Wednesday, August 25, 2010

Berkshire Hathaway (and Marek Svatos)

The results are normally inconsistent when you have a non-sports publication writing about the NHL. This article over at Forbes is just that - it raises some interesting points but falls flat on others.

Given that the article compares the Penguins to Berkshire Hathaway, I knew I had to read it. Berkshire, if you don't know, is probably the most successful company in the world. It is run by Warren Buffett and a single share of the stock currently costs $115106 (for a Class A share). The cheaper shares used to cost 1/30th of that (so still over $3500) until they recently split the stock. Buffett is called the Oracle of Omaha (where Berkshire is based) and is the world's most successful investor.

The immediate implication of the article title is that the Pens are brilliant not only in the moves that they make, but also with the timing that they make them. Buffett is famous for his attitude of "be fearful when others are greedy and be greedy when others are fearful".

Anyway, the article, by Mike Colligan (a writer over at, makes some interesting points:
  • Asham had other offers that were better, but came to Pittsburgh because he thought it was the best shot to win the Cup.
  • Several examples of players accepting less to play in Pittsburgh
  • An interesting contrast with the Blackhawks, as Chicago has had to dismantle a large part of their secondary cast this summer while the Pens opened the wallet and signed two premier defensemen.

I do have a few issues with what Mr. Colligan writes, however:
  • Sid is cited as taking less to stay in Pittsburgh, but the article makes it out to be better than it is. Sid signed for $8.7m per season and the article implies he could be receiving $11.88m. While it is true that he could renegotiate his contract to get that maximum, when he signed the deal, the salary cap was lower and the maximum that Sid could have signed for was a hair over $10m. Still, it was nice of Sid to provide the discount.
  • The Blackhawks issues this off-season were partially due to aggressive spending (hello, Brian Campbell), but also due to an offer snafu last year that forced the Blackhawks to sign several players to contracts that were much larger than what they ordinarily would have received (see Versteeg and someone else I can't remember - Seabrook or Sopel?)
  • A bizarre advertisement, essentially, for Marek Svatos at the end, citing Svatos as one of the players that the Pens have the luxury of choosing. I'm sure Svatos would love to play for the Pens (heck, anyone that is in danger of falling out of the NHL would love to), but he hasn't played well for two years running. While the earlier part of the article shows how Berkshire picked up quality companies, the last example of Svatos doesn't line up.
All told, however, I think it was an interesting way to consider how the Pens are perceived around the NHL by players and their agents.


The Forechecker said...

Actually, renegotiations aren't allowed under the CBA. Even if Sid and the Penguins wanted to rework things, they can't.

Pat said...

Thanks! I didn't know that, but I guess if I had taken a second to think about it I would have realized there were none of the NFL-style shenanigans (holding out for a new deal) in the NHL...

The Forechecker said...

It's funny, because I had the same reaction when reading that piece. Sid didn't really cut the Penguins that big of a discount, but there are some teams which are able to pull that off.

Mostly, I think it was just a cheap ploy to get Forbes readers to click on his story, anything with a whiff of Warren Buffet to it will draw a crowd.

Pat said...

Yeah - it worked for me - I'm a big fan of Warren Buffett, which is why I read the story in the first place :)

ppirilla said...

Crosby (and Malkin) took around $1.5M less than they could have earned to stay here. Between them, that covers the entire fourth line PLUS the backup goalie

Scott said...

Well said, ppirilla!