Feeding the Monster

by Seth Mnookin

  In the early 1990s, baseball was at the tail end of a 30-year trend that saw the quirky ballparks of the turn of the century replaced with cookie-cutter concrete monoliths. Lucchino, Eli Jacobs, and Janet Marie Smith, the architect in charge of planning and developing the new stadium, envisioned something entirely different. To start, they didn’t want to use any concrete in the Orioles’ new home; instead, they planned to build the park with steel trusses that could be painted to blend into the surrounding environment. They chose a location rich with baseball history, only blocks from Babe Ruth’s birthplace. (Ruth’s father operated his eponymous tavern at a spot now occupied by center field.) True to Lucchino’s word, Camden was full of the amenities of new stadiums—bigger seats, more leg room, plenty of luxury boxes, high-end food options—while retaining the charm of parks like Fenway and the Chicago Cubs’ Wrigley Field. More than a simple place to see a baseball game, Camden Yards became the much-beloved centerpiece of a revitalized neighborhood. Sodded with verdant Maryland bluegrass and constructed with a brick exterior for a more traditional appearance, the park was built bordering the old Baltimore & Ohio Railroad Warehouse, which rises over right field. The team’s offices, along with a cafeteria, sports bar, gift shop, and exclusive club, are now housed in the warehouse, which has banks of lights mounted on its roof.

  After the park opened, Paul Goldberger, then the architecture critic for The New York Times, said Camden Yards was “a building capable of wiping out in a single gesture 50 years of wretched stadium design.” Those seemed to be prescient words: Over the next decade, a dozen new ballparks were built around the country, including stunning new facilities in Cleveland, Seattle, Cincinnati, and Pittsburgh. All of these would imitate the marriage of past and present that Camden had managed so brilliantly.

  With Camden built, Lucchino would not stay long in Baltimore. When Eli Jacobs ran into financial trouble, he was forced to part with the team, and in August 1993, Peter Angelos led a group of investors that bought the Orioles in a bankruptcy auction for $173 million, at the time a baseball record. Lucchino found himself a rich man: His 9 percent share had earned him approximately $10 million. Although Angelos invited Lucchino to stay on in some capacity, Angelos made it clear that he himself intended to operate as the team’s CEO. Instead of accepting a demotion, Lucchino decided it was time for a new challenge. He pondered assembling a coalition to buy his hometown Pittsburgh Pirates, and even talked with Angelos about joining forces in an effort to bring a National Football League franchise to Baltimore.

  Eventually, though, Lucchino headed west, pairing up with software entrepreneur John Moores to buy the San Diego Padres from Tom Werner. The transition would be a stark one. The Orioles, a proud, history-laden franchise, had been baseball’s winningest team since 1960. The Padres, in contrast, were a small-market expansion team that had never built a solid relationship with fans and were perhaps best known for their incomparable mascot, the San Diego Chicken, and the odd color of their uniforms, which had been at various times compared to the color of diarrhea.

  Lucchino, well aware that the Padres’ relationship with their fans was at a crisis point, decided to signal immediately his intention to do things differently. He imported one or two people from each department from the Orioles to the Padres in order to quickly instill a new mind-set. Among those he brought along were some of his most trusted lieutenants, men like public relations guru Charles Steinberg. The roly-poly and always upbeat Steinberg had been a 20-year-old Orioles intern about to embark on a career in dentistry when, in 1980, he first met Lucchino, the “hard-charging vice president and general counsel,” as Steinberg describes him. Many Orioles employees didn’t know what to make of Edward Bennett Williams’s young protégé. “I had the benefit of being sufficiently young, naïve, and open-minded, so the idea of this young guy coming in wasn’t a threat to me at all,” Steinberg says. “We’ve been together ever since.”

