Good Money After Bad

The first tip my dad taught me about gambling is to always cut the cards. At 5 years old, I don’t know if the lesson sunk in right away, but eventually I got it.

When I was old enough to go to Las Vegas, my dad pulled me aside and said “don’t go spending good money after bad.” He explained that the best way to deal with the city of lost wages was to predetermine an amount to lose in the casino, and once I had lost it, to stop gambling. While it would be hard to resist the urge to pull out more money to “try and win it back”, that strategy never worked out. I’d just lose more good money—resulting in bigger losses that I probably couldn’t afford—in a foolish effort to try and win back what I had lost.

The same principle applies to business: never let a sunk cost result in more losses for the business. It doesn’t matter how much money was sunk on the investment, if it’s a non-productive asset, you have to let it go. Rarely do bad investments come back to become winners. But, invariably, bad investments end up costing businesses lots in terms of time, money, effort, and opportunities lost. In a tough economy, businesses cannot afford to waste more resources trying to get some value out of something that isn’t productive—no matter how much they spent on it.

Even though the season is less than a week old, the Angels are facing this exact type of predicament Scott Kazmir and Fernando Rodney. Both are signed to expensive contracts. Both will have to be paid this year. And neither is performing well at all. What should the Angels do with them?

As hard as it will be for the Angels and Arte Moreno to admit, both Kazmir and Rodney are sunk costs. Both have not shown any signs of improvement. Kazmir’s velocity is substantially down. Rodney’s pitches are not moving. Their control is not where it needs to be. More importantly both are costing the Angels games, which could come back to haunt them in September.

At this point, the Angels flip Kazmir’s and Takahashi’s roles on the team. The Angels signed Takahashi to be Kazmir’s insurance policy in case he couldn’t recover from last year. After Spring Training and his first start of the year, it’s safe to say that Kazmir will not recover enough to be a viable option as a 5th starter. He cannot be counted on to give the Angels a chance to win half his starts. Worse yet, Kazmir can be counted on for burning up the bullpen in a large number of his starts (since he rarely makes it into the 5th inning—even when he isn’t struggling), which will hurt the team on subsequent games.

Takahashi, on the other hand, will give the Angels an even chance to win at least half his starts. Unlike Kazmir, Takahashi is far more likely to pitch into the 6th inning, which means that Weaver won’t have to go down to the bullpen just to be ready to take over when no one else is left. The bullpen can continue to function smoothly without Takahashi, especially when Downs comes back from the DL.

In the bullpen, Kazmir can mop-up blowouts. Sure, he will be the most expensive mop-up pitcher in the game, but, unfortunately that’s all he can do at this point. At this point, the Angels are on the hook for paying him regardless of where or how he performs, so, they might as well place him in a position where he cannot do any more harm to the team. Working in a mop-up role would allow Kazmir to continue to try and figure out whatever ails him without costing the Angels any more wins.

As for Rodney, the Angels need to cut him. Ideally, it would be nice to wait for Scott Downs to be ready to come off the DL to make that move, but, every day that Rodney is out there is another day that he might cost the Angels a win. More importantly, every day that he is out there, it’s another missed opportunity for Walden, Kohn, Thompson, or Jepsen to get experience handling tough situations. While some of those pitchers have struggled at the start of the season, unlike Rodney, they all demonstrated much better performances last year and in Spring Training, so it is far more likely that they still have upside, whereas Rodney does not.

I know that Mike Scioscia preaches a one-game-at-a-time philosophy (OGAAT), but, this team cannot afford to give perpetually struggling players a long leash. The race for the A.L. West in 2011 will not be an easy one: the Angels cannot afford to give away easy wins like they did in their opening series with Kansas City. It’s time for the Angels to close the books on Rodney and Kazmir and admit that they are sunk costs. While it may be painful to admit this, especially to Arte’s wallet, not playing in October hurts even worse.

Doing anything less would just be spending good money after bad.

Food for thought
$31.4 million dollars are being paid to Fernando Rodney, Scott Kazmir and Gary Matthews Jr.  this season.

In contrast, the Kansas City Royals entire team payroll — you know the team that just beat the Halos 3-out-4 — is at $36 million.