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Empowering Exceptional with Jeff Luhnow, Part 1

Our first guest is Jeff Luhnow, general manager and president of baseball operations for the 2017 World Series Champion Houston Astros. A longstanding friend and client of Vinson & Elkins, Jeff recounts his unique approach to building a winning team, his untraditional path to success, and the future of baseball. One of the first to introduce analytics to the game of baseball, Jeff Luhnow’s ahead-of-the-curve thinking has now been adopted by many in the league. Please enjoy Part 1 of 2 sessions with Jeff Luhnow.

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Transcript

Sean Becker:
All right. Well, hello. I’m Sean Becker and welcome to the inaugural episode of empower exceptional, the V&E plus podcast series where we’re going to focus on fascinating people doing some innovative things in their fields. And we’re honored today to have as our first guest Jeff Luhnow, who’s certainly a leader in his field. Jeff, as you likely know, is the general manager of the 2017 World Series Champion Houston Astros. Jeff, it’s a pleasure to have you here.

Jeff Luhnow

Jeff Luhnow:
Oh, thanks for having me here. It’s fun to be here to talk to you.

When I was in business school, I studied baseball as an industry and tried to figure out ways that teams could succeed or become more profitable.

Sean Becker:
Jeff is obviously, you won a world series, that’s an incredible achievement. But your path to baseball and your path to winning that world series, it’s pretty incredible as well. You took an unconventional career path, I’d say. Give us a little bit of a background about your professional history.
Jeff Luhnow:
Well, unlike most people in the industry, I had three careers before I got into baseball. My first career was as an engineer, and then I went on and became a management consultant for about six years. And after that, I participated in two startup technology firms, starting them from the ground, getting them funded into profitability. It’s unusual for someone to come into baseball at an executive level on the sports side, on the baseball side that has diverse set of experiences. This was 2003 when I got into the industry. Today, it’s a lot more common because I think most owners and baseball teams and other sports teams realized that there are some skills outside of baseball that are necessary to run a good franchise.
Sean Becker:
Were you always keeping an eye on a potential path, a career in baseball or in sports even while you were doing all these other careers?
Jeff Luhnow:
I grew up in Mexico, and soccer is the number one sport in Mexico, but baseball is number two. And I was an avid baseball fan growing up. Excuse me, and when I was a teenager, Fernando Valenzuela, while I became a phenomenon at pitching for the Los Angeles Dodgers, so that was another reason I was interested in baseball. When I was in business school, I studied baseball as an industry and tried to figure out ways that teams could succeed or become more profitable. I always had an interest in it, but I never thought I’d have a chance to work in baseball until 2003. And then suddenly out of nowhere, I got an email from a former colleague of mine at McKinsey, at the management consulting firm I used to work for asking me to talk to his father-in-law who happened to be the owner of a major league baseball team.
Sean Becker:
Okay. So that email comes out of nowhere, but your colleague knew that you were the right person. How did he know that actually you had this analytic interest and could add value to the Cardinals?
Jeff Luhnow:
Well, I think the first thing was he knew I was a passionate baseball fan, and he knew that I knew a lot about baseball players and baseball teams. He also knew based on my background, educational and work experience that I had a technology bent and was also economics minded. And really what the Cardinals were looking for in 2003 is someone to add to their baseball front office that had a more balanced background with respect to business and technology because the owner of the Cardinals felt like there was some changes coming to the industry that were going to necessitate some different thinking and some different approaches going forward.
Sean Becker:
What were those different approaches that you had in mind?
Jeff Luhnow:
Well, in 2003, there was a book published called Moneyball, written by Michael Lewis. And it was about how the Oakland A’s were using data and analytics to find pockets of value among players and compete with the larger market teams, and they were being very successful in doing that. And the owner of the Cardinals thought, “Well, if the A’s can do that, why can’t the Cardinals do that?” And we have a larger payroll, we should be able to do it and spend money and have success doing both. And at the time, the traditional way of evaluating players and predicting what they’re going to do in the future was using your expert scouts to go out in the field and watch them, observe them and use their best judgment to make evaluations.
And that’s fine, and it does work. But there was so much data available by 2003 that the Oakland A’s were looking at and some other teams we’re looking at, which allowed you to look at how the players have performed in the past and try and predict a little more accurately how they’re going to perform in the future. Because really that’s what baseball predictions are all about, not what happened in the past, but really trying to predict what’s going to happen in the future. And recognizing that this was a skill that the Cardinals didn’t have, the owner asked me to come in and build a department and build a capability around using data and analytics and trying to figure out how to better compete, make better decisions essentially.
Sean Becker:
How does a management consultant with his PowerPoints, how do you adapt and learn from people in the field and teach those in the field of what you’re trying to do?

