Businessperson’s Special

By Alan Schwarz

Businessperson's_SpecialWharton alumni lead professional baseball teams — in the front office, the owner’s box, and even on the field.

In ballparks throughout the United States this summer, fans will celebrate the seventh-inning stretch with one more hot dog, yet another beer, and a rousing chorus of “Take Me Out to the Ballgame.” They’ll toast to their good fortune and soak in the panorama, whisked back to their youths in a delightful, dreamy daze. They’ll come to just as Shoeless Joe emerges from the cornfield in right. But for about a dozen Wharton alumni at these games, their stadium experience will be considerably different. They will enjoy none of these Rockwellian delights. They will be working. They will be in the owner’s box, surveying the attendance figures and sweating next year’s payroll. They will be pointing a radar gun at the fastball of next year’s high school phenom. They will be in the boardroom devising new wireless services for fans that will make Dick Tracy look downright Victorian. They will be brainstorming tomorrow’s minor-league Vasectomy Night promotion. (More on that later.) They will be playing second base, of all things.

The_Work_Behind_the_Game

For these Wharton alumni, baseball isn’t a break from work—it is their work. So what if they don’t make anywhere near the money they might on Wall Street’s treadmill, at plush-leather consulting firms, and other traditional b-school careers? And who cares if working in baseball forfeits one’s ability to blow off the office and go to the ballpark, since the ballpark is the office? Talk to any Wharton alumnus working in the national pastime, and you’ll find that the most difficult thing about calling baseball your job is not being able to call it anything worse.

“It’s virtually impossible to complain about this job,” said Bob Bowman, WG’79, the president and CEO of Major League Baseball Advanced Media, MLB’s flourishing Internet arm. “Because when people like doctors and lawyers and bankers are complaining about their jobs, and then you mention you work in baseball and there are not a lot of sympathetic ears.” Or as Jon Searles, W’05, a pitcher in the Boston Red Sox minor league system, put it: “I have friends who are making six figures at Lehman and Citigroup, and they all say, ‘This’ll be here when you retire. I’d do anything to be where you are.’”

Between Bowman, one of the most powerful people in all of sports, and Searles, an all-but-anonymous farmhand, lives a full roster of Wharton alumni making names for themselves in the baseball world. There’s Bob Castellini, WG’67, a native Cincinnatian who recently became principal owner of his hometown Cincinnati Reds, joining longtime Phillies CEO Dave Montgomery, WG’70, at exclusive ownership meetings and invitation-only events like Wharton’s May 2006 Impact Conference: Building Winning and Profitable Organizations in Professional Team Sports. Cardinals executive Jeff Luhnow, M&T’89, is part of the Ivy League revolution among team front offices. Mark DeRosa, W’97, is where Searles wants to be—in the major leagues, playing well for the Texas Rangers. Marvin Goldklang, W’63, is one of the most prominent owners in all of the minor leagues, his clubs setting the gold standard for both profitable business sense and headline-worthy hijinks.

All of these men have become so successful in an industry often overlooked by Wharton grads that the next generation has started to take notice: Both the Wharton Sports Business Initiative, a research and industry arm led by longtime professor Kenneth Shropshire, and the new Wharton Sports Business Club (WSBC) are indoctrinating new students about how fertile major league grass can be. “The sports industry as a whole is not hiring a lot of MBAs, but I think they’re starting to, and that trend is moving in a positive direction,” said Anne Boviard, WG’07, co-president of the WSBC. “People who are involved in major sports companies who now have moved up in the ranks and have their MBAs are looking to their alma maters to hire people coming out. That’s not something that’s traditionally done in the sports industry in the same way that it’s done by investment banks or consulting firms or consumer products companies.”

Perhaps. But if there’s anything these Wharton grads are doing just like their breathren at those banks and firms, it’s succeeding. Wildly.

