The Two Rubensteins

Under John Angelos, son of Peter Angelos, who took the team to the verge of the World Series in the 1990s, the Baltimore Orioles have been hamstrung by a lack of investment, uncertainty over potential relocation, and a lawsuit over control of the family fortune that contains allegations straight out of the Book of Genesis. A 100-win team with a once-in-a-generation core of up-the-middle talent has had its wings clipped by an owner whose picture should be on the Wikipedia page for Hanlon’s Razor.

Well, the O’s are finally getting out of purgatory. Angelos has agreed to sell the team to a group fronted by billionaire David Rubenstein. The new owners will reportedly purchase 40% of the team now, with Rubenstein replacing John Angelos as the Orioles’ control person once the sale goes through. His group will then have the option to buy full control at a later date.

Even before the sale is official, the Orioles have solved their no. 1 glaring weakness by acquiring Corbin Burnes for a draft pick and two players they didn’t really need. It’s as if the mere mention of Rubenstein changed the omens around the ballclub.

Rubenstein made his money as the co-founder of The Carlyle Group, a private equity firm. He now leads a syndicate that includes as minority investors a number of other investment bankers, as well as former New York City Mayor Michael Bloomberg, former Baltimore Mayor Kurt Schmoke, basketball Hall of Famer Grant Hill, and a local businessman named Cal Rikpen Jr. The Angelos family will retain a minority share as well, at least until the elder Angelos dies.

How Rubenstein will run the team remains, at this juncture, an open question. The 74-year-old was born and educated in Baltimore, and is a lifelong Orioles fan. But he also spent 30 years making billions of dollars in an industry that’s ordinarily antithetical to the kind of civic obligation, humility, and long-term thinking required of a successful sports owner. As a rule, I’m skeptical of any sports owner with Rubenstein’s professional background. When the Marlins rid themselves of hated owner Jeffrey Loria in the last decade, his replacement — the private equity billionaire Bruce Sherman —actually made things worse.

The Orioles are getting out of purgatory. We’ll see which direction their new owner will take the team.

In Ken Burns’ Baseball, the prolific conservative columnist George Will offered a comment on the dawn of free agency that was ironic for both its content and its incisive brevity: “I happen to be a semi-Marxist in this field. I believe in the labor theory of value. The players are the labor. They create the economic value. They ought to get the lion’s share of the rewards.”

Unfortunately for Will, and Marx, and indeed the players, they must share those rewards with owners. Now, because baseball as a business generates some $10 billion a year, those rewards are rich enough for owners to pay their (admittedly enormous) labor costs, put some in the bank, and to reinvest a big chunk of change into improving the team. A healthy team with a competent owner will find room to do all three. These teams are such bulletproof investments that even an incompetent owner will have no problem at all finding financing or, in the worst case, a buyer who will take the team off their hands for a handsome profit.

But an incompetent owner, or worse, an inattentive or disinterested one, will take in all the revenue from fans, all the labor generated by the players, and hoard it. Major league payroll will stagnate, facilities and infrastructure will be neglected, scouting and analytics departments will fall behind the times, and the team will lose 90 games a year.

Clever GM-ing and homegrown talent can only take a team so far when ownership is pulling money out of the organization. Never mind that clubs with tightfisted or meddlesome owners are less likely to attract clever executives or develop prospects in the first place. Being cheap does not magically make your employees smarter.

Talented major leaguers, savvy baseball ops people, top-end coaches and training equipment — a sufficiently engaged and deep-pocketed owner can just buy all of that. Wins do not follow automatically from good funding and sound process, but they’re much easier to achieve.

I’m sure you all remember how bored baseball people got during the 2021-22 lockout. (I wasn’t covering baseball exclusively back then, but at one point things got so slow I watched and ranked 13 different film adaptations of Cyrano de Bergerac over the course of a week. We were so bored.) The folks over at The Athletic came up with a more constructive way to keep the content engine ticking over: An MLB fantasy draft, of sorts.

Group projects like this are almost always interesting to play along with, and usually generate some new insight for the reader. But while most fantasy drafts are strictly about ranking players, The Athletic broadened the scope of the draft to include managers, markets, ballparks, even owners.

With the first pick, Dodgers beat writer Fabian Ardaya picked Dodgers owner Mark Walter, which is exactly what I would have done in his shoes. Five owners went off the board before Shohei Ohtani, and 11 owners went off the board in the first round. Seven of the remaining 19 picks were home cities.

That speaks to the importance of structural factors in team success. You can’t buy a championship, but you can absolutely buy a contender. As much as I love Baltimore, it’s not as glitzy as New York or Los Angeles. But most players want two things above all: They want to be paid well, and they want to win. When the older Angelos was funding a regular championship contender in the 1990s, the Orioles had no trouble attracting and retaining star players. Engaged ownership helped the Padres and Rangers speed-run their own rebuilds. The owner matters an enormous amount, because everything that makes a baseball team run smoothy is downstream of that person’s whims.

Rubenstein is a fascinating ownership candidate because his background points to two extremes. The engaged, committed local businessman is the absolute best type of sports owner. But the private equity billionaire is the worst, not just for a sports team, but for any company.

Let’s get the bad news out of the way first. Understanding what private equity investment does, and the way it impacts our daily lives, is going to be a lot easier once Megan Greenwell’s book on the subject comes out next year. Until then, I’ll do the best I can.

