Cheap Baseball Teams are like Loose Women, they rip your heart out when you fall in love with them!

 Tori Hunter is a slightly above average outfielder. By the end of his contract he will be a below average outfielder. This makes the 90 mil for 5 year contract he just signed one of the worst contracts in baseball, and he hasn’t played a game yet. 

 Andruw Jones also signed for 18 mil a season which makes me wonder whether teams just like watching money burn. 

The mainsteam media thinks Santana asking for 25 million a season is asking for a lot. It’s not it’s a huge fucking bargain.  I mean Jones and Hunter are really just average players. They are overhyped for past performance but when you look at their composite numbers they create a very average number of runs.  Santana is a huge outlier statistically and is able to save his teams more runs compared to the league than almost any pitcher ever. Smart investing in baseball works according to the following idea:

 There is an idea of ‘salary worth’ which is a fictional number representing the value to a team based on run’s created/allowed compared to the league average. The salary is proportioned along the lines of how different the performance was compared to league average and then matches that with a salary that is equally distant from league average salary.  Using this idea Hunter and Jones’ contracts are abysmal while the recent contracts for all top-notch starters (Zito is not a top-notch starter) have been amazingly great.

 The other realization is that paying a young talent far less than he is worth, while he puts up great numbers in the single most important factor for 2/3 of the league in baseball.  The most valuable players in ‘salary worth’, which means the most valuable players once you adjust to the realities of baseball economics are young players like Ryan Howard, Ryan Braun, Erik Bedard, Prince Fielder, Dan Haren, Miggy Cabrera (last year, not this year), Jose Reyes, David Wright, and Hanley Ramirez. So for 2/3 of the league finding these gems of young players is the only way they can afford to have more than a handful of talented players.  Thus any good mid-budget team will have a huge difference between their salary worth and their actual salary.  Hell if the Brewers had to pay Prince Fielder, Ryan Braun, Corey Hart, JJ Hardy, and Yovani Gallardo what the free market would offer them these players alone would account for more that the entire current salary of the team. 

As a corralary to this, it becomes obvious that mid-level teams should not pay for free agents except for very rare occasions. The reason for this is that free agency can at best produce a slightly positive salary worth to salary diffenential. It can also produce a hugely negative one (see Chan Ho Park w/ the Rangers). This is especially true of pitchers who are not as predictable year-to-year as hitters.  But what happened last year? Gil Meche to the Royals for 10 mil, Jeff Suppan to the Brewers for 10 mil etc…

 So what should the Twins do with Santana? Well 25 million is below market value and so there is likely to be a positive differential, but as a mid-market team they are more likely to be able to get a very high differential on players acquired in a Santana trade. The Twins GM is doing a good job of not rushing into making a deal, but rather playing teams off of one another and maximizing his return. Does it suck to be a twins fan? Maybe, but your GM at least is going to get you the most bang for your buck, which is all you can do as a mid-market.

 This strategy can be taken too far however, and the Marlins are pushing it further than it has ever been pushed. They will certainly have the highest percentage differential ever acheived next season, but they will also have a really low salary worth, because they don’t have the talent. There are cases, in particular with excellent hitters like Cabrera (but not Willis who was overvalued, and a pitcher), the team would be well-suited to re-sign a player. This is because signing players creates a situation where a player is going to be around for a long time, which can help overcome the second-largest problem for the lower 2/3 of teams, which is timing. 

You need a large group of young players to come up at the same time to create a period of a few years in which you can succeed. The Brewers are in the midst of a great timing situation right now– they have young players performing great at the same time. Oakland had a similar situation with pitchers in the late 90’s into the early 2000’s. 

Oakland’s Billy Beane is also clearly aware of the issues I am presenting. His decision to put Haren and Blanton on the trading block is at first glance baffling, I mean they both greatly outperform their contracts and neither is going to be a free agent any time soon. Beane realizes two things however, first that even if Haren and Blanton are good, the rest of his team isn’t good enough to win and so trading these players for a salary worth differential down the road, when his other positive differential players peak could create a situation where the team is running on all cylinders and everyone peaks at the right time. That is why he is so good, he understands the intricacies of the market. Furthermore he recognizes that others are beginning to understand the market so he cannot wait until the last year of a guy’s contract to move him, those deals have dried up in recent years.  So he knows he has to trade more value to get back what he wants than he had to in the past.

 This creates an opportunity for mid-market teams though. If they all became aware of the market the teams that were close to having the salary worth they needed to compete could trade long-run salary worth differential for short-run salary worth. What this means is that a team like the Brewers would be a great fit for a Dan Haren, and they would give up a group of slightly younger prospects to get him. Because the younger guys have more years before they reach salary worth/salary equilibrium (free agency) even if their projected differential is initially smaller it gets multiplied as it occurs over a number of seasons.  Later when the A’s are peaking and close they make the opposite deals with other mid market teams. The end result would look like a sine wave, wherein mid market teams understand that they cannot compete year in and year out so intead organize their resources into being great some years and terrible other years.

Now astute readers will ask: isn’t that exactly what the Marlins have done? Been terrible and then timed their prospects just right to win world series? The anwser is mostly yes, but they would be better served if they didn’t sell off all of their pieces and become the poorest team in baseball. The Marlins have come closest to what I am advising, but by not keeping anyone from their great teams they are putting too much stress on their farm system to produce everybody. They would be better served looking for slightly positive differentials in players like Miggy, tried to sign him for 18 million per perhaps, and he could have helped them.  You occasionally need to pay a player his actual worth. The reason is that while their salary differential improved, their salary worth just took a big hit, and in order to compete you need to have one of the top salary worths, which for a mid-market team can only be acheived via a huge salary differential, but it is the aggregate worth not the differential which dictates a team’s success. Maybin and Miller are great, great, prospects but Miggy was special in a similar way to Santana. The market poorly accounts for outliers like them (except for A-rod for whatever reason) and thus they are generally underpaid. 

It will be interesting to see what the Marlins do three years from now, they have a great collection of young talent and if things break right they could be back in the mix again. If they win another world series in three or four years I think this strategy might be adopted by more mid-market teams and we could see a distorted type of parity take place in MLB.

 I hope you understand my points on baseball economics, but this may come off like giberish, in which case I’m sorry.

T

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