A big part of my role in those first couple of years was listening, asking questions and really trying to dig into the mentality of what’s it like to be a scout.

Jeff Luhnow:
I think the first thing to recognize is that there’s a lot of wisdom among the people that are on the front lines in the field that have been doing this their whole lives, and to come in as an outsider and assume that the answer just by studying the numbers is not going to get you anywhere. And in fact, you probably ended up creating more harm than good. A big part of my role in those first couple of years was listening, asking questions and really trying to dig into the mentality of what’s it like to be a scout. What are they really looking for? What’s it like to be a coach? How are they making decisions? And get them to articulate how they thought things could be done better, and making it their idea, helping shape their ideas into a change program.
And once I started to do that and talk to the area scouts, talk to the coaches, talk to the people in the front office, I realized there was a lot of a passion for improving and being better than the other teams. They just needed some help in pulling together the ideas and figuring out which ones to pursue and how to pursue them. And that was all things that I had done in management consulting, worked with companies to figure out how to make change happen. And so it was more organic than it would have been otherwise, but because it involved people with their own ideas and helping shape their ideas, they bought into it and eventually became champions of the change.
Sean Becker:
There’s a great book out called Astroball written by Ben Reiter, who you allow generously to track you for over a period of years. And one insight from that book is that you innovated by letting a lot of different people into the decision making process, including having area scouts in the room on draft day. That was something that wasn’t so common in the mid 2000s.
Jeff Luhnow:
Well, every team is competing with the other teams, so you want to protect your information and you also want to have a relatively easy way of making decisions. And when you have 25 area scouts in the room all advocating for their own players and you’re the one in charge having to make the ultimate decision, every time you make a draft pick, you’re going to be making one person happy and you’re going to be aggravating 24 others. And so it’s hard to make decisions when there’s that much pressure in the room. But the reality is for us, we wanted everybody’s opinion and we wanted to be able to ask follow up questions on the area scouts, what’s this guy’s work ethic like? What are his parents like, what’s his home life like? Is this guy going to be early to the park and late to home? And try and find out more about the players and also get them to communicate with the agents and the players to find out what their sign ability was.
Overall it was a trade off worth making. I would say the same thing happened on the field with our players. Oftentimes we’re asking players to change their behavior and do something different that they haven’t been used to doing in the past. And if you just ask them to do something different without telling them the reasons why, they’re going to do it because you’re in charge, but they’re not going to do it with any passion or conviction. And the moment anything goes wrong, they’re going to complain and want to go back to the old way of doing things. So we realized that it was important to share the information with them about why we’re asking them to change behavior. And this applies from everything from how they should throw their pitches to where the infielders should stand defensively to whether or not they should be aggressive or passive on certain pitches in the strike zone. All of those sorts of things. If they know the reasons why, there’ll be much more convicted in following through.

Becker Luhnow Podcast

Sean Becker:
And let’s take an example, and I know mid 2000s, it’s not common baseball practice to shift the infield as you do today. So what kind of pushback would you get from pitchers, from infielders when all of a sudden you’re telling a shortstop to play closer to first base than third base?
Jeff Luhnow:
Yeah. And it was a lot of pushback because what happens is you have a pitcher on the mound, he throws a pitch and that pitch gets hit right to where the shortstop used to be. And he turns around thinking, okay, that’s an out. And it goes right through into left field and it’s a single. And he’s going to want to blame somebody for that because he thinks he made a good pitch. Now, what he doesn’t realize is all of those pitches that he makes that get hit passed him up the middle that are now getting caught and turned into outs that used to be singles and doubles, he’s not really giving us a lot of credit for those outs, but he’s certainly dinging us for the pitches that turned into singles. What we ended up doing, and of course the picture will glare into the dugout and glare at the manager or the bench coach, whoever’s responsible for the shift. And then they become less enamored with it because they’re getting resistance from the players.
What we did is we brought all of our pitchers and infielders into spring training. We sat them in a room and we put the charts up and we showed them the distribution of ground balls for every kind of hitter imaginable. And we ask them to brainstorm with us, where would you like to see your infielders so that you could capture the most outs? And lo and behold, as they started to think through it and work through it, they ended up putting the infielders exactly what are we had asked them to. But now, they took ownership of it. It was their idea, they understood why. And now they knew that there would be times that the ball would go through those holes where there’s no infielder, but it’s not anybody else’s fault. It’s just we’re trying to capture as many outs as possible.
Sean Becker:
And were there any PowerPoints involved in those presentations with the pitching staff?

