David Einhorn: Manchurian Candidate?

Two weeks ago, when David Einhorn was first unveiled as the Mets' potential minority investor, it was generally regarded as a good thing. Einhorn appears to be a baseball fan and rooted for the Mets in his youth in New Jersey. He is relatively young man who made his bones in hedge funds, a business not for the meek. His biggest claims to fame in that business--publicly calling out misdeeds by Lehman Brothers, for instance--indicated he had a well-tuned BS detector. All of these factors made one think the Wilpons' choice was, if not great, at least not terrible.

Not so fast! Soon it was revealed that Einhorn's deal to buy the team was so suspiciously sweet, it should not be mentioned in the presence of diabetics. The details are still unclear and have been disputed by the Wilpons themselves, for however much that's worth, but the budget version goes like this: Einhorn has the option to buy controlling interest in the team in three years. If the Wilpons don't let him do this, they are obligated to pay him back his initial $200 million investment--and he still retains a share of the team (anywhere from 16 to 25 percent, depending on your source).

To some, this simply signals Fred Wilpons' desperation. It's a long term, backhanded way for him to sell the team and not lose face, because there's no way in heaven or elsewhere that Wilpon can afford to pay back Einhorn's investment, even if he somehow escapes unscathed from the Madoff-related lawsuit.

But to others, it signals even darker days ahead for the Mets. The thinking goes, if Einhorn hopes to buy the Mets in a few years, he would want to make sure he gets the best deal possible, right? In other words, he doesn't have any real interest in improving the team, does he? If anything, he'll want the Mets to tank even worse than they are now, so he can snatch them up for next to nothing. The continued financial ruin of the Wilpons--and hence the Mets--are in his best interests.

This would certainly fit in with the buy-low-sell-high MO of the average hedge fund manager. Adding fuel to this fire: Einhorn's extremely noncommittal statements when asked what the future holds for the Mets. ESPNNY's Adam Rubin put forward this theory, and so did Newsday's David Lennon, in almost apocalyptic terms. They both envision scenarios in which Wilpon's most dire pronouncements about the team's finances are Einhorn's dreams come true.

Before I write anything else, just know that I am not a business guy. I am so not a business guy I think "business guy" is an acceptable term. I'm not proud of this; I'm just saying it so you know I'm not coming from an area of strength here. However, I know some stuff about baseball, and common sense. While I can't dispute that it might make some short-term sense for Einhorn to actively wish for the Wilpons to go down the Barrels-and-Suspenders Road, it's not in his long-term interests. And in any case, I'm not sure how much power he will have over the WIlpons' ultimate fate.

First of all, baseball is not like other businesses. I know I just said I'm not a Business Guy, but I think I know enough to make this statement with confidence. If a regular failing business tries to right itself by gutting and retooling in the most brutal way possible, nobody will care. No matter what this imaginary business sells, if the product is good, people will come back. Nobody is a fan of a business. Sure, we've all heard of people who have such brand fealty they feel compelled to attend the opening of every new Chik-Fil-A, but these are decided, deranged exceptions.

Maybe you think Einhorn is only looking at the Mets as an investment, that he's only interested in turning a profit, everything else be damned. Here's the thing, though: for a sports team, fans are profit. Fans, in turn, rely on the twin engines of Entertainment and Hope. To keep fans coming back--and attract new ones--the product has to be enjoyable and hold out some reasonable expectation of winning, if not now then in the foreseeable future. We often talk of fans having faith or belief, but that's not really true. Fans invest in a team. They want some kind of return on that investment. If a team gives signs that there will be no return for quite a while, they will pull out their fan capital.

Primary example: The Marlins. They've won two championships in their brief existence, just as many as the Mets have in 50 seasons. And yet, they can't draw flies and "earn" revenue sharing funds each year. Why? Well, in part because Whatever It's Called This Week Stadium is such a horrible place to watch baseball. But also because they've destroyed fan equity--twice. Two times they bulked up for a championship run, and two times they dismantled that foundation immediately thereafter. Despite having a young, talented team that has competed the last several seasons, fans have largely decided that such an organization isn't worth an investment of their time and attention.

Could the Mets turn into the Marlins? On the one hand, they have a much more established fanbase in a city that's nuts about baseball. On the other hand, there is also another team in town--remember them?--competing for fan attention. How do you draw eyes away from the Yankees and onto the Mets? I can tell you how you don't do it: by selling away the team's best players and substituting for them with replacement-level garbage. That would be the most profitable thing to do, but I doubt it would attract too many ticket buyers, or get too many people to tune in at home.

Let's say Einhorn wants this to happen in order to devalue the Mets' value, enabling him to buy the team sooner. It would be a Pyrrhic victory, because there's no way of knowing how long it would take the team to recover from such a situation. Maybe two seasons, maybe ten, maybe more before fans would migrate back to team that had been run into the ground. He would inherit an utter mess on the field and a ghost town of a stadium that costs a boatload of cash to run regardless if anyone shows up to patronize it. Do you think someone would want to take over a team like that? Or would he rather buy into a team with some kind of foundation for winning? My guess is the latter.

All of this is not to say the Mets can't "rebuild" because that's something New York teams simply don't do (a theory put forth by Omar Minaya last year and last night during the ESPN broadcast by Bobby Valentine). And I'm also not saying that a big payroll = success, because if any team has disproved that equation, it's the Mets. But there's a difference between rebuilding and dismantling, and some people think the Wilpons (with Einhorn's tacit approval) want to do the latter. I simply don't buy it.

But let's say I'm wrong. Let's say Einhorn really, truly, actively wants the Wilpons to fail. How does he go about doing this when he only has a minority stake in the team? The Wilpons still hold all the cards, as far as decision making goes. There's not much Einhorn can do to hurt their cause, unless he's asked to invest more money in the team and refuses. That wouldn't make too much sense for someone who hopes to own the team someday, I think.

Again, this is not my area of expertise, but I don't see how the Mets completely crashing and burning and slashing payroll to the bare minimum could benefit Einhorn in the long term. Or even the short term, since any joy he experienced over acquiring the team would be quickly offset by the state of that team. If anyone can show me how I'm wrong, I'm open to learning the error of my ways. Then I might be able to be a big business guy like Einhorn. I hear there's a lot of money in the business business.

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