MICHAEL SCHWIMER: I was looking at one side, the investors, it wasn't hard for them to understand. These are finance guys, the vast majority of finance guys. They're like, look, yeah, of course, you can build a model to predict who's going to be good, but I don't know, players aren't going to sign this. They aren't going to do these deals.
Then I go to the player side, and they say, oh, this is the greatest thing ever. All players are going to sign this deal. There's no way you can figure out which one of us is going to be good. I was like, I'm writing this Honey Hole.
I grew up- I've always been a huge sports fan and math has always come pretty natural to me. I took AP step place at all stackers and went to the University of Virginia on a baseball scholarship, always wanted to be a baseball player, but also interned at a hedge fund as a plan B. If baseball didn't work out, I'd be an analyst at a hedge fund that's actually up here, in the Grand Jury, PAW Partners. Fortunately though, baseball did work out. I got drafted by the Phillies in the 14th round, had a $5,000 signing bonus, and off I was going.
Minor league life, man, it's so much different than anybody, anybody can imagine. You get paid $5,500 a year. That's it. The team doesn't pay for anything else. Your housing, everything you're doing, you're paying for on your own dime. Therefore in the offseason, you have to work. You can't make yourself a better player because you have to make money so you can survive the next season.
Kids these days have it easy. They get to drive Ubers. There's no Uber when I was playing. I was oathing basketball games, babysitting, doing whatever it takes and minor league gives you overall statistics. There's 7000 minor leaguers, less than 10% will play one day in the major leagues, less than 3% will make millions of dollars. These people with 90% failure rate are trying to live their American Dream doing this.
It's a really difficult thing. I was fortunate enough to make it. I made my major league debut for the Philadelphia Phillies in 2011. Took me about three years to get through the minor league system, which was actually really fast. If you do make the Major Leagues, of all players that do make it spent on average five and a half years in the minor leagues, and so making the Major Leagues was the best team in baseball. I mean Roy Halladay, Cole Hamels, Cliff Lee, Brad Lynch, Chase Elliott, Jimmy Rollins, Ryan Howard, the list goes on and on. We're the best team in baseball, 101 wins, won the division.
It was a real honor for me that as a rookie, they named me to be a rep in the Union to represent them. That's where I fell in love with the business of baseball and I joined the licensing committee and the executive subcommittee, and really, again, saw like the inner workings of how the business side went. I had a soft spot in my heart for the minor league players. Again, I grew up. Every major league player does this. I want to make a change.
I say, you know what, I'm going to make a change here. I have this plan. I put together this plan of how we're going to fund minor leaguers to make them at least minimum wage. If you have $2 an hour, at least get them up to $30,000 a year so they can maybe focus and make the game better. Unfortunately, I went to the Union leader at the time, Michael Wiener, who was maybe the best Union leader baseball's had outside of Marvin Miller, who started a free agency. Unfortunately, he since passed.
Going to him and like, he explains this plan to me, that's when I got the cutthroat side of baseball. It's like, look, we're the Major League Baseball Players Association. We cover Major League Baseball players. We don't cover minor league players. Our goal is to make sure major league players make as much money as possible. My argument was, well, all the major league players come from the minor leagues. Ultimately, the plan didn't go through but that was always a passion of mine to be able to fix this system or help change it a little bit.
I get to the major leagues, I play a little, have a little over two years of service time. End up getting traded to the Blue Jays and immediately blowing out my shoulder, I had labrum surgery. I was a pitcher. That's when I had this idea of investing in players, so me, as a baseball player, a little bit of background, it should be point blank. I wasn't very good. I was a pitcher. That was a $5,000 signing guy. I threw 92, 93 miles an hour, which is below average. I had four pitches, none of which were above average.
MAX WIETHE: How many games did you end up playing in, that you actually appear?
MICHAEL SCHWIMER: Oh, it's good question. I think it's around 50 or so. But I ended up striking out more than one an inning and having good numbers. The reason is because I was able to outsmart, outthink hitters. I was actually building models to be able to strike hitters out and get hitters out. People always ask me, what's your best pitch? I was like, that pitch the hitter doesn't want to see. I don't have a pitch that's good.
MAX WIETHE: They're up there I guess.
MICHAEL SCHWIMER: Right, exactly. I should try to figure out the patterns in their swing pass and where they stand in the box and putting all this stuff in a model for basically pitch calling and figuring out what they don't want to see, and throwing that pitch.
MAX WIETHE: Catchers must have hated you.
MICHAEL SCHWIMER: That wasn't pretty. I'm glad we don't have them. Was one of those shows, you can't cut to a catcher that was shaking their head. There's not--
MAX WIETHE: Lot of shaking off the signs?
MICHAEL SCHWIMER: A lot of it. The catchers, I had a good relationship. After a while with me, they understood, and actually, like, there were times where I'd call the game on the mound. No one knew. I like go like this, or take us out, my glove down, that meant change up, like adjust my head a little bit. Then fastball. I was actually calling the game from the mound at times.