We’ve had to bridge that gap by making our coaches more technology enabled so that they can keep up with the athletes and also keep up with the demands of the home office.

Jeff Luhnow:
Well, we did have a nice interactive model that we could show where the balls were hit. So we did use some technology there. But the thing is about our athletes, many of our athletes these days are already technology enabled. They go to high school, they go to college. Sometimes they’re studying maybe computer science or math. A lot of them are studying things where they have to use technology. So we’re in this dynamic where are our students, our athletes coming into our system are sometimes more technology enabled and the coaches that are coaching them. We’ve had to bridge that gap by making our coaches more technology enabled so that they can keep up with the athletes and also keep up with the demands of the home office.
Sean Becker:
And for those of our listeners who aren’t baseball fans, how did your implementation of analytics and the new approach, how did that work out with the Cardinals?
Jeff Luhnow:
Well, with the Cardinals, it was a tough go at first and there was a lot of resistance and a lot of people thinking that this guy that came in to our front office from outside of baseball who used to be a management consultant, what does he really know? We’re trying all these new things, we’re drafting players in a different way, we’re developing it in a different way. And over time though, these players that were being drafted and developed using the new methods or different methods began to progress through the system. They eventually got to the big leagues. And by 2011, the world series champions were the St. Louis Cardinals. And about half the players on the field were a product of either drafting or developing or being traded for using some of the new methods that had been implemented over the past seven or eight years.
So it was very satisfying and very vindicating to a certain extent, I didn’t want to say I told you so, but it was nice to know that the work that we had done had resulted in an actual championship because ultimately that’s what we’re trying to strive for every year.
Sean Becker:
With your approach, you mentioned that you were drafting a different way. You thought about how you’re going to select the players that hopefully then become the future of your organization. What different approaches did you bring?
Jeff Luhnow:
Well, I think what we did is we looked back at their history. So a college player has maybe played three years of division one baseball, one year in a summer league. And we have enough data from all of their playing experience to figure out how well they’re likely to do in pro ball. And it’s not just batting average and home runs, there are other things we look at. And the more data we can gather from their amateur experiences, the more we can figure out which characteristics of their skill sets appear to be predictive of success in major league baseball and in professional baseball. And in the past, scouts would look at data and look at batting average and home runs and try and use it to validate their opinion about the players.
But what we were finding is there are certain players that had skills that didn’t really show up on the scouts radar. They didn’t maybe have the strongest arm or run the fastest or seem to be the strongest, but they somehow could play baseball and produce at a really high level against pretty good competition in the PAC 10 or SCC. And those players tended to be overlooked in the draft, but tended to perform really well in professional baseball and potentially get to the big leagues. I’ll give you a great example, a player named Matt Carpenter out of TCU is a fifth year senior, older guy. And most scouts would discount older guys because they were playing against younger guys. And Matt Carpenter’s profile to us, screamed this guy’s going to be a good major league player, but he didn’t get drafted until we took them in St. Louis in the 13th round.
And Lo and behold, Mark Carpenter not only became a prospect, made it to the big leagues, but accumulated several MVP votes over the past few years and has become one of the best players in baseball. And this is a guy that lasted until the 13th round because he didn’t fit the traditional profile of what scouts are looking for. And so those are the types of things that St. Louis started to look for in 2005 and that other teams eventually caught on and started to close the gap. Those types of players are no longer available in the 13th round.
Sean Becker:
Was there resistance again from the scouts when you were first asking them to follow data instead of the eye test?
Jeff Luhnow:
Well we wanted them to continue to do the things that they were doing because they do have very valid opinions about players, and they see things from their expert point of view that I couldn’t see or that a lay person couldn’t see. So for us, the most powerful combination was having someone study and analyze the data, the performance history, and then having the scouts really do their evaluation of the skills because they’re trying to figure out what the skills are. And then you mesh those two together in a smart way, and that gives you ultimately the best predictive model of what these players are likely to do in the future. Either one alone is going to be suboptimal. The two together working together end up giving you the best output. And that’s what we’ve seen both in St. Louis and here in Houston.
Sean Becker:

The most powerful combination was having someone study and analyze the data, the performance history, and then having the scouts really do their evaluation of the skills because they’re trying to figure out what the skills are.

