The High Cost of Mediocrity

Back in the days when free agency was new to baseball and Bill Veeck owned the Chicago White Sox Veeck once commented that it wasn’t the salaries that were being paid to the stars that made operating a ball team expensive it was the high cost of mediocrity.

Veeck believed the big name players, the ones at the top of the salary scale, pay for themselves. Alex Rodriguez, Manny Ramirez and a few others are the guys who actually bring people into the ballpark. Whether they are actually worth the amount that they’re getting may be another matter but that’s between the ballclubs and their accountants. What inflates the cost to the ballclub is having to pay the utility infielders, fourth outfielders and LOOGys (Lefty One Out Guys) a lot of money to be, largely, interchangeable parts. That’s been going on, spiraling upward, for over 30 years. Until this winter.

Suddenly even the stars are having trouble getting the big bucks and there’s a lot of other good ballplayers, the interchangeable parts, signing for a lot less money. If they’re getting signed at all. Baseball is seeing a huge market correction. Andy Pettitte turned down $10-million a few months ago then signed for $5-million. I’m sure Andy and his family will get by on $5-million if they eat more casseroles, shop carefully, clip coupons and do the rest of the things some of us must do to get by in these difficult times.

The market correction appears to have begun in baseball just as it has on Wall Street but, and this is pretty astounding, baseball would appear to be getting the message well ahead of the financial folks. Manny Ramirez, arguably the best hitter in the Major Leagues today, opted out of a deal that would have brought him about $20-million this year in hopes of getting $25-million or so for several years. It’s getting close to spring training but so far there are no takers.
Meanwhile from Wall Street we keep hearing of bonuses being paid to people who helped the institutions they work for do a thorough job of screwing up their own companies, America’s economy and the world’s economy. The argument in favor of the bonuses for screwing up everything this side of gravity is that they’re the best people in the business and if they don’t get the big bucks and the big bonuses they’ll go to a competitor.

Well, let’s see. These wizards did such a great job that you had to borrow money, my money, to keep your financial institution afloat. Your competitor is at least as bad off as you are. And by the way you’d like some more of my money when I can get it to you just to keep you functioning.
Look, I can lose money hand over fist for half of what you’re paying the imbeciles you have now and I won’t even ask you for a $1.1 million makeover of my office.

I’m no financial genius but just off the top of my head I would think that if my guy does such a whiz bang job that my company is bleeding red ink from every pore like it has the Ebola virus, and the guy who led my company into this situation is spending money like a drunken sailor in a whore house, I don’t believe I’d be too upset if he got stolen by the people across the street.
I might even help. “John Thain is so valuable to us,” I might say over dinner with J. P. Citicorp-BancoGroup, “I don’t know what we’d do if you guys ever got a guy like that. You know J.P. we’d really be screwed.” Then I would accidentally leave a cocktail napkin on the table while I went to the men’s room.

On that napkin I would leave John’s home address, land-line and cell phone numbers, email address(es), the name of his wife, her favorite perfume, the names of their children and all of their birthdays. Of course I’d be prepared to bemoan John’s loss when the J.P somehow managed to steal this most valued and valuable player in our company. I would wonder aloud for the Wall Street Journal’s benefit whether our institution would be able to muddle through without him.

Then I would quietly recruit some reasonably sharp business school graduate, make sure he or she met our minimal moral standards (about on a par with a feral cat), give him or her a reasonable salary and tell the ingénue, “If we all make money you’ll make more. If we all lose money you’ll be looking for work. This isn’t kindergarten. Not everybody gets a trophy. We’ll pay real money for real results. We won’t pay for mediocrity”