(On)line_Drive

To anyone familiar with the baseball biz, Bowman’s work with MLB Advanced Media is the industry’s most intriguing, and potentially profitable, venture since Mr. and Mrs. Ruth decided to have a Babe. Just 10 years ago, only a few baseball owners—if any—had ever heard of the Internet. Now, this cash cow might just save their bacon.

Bob_BowmanBAM, as it’s known among baseballites, oversees MLB’s online business on its portal (mlb.com) and elsewhere, from ticketing and merchandise to Web broadcasts and wireless services. It has exploded from a 2000 startup with $120 million in seed money to a profitable company with $195 million in annual revenues and growing at some 30 to 40 percent a year. Some experts say that if it were to go public—a temptation baseball owners have thus far resisted—it could be worth $2 billion and go a long way toward fixing the game’s problems with revenue imbalance among clubs. Said MLB commissioner Bud Selig, “I don’t think a lot of people understood how important this is going to be.”

Leading the company is Bowman, a 51-year-old Michigan native who arrived with the all-but-motto, “It’s the content, stupid.” While he has leveraged his company’s position in the ticketing and merchandising areas—as well as building such a mammoth broadband pipeline that BAM now hosts sites for top music acts and even the NCAA basketball tournament’s streaming video—Bowman has always clung to the fact that baseball, because it plays 2,430 games a year, had vastly more material to exploit than any other sport. (Football, by comparison, plays only two days a week with every game part of a national television contract.) Bowman’s enterprise first tackled radio, began webcasting every game in full this season—in perfectly watchable video clarity—and now is tackling an array of wireless services that will keep fans connected to the game as tightly as the 108 stitches on baseballs themselves.

“We’re at an inflection point,” said Bowman, who speaks about as fast as you’d expect from someone for whom Diet Coke is a major food group. “The question is, will people watch 40 minutes on a 1.5-inch screen? I don’t know. Certainly we’re preparing for it, and certainly in terms of ubiquity and the ability to reach customers, we’re doing everything we can. We’re preparing for everything. And it’s going to be a real maelstrom in terms of trying to get on cellphone devices and wireless devices. I can’t predict where we’re going to go, and if you can’t predict, you’ve just got to plan a little bit more.”

Much will depend on how the marketplace reacts to paying for baseball’s type of premium content. More than 800,000 people in 2005 subscribed to some sort of streaming audio or video package, that number probably rising another 50 percent this year. (“And as we move over to cellphones,” Bowman said, “people are more used to paying for services on that kind of device than they’ve been on the Internet.”) The result could become so many tens and hundreds of millions, all of which is shared among baseball’s 30 owners, that some believe MLBAM could help fill the financial gulf between the game’s opulent New York Yankees and penurious Kansas City Royals. Whispers among baseball’s power brokers suggest that Bowman has become as powerful as anyone at Major League Baseball not named Selig.

“I don’t know if they’re taking me more seriously or the business,” Bowman quipped about ownership, “but they’re certainly taking this business more seriously.”

From_Rangers_to_Reds

One of the owners taking it all more seriously is Castellini—after all, when you drop an estimated $270 million to buy one of the more cash-strapped franchises in baseball, you tend to keep your eyes open for revenue. Since earning his MBA from Wharton in 1967 and eventually running his family’s food-distribution and processing businesses, Castellini had been a minority owner in several big league franchises (including the Texas Rangers along with a certain fellow named George W. Bush) but never had sat atop the power pyramid. Now he does, and while that doesn’t quite fit his down-home, gregarious personality—”When you’re the owner,” he lamented, “people look at you like you have two heads”—Castellini is determined to bring back Cincinnati’s glory days of the 1970s Big Red Machine.

“We’re in this because of a specific generational interest,” Castellini said. “Was it to make a lot of money? No. And I told my partners there will be no distributions. Everybody who’s in this is in it because they are passionate baseball fans—they’re passionate about the Cincinnati Reds and they care about their city. In a small-market city like ours, we only have two Major League teams, football and baseball. The psyche of the city is very dependent upon the success of the two teams.”

