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Tuesday, June 11, 2013
Updated: June 21, 9:52 AM ET
Investment club

By Molly Knight
ESPN The Magazine

Nyjah Huston was planning to defend his Street League Skateboarding gold at X Games Munich this week. But on Tuesday, he withdrew from the competition due to a rib injury. This story appears in ESPN The Magazine's June 24 Money issue. Subscribe today!

AT 10:30 ON a Wednesday night in late May, a dozen Astros huddled around a small clubhouse television an hour after a rare victory. Earlier that evening, Houston had taken the field for the 47th time, seeking just its 14th win.

The cellar dwellers played like kings. Fledgling cleanup hitter J.D. Martinez crushed a flat cut fastball from Royals ace James Shields for a two-run homer in the first inning. Then righthander Jordan Lyles tossed his best six innings of the year, as the 22-year-old allowed one run on six hits. The bullpen was damn near perfect too, hurling three hitless frames. And in the eighth, the Astros' best player, fearless 5'5" Venezuelan second baseman Jose Altuve, drew a two-out walk, stole second and hustled home on catcher Jason Castro's double to ice a 3-1 win.

The perfect night was almost enough to make the 12,000-odd fans in attendance forget that the Astros -- fresh off a major-league-worst 107 losses in 2012 -- are intentionally fielding one of the least experienced teams in history during their first season in the AL West. Through June 5, they were 22–38, already 15 games behind the Rangers. Two seasons into its latest painstaking, and painful, rebuilding process, Houston is on pace for another 100-loss campaign.

So the Astros -- flush with success, however fleeting -- were in no hurry to go home. A clutch that included Martinez and Altuve slid chairs next to outfielder Chris Carter's locker, their eyes locked on a modest TV hanging from the ceiling. The Pacers were down two to the Heat with four seconds left in overtime of Game 1 of the Eastern Conference finals. Martinez, a Miami native, could only peek at the screen through his fingers as his teammates took turns lobbing anti-Heat barbs. As Pacers guard Paul George's 28-foot jumper sailed wide, Martinez took a deep breath, then gasped when Dwyane Wade was whistled for a foul.

"What?" Martinez yelled. "Where's the foul?"

After Miami regained possession, down one with two seconds left, Altuve bounced on his toes as Carter called LeBron James' number. "Watch this," he said, just before James drove for a buzzer-beating layup. Shouts of disbelief and whistles of wonder filled the Houston clubhouse.

The worst team in baseball over the past three seasons had just paid collective witness to what has been the best team in sports, glimpsing what it believes its own future could hold.

Houston has come by losing honestly, and second-year general manager Jeff Luhnow has been purposefully transparent at every turn. Smart baseball fans in Houston see Luhnow as their team's savior, the mad scientist brave enough to lose big now to win even bigger later. Outsiders see him as nuts for willingly fielding a team of glorified minor leaguers.

As for Luhnow? He shows few signs that the heat is on.


Minute Maid Park
Houston's attendance has fallen nearly 20 percent this year.
IT ALL BEGAN with a 25-page plan.

When a group led by Houston businessman Jim Crane purchased the Astros for $680 million in November 2011, the club and its minor league system were in dire straits. Seeing the cupboard bare, Crane set out to find the game's best scouting guru. He and then-team president George Postolos interviewed a dozen candidates but were intrigued most by a man who had helped drub them year in and year out. With Luhnow as vice president of player development for nearly a decade, the Cardinals had won two World Series by stocking their minor league system. St. Louis was so deep it could let a superstar like first baseman Albert Pujols walk after 2011 yet still reach the NLCS in 2012 and boast baseball's strongest farm system in 2013.

At the end of his two-hour phone interview, Luhnow asked whether he could send an organizational plan. A 25-page blueprint arrived the next day, outlining budgets for the draft, player development and international signings, and methodically detailing the steps Luhnow would take to execute it. "It was a showstopper," says Postolos, who resigned in May and was replaced by Reid Ryan. "We needed someone to take a blank sheet of paper and put a plan in place. That's what Jeff did." The next day the team flew Luhnow in and hired him on the spot.

Luhnow's plan was simple: blow up everything; trade for crops of prospects; outsmart everyone in the draft and beat teams to untapped talent overseas; hoard as many toolsy kids as possible; and sleep soundly knowing that, based on sheer laws of probability, some of these shiny orphan toys would become stars.