  In addition to aides such as Steinberg, Lucchino brought along some associates he’d known in Baltimore who hadn’t even worked for the Orioles. For example, Mike Dee, an Orioles season ticket holder, came to know Lucchino socially in the early 1990s—for a while, Lucchino had dated one of Dee’s best friends—and the two frequently chewed over ideas about sports and sports marketing. Soon after taking over the Padres, Lucchino called up Dee. “It’s Larry,” he said. “We only have eight full-time employees out here.” (Because of the 1994 strike, the Padres had all but shuttered their day-to-day operations.) “I always told you you’d be great in sports. Why don’t you come out here and work with me?” Dee, who was at the time running the sales department for a family-owned business, said yes. Lucchino also hired Theo Epstein, a recent Yale graduate who had previously interned in the Orioles public relations department.

  “The goal was to bring some of the experience and work ethic that came from Baltimore and replicate it [in San Diego],” Lucchino says. “We knew that there was a contrast that we had to draw right away. One of the things we did quite literally was get dozens of stickers that said ‘New’ on them and we stuck them over everything that said ‘Padres,’ so everywhere you looked, it was ‘New Padres, New Padres, New Padres.’ ” To drive this point home, a week after taking over, Lucchino oversaw a 12-player deal that brought third baseman (and future Most Valuable Player) Ken Caminiti and center fielder Steve Finley to San Diego from Houston. “We wanted people to know right off the bat that we were going to be bold. We were going to focus on improving the quality of the team. When we got there, the Padres had the worst record, the lowest attendance, and the lowest revenue in baseball. We were determined to change all of that.” Kevin Towers, who served as the general manager of the Padres under Lucchino, describes his former boss as “a very driven son of a gun, very outspoken. He’s Italian: It’s energy, energy, energy, go, go, go. Don’t sit and think, do it.”

  When Lucchino moved from the large-revenue Orioles to the small-revenue Padres, he found himself on the opposite side of what had become one of baseball’s most contentious labor issues. The 1994 players strike had been brought about, in part, by an inability to resolve the disparity between the league’s wealthiest and poorest teams. Lucchino, whom Werner admired when he fought for financially flush teams like the Orioles at the Kohler conference in 1993, now became one of baseball’s most forceful advocates for increased revenue sharing. At the time, most of the game’s shared revenue came from fees paid for national, baseball-wide television contracts and income from all official baseball merchandise, which was divided equally among all the teams.* Beyond that, a small percentage of the ticket gate was shared: In the American League, the gate was split 80–20, while in the National League, the visiting club received 42 cents per admission.†

  But in baseball, the real money came from contracts for local television and radio rights. If large-market teams had an easier time drawing fans, they benefited even more from the kind of concentrated, affluent fan base advertisers loved. Teams like the Yankees, with around 20 million people in their media market, obviously stood to make far more from their local contracts than teams like the Cincinnati Reds, and the explosion of cable television only added to this disparity.

  In 1996, just two years after the strike that canceled the World Series, Major League Baseball worked out a difficult compromise with the players union. Instead of a salary cap—something the union threatened to strike over—the new collective bargaining agreement called for a payroll tax, which was paid when a team’s total payroll rose above a set level, and a vastly increased system of revenue sharing. Teams would no longer simply share a fraction of their ticket receipts; instead, they’d pay 20 percent of their local revenues (stadium expenses were allowed as deductions) into a pool. Seventy-five percent of this pooled money would be split evenly among the teams, while the other 25 percent would be distributed to those teams with below-average local revenues.

  In his years with the Padres, Lucchino helped prove that small-revenue teams could be competiti
ve. The Padres won two division titles, and in 1998, the National League pennant. (In the World Series, they were swept by the New York Yankees, who were in the midst of winning four championships in five years and 14 World Series games in a row.) He also planned, with the help of Janet Marie Smith, the architect behind Camden Yards, a new, intimate, baseball-only stadium for San Diego. Even more impressively, he convinced San Diegans to support construction of a facility for a team that had, until recently, been thought of as a public disgrace.

  This was only possible because Lucchino had worked so hard to attract new fans to the Padres. “You tend to replicate in later life successes you’ve had earlier,” Lucchino says. “We had spent years striving for a regional franchise in Baltimore. We had marketing meetings all the time where regionalization was the dominant theme. How do we market a team in and around the whole mid-Atlantic region? How do we make the Orioles the team of all of Maryland, the team of southern Pennsylvania, the team of Washington, D.C., and Northern Virginia? And we took that whole concept to California and decided we were not going to limit the Padres to San Diego County. We went to the north and tried to recruit fans from the Dodgers and the Angels by saying, ‘We’re a Southern California team.’ We went to the east. We went into Mexico, in the south.” After drawing just over a million fans in 1995, the Padres sold 2,187,886 tickets in 1996 and set a club record with 2,555,874 paying customers in 1998.