(Speaking of city psyches, it must be noted that it was a Penn grad, Walter O’Malley, C’26, who moved the Dodgers to Los Angeles after the 1957 season and in so doing broke the hearts of generations of Brooklynites—but in so doing brought major league baseball west of the Mississippi for the first time. And O’Malley’s Wharton-grad son, Peter, W’60, ran the flagship franchise from 1970-98, becoming one of the most beloved owners in big league history, paving the way for baseball in the Olympics and overall internationalization the sport that we now take for granted.)

For all baseball’s romantic virtues, though, Castellini insists on bringing to the Reds a disciplined business sense, lessons he said he learned way back at Wharton. (Early results were encouraging: the Reds, longtime small-market doormats, started this season 23-12 as one of the best teams in the National League.) He wants to build his roster through the farm system, understanding that it’s far more efficient to develop your own capital (minor leaguers) than to compete for it on the open market (major league free agency). He’s big on hiring the right people and empowering them to do their jobs unfettered. And he doesn’t mind a little Wharton networking either—after noticing the gorgeous spring- training facility that Montgomery got built in Clearwater, FL, for the Phillies, Castellini chatted with him about doing the same for a new Reds complex someday.

“Wharton gave me a lot of confidence to go out and tackle almost any business challenge I encountered,” Castellini said. “Baseball is a terrific challenge and a unique industry, but it has a lot of things in common with the ABCs of business.”

If you can’t own a ballclub—and even Wharton grads can have a hard time scraping up the requisite $250 million—the next best thing is to run one as the general manager, making trades, signing free agents and generally finding your face on talk-radio bullseyes year-round. Young Ivy Leaguers with little or no baseball experience have become en vogue these days, with several becoming general managers: Jon Daniels (Rangers, Cornell), Paul DePodesta (Dodgers, Harvard), Theo Epstein (Boston Red Sox, Yale) and Mark Shapiro (Cleveland Indians, Princeton). No Penn grads yet, but if Jeff Luhnow keeps rising in the Cardinals’ front office, it won’t be long.

Luhnow entered baseball in 2003 after starting two companies from scratch, and brought that entrepreneurial mentality to an industry that, ideologically, is about as progressive as a glacier. Baseball folks typically like doing things as they’ve always been done, and Luhnow, now 39, was hired by the Cardinals in part to shake up an organization that wanted new ideas. He now runs their scouting operation, heading up the evaluation of high school and college amateurs, manages an international talent pipeline from the Caribbean and elsewhere, and oversees a department that evaluates all players, including major leaguers, through sophisticated quantitative analysis—all the while seeing those ventures through the filter of a Wharton education.

“When you talk about where to put money as far as players in the amateur draft or internationally or on the major league free-agent market, we think of it as a portfolio of investments,” Luhnow said. “They all have different returns and risks associated with them, and you try to find the right mix. It’s the same as if you’re in a business where you’re deciding whether to put money into R&D, or a marketing campaign, or a new manufacturing facility.”

While most young executives are dismissed as numbers geeks by baseball traditionalists—of which this industry has never suffered a shortage—Luhnow focuses on the integration of all ideas, new and old, into one operational, decision- making philosophy. His influence certainly hasn’t hurt, as the Cardinals won 205 games from 2004-2005, the most in the major leagues, and have an improving farm system.

“I had to start our international program from scratch,” Luhnow said. “And I like to think we’re doing many things differently than we used to. I still feel like a bit of an entrepreneur.”

If Luhnow wants to draft any players from Rhode Island, he might want to stop by the Extra Innings training center in Warwick, opened last year by 1992 Wharton grad Todd Mascena, himself a stand-out on Penn’s baseball team as a student. And if the Cardinals decide they want a new utility infielder, they can find a ready-made one in yet another Wharton product, current Texas Ranger Mark DeRosa.