And you have your incredible success in St. Louis. You helped modernize and transform the approach that that organization takes, and then fortunately for the Astros fans of the world, you then come to Houston. Tell us how that came to be?
Jeff Luhnow:
Jim Crane studied, he grew up in St, Louis, so he knew all about the Cardinals. But he had studied what makes organizations tick, and he identified a few organizations that he thought were really successful, and Cardinals being one of them. So he looked at the management teams and said, “Is there someone among these management teams that I can interview and potentially come help me with the Astros?” Fortunately, he found me. He interviewed me. After a couple meetings realized, we were on the same page because I was recommending a fairly radical approach to helping the Astros become good again. The Astros had been in decline since the world series in 2005, and had reached the point where not only were they the worst team in baseball, but they had one of the worst farm systems in baseball. So prospects for the future were pretty grim. And nobody wanted to go through a 8 to 10 year rebuilding cycle, which is what many teams, Pittsburgh, Kansas City, Tampa Bay, that’s about how long it would take to do that.
So we realized it would have to be a fairly different approach in order to cut that rebuilding time in half and get the Astros back to where they deserve to be. This is a great city, it’s a great market. Deserves to have a sports team that can compete for a championship.
Sean Becker:
And it said that your initial interview with Jim Crane is a great example of preparation meeting opportunity. You showed up for your initial meeting with a 23-page proposal ready to present to him?

Jeff Luhnow:
Yeah, I sent it the night before. And I was taking a risk because, like I said, it was a little bit of a radical proposal. But it’s something that I had been working on for a while. Not that I knew this interview was coming, but I had a habit of constantly trying to remind myself, “Okay, what is our objective and how are we trying to accomplish it? Am I ready to take the next step if that opportunity ever presents itself? And so throughout my time in St. Louis, I always kept mental notes of what I would do if I was in charge of a team. And it didn’t take me long to put them down on paper once Jim Crane called me and asked for an interview. And I’m glad I did because he read it, he took notes on it. And it was very much aligned with his thinking. He was prepared to do some things in a different way in order to help this franchise become good again as quickly as possible. And not only just become good again, but also stay good once we were good.
And that’s a difference, a lot of clubs will mortgaged their future in order to become good in the present and will be good for a year or two and then have to go through a natural decline and rebuilding process again. We don’t want to do that, we’ve been through that, Houston had been through that. We wanted to get back to the playoffs, get back to being a contending team and try and keep it at that level for as long as possible, hopefully 5, 10 years.
Sean Becker:
And how was your proposal radical then?
Jeff Luhnow:
Well, every decision that a front office makes is a trade off. You’re either trading off resources for players or future value for current present value. And oftentimes, the future value gets discounted because the present value is such an allure. You want to be able to win more games in the short term. You want to be able to satisfy the media and the fans that are clamoring for a big name signing or let’s get a veteran in here that can help us win a few more games. But we knew we were going to lose a lot of games in those first two years because we had no choice. There was no way to fix this team that quickly.
And so rather than spending money on players that would make us just incrementally better but still be a last place team, we decided to spend those resources in the draft, to spend those resources in building our scouting and development infrastructure so that we could rapidly accelerate our process of developing the best young talent in baseball. And in 4 years or 5 years instead of 10 years, have a pipeline of players coming through our system that would be able to not only we could trade for better players but also use in the big league team to help us win.
And that’s essentially what happened. A lot of teams will cater to the public and pressure of wanting to win a little bit more now. But who wants to be a 500 team for 10 straight years? I’d rather be a 200 team for two year and then win a world series, which is essentially what we did.
Sean Becker:
Thank you so much, Jeff. We actually have much more to chat about with Jeff, including what it takes to weather controversy and what’s in store next for the Astros. Please join us for part 2 of our discussion, here at the Empower Exceptional podcast.