THE BOOK--Playing The Percentages In Baseball

It’s like they just decided to ignore whether research had been done in the player valuation field.

Well-said.  This article would have been well-placed 30 years ago.

Have you guys heard about OPS?  It’s now a major metric of player production.

Serious question: Does this accurately reflect Forbes’ ability to write about general financial topics?  I mean, I’ve never been impressed with any sports-related stuff they’ve done (like cross-sport GM rankings).  Is that just out of their league or do we swallow as much mainstream financial BS as we do baseball BS?  (I know which way Jon Stewart and the recent financial meltdown would lean.)

Re 4:
Unless Forbes (or anyone else) does any serious self-evaluation and discloses those results to the public, we ought to assume their stuff is BS. I don’t read the magazine, so I cannot speak as to whether they do that or not. I do know that there have been threads at this site documenting how the Jim Cramers of the world are essentially useless as studies have shown that in the aggregate few financial analysts show an ability to beat the S&P 500 (or some similar index).

I really didn’t mind the article, until this:

“Moving to a true free market for all players’ services would benefit the business, as the extra supply on the market each year would mean an end to teams chasing a handful of top stars each winter.”

“But constraints that benefit players – such as minimum salaries and limited free agency that controls the supply of players each year – are just fine.”

So an article written by someone who works for a “financial expert” (Forbes) would have us believe that allowing all players to be free agents at all times would be beneficial to the teams?  That it is in the best interests of the players for teams to control a player and dictate their salaries, albeit with a minimum, for up to 6 years? Huh?

It was interesting that they considered players excused from being overpaid because they are on the disabled list (I’m looking at you, Carlos Silva).  Do they think that players on the disabled lists aren’t paid?

"That it is in the best interests of the players for teams to control a player and dictate their salaries, albeit with a minimum, for up to 6 years? Huh?”

That is what Marvin Miller believed. Seems to have worked out pretty well for the players.

I’m wondering how seriously the business world would take an article published in the Hardball Times about the “most overpaid business executives”.

And I am 100% confident that the article in the Hardball Times would be would have more value than the baseball article by Forbes.

Right, I agree that limiting the supply of players such that they are not all free agents is a plus for the players (overall).  It’s a minus to the young below-average players (because they will never enjoy the fruits of their labor), and a plus for the above-average players who play into their 30s.

BrianK: fantastic point.

I keep harping about “subject matter experts” (SME).  The “subject” is not just financial analysis, but baseball itself.  Having Wall Street determine the value of Cisco and have no idea what a router is, is similar to the sports gasbags evaluating trades, and having no idea how to quantify fielding, or know anything about the aging curves.

I guess that as long as there is SOME FA, no matter how you structure it, the amount of money spent overall on salaries is going to be the same.  But I have a hard time believing that it is in the players overall best interests for teams to be able to pay players the minimum salary for at least 2 years no matter how good they may be (no matter how much MRP they provide to the teams).

Do you really think that if we started baseball all over again, and if you asked the players what they preferred (what was in their best interests, money-wise), “You can offer your services to the highest bidder from day 1, like in any other profession, or you will get paid a certain amount, no more, no less for the first 2 or 3 years, and then after that, we’ll talk?” that they would choose the latter?

If I said, “Tango, all full-time sabermetricians are going to get paid $30,000 a year for the first 3 years, and then after that, they can work for whomever you want for whatever salary - oh, and you should like it because it will create more of a bidding war when you do become a free agent, because there will be fewer sabers to compete with at that point in time,” I think you would tell me, “Go to hell,” you’ll take your chances from day one, thank you very much.

I was under the impression that the current structure was a compromise between the players and owners and not chosen by the players as being in their best interest, but I could be wrong as I don’t know the history of this stuff.

In any case, it is a minor point vis a vis the arricle…

The owners spend say 40MM on player development every year.  Therefore, the only way they’ll do that is if they can control player costs in the beginning.  No way is 6 years in MLB fair.  I’m sure it’s easy enough to work out, but I’d say 3 years, maybe 4, is the correct level.

This is similar to what I have to do as a sabermetrician: pay my own way through college for 3 years, then go through inefficient job interviews to try to sell myself, and work for 1-2 years to establish my “true worth”.  So, for the first 5 years out of high school, I’m not getting compensated as I should.

It applies similarly here.  Players out of high school are given a stipend, they put you through boot camps for a few years, and when you are finally ready, the teams get to reap the rewards of that investment.

Seeing that free agents are getting nearly double what they should get, in no way then is six years the correct level.  The second-year arb-eligible players is the group most likely to be fairly valued (dollars to WAR is correct).  That makes them 4+ years of service players.  You can fairly call for free agency after 4 years of service.

Players however have no need to do this, since they are being overpaid for the 5th and 6th years (as well as in free agency).  Teams should demand that free agency kick in after 4 years of service.  This will balloon the supply.  And if they were smart, they’d limit their signings to 2 or 3 years.

I bet Forbes would print a letter to the editor criticizing this ...

I don’t see why they should, Phil; the writer is from Forbes and bylined as such, but so far as I can tell, it’s simply a Yahoo Sports article that didn’t appear in Forbes.