Mark_DeRosaA former Penn quarterback and baseball star, DeRosa spent parts of seven seasons with the perennially playoff- bound Atlanta Braves before joining the Rangers as a free agent two offseasons ago. And while he has had some fine major league moments—including a “walkoff” shot to win a game over Baltimore early this season—he still feels like he has to justify his career choice. “I had eight roommates in college,” he laughs, “and I probably make the least out of all of them—and I play in the big leagues!” Then again, DeRosa has had one experience those buddies would give up their 401(k)s for.

Now bah-ting . . . Mahk . . . Deh-Roh-sah.

“When I walked into the batter’s box at Yankee Stadium in ’99, to Bob Sheppard announcing my name in that voice, it was just awesome,” said DeRosa, now 31. “I went to games as a kid and I remember him saying ‘Dahn . . . Mat-ting-ly’— and to hear him say my name, it was like, ‘God, I’ve arrived.’”

Most of his teammates, DeRosa said, have no idea of Wharton’s prestige, and assume that every Ivy Leaguer walks around with glasses and pocket protectors. (“If they went to Smokey Joe’s on a Saturday night,” DeRosa chuckled, “I think it would change their image of what going to Penn is about.”) But they’ll sure be glad DeRosa has his Wharton degree if, after his career ends, he goes into his brother’s financial advisory business and helps manage their considerable earnings. In the meantime, DeRosa is trying to learn about running a club from Daniels—and fitting some Penn-Cornell trash-talking in there, too—in case he chooses to follow Luhnow’s lead and pursue a career in a baseball front office.

Game_Theory_in_Practice

Daniels’s appreciation for DeRosa’s intelligence is mirrored in Boston, where Red Sox brass, a gaggle of young and intellectual thirtysomethings led by Yale’s Epstein, signed Searles this offseason in the hope he can contribute to their bullpen staff within a few years. Searles, now pitching at the Red Sox’s Double-A Portland (Maine) affiliate, took a rare route to where he is today—rather than turn to professional baseball full-time either after high school or college, he signed with the Pittsburgh Pirates out of his Long Island high school and played in the minors primarily as a summer job, attending Wharton otherwise as a reasonably regular student. He graduated last December and can now, at age 25, focus entirely on baseball.

Then again, maybe he focuses too much. Like many Ivy League athletes, Searles is accused of being a little too cerebral on the field—”thinking too much” in baseball parlance. (Perhaps you recall the Crash Davis line in Bull Durham, “Don’t think—it only hurts the ballclub.”) As Searles puts it half-jokingly, “They can see the wheels turning on the mound. I’m thinking things through. If I was dumb as a rock, I might be in the big leagues by now.” But Searles has improved to the point where he has an outside shot of getting a callup to Boston in September, to help the Sox in their pennant push as a righthanded middle reliever.

Jon_SearlesAs Searles wants to escape the minors, a Whartonite one generation ahead of him, Marvin Goldklang, savors every moment of it. “Minor league” has a certain pejorative connotation, but no owner in the minor leagues has had more of a blast operating clubs, and sharing that joy with his community, than Goldklang. When you consider that his main partners include Mike Veeck (whose father, Bill, was known as Baseball’s Barnum for his promotional stunts) and comedian Bill Murray, it’s a wonder anyone their ballparks pay any attention to the games. From sack races for childen to actual nuns giving massages in the stands to pigs carrying baseballs for the umpires to, yes, Vasectomy Night (in Charleston, SC, one lucky man on Father’s Day was going to get a free vasectomy before the local church got, uh, snippy), the Goldklang Group’s half-dozen teams have played a large role in the modern minor league boom by teaching everyone to not take baseball too seriously.

Marvin_Goldklang“When people come into our ballparks, we view them as customers, not as fans,” said Goldklang, who also owns 3 percent of the New York Yankees. “The product is the experience. It’s not a baseball product or even an entertainment product. We’re in the business of creating positive experiences for people in a manner wrapped around a baseball game.”