THIS YEAR, EIGHT MLB players are earning more than the Astros' Opening Day payroll of $22 million, lowest in the majors, according to USA Today. Crane insists he'll loosen the purse strings once the team begins to win. "We'll spend the money when it's time, but right now is not the time," he says. "Once our minor league system is filled in, we'll move up into the top five or 10 in payroll." Of course, Jeffrey Loria, owner of the Marlins, the only team with a worse record than Houston, said the same thing before trading high-priced players in a fire sale in 2012.

When the time comes to spend, the Astros will have quite a war chest after inking a TV deal for $80 million annually starting this season -- a $50 million jump since 2012. Luhnow maintains that any surplus is best spent on the draft and on developing international talent, and he says the Astros will spend more money than any other team in both areas this year.

Luhnow is well suited for the social business of signing foreign prospects. He not only speaks Spanish, he was born and raised in Mexico City after his dad, an ad executive, relocated there. He effortlessly shifts to Spanish in interviews or when joking with Latin players. And he has business bona fides, having earned his MBA from Northwestern and worked at consulting giant McKinsey & Company.

Though he throws around terms like "consideration set" and "hard vs. soft numbers" before breakfast, Luhnow, in an era defined by the scouts-vs.-statheads debate, embodies the nexus of both. His nine years with the Cardinals were spent pounding dirt all over the world, evaluating thousands of players with his own eyeballs and filing meticulous, handwritten reports in notebooks he hauled with him to Houston.

From 2005 to 2007 -- the first three years he oversaw the draft for St. Louis -- the Cards picked 30 players who have since made the majors. During that same span, the Astros selected eight big leaguers.

Luhnow knew that if he was to rebuild Houston from the ground up, he had to hire a certain kind of manager, so he made a list of 49 candidates and seven criteria he wanted in a skipper. The most crucial attribute was the ability to develop young players. In the final week of last season, the club named Nationals third base coach Bo Porter as its new manager.

It's a dream job for Porter. His wife was born and raised in Houston, and the couple have made the city their home for 16 years. Porter's resume includes 89 games in the majors as an outfielder for three teams, as well as minor league managing stints with the Marlins. But most important, he was integral in Washington's youth movement; the Nats grew from a major-league-worst 59 wins in 2009 to a league-best 98 last season.

Astros
Luhnow has made believers of the Astros.
By the second week of spring training this season, Porter's upbeat stamp was everywhere in Kissimmee, Fla. Inspirational slogans lined the walls of the clubhouse. Small circular mirrors hung in every locker so players could study their reflection daily and ask themselves what they could bring to the ballclub.

Porter wants his guys to get used to what it feels like to win, so on a late February morning, he ran a handshake drill. Players took their positions, and Porter rolled the ball to Matt Dominguez at third, who then whipped it to Brett Wallace at first. The team pretended it was the final out of a win, forming two lines on the mound and slapping fives. Some even screamed and embraced in celebration. They would do this every day for the rest of spring training.

None of the 61 players invited to camp had his name on the back of his jersey. Porter thinks that honor should be reserved for the 25 who make the team. Although most clubs head into spring training with a few positions up for grabs, the Astros had only 12 roster locks. Half of their 40-man roster had turned over since the end of last season, so there was a sense that any player in camp could make the team -- if not immediately, then as a call-up during the season.

As he sat on the deck outside of his second-floor office overlooking the Kissimmee grounds, Luhnow was reluctant to talk about benchmarks in terms of wins, knowing it's among the worst ways to evaluate progress with these Astros.

Still, downstairs his coaches were trying to convince dubious reporters that Houston might even sniff .500. "It's been a long time since our fans have been excited about their team," Luhnow says. "The goal for this season is to clearly demonstrate progress so our fans know we're headed in the right direction."

If their minor league affiliates are an indication, the Astros are right on track. According to ESPN's Keith Law, in 2012 Houston's farm system was ranked 27th out of 30. This year -- thanks to Luhnow's trading frenzy, which landed the club 21 farmhands -- it jumped to fourth. And as for the parent club, on Memorial Day, the Astros began a streak in which they won seven of eight games leading up to this year's draft on June 6, when they collected more reinforcements.


