Vince Gennaro Explains Why Baseball General Managers Are Like Money Managers

In the May 2015 issue of Berenberg: Equities Highlights magazine, director of the M.S. program in Sports Management Vince Gennaro wrote about how sports execs are harnessing the power of big data, how those numbers influence how managers develop their portfolios of players, and why being a general manager is not unlike being a money manager.

He addressed how decision-making has shifted from scouts’ gut instincts to tech-fueled sports analytics. “The volume of baseball data has grown exponentially, from recording the singular outcome of a batter-pitcher match up just a decade ago, to capturing 20 different metrics for every pitch thrown today.”

These digitally-driven developments ease the burden of evaluating players’ performances, but they don’t solve the problem of how to build a consistently successful team on a budget. In that sense, he explained, “The baseball general manager (GM)...role is remarkably similar to that of a professional money manager tasked with managing a portfolio of assets for a high return.”

As with financial investments, one way to maximize returns is to acquire capital and build its value. “Developing talent from within – by drafting young players and coaching them through a team’s proprietary developmental system – is far cheaper than the free agent market,” Gennaro wrote, “but can take four to six years from player acquisition and incubation to on-field results.” He said, “There is no shortcut to being an effective low-cost producer of talent.”

While a financial pro might tap into new markets, “the GM searches for talent in remote areas of Venezuela or Colombia for the under-nourished, inexperienced 16-year-old who may be overflowing with raw talent.” That’s where sports analytics and performance metrics can come in handy.

He concluded, “My advice for sports leaders: bring your gut instincts, but also bring your spreadsheets and quantitative models. The competition is sure to bring both.”