of summer and the Red Sox are wilting, I need to drown my baseball sorrows by evaluating Theo Epstein’s 10 worst moves as Red Sox general manager.  VCs are often defined by their winners, rather than their losers.  Unfortunately, life isn’t so easy for baseball GMs.  Without further ado:

1. Freddy Sanchez (.300 career batting avg, all-star), traded with Mike Gonzalez for Jeff Suppan, Brandon Lyon, and Anastacio Martinez. 
2. Matt Clement, free agent pick-up.  4 years, $40M.
3. J.D. Drew, free agent pick-up.  5 years, $70M.  He’d be #1 or #2 except he actually plays once in awhile. 
4. Julio Lugo, free agent pick-up.  4 years, $36M. 
5. Edgar Renteria, free agent pick-up.  4 years, $40M.
6. Doug Mirabelli, traded away Cla Meredith (3.57 career ERA) and Josh Bard (.261 career batting avg). 
7. Eric Gagne, traded away David Murphy (.280 career batting avg) and Kason Gabbard. 
8. Bronson Arroyo (4.35 career ERA), trade for Wily Mo Pena. 
9. Jeremy Giambi, traded away Josh Hancock (4.20 career ERA). 
10. Daisuke Matsuzaka, 6 years, $52M plus $51.11M posting fee.  Tough call, but not looking good.

If there’s a lesson learned from Theo’s free agent mistakes that in its own way applies to the venture business – it is to be willing to pay up for the sure thing.  Now you could say there is no sure thing, which is fair.  But the closest thing is someone like Mark Texeira who had 30–40 home runs and .380 OBP in his bad years prior to being signed by the Yankees (away from the Red Sox).  Alex Rodriguez in his bad years still hit 30 home runs with a .400 OBP prior to once again being signed by the Yankees (away from the Red Sox).  Theo seems to like to pay $10M-$15M/year for above average historical performance (J.D. Drew, Julio Lugo, Matt Clement, Daisuke Matsuzaka, etc.), but not $20M for spectacular historical performance.  Ironically, a great example of the latter category is Manny Ramirez, not a Theo signing, but also an example of a sure thing (when mixed with PEDs). 

That all being said, the Boston Red Sox have have won two World Series championships during the Theo Epstein era.  So, I am still a Theo Epstein fan.  Maybe like VCs, baseball GMs are defined by their winners after all.