The Price of Winning

by
January 13, 2009

In a great big goody bag of an article, Peter Bernstein at ESPN the Magazine looks at the most and least cost-effective teams of the past ten years and figures out just how much spending correlates with winning. A passage to keep in mind as you prepare to shift from winter Yankee outrage to spring Yankee outrage:

We also looked at the connection between opening day payroll and making the playoffs. The results were similar—spending helps, but it’s no guarantee of reaching the postseason. In fact, the link between payroll and playoffs has gotten weaker over time . . . Of the 16 teams that made the playoffs in 1998 and 1999, 14 were in the top third of payrolls. In other words, 70 percent of the high spenders made the playoffs in those years while virtually none of the lower two-thirds of spenders went anywhere. But that was then. Since the start of this decade only 40% of top third of spenders have made the playoffs since the start of this decade. In fact, the top payroll teams in 2008 (Yankees, Mets, and Tigers) all failed to reach the post-season.

Yes, there is an advantage to spending more money, but buying a playoff slot — let alone a championship — is an inexact science. Given how big a part luck plays in baseball — CC and Tex could crash their golf carts into each other with each breaking their femurs this spring — I think it’s silly to say that the system is truly broken, even if it isn’t ideal.


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Chris H.
13 years ago

Maybe, but isn’t saying something like “Since the start of this decade only 40% of top third of spenders have made the playoffs since the start of this decade. In fact, the top payroll teams in 2008 (Yankees, Mets, and Tigers) all failed to reach the post-season” kind of like looking at a pitcher’s W-L record?  Coincidence does not prove causality.

Look, I don’t think a salary cap will fix anything; as others have pointed out, it really works out to be a wealth transfer to owners.  And as a fan, I love both the hot stove season and the trading-deadline season for all the stories and drama; I’d hate to turn into the NFL where there’s little free-agent activity of consequence and no trading at all of consequence (except in extreme, Favre-ish cases).

And yes, we do see small-market teams succeed, but all that really proves is that smart-versus-dumb matters MORE than rich-versus-poor.  Which is fine; that’s how it should be.  But a smart-yet-poor organization is going to be constructed very delicately; they don’t have the resources to absorb mistakes or unexpected occurrences, and because they can’t lock up their studs, they will always be on the treadmill of maintaining/improving.  Meanwhile, a rich organization can use its resources to quick-fix mistakes or injuries. 

The mistake the Yankees (and others) make is to use the money IN PLACE OF intelligence: instead of doing the hard work of building up a deep farm system and acquiring the “right” players instead of the “big-name” players, they’re on their own treadmill that keeps the farm system empty.

As a fan of a larger-market team, I can clearly see where money is used to make up for a lack of intelligence.  If my team dumbs its way into a hole (as it has done in the past), big trades and FA signings can give me hope again quickly—something that smart analysis and drafting just can’t do.  I’d hate to be a fan of the Royals or somesuch, where bad GM decisions doom fans for years because the organization cannot afford to spend its way out of misery.

Of course, ideally a team would have both: resources and smarts.  Such a team could dominate for a long time, which is what I expect the Red Sox to do.

Hmm.  Where was I going with this?  Oh yeah…anyway, I think the system is worse than “not ideal,” but I don’t think a salary cap would be the solution.  Yes, it would level the financial playing field—and make a lot of owners richer—but I’d rather find a more creative solution that maintains the FA-and-trade activity, etc.

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pete
13 years ago

I pretty much agree, Chris…I think “not ideal” is pretty kind, but I don’t want a salary cap for a bunch of reasons. I also can’t come up with a better system.

My biggest problem with revenue sharing is that teams end up getting penalized for maxing out their market’s potential. For years, the Indians actually paid into the revenue sharing pool because they sold out every game, while the Marlins continue to draw from the pool and completely waste a huge market in Miami.

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Chris H.
13 years ago

Which is why revenue sharing shouldn’t be based purely on, er, revenue.

I think you need to look at things in context.  The Marlins are a great example: they’re in the 16th-largest media market in the country (by comparison, the Royals are in the 31st; the Brewers, 34th).  There’s no excuse for what they’ve done.

Perhaps tie things to attendance.  If you’re not putting fannies in the seats, then you’re doing it wrong.  You shouldn’t get to whine for a new stadium if you can’t fill the existing one, and you shouldn’t get revenue assistance if you can’t maximize what you’ve already got.

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Grant
13 years ago

Before I even clicked the link I knew in my heart that the Orioles would be dead last. I just knew it.

Ugh.

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Jesse
13 years ago

Craig—

This is a terrible article.  His conversion of $100M in 1998 to 126M in 2008 is so off that it isn’t worth looking at his numbers.

The market share of a club with a payroll of 100M in 2008 would have been 8.11% of MLB’s combined payroll (about 1233M).  His calculation of 126M would be about 4.71% of MLB payroll (about 2671).

To use an actual team, I will adjust the 1998 Baltimore Orioles (highest payroll in MLB) to 2008 by his conversion:

1998 BAL (72M), 90.7M in 2008, would be 3.40% (actual 1998 share was 5.84%).

To reverese, we’ll use the 2008 Yankees

2008 NYY (209M), 166M in 1998, would be 13.46% (actual 2008 share was 7.82%).

This is a great idea, but he should have used a relationship between Team Payroll and total MLB Payroll, not tried to convert 1998 dollars to 2008 dollars.

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