Firms like The Carlyle Group make their money by buying up companies they view as insufficiently profitable, and turning them into something they can sell at a higher share price. Frequently, that means targeting a company — like a newspaper, or a retail store, or a baseball team — that has brand value and owns useful real estate, and slashing costs wherever possible in order to achieve greater return on investment.

And because rich people don’t risk their own money if they don’t have to, these business acquisitions are usually highly leveraged. That means that the new owners demand greater profits on top of the money to pay back the loans they took out to buy the company in the first place.

That means laying off or underpaying workers, skimping on safety and build quality, and selling off real estate while maintaining or even raising the price of the product. David Roth’s recent Defector essay, “How Will the Golden Age of ‘Making It Worse’ End?” is not strictly a private equity story, but he offers a useful summary of the life cycle of a company under this type of ownership: “Management’s quest to see how much more cheaply an increasingly poor product can be sold at the same price and under the same name as what came before is, at bottom, the story of basically every industry or institution currently in decline or collapse.”

Normal businesses make things of value — either goods or services — and because their viability depends on the willingness of customers to buy what they’re selling, those goods and/or services have to create something worthwhile. A baseball team, or a newspaper, or a car company, is founded by people who are interested in the creation of the worthwhile thing, of making a widget to fill a need. Private equity sees only the value in the company, and desires to extract as much of the former from the latter as possible, even if it means disposing of the people and processes that made the company valuable in the first place. It is teleologically opposed to creation or innovation.

I have a hard enough time avoiding 100-word sentences even when I’m not quoting Will and Roth, so I’ll just spell out the worst-case scenario for anyone whose eyes have glazed over and is in need of a strict example from the world of baseball.

We know what it looks like when the owner of a baseball team is in it to cash revenue sharing checks and is indifferent to the on-field product: the Pirates, the Reds, the Guardians, the Marlins, the Athletics. Insofar as these owners care whether their teams win or lose, they do so under the assumption that their players and front office personnel can outperform better-spending teams by working harder or being more clever.

On rare occasions, it works. But these owners are under the mistaken impression that spending less money does inherently makes your employees smarter.

Here’s the good news, for the Orioles, if not for society.

Sports teams are such great investment vehicles because they don’t operate in a free market. If we spent money on baseball as a pastime according to quality of product and value for money, there would not be a single Pittsburgh Pirates customer in existence. They all would’ve started buying baseball from another club decades ago.

Instead, ballclubs have fans. Both company and consumer have grafted local tribalism into their very identity, so the one is inextricable from the other and bound to personal self-image. I am my community, and my community is my team, so I am my team. That’s how bad owners bilk fans out of hundreds or even thousands of dollars, in the interest of supporting a club that provides nothing in terms of civic pride. Most fans of perpetual last-place teams would no sooner abandon their baseball allegiance than their religion or their family. That’s how deep this adherence, however irrational, takes root.

Some people never outgrow those attachments, no matter how rich they become. And on rare occasions, those people end up with billions of dollars to spend when their childhood ballclub becomes available.

Mets owner Steve Cohen is such a person, and while his project has yet to bear fruit, it’s not for lack of effort. The Mets are better-funded and better-managed than they ever were under the Wilpons. Sometimes, a love of the sport itself is enough. The late Peter Seidler made his money in private equity, then bought into the Padres alongside his uncle, former Dodgers chairman Peter O’Malley. Seidler became one of the most popular owners in baseball after he funded San Diego’s most successful team in more than 20 years.

Rubenstein might turn out to understand, as Cohen and Seidler did, that his wealth is not an empirical measure of his own wherewithal, but an opportunity to live out a boyhood fantasy. A profile in the Baltimore Sun from earlier this week paints about as optimistic a picture of the new owner as you could imagine. Drawing on interviews with business associates and previous statements by Rubenstein himself, the article depicts Rubenstein as a lifelong baseball fan and a proud Baltimorean who had long dreamed of owning the Orioles.

Until very recently, Rubenstein was chairman of the board of trustees of the Kennedy Center, and the center’s president described him as involved and attentive. A Carlyle Group senior adviser was quoted as saying, “He’ll have a strategy, which is one of his strong points. He’ll be deeply engaged. But I wouldn’t expect to see him showing up with the lineup cards.”

Deep-pocketed, engaged, but not micromanaging is basically the ideal sports owner. After suffering through Peter Angelos’ later years, followed by his sons’ fractious stewardship, Orioles fans must be gnawing through their rope at even the potential for an owner like that.

They deserve it, this local boy-made-good, this Cohen-in-miniature, that Rubenstein could become. Every fan base does. But Rubenstein’s stewardship must be judged by his actions. And we’re in luck: The Burnes trade offers Rubenstein a pivotal test right off the bat. Burnes immediately becomes Baltimore’s best starting pitcher since Mike Mussina. (At the risk of offending those Erik Bedard sickos whom I know are out there somewhere.) And with only one year left until free agency, the Orioles have an opportunity to sign Burnes to an extension, but not much time to do it. Whether or not they pull it off, or at least come close, will send a powerful signal to the fans, as well as the likes of Adley Rutschman and Gunnar Henderson, about the new owner’s intentions.

We’ll see how far Rubenstein is willing to go. And only with time will we know which owner the Orioles are getting: creator or destructor. Fan, or financier.