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Theo Epstein: What Baseball Can Teach Advisors About Failure

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Although he had taken two notoriously losing teams to World Series Championships by the age of 43, Theo Epstein, general manager of the Chicago Cubs, is a humble man.

He credits his success to a love of baseball at an early age, good timing when he started in the front office as an intern at the Baltimore Orioles, and good luck and great co-workers and mentors when he was general manager of the Boston Red Sox and then the Chicago Cubs.

Interviewed by historian and “Team of Rivals” author Doris Kearns Goodwin, Epstein was the cleanup keynote speaker at the Schwab Impact conference in Chicago last week.

He spoke about his own development, what he looks for in players and teams and what he sees as key leadership traits. He said baseball is “based on adversity, failure is inherent in the game; the best hitter will fail 7 out of 10 times; and being successful in baseball requires you to be able to handle failure the right way and learn from it and move forward stronger. The same is true of life. Out of facing failure often springs great narratives.”

It’s how that failure is handled that Epstein puts emphasis on when selecting teams. “There isn’t a big leaguer who hasn’t failed dramatically and then handles it in a way to grow stronger and go forward,” he said. “I believe in it so strongly that when we are looking for young players, we ask the scouts for three examples of how a potential player faced and responded to adversity on and off the field. If they haven’t demonstrated a strong record of handling adversity and failure in a productive way, how will they handle the trials and tribulations of life in baseball?”

He told the story of how at age 28 he became general manager of the Boston Red Sox, which hadn’t won a World Series in 85 years. As assistant general manager, he was put in charge of finding a new general manager. His first choice decided to stay where he was, and his second choice was Billy Beane, GM of the Oakland Athletics and famous for implementing the “Moneyball” method, who quickly turned down the Red Sox. So “with my tail between my legs I went back to the office and said I’d start a new search, and they just said, ‘we’d like you to do it.’”

The rest is history, as the Boston Red Sox won the World Series in 2004 and in 2007, and after those feathers in his cap, he went to save the Chicago Cubs, who hadn’t won’ a series in 108 years, a dusty drought broken when they won the 2016 World Series.

“In a lot of ways I still don’t feel I’m a qualified leader, because by definition leadership means if you’re a great leader you’re but part of a great team, and that’s what I connect more to, the affiliations with people I admire and respect and learn from and my leadership style takes from that.”

He said because of the rhythm of baseball, in which a game is played almost every day, he’s developed a rule when something goes horribly wrong. “There’s no need to talk it over immediately after the game when emotions are running hot,” he says. “Wait until the next morning. Baseball may be best enjoyed in the moment … but [it’s probably] best understood from a distance.”

He also notes that he separates a process from a result. “Just because it was a bad result doesn’t mean it was a bad decision,” he said. He said the process might not have gone through all the steps or had all the information, and they spend time reviewing it from all viewpoints to see what might have gone wrong. “We find solace in our thoroughness.”

He also said his process with the Boston Red Sox differed from the Chicago Cubs because when at the Red Sox, only “a handful of teams were using data and analysis” to select players. Now every team does it, he said, which weakened its importance. “So I figured the game isn’t played by numbers but by human beings,” he said. “I began to put a greater emphasis on character and a combination of talent.

“If you’re around players enough, you know what motivates them,” he said. “A good time to look is after a game where the team won but the player went 0-4, and you can see if he’s angry or enthused by the team. You get a feel of that; character reveals itself over time.

“You’re never going to have 25 shining examples of what it means to be a great teammate. What’s most important is your most influential players, the best players; most vocal players, loud and comfortable in the spotlight; and the veterans on the team. Those three categories of players really have the model of character, and conscious of the importance of building a team. They don’t look at a team as a group of individuals but first look at the interest of a group as a whole.”

However, he cautioned, “I don’t want to come off as having all the answers, for I’ve failed more times than succeeded in finding right connections,” Epstein said. “If you think you have it figured out and have all the answers, you’re about to be humbled as is often the case in baseball, as in life.”

— Check out What Buffett Saw in Baseball’s Greatest Hitter on ThinkAdvisor.