That was what got me to the major leagues and successful, but I was able to figure out where these hitters' strengths and weaknesses were. I thought, look, I can figure out which these minor leaguers are going to be good, which ones aren't, like the ranking systems are so far off, and I want to build this company to invest in some of these players. You give them money upfront, in exchange for a future share of their earnings. It's not like, if they don't make it, they keep all the money. If they fall in the 90% range, they keep all the money, but the money could then be used in the offseason and actually help them get to the major leagues.
The one thing what I did not have was money. Exactly. I have to go raise this money. I went to- the only guy I knew that really had money was the hedge fund I spoke about, went to him and said, hey, this is my idea. He looked at me and said, you're crazy. There's no way like- there's 1000 people that can tell me who's good or not, show me, prove it to me. Like build a model and actually show me. I was like, all right, no problem, it's going to take me a month, maybe two months. It will confirm what I already believe.
After a month or two, I found out I was wrong. The models and the numbers were so much better than my eye test and the stuff I was doing, and I ended up spending more than a year of my life, 14 to 16 hours a day, just modeling. I end up modeling over 28,000 minor league seasons, any different variable I could have that's in a data set to make what is predictive in terms of Major League success. After that process was done, I went back to him said, look, here's what the numbers say. It was just outrageous of how we were able to predict some of these players. He's like, well, now you got something.
Now, I got to make a business plan. This was 2014. One thing that a lot of my critics say, and they're right, is I'm a perfectionist. I didn't go to an investor until October 2015, took me a year and nine months after I had this goaled model, because I had to write the business plan. I went always tweaking it, tweaking it, tweaking it, tweaking it. In retrospect, I probably should have brought it to investors earlier. At the same time, I was 28, 29 years old, no experience running a business and saying, hey, by the way, I'm trying to raise $25 million at a 2 and 20. It was a difficult thing.
MAX WIETHE: What was the breaking point? What opened the door where the money started to flow in?
MICHAEL SCHWIMER: I had a first meeting with a group. They wanted to invest in it, which was great, and it's a group, a big network. Now, the minimum investment was $250,000. I spent from there until February raising it on my own and I got about $5 million, I was in 37 cities in four months. It was just on the grind, but a lot of people were in, very few said no.
MAX WIETHE: Yeah. Nobody went all in.
MICHAEL SCHWIMER: Nobody went all in. It was like, oh, here's 250. Here's 250. During those meetings is when I really knew this was going to work. Because I was looking at one side, the investors, it wasn't hard for them to understand. These are finance guys, the vast majority of finance guys. They're like, look, yeah, of course, you can build a model to predict who's going to be good. I don't know, players aren't going to sign this. They aren't going to do these deals.
Then I go to the player side, and they say, oh, this is the greatest thing ever. All players are going to sign this deal. There's no way you can figure out which one of us is going to be good. I was like, I'm writing this Honey Hole. Like I just can convince each other and the other sides but that's when the big break happened. This is, I believe in a lot of companies, you get these lucky breaks, and this was so lucky me.
By chance a friend in Microsoft Health Services was like, "You want to come to this health conference?" I'm like, no, I don't. He's like, "Well, the keynote speaker is Paul DePodesta." I'm like, you have my attention. Yes, I'd like to come. If you guys don't know Paul DePodesta, was featured in the book Moneyball. He was the Jonah Hill character in the movie, but the god of sabermetrics in the modern era, took I think four teams from dead last place to winning the division and then basically conquered baseball by taking the Mets to the World Series in 2015, and now switched overs with the Cleveland Browns now.
I talked to him, and he instantly knew me. He's like, "Hey, what's going on?" Because I pitched for the Phillies when he was the GM of the Mets. He just saw me striking out David Wright all the time. He came to me and he's like, "What are you doing now?" I told him, I've never seen a man's face go white before. Just pure white, he goes, "In 2004, I was going to do this exact same thing. I had the money, I had the money pretty much raised. Had this whole plan and the Dodgers called me and offered me the GM job."
MAX WIETHE: It's like a tough gig to pass up.
MICHAEL SCHWIMER: Yeah, he goes, "But I'm still 50/50 on it. Like it wasn't a no-brainer to go to the Dodgers because I thought this idea was going to work. Ultimately, I chose the safe route. I chose the Dodgers. I've been waiting 12 years for somebody to come up to me and tell me they're doing something like this." So here I am, practically pissing down my leg with excitement over here. He canceled his flight back to Cleveland. We just sit out there and talk.
He's like, "Look, I got to be a part of this." Absolutely. We started talking about this. He goes, "You got to go to this guy, Bill Mueller." I'm like, the famous Bill Mueller like Macy's? He's like, "Yeah." I'm like, how do you know him? He's like, "Well, through connections, and he's a big baseball guy. He'd be really interested in his funnies in your backyard. I'm in the DC area. He's in Baltimore." I said, absolutely.
I go up and met with Bill Mueller, and he just instantly got it. Understood the minor league life. He's again this huge baseball fan. He's always wanted to buy the [inaudible] and see if that happens one day. He's like, "I'm in." He's wrote a very large check and then within three days, the fund was closed. I was getting subscription documents from people that I've never really even heard of. Bill Mueller said, "I'm in."