His accomplishment is straightforward, and his plaque, if there was one, would read like this:
“Billionaire Wall Street money manager and die-hard Mets fan/owner engaged in a historic feat of asset misallocation. He assembled the worst team money could buy with a record payroll of more than $350 million, including more than $80 million for two performance-impaired pitchers that had to be traded for prospects of unquantifiable intrinsic value.”
It’s true that every sports team makes mistakes like Cohen’s. The Yankees signed Jacoby Ellsbury, a star outfielder on the Red Sox, to a seven-year, $153 million contract in 2014. But he played in only half the games — and stunk most of the time — before he was released in 2019.
And let us acknowledge Cohen for acting on the instincts that made him a billionaire hedge fund manager and cutting his losses quickly with the trades of expensive and over-the-hill pitchers Max Scherzer and Justin Verlander.
There’s also a long history of successful businessmen recovering from setbacks like this. Eleven years ago, when JPMorgan Chase lost $6 billion in a botched derivatives trade called the London Whale, Jamie Dimon owned up, saying “It was a bad strategy, executed poorly.” Asked if others made the same trade, Dimon said: “Just because we were stupid, doesn’t mean anyone else was.” Dimon’s fans and shareholders liked his candor, there haven’t been any further slip-ups, and he’s universally considered the best banker in the business.
While Cohen isn’t the first businessman to show it’s harder to value professional athletes than stocks, real estate or even derivatives, the scope of his folly is really impressive. The Mets' 2023 payroll of $376 million is 50% higher than the Atlanta Braves, the best team in baseball, and more than six times higher than the best team in the American League, the Baltimore Orioles, according to Cot’s Baseball Contracts. It is $80 million higher than the last-place Yankees, and Cohen entered the season on the hook for $100 million in luxury taxes because payroll was so high.
The Mets have trailed the Yankees in every imaginable way for years, and even the bonds used to pay for Citi Field are rated a notch below Yankee Stadium’s. (BBB for the Mets vs. BBB+ plus for the Yankees.) It was fervently hoped that Cohen would change that dynamic when he bought the Mets for $2.5 billion in 2020 and started throwing around massive contracts. Alas, this year’s mess of a team will be recounted by fans and tormentors forever.
That’s a certain form of immortality.
From Crain's New York Business, a sibling publication of Crain Currency