THE SILVER LINING to finishing dead last is that you are guaranteed the first crack at the top amateur talent the next season. The Nationals' ineptitude was rewarded with Stephen Strasburg and Bryce Harper. Last season Houston had the No. 1 pick for the first time since 1992, when the Astros infamously passed on Derek Jeter for Phil Nevin. On the morning of the 2012 draft, Luhnow stepped onto the treadmill in the players' weight room at Minute Maid Park to run three miles, like he does most mornings before home games. With each stride, three names danced in his head: Buxton. Appel. Correa. Stanford pitcher Mark Appel, a 6'5", 215-pound junior, was the consensus top pick. The first-team All-American was also conveniently a Houston native. And betting on an established 21-year-old college player is not as scary as gambling on a high school senior who rocketed from obscurity in one prep season, as überathletic centerfielder Byron Buxton did. Then again, Carlos Correa, a lanky 17-year-old shortstop -- valedictorian of his high school class at the Puerto Rico Baseball Academy -- had shown Jeterian flashes of brilliance. And since every club covets a Hall of Fame shortstop, Luhnow went with Correa.

But nailing last year's No. 1 pick was just one of Luhnow's concerns. The real challenge was maximizing the total talent Houston could afford in the draft. New signing-bonus limits allowed the team to game the system, giving the Astros an MLB-high $11.2 million to use on their picks in the first 10 rounds. "Uncertainty creates opportunity," Luhnow says. "We play out all the what-ifs to identify who might fall."

To help him identify those what-if bargains, Luhnow assembled a stable of millennial Ivy Leaguers that resembles a dot-com garage startup. When Luhnow arrived, Houston was using the same software to evaluate players that the Cardinals were using back in 2003. So he brought Sig Mejdal -- who had built mathematical models for NASA that predicted human performance based on sleep-cycle data -- from St. Louis to be his director of decision sciences. He named 27-year-old Harvard grad Stephanie Wilka, one of baseball's few female front office executives, coordinator of amateur scouting. And he plucked David Stearns, who grew up a Mets fan and went to Harvard, from the Indians, where he had landed after helping the commissioner's office negotiate MLB's collective bargaining agreement when he was just 25.

Mejdal says progressive teams like the Astros don't pick stats over scouting reports but grapple over how to best combine them. "Part of the baggage of being human is your decision-making inefficiencies," Mejdal says. "You can't get around them, but you can be aware of them." Scouts are human and have inherent biases that influence how they rate a player. So Mejdal looks for patterns in judgment, such as an unconscious (or conscious) bias against short third basemen or lefthanded outfielders.

Picking Correa didn't present much downside, especially when the Astros were able to sign him for $4.8 million -- a whopping $2.4 million less than his slot value. Buxton, who went second to the Twins, got a draft-high $6 million bonus. Appel fell to the Pirates at No. 8 but opted to return to Stanford. The Astros used the money saved on Correa to land two first-round talents who fell because of signability concerns, giving $2.5 million to the 41st pick overall, righthander Lance McCullers Jr., the 2012 Gatorade high school player of the year, and $1.85 million to the 129th pick, freakishly talented third baseman Rio Ruiz. Baseball America hailed Houston's haul as "masterful," and observers were impressed by Luhnow's patience in the face of an impending shipwreck. "It takes four years for high school players to be ready and three years for the college players, so you're only talking about a year difference," Luhnow reasons. "We weren't going to sacrifice long-term benefit for short-term gain."


TO PREPARE FOR the 2013 draft, Mejdal and his team again created more than 1,000 magnets -- one for every prospect on the Astros' radar. Each 5-by-7 magnet listed a player's name and evaluative information such as arm strength, first-step quickness and psychology-test results. "We look at a century of baseball data," Wilka says. "For example, we know what the data says is likely to happen to a lefthanded pitcher from Fresno State because we know what lefthanders from Fresno State have done."

But not everyone is buying the Astros' youth movement, on the field or in the front office. "Who is going to tell Luhnow no?" says one NL executive. "Too many kids in the organization were given the breaks of their careers. Are they going to tell him, 'You've taken this too far and now you're out of your mind'?"

When told of this, Luhnow chuckles. "I'm sure others think I'm nuts," he says. "Pressures from the press, fans and ownership constrain general managers from being able to do what they think is right." But instead of resistance, Luhnow has the backing of Ryan, the new team president whose lineage as Nolan Ryan's oldest son can only help keep fans in the seats and whose stint as a minor league pitcher resonates with players.

Luhnow's iPhone stores a list of prospects he drafted who have made the bigs. The number has grown to 46 -- "enough for a 40-man roster," he jokes. Time will tell whether Appel (remember him?), whom the Astros drafted No. 1 on June 6, will make the list. In his darkest moments, Luhnow glances at that collection of names to remind himself that his system works. But it's also a way for him to keep track of his guys. He is both prospector and proud papa.

Their success is his as well.

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