What’s Next For The Astros?

Plenty has been written in the last few days about Major League Baseball’s findings during its investigation into the Astros and the pending inquiry into the Red Sox, the penalties that were received or will be, and what these punishments say about baseball. The various (and sometimes divergent) constituencies commissioner Rob Manfred had to satisfy made doing so basically impossible; I’ve made it clear how I feel about the punishments. The Astros dismissed Jeff Luhnow and AJ Hinch following their suspension by MLB. The Red Sox mutually parted ways with Alex Cora on Tuesday; Carlos Beltrán and the Mets followed suit Thursday afternoon. It is and will continue to be a dark time for the league.

But even as the ramifications of the scandal continue to make themselves felt, we can look ahead to how we think the Astros baseball operations group might operate going forward. Houston’s baseball ops groups was already on the small side before Luhnow was fired, both by design and as a result of recent departures. In the last year or so, the club has lost Mike Elias, Sig Mejdal, and Eve Rosenbaum to the Orioles, Mike Fast and Ronit Shah to the Braves, and Oz Ocampo to the Pirates. Colin Wyers departed the organization, but hasn’t yet landed with another team. Brandon Taubman was fired before being placed on baseball’s ineligible list; he can apply for reinstatement after this season. And all of that has come against the backdrop of another scouting purge, and a couple of lower-level departures. So what comes next in Houston?

How The Astros Have Done Things

The Astros pioneered an organizational structure of having one assistant GM who’s in charge of everything other than the big league team. That role was first occupied by Elias, then by Taubman. Now Pete Putila is the lone assistant GM, though it appears his role is more limited than his predecessors’ as his experience is limited to player development. I’m told that Bill Firkus (Senior Director, Baseball Strategy) has been assisting with other high-level, day-to-day decisions. Putila interviewed for the Pirates and Giants GM openings and is seen as a strong GM candidate, though likely years from now, when he has more experience in other departments.

This small, inner circle structure also resulted in another signature trait of the Luhnow-led Astros: a lack of traditional scouting directors. If the evaluation process for the most progressive team in the sport includes more video analysis and statistical modeling, the value of a traditional scouting leader is diminished. The processes by which you scout an 18-year-old in the GCL or in high school or as an international free agent then become much more similar, allowing office roles to bounce between traditional department lines more than they do with other clubs. This means the Astros don’t have a domestic scouting director, as that decision-making has shifted a bit north on the org chart to assistant GMs and heads of research & development (read: the analytics department).

This serves to further a goal of today’s more paranoid, progressive clubs: confine valuable, proprietary knowledge to as few people as possible, and silo smaller snippets of information within each department to minimize losses. Having just a handful of decision-makers with a larger layer of rank-and-file below them means less turnover at the top (since there are fewer people at that level, and they are afforded the salary and autonomy that inspires them to stick around) and more turnover at lower levels, which are staffed with less experienced employees with less access to internal information. Replacing a veteran scout who travels frequently with an entry-level video scout based in the office (all while doubling the responsibilities for another existing scout) saves money while allowing the club to publicly (and technically, correctly) claim “scouting headcount” is unchanged.

As you might guess, the morale of the handful of traditional scouts is, I’m told, generally not high. Meanwhile, the unifying characteristic amongst the rank-and-file analysts and scouts is that they, on an individual basis and as a department, are cheaper. To my knowledge, all of the front office losses mentioned above have been replaced with less experienced, often cheaper personnel, if they were replaced at all. And not having a traditional director of these departments means the people at that level are paid less than their counterparts at other clubs. That’s why Eric and I refer to these sorts of practices as the corporatization of baseball in our forthcoming book Future Value, as Luhnow’s background working for management consulting giant McKinsey (and their long-time consulting deal with the Astros) is very apparent in the ruthless, efficiency-for-efficiency’s-sake approach that can be seen throughout the organization.

This, combined with an inability to put out an even passable press release after the organization’s various recent scandals, and these scandals themselves, makes it pretty clear that institutional control and self-awareness in the organization is pretty low. More than a few of the recent front office departures were people who left the team with no other job in hand, or for a lateral position.

How Will Houston Proceed?

It seems likely the Astros will hold steady with the current group of Putila, Firkus, and Co. to assess what they have in that group and what they need in terms of additional high-level ops staffers, then add to and re-title their personnel when those answers emerge.

Given the Commissioner’s comments about the team’s poor culture, and the Astros top execs’ relative lack of experience, an outside hire seems likely, and the sooner the better. Hiring someone with experience working for MLB’s Labor Relations Department seems like a strong possibility. The LRD is a small group within the league office that uses economic studies and its arbitration expertise to advise clubs in contract negotiations. Alums typically have a strong understanding of transaction rules, which translates well to eventually joining a club as a director of baseball operations or assistant GM. There are a number of LRD alumnae in senior positions on the club side, and such a hire by Houston could serve as an olive branch to MLB, which would no doubt like to have one of their own inside the new-look Astros.