MGL/6,

In this climate, it is crazy to think that that a fully free market without regulation is appropriate.  The business cycle is still very real, and would lead to booms and then inevitably to talent recessions within baseball.

Fluctuations in the business cycle would lead to decreased talent, which would increase the cost per win.  That would cause teams to cut back their investments, further decreasing the talent pool.  This feedback loop would need to be addressed the same way national economies are: there would need to be a regulating body with the power to inject talent into the system.

This regulating body (let’s call it Big Baseball) would have to buy and sell baseball players (though, of course, not let them play) in order to regulate the price of talent.  Indications of a talent recession should be met with large injections of talent into the MLB clubs, whereas indications of overvaluation should be met by depleting the amount of talent in the market.

The real challenge will be regulating the exchange rate of baseball players across nations.  One possibility is to have the regulating boards enforce an exchange rate (say, one Ichiro Suzuki = one Chase Utley), but loss of consumer confidence could lead to major baseball talent crises if there is a run on Ichiro’s, for instance. An International Baseball Fund may need to be introduced to buy devalued players to prop up baseball economies in distress.

Clearly, its a tricky matter, but a truly “free” market really isn’t the way to go.

It appears to be from Forbes.com ... judging by all the sidebars, I bet it appeared in print.  I’ll check when my next issue arrives ...

If you made everyone a free agent, but, at the same time, eliminated minimum salaries ... would that be good for teams, or bad? 

It depends what the de facto minimum changed to, doesn’t it?  If players really were willing to play for $1 (and make money on autographs and card shows and endorsements), then every player’s salary would go down by the minimum, and every team would save about $10 million a year.  Do they get $10 million benefit from slaves and arbs?

Yeah, they do.  So it would be a bad deal for the teams.  And players would play for $100K, but not $1, I don’t think. 

However: if you think salaries would drop for other reasons, that might change.  Suppose you suspect that teams irrationally bid up the prices of certain free agents—say, when there’s only one all-star shortstop available and two teams desperately need one.  If you think that with more free agents, the prices will drop, then it might be advantageous to the teams.

But still, I don’t think the numbers would work out.

If it was purely like corporate America, and players would play for the minimum (say $12,000 for a 180-day year), your choices are to believe:

a. teams will pay the proper $ per MRP (around 2.5MM per win), and therefore would pay for those 32.4 marginal wins a total of 81MM plus the minimum of 12K times 28 players, for a total payroll of 81.3MM

b. teams will spend to their budgets (say 50-55% of revenues to payroll, or around 100MM per team), and simply allocate those 100MM over those 32.4 wins for a total of 3.1MM per win.

I believe a sizable number of teams will spend to their budgets.  While the A’s and Twins might be happy to field teams making 20MM a year, most teams won’t do that.

In any case, if the players take out the minimum on a per-player level, they will at least force a minimum on a per-team level.

Since teams have now outsmarted players, the union will almost certainly demand a minimum salary level of at least $1MM.  They slave and arb players are taking an enormous beating here, and the free agents are not keeping up their end of the bargain by hypnotizing the owners into acting as if they have a gun to their heads. 

The MLBPA strategy is faltering, and they need to put something in place that has controls in place.  As it turns out, the teams could end up with the “a)” option in place only for free agents, AND have the suppressed salaries for the non-free agents.  It would be the worst of both worlds.

I think the major problem with this author was that he didn’t ask others for help when he wrote the article. 

A friend of mine was huge baseball fan and was actually fairly up to date on statistics until 2000 when he moved to Portland, Oregon.  Since the Blazers are the only pro-team there, he now follows basketball religiously and can rattle off more basketball information than I ever could.

He come down to Tucson to join me for a few Spring Training every year and he is pretty much amazed at the some of the stats that are now created.

We are both fans of sports, but both can only follow one sport intensely (and still stay married and employed).  I think authors for non sports publications that dabble in sports only should try to make contact with some more in depth writers for research/explanation/verification.  This would allow them to not look foolish and add some more creditability to their work.  They could name drop the person/group that helped them.

From Phil:

My perception is that among most of the media (the Wall Street Journal among the notable exceptions), sabermetricians are seen as fringe researchers, nerds with the “blogging out of their parents’ basement” stereotype.

I find it interesting the the WSJ consults sabermetricians all of the time when writing their articles.  Forbes and WSJ seem to be similar, in that they appeal to the financial savy upper class types, so why does the latter seem much more willing to get their Sh-t right?

WSJ has Geoff Foster (my editor), and sometimes, all you need is to get that one right guy to set things right.

I’ve talked to or emailed with no less than 5 different guys from the WSJ.  No doubt Foster sets the tone, but the other guys seem genuinely interested themselves as well (note, this is a massive understatement for Sam Walker, who wrote Fantasyland)…

Yeah, it’s not just Geoff.  Pretty much the whole writing staff there gets it.

I’m sure the whole staff gets it.  I’m just presuming there was one guy who champions it.  I figured it was Geoff, but maybe it’s whoever he reports to.