Did that strategy work? Put it this way: The Goldklang Group’s four core franchises (in St. Paul, MN; Charleston; Hudson Valley, NY; and Fort Myers, FL) cost $2.5 million from 1989-1993. They are valued at about $30 million today. And as he manages these holdings, Goldklang views the “minor-league” label as less insulting than liberating, as an opportunity to try things the starched-shirt major leagues can not.

“We know who we are,” Goldklang said, “and we’re comfortable with who we are.”

Another minor league owner, Bob Friedman, W’61, concurs. One of the former principal owners of the Norwich Navigators, a AA farm team for the Yankees until 2004, Friedman now is a limited partner with the team, which is now affiliated with San Francisco Giants as the AA Connecticut Defenders. Friedman fulfilled his lifelong desire to own a team. He says half the current Yankee team played for him over the years, including Bernie Williams, Andy Pettitte, and Derek Jeter. “I knew I wouldn’t be the next Phil Rizzuto, but this was the next best thing,” he said. “It keeps me young.”

Wharton_Takes_the_Field

To current Wharton students who have yet to figure out who they are, nothing inspires them more than hearing these success stories directly from, and networking with, graduates who came before them. Hence the Wharton Sports Business Initiative and the Wharton Sports Business Club, which together are striving to make Whartonites in the sports-business world more the rule than the exception.

Kenneth_ShropshireProfessor Ken Shropshire keyed the Initiative two years ago in an attempt to help Wharton develop more of a relationship with companies involved in sports, through speaking engagements and consulting projects, and in so doing create more of a pipeline from West Philly to the best sports-related companies and positions. He said that those firms are looking more to MBAs now than they have in the past—rather than having Joe Ex-Cornerback develop sponsorship plans, for example—and Wharton, despite not having a formal sports business program like UMass-Amherst or Ohio University do, can prepare graduates to consider sports business as a legitimate career. Shropshire has already had groups of students work with CBS Sportsline and the National Football League on different projects, exposing each group to the other.

“I think more people than we really understand come to business school and say, ‘I need to make a transition and I’m not sure what it is,’” Shropshire said. “And one of the places they can look is at this sports business initiative and see if there’s some connection for them.”

More than 60 students, about one-third of them women, have a sports business connection enough to join the Wharton Sports Business Club, which just finished its first academic year. Co-president Anne Boviard, a Philadelphia native who, while working in the White House Office for Cabinet Affairs several years ago, served as a liaison with operators of the 2002 Salt Lake City Winter Olympics, said that pow-wows with sports executives aren’t always encouraging about joining the industry immediately.

“The advice that we often get from sports companies is to go out, build your functional expertise somewhere else—become a true expert in financing, operations, media strategy—and once you’ve got your expertise that you can bring to the table, come back to us,” said Boviard, who will earn her MBA next spring. “They don’t have major training programs. They don’t have those kinds of resources where they can take people fresh out of school without specific industry experience and then make them experts. They need people who already are functional experts.”

The Wharton grads already thriving in the sports business arena—the Bowmans and Castellinis and Luhnows and Goldklangs and all the others—keep saying how their Wharton educations are what prepared them for success. Listen to them, and they learned almost everything they needed to know in Steinberg Hall-Dietrich Hall. Perhaps the learning curve isn’t as steep as people assume.

“While the words have changed and the technology has changed and 10 million books have been written since I graduated, the basic tenets are the same,” Bowman said. “Find out what you’re doing, do it well, find out what your customers like, and make sure they know you’re doing it.” Or, as Luhnow put it, “I use the same analytical frameworks I always have. And it all started within the classrooms at Wharton.”

It’s hard not to see those classrooms, now relocated to Jon M. Huntsman Hall, re-populating the baseball world in even greater numbers moving forward. “Knowledge is everything,” Castellini said. “I’d say Wharton really taught me that.” For the next generation of baseball Whartonites, his and others’ success stories could teach them even more.

Alan Schwarz, C’90, is the Senior Writer of Baseball America magazine.

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