And regardless of the penalties the league recently imposed, Houston’s GM job is enticing relative to other recent GM vacancies because there’s a very strong big league roster, a high payroll ceiling, strong infrastructure, and a seeming desire from ownership to right the most recent wrongs, or at least move on from them. The attractiveness of this GM opening is similar to the Braves’ vacancy post-scandal, but the Astros are a win-now contender while the Braves boasted a strong system in the upper minors, with a contending roster clearly on the horizon. An experienced, steady hand would seem to be most important for this role, and time is of the essence. Crane can’t afford to let 2020 be a time for tinkering. A high-profile front office addition before the end of the upcoming season would make a lot of sense. Someone like current Brewers GM David Stearns seems like a perfect fit, having previously worked under Luhnow as the Astros AGM, and in LRD. Stearns is free of any discipline or residue of scandal, and the Houston job offers some things Milwaukee’s can’t. But Stearns pulled out of the running for the Giants club president role and now has that title with the Brewers, making his availability difficult to project.

In terms of the actual day-to-day decision-making, I wouldn’t expect much to change. Crane appears to be comfortable with the organization’s general approach; despite firing Luhnow and Hinch, he disputed the Commissioner’s assessment of Houston’s culture in his press conference on Monday. The Astros could try to lessen the roughly $30 million’s worth of lost draft pick asset value by signing free agents to delay those picks into the future, but testing the limits of Manfred’s ire is juice that’s not worth the squeeze at this point. There’s value in cooperating with MLB, as John Coppolella learned the hard way. The team also doesn’t have a ton of holes or the money left to address it, so treading water with a slightly updated version of what has worked in recent years seems likely.

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Kiley McDaniel has worked as an executive and scout, most recently for the Atlanta Braves, also for the New York Yankees, Baltimore Orioles and Pittsburgh Pirates. He's written for ESPN, Fox Sports and Baseball Prospectus. Follow him on twitter.

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Roger21
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Roger21

Your linked twitter comment that “[e]very owner would trade this for the title and money Houston made the last few years” is questionable at best. Maybe in a vacuum an owner would pay $50 million or so (the approximate value of the fine, the lost draft picks, and possibly buyouts for Luhnow and Hinch) for a championship, but for the Astros, the loss in value isn’t being imposed in a vacuum. Instead, it’s being imposed in a highly public way that calls into question every win the Astros accumulated in 2017–including the very title that is the object of your hypothetical trade. So no: an owner would not happily accept the penalty the Astros received in exchange for a title because the penalty itself calls into question the legitimacy of that title. And that calculus doesn’t even include the impossible-to-quantify damage that has been done to the future of the organization by the loss of a talented GM, nor does it include the public scorn and ridicule that will reduce fan interest and attendance, and hence damage the future value of the franchise.

Rational Fan
Member
Rational Fan

How did the owner lose 50 million with the draft pick? The owner paid 5 million and 5 million only. The cost of those draft picks is actually more than the fine they paid; from a bottom line standpoint, he came out ahead and made all the money he made winning it all and competing for multiple years.

Why does an owner care about the public perception of the legitimacy of his teams title? Does that mean he has to give all the money he made throughout that run back? No, obviously not.

The things that matter to the owner:

1. Value of the team – it went up, as other teams have, a lot. The title just helped further propel the value of the organization. This is a clear win.

2. They played extra baseball and generated extra revenue for years in a row; that revenue is his to keep. That profit will never go away.

Do you think Crane gives a damn if people on twitter are saying the players cheated has hurt the game? Of course not, because that trophy is still on display, those tickets were still sold, and that money still poured in.

Roger21
Member
Roger21

The owner’s overall value (naturally) includes the value of the franchise. When the franchise loses tens of millions of dollars in value because of a loss of draft picks, the owner thus loses that value as well.

The owner cares about the public perception of his team because a negative public perception hurts the value of the franchise. There’s a reason teams have media relationships departments, and there’s a reason the Astros ultimately dismissed Taubman–they were trying to protect perception of the organization because they feared the negative impact that the publicity associated with the Taubman incident would (and did) bring. The same rationale applies to the sign-stealing scandal. The taint that is now associated with the title hurts the long-term value of the franchise. Put it this way: if Jim Crane tried to sell the team today, do you think he’d receive as much as if he had tried to sell the team two weeks ago?

