Yankees GM: Quant Analysis Key To Winning

January 28, 2013

Brian Cashman talks with IndexUniverse on the similarities between baseball, business, investing and quantitative analysis.

Brian Cashman, general manager of the legendary New York Yankees for nearly 16 years, will be a featured speaker At Inside ETFs, the world’s largest ETF conference, to be held Feb. 10-Feb. 12 in Hollywood, Fla. Cashman recently spoke with IndexUniverse Editor-in-Chief Drew Voros about how the management techniques and tools he uses directing the Yankee’s baseball operation are similar to those used in business and investing.

IndexUniverse: As you know, Inside ETFs is a financial conference. We’ll have a lot of hedge-fund types, institutional investors and a lot of discussion about hedging. How does a Major League Baseball general manager like yourself hedge risk when it comes to not just high-priced players, but players in general?

Brian Cashman: The thought process incorporates communication and information as the most important aspects. The more accurate information that you can obtain and dissect, the better informed you’ll be to make safe bets, safe investments. My investments are into players. As an industry, we have seen a radical change. “Moneyball” is a term that people repeat too often—the movie and the book—but essentially we have gotten to the point with technology that we can measure everything that takes place on the field. We’ve hired some really smart people to educate us on what statistics are more meaningful than others. This allows you to make safer bets and manage the risk in a much smarter way than I think the old-school regimes used to do.

IU: So you have essentially an analytic process, right?

Cashman: Big time. I’ve been with the team here about 15 years now, and going on my 16th year, and I have changed over time as a department head. One of the changes I’ve made is to take the Yankees into the 21st century. When you see things in the industry improve and change, you’ve got to keep up with the challenges. We have created a quantitative analysis department and hired a director of quantitative analysis. That department has grown to some 14 people who manage a number of different information streams. Not only do they pool that information, but then it is dissected and produced in a meaningful way about what is truly taking place on the field in present performance and then future predictable performance. That has certainly allowed us to make safer, more informed decisions.

You’ll never be perfect or right all the time, but I think I’m in a much better position to make decisions and be comfortable with those decisions if they are educated-based.

IU: What are some of the advantages and disadvantages of having to manage the highest payroll in baseball?

Cashman: Well, the advantages … obviously, having the highest payroll means your ownership is fully committed. Being in the position to have the highest payroll means you can support that payroll. So it gives you full access to all pools of talent, but with that access comes exponential pressure to perform. A lot of times, payroll will not translate into performance, because ultimately, when you commit to long-term multiyear contracts, there is always a declining value of the player over the course of time, but the value of the contract stays the same or gets worse.

Sometimes you want to have the payroll that might be No. 1, but the production from individual players that make up a large percentage of that payroll will be in decline as they age, so most of the time it won’t match up. But with the highest payrolls come clearly a lot more pressure and a lot more publicity and a lot more expectations.


Interested in China? Use our China ETFs Channel, library, and ETF screener.

Interested in oil? Use our oil ETFs channel, library and ETF screener!


The largest gold miners ETF lost assets on Thursday, April 28.

BlackRock's ETF assets gained $859 million on Thursday, April 28.


By Drew Voros

With the broad equity ideas all taken, issuers look for thinner slices of exposure.

By David Lichtblau

How funds wash away capital gains through create/redeem process.

By Dave Nadig

End investors are the big winners; brokers—not so much.

By Dave Nadig

ETF industry petitions the SEC for market microstructure changes.


By Sprott Asset Management

New fund’s underlying index targets equities sentiment on social media.

By Kristi Kuechler

Avoid taking unrewarded—or unintended—risks.

By Vanguard

The investing giant outlines its expectations for the markets and global economy in 2016.