  Even with on-field success, increased revenue sharing, and record fan attendance, Lucchino and Moores were finding, much as Tom Werner had before them, that making money in San Diego was no easy task. By the end of the 2000 season, although fans were flocking to the park, the team was losing around $15 million a year. Eventually, Lucchino said, the team would have to cut back on payroll. “The [monetary] losses have become intolerable for us,” he said. “We aren’t going to continue to absorb them. We’ve been spending beyond our means in an effort to keep the team competitive. We cannot continue to do that endlessly. We’re tapped out and awash in red ink.” At the same time, Lucchino’s relationship with John Moores, once warm, had grown strained. Lucchino’s friends say this was due to some legal issues Moores was having; others at the Padres said Moores grew tired of Lucchino’s combative and abrasive management style. In July 2001, after several months in which Moores and Lucchino’s relationship went from bad to worse, both men agreed it made sense for Lucchino to move on.

  While nominally staying on the Padres board until October, Lucchino quickly began to sort through his options. Tom Werner’s invitation to join his bid to acquire the Red Sox was one of the first offers to come in. In the meantime, Lucchino had a new task in front of him. Bud Selig had asked Lucchino, who by that time had become known as an expert in convincing cities to help pay for new stadiums, to head to South Florida, where Marlins owner John Henry was thinking about selling the team or moving it elsewhere. Since buying the Marlins in 1998, Henry had spent enormous amounts of energy working to pass legislation that would help build the Marlins a baseball-only stadium. After yet another setback, he was ready to give up. Selig wanted Lucchino to find out if Henry had really exhausted all his other options.

  *This means that teams like the Red Sox and Yankees get no more money from the sale of their hats and jerseys than the Kansas City Royals do: At the end of each year, all merchandise revenue is pooled and divided equally among all the clubs.

  †Sharing of gate receipts varies widely among American sports leagues. The National Football League, widely considered to have the most parity among North American sports leagues, splits its gate receipts 60–40. In the National Basketball League, the gate is split 94–6, and in the National Hockey League, the home team retains the entire gate.

  Chapter 9

  From Soybeans

  to Stadiums

  JOHN W. HENRY WAS BORN on September 13, 1949, in Quincy, Illinois. In the early 1950s, his family moved to Arkansas, where his father owned a large farm. Henry was a shy and awkward child: His peers would sometimes come to the Henrys’ yard to play ball and the young John Henry was too timid to ask if he could join in the fun. Increasingly, he took refuge in listening to baseball games, especially those of the St. Louis Cardinals, whose broadcasts Henry could pick up on his radio. It wasn’t until he was 10 years old, in 1959, that Henry made the trip to St. Louis, and that was only because his father was hospitalized with a brain tumor. Cardinals coach Johnny Keane, who went on to manage the Yankees, was staying at the same hotel as Henry, and Keane left the young boy tickets to games. “It was really heaven and hell,” Henry says. Henry’s father, whom he describes as so commanding a presence that “even the insects got quiet” when he entered a room, never fully recovered.

  By the time he was a teenager, Henry found that his facility for numbers made baseball even more of a potential source of wonder and escape than before. He could, he discovered, calculate a player’s batting average in his head. A talented but occasionally indifferent student, Henry also devoted much of his energy to learning how to play music, which helped transport him away from his sometimes lonely reality.