One final point: the Astros only “played extra baseball and generated extra revenue” if you believe they were not a playoff team in the absence of the sign stealing. Given how difficult it is to quantify the effect of sign-stealing, though, and given how easily they won the division the last few years, that’s not an assumption I’m willing to make. The benefit of the sign stealing, in other words, was small enough that any owner would obviously question whether stealing signs is worth the negative repercussions outlined above.

dl80
Member
Member
dl80

While the lost draft picks might (might) hurt the current value of the franchise, that only matters if the owner is selling now. By the time he might sell, in 5 or 10 years, both the lost draft picks and whatever tarnished reputation of the front office will be long gone. Perhaps the team is slightly less successful in 5-10 years when those lost prospects would matter, but it’s unlikely to make a meaningful difference in the sale price of the team.

mikejunt
Member
Member
mikejunt

I think you’re both missing the point. The estimated economic value of the draft picks is just a way of trying to translate those things into comparative economic value so that they can be compared with other means of talent acquisition. They can’t be replaced by spending $30m to acquire new draft picks. They can potentially be replaced by spending $30m on the free agent market, but that misses the way that draft picks work:

Most of them are worth $0, but the ones that work out are worth a lot more than $30m.

The Astros aren’t really losing $30m in franchise value; they’re losing, on average, $30m worth of baseball talent, but that comes with enormous error bars and represents everything from a 60% chance of $0 to a 1% chance of $300m.

For a team with particularly strong player development, those picks likely have more than strictly $30m in estimated future value to begin with, and it will cost more than the $30m to replace that talent as they will have to acquire it post-development instead of acquiring it and developing it themselves

It’s a real penalty that will harm the Astros’s ability to compete at some point in the future. Maybe they will just get super lucky with their 3rd, 4th and 5th rounders and it won’t matter, or maybe they would have picked poorly with these picks and it wouldn’t matter, but one upside scenario (picking well and finding 2 or even 3 MLB contributors) is now gone and cannot be replaced in any meaningful fashion.

The proxy of assigning an estimated dollar value to the draft picks is misleading you guys in your analysis of the impact of this choice. It is not something that can easily be replaced, and the $30m expected value comes with enormous error bars. Teams like the Astros build their long-term competitiveness on consistently exceeding the expected value of their draft positions through superior player development. That opportunity cannot be replaced by the Astros through the substitution of dolla bills. International spending is hardcapped. The closest fascimile would be to acquire $30m of salary dump dead contract in return for low-level prospects.

cs3
Member
Member
cs3

Rogers21,
Wrong!

Nats Fan
Member
Member
Nats Fan

I am sure the offense would have been much worse without the sign stealing. I’d wager close to 10 wins a season. Plus, no chance they get as far in the playoffs.

montreal
Member
montreal

well said. good job

Baron Samedi
Member
Baron Samedi

“that trophy is still on display”

is it though?

jaywil08
Member
Member
jaywil08

lol

Dominikk85
Member
Dominikk85

The owner loses 50m if he wants to replace that value on the free agent market. He obviously also can let his team get worse but losing cheep, young talent is costing money because it is the only way to get talent so cheap.

neuronic
Member
neuronic

As stated in the report, Crane had no involvement with the cheating and, if anything, wanted to keep things squeaky clean.

The people who needed to be punished likely will not return to the MLB in their original capacity. Probably not Hinch, definitely not Cora, and definitely not Beltran. The punishments handed down severly limit their careers and livelihood. Threatening careers definitely places a deterrence on organizational cheating of this nature.

Hinch and Cora do not see the ticket revenue. Hinch and Cora will not be known primarily for the WS pennant.

rustydude
Member
rustydude

“Crane had no involvement with the cheating”

If you believe that I have a great deal for you on a bridge in Transylvania.

neuronic
Member
neuronic

According to the MLB, the cheating efforts were player/coach driven. While the MLB report says it has insufficient evidence to determine whether Luhnow knew anything, it explicitly states that Crane did not know.

Crane handled the business side. Luhnow handled day-to-day baseball operations. Cynicism isn’t evidence, friend.

AshnodsCoupon
Member
Member
AshnodsCoupon

The most likely scenario is that Crane knew about all this but Manfred didn’t bother trying to find out what Crane knew, because Manfred knows who signs Manfred’s paychecks — Crane and the other owners.

Knoblaublah
Member
Knoblaublah

The Giants just paid $12.67M to get a 1-15 draft choice. The Astros picks will likely be lower and therefore worth much less than #15. A guess would be that #25 is worth $9M and #55 is worth $2-$3M. That values the lost picks at about $23M over two years. The Astros will figure that out and perhaps be comfortable eating the cost. The title is definitely worth it.

Later you ask if the franchise is worth as much as it was two weeks ago. Wrong question. The right question is if the amount by which the value of the Astros today exceeds its 2016 value is more if they cheat and win the title or don’t cheat and don’t win the title. Seems likely that a tainted title is worth more than no title.

montreal
Member
montreal

I agree strongly with this post. I’m surprised there are so many negative votes. There should be much more importance placed on integrity in baseball. I would never trade integrity of my franchise for a World Series.