The perils of a high risk, high reward business strategy are currently on full display in major league baseball with the news that superstar Shohei Ohtani suffered a major injury that could affect the arc of his unparalleled career. The implications for both the player, and for his team, the Los Angeles Angels, could not be more significant.
These implications transcend the sports world to the broader business sector, where corporate leaders are often called upon to consider similar “bet the farm” strategies. It certainly wouldn’t be the first time where professional sports have provided valuable lessons for the larger business world.
Ohtani is the highly decorated pitcher/designated hitter for the Angels who is not only widely considered to be the best player in the major leagues, but is also favorably compared to Babe Ruth in terms of his skill, performance and impact on the game. His extraordinary ability to perform as both a pitcher and a hitter is (but for Ruth) unprecedented in major league history. Ohtani’s contract with the Angels ends at the conclusion of the current season and he is planning to enter the free agent market. Expectations have been that he will earn the largest contract in major league history, possibly approaching $500 million over multiple years.
The Angels, on the other hand, have long been a franchise in turmoil. Since Ohtani’s arrival in 2018 they have inexplicably failed to have a winning season despite having the two of the best players in the game (Ohtani and Mike Trout). With questions swirling around their ability to resign Ohtani after this year, the team was desperate to make the playoffs while Ohtani and Trout remained on the roster.
And so in different ways, both the player (Ohtani) and the team (the Angels) embarked on a “bet the farm” strategy: a determination that a drastic change in the status quo was necessary to achieve important goals and objectives.
For the player, it was a free agent bet on himself, his star power, his generational talent and his durability (despite an earlier Tommy John surgery). For the team, it was a “win now” bet, to hold on to Ohtani before his free agency and push for a playoff spot.
Both strategies carried major concerns. For Ohtani, it was rejecting contact certainty from the Angels and assuming the possibility of injury before season-end. For the team, it was the possibility of losing Ohtani to free agency without any return, thus mortgaging its future.
And wouldn’t you know it-the near-term verdict on both strategies has been sudden, swift and catastrophic. Following the trade deadline, the Angels lost 16 of 21 games, falling hopelessly out of contention. And on August 24 the team announced that Ohtani had suffered an UCL tear in his pitching arm. While he would continue his designated hitter duties, he is not expected to pitch again in 2023. His availability for the 2024 season is unclear at present.
What happened? Had the team, or the player, been reckless in their plans? Had they needlessly rolled the dice? Not at all. By all accounts, both approached their respective challenges-free agency, the pennant race, the team’s future-with thoughtful, measured consideration, despite substantial criticism. They both made informed decisions that they determined in good faith were in their best interests.
Both the financial and on-the-field impact for Ohtani, and the performance risks for the team, are highly uncertain at this point. But neither appear to be the result of recklessness.
For both an individual, and for a company, the nature of a “bet the farm” business strategy is one of inherent risk. It typically represents a huge, consequential shift in a business plan that is seen as a “last chance” effort to address desperate, dead-end, or exceptionally time-sensitive business challenge. It benefits from a level of confidence and judgment that is grounded in reality.
And despite the odds, there’s nothing fundamentally reckless about such a strategy when it is approached thoughtfully, with an appreciation for the circumstances, a recognition of the alternatives and an awareness of the risks. The concept of informed risk taking is central to successful business stewardship and prudent fiduciary conduct. It’s an approach that both Ohtani and his advisors, and the Angels and theirs, appeared to follow.
Problems can arise, however, when they’re the byproduct of rushed, incomplete deliberations that haven’t included expert input nor evaluated less seismic alternatives. And be wary of leaders who describe themselves as a “disruptor,” or “change agent,” who by their nature tend to be guided by their own instincts as opposed to the counsel of reliable advisors. In their hands, the success of “bet the farm” strategies are more likely to be uncertain.
“Second guessing” is a shared trait of the baseball fan and the business investor. And there’s got to be a lot of second guessing about the Ohtani/Angels relationship right now. But there are more innings to be played in this particular game, and there’s no counting out either the player and/or the team from making a late game comeback.
Because sometimes the payoff from “bet the farm” strategies is worth the wait, for those who are patient enough to do so.
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