  After high school, Henry spent several years taking philosophy courses at various California colleges, although he never got a degree. He also traveled to Las Vegas, where for a brief period he made good money counting cards at blackjack tables. (Once he was found out, the local casino owners politely—but forcefully—asked Henry to find some other way to occupy his time.) During these years, his main focus was on his budding progressive rock band, Elysian Fields, which was named after the mythical abode of the blessed situated at the end of the world. Henry played bass in the trio, which also featured a keyboardist and a drummer. He bankrolled the group’s elaborate stage shows, which for a while featured a ring of speakers arranged around auditoriums in such a way to create roiling waves of sound. (At one point, the band’s live shows centered on a rock opera about aliens from the Cassiopeia solar system. During this era, the entire band shaved their eyebrows in order to get into character.) Eventually, Henry decided to break up Elysian Fields, although not without some trepidation: “I wasn’t sure if I’d ever have sex again,” he says, laughing. “I thought the only reasons girls liked me was because I was in a rock band.”

  In 1975, Henry’s father died, and Henry moved back to Forrest City, Arkansas, to run the family farm. While managing a 1,000-acre soybean farm, he began to examine the commodities markets, in which contracts for agricultural products are bought and sold, and soon realized he was more interested in numbers than in working farmland. He began spending his days at a small commodities brokerage firm in town, eventually moving on to trading commodities in Memphis. What happened next is a fortuitous coincidence that forever altered his life. While in Memphis, Henry got a hunch that soybean prices were about to spike upward, and he began aggressively buying. Sure enough, up they went, from just under $7 a bushel when Henry began his buying spree to more than $13 a bushel. Henry was convinced they’d go even higher but was prevented from riding his hunch when his girlfriend became crippled by panic attacks. Henry sold his contracts and moved back to Illinois to help.

  While Henry was gone, soybeans collapsed to about $4 a bushel. Henry had been saved from financial ruin by the emotional vicissitudes of a lover. Instead of simply thanking his lucky stars and moving on, Henry realized he would never again be comfortable relying on instinct; instead, he wanted to develop a systematic approach to commodities trading. He decided that, unlike so-called fundamental traders who try to predict where prices will go, he would track prices in order to identify broad market trends that were already occurring. In doing this, Henry was partially influenced by the college philosophy courses he took in California in the early 1970s, where he met the Indian philosopher Jiddu Krishnamurti and became fascinated with the work of Carl Jung. “It’s the whole notion of ‘what is,’ not ‘what should be,’ ” he says. Henry had also become convinced that markets, for the most part, reflect people’s expectations and if he could identify market tren
ds early on, he could invest accordingly. And so, at an age when many of his similarly music-obsessed peers were touring with rock bands or embracing the drug culture, John Henry all but moved into local libraries, pawing through microfilm printouts and fraying newsprint, studying commodities pricing all the way back to the nineteenth century. By the end of 1979, he had devised what he thought was a valuable model. With the help of little more than a hand-held calculator, he spent most of the following year testing his model against historical data, and as he had expected, found that it worked across varied eras and assorted markets. In 1981, at 31 years old, the formerly eyebrowless aspiring rock star opened John W. Henry & Co. and began offering managed futures funds.

  Seven years later, JWH & Co. had experienced such fantastic success that Henry was able to hand the day-to-day running of his company over to a full-time professional staff. Though he never did make it as a rock star, he eventually built a recording studio in his home and became friends with musicians, including members of the Rolling Stones and Aerosmith. By the late 1980s, he was wealthy enough that he could actually consider fulfilling his other boyhood dream: buying a baseball team. In 1989, he debated making a bid for the Kansas City Royals. “I had lived in Southern California for two-and-a-half decades, and I was ready to live somewhere else,” Henry says. “But I flew into Kansas City and…drove around during the day and thought to myself, ‘I just don’t think I could live in Kansas City.’ I lived in Middle America. I wasn’t ready to go back.” Instead, he purchased a stake in the minor league Tucson Toros of the Triple-A Pacific Coast League, and then, after moving to Boca Raton, Florida, helped start the Senior Professional Baseball Association, a short-lived league of former pro players. Henry’s team, the West Palm Beach Tropics, was the runaway star of the league. Dick Williams, the manager of the Impossible Dream Red Sox, ran the club, which featured former big-league stars such as Dave King-man, Mickey Rivers, Ron Washington, and ace reliever Rollie Fingers, who was elected to the Hall of Fame in 1992. “We had an enormous amount of fun,” says Henry, who ran the in-game entertainment at Tropics games. “We went 52-20. They changed the league’s rules because we were so good.”