Discussing the relationship between money and success in baseball provokes strong reactions.
Yankees fans decry the suggestion that their team’s success over the last six years rests on George Steinbrenner’s bank account. After all, the latest dynasty has thrived in part on homegrown talent like Derek Jeter, Bernie Williams, Andy Pettitte, Mariano Rivera and Jorge Posada. General Manager Brian Cashman didn’t earn respect in his profession simply by spreading around Steinbrenner’s fortune. Winning four World Series and five pennants in six years is a claim few clubs in history, free-spending or not, can make.
Many sabermetric types resent the implication that low-payroll teams are handicapped, since their favorite GM, Billy Beane, has turned the Athletics into a contender on a shoestring budget. Genius that Beane may be, however, one wonders how long he can continue to replenish his pool of young, cheap talent or what he would do with greater resources.
Nor does the analyst crowd want impoverishment to serve as an excuse for lack of performance by poor decision-makers. Give former Pirates GM Cam Bonifay a pot of gold and he still might sign the likes of Kevin Young, Pat Meares and Derek Bell to long-term contracts.
Baseball writers are keen on noting that extravagance hasn’t bought a World Series for the spendthrift Orioles, Red Sox and Dodgers. But stating that spending and winning are related isn’t the same as saying that profligacy guarantees success or frugality ensures failure.
There is ample evidence to demonstrate that payroll and winning percentage are at least moderately correlated, especially over a span of years. While correlation doesn’t prove causation, it raises the possibility that payroll disparity is a prime factor in competitive imbalance. Whether competitive imbalance is a problem that Major League Baseball needs to address and whether a different revenue-allocation system or a salary restraint is the proper solution are topics for a future column.
The cost of labor has risen massively since the advent of free agency in the mid-1970s. The table below shows the growth in average salary since 1969 (average salary data courtesy of Rodney Fort’s MLB Business Pages):
Average Salary, 1969-1998 Year Salary Change ------------------------ 1969 $24,909 --- 1970 $29,303 18% 1971 $31,543 8% 1972 $34,092 8% 1973 $36,566 7% 1974 $40,839 12% 1975 $44,676 9% 1976 $52,300 17% 1977 $74,000 41% 1978 $97,800 32% 1979 $121,900 25% 1980 $146,500 20% 1981 $196,500 34% 1982 $245,000 25% 1983 $289,000 18% 1984 $325,900 13% 1985 $368,998 13% 1986 $410,517 11% 1987 $402,579 -2% 1988 $430,688 7% 1989 $489,539 14% 1990 $589,483 20% 1991 $845,383 43% 1992 $1,012,424 20% 1993 $1,062,780 5% 1994 $1,154,486 9% 1995 $1,094,440 -5% 1996 $1,101,455 1% 1997 $1,314,420 19% 1998 $1,378,506 5% 1999 $1,604,972 16% 2000 $1,888,825 18% 2001 $2,249,755 19%
The rise in salaries is not necessarily problematic. Prior to free agency, MLB’s reserve system afforded players no opportunity to seek compensation according to what the labor market would bear. Part of the increase in the last 25 years reflects a correction of that system. In addition, over that span MLB has grown much wealthier, particularly as media contracts have ballooned. MLB’s current national TV contracts, including ESPN and Fox, are worth a combined $457 million per year. Annual national TV revenue was one-tenth of that two decades ago.
Whether MLB’s asserted losses of $519 million last year resulted from payroll expansion is questionable. Payroll expenditures grew 109 percent from $927 million in 1995 to $1.9 billion in 2001, while reported revenues increased 157 percent from $1.4 billion to $3.6 billion over that span. This data implies that growth in non-payroll costs are the culprit for purported red ink. In any event, MLB has been accused of all sorts of accounting tricks in claiming such massive deficits, its economic disclosures having credibility approximating that of the Hitler diaries or Enron’s financial statements.
Aggregate numbers are superior to anecdotes in examining whether a relationship exists between money and success. One way to look at this is to divide all teams since 1995 into three tiers — those ranked 1 through 10, 11 through 20 and 21 through 30 in payroll in a given season. As the table below demonstrates, the average payroll of each tier has roughly doubled since 1995 (payroll data courtesy of Doug Pappas’ Business of Baseball Pages):
Average Payroll by Tier, 1995-2001 (Millions) Year High Mid Low All -------------------------------- 1995 $43.9 $33.5 $19.2 $33.1 1996 $47.1 $32.0 $19.1 $33.7 1997 $54.3 $39.1 $23.5 $40.1 1998 $61.6 $43.6 $21.6 $42.3 1999 $74.8 $47.5 $24.1 $48.8 2000 $84.2 $55.6 $30.1 $56.7 2001 $92.8 $62.7 $37.9 $64.5
The 70 teams in the high tier posted an average record of 89-73, made the playoffs 43 times (61 percent), and finished in the top 10 in winning percentage 48 times (69 percent).
The 70 teams in the middle tier posted an average record of 80-82, made the playoffs 10 times (14 percent), and finished in the top 10 in winning percentage 19 times (27 percent).
The 64 teams in the low tier posted an average record of 73-89, made the playoffs three times (5 percent), and finished in the top 10 in winning percentage five times (8 percent).
The only teams in the bottom tier to reach the postseason were the 2000 White Sox and the 2000 and 2001 Athletics. In addition, the 1996 Expos and 1999 Athletics finished in the top 10 in winning percentage but failed to make the playoffs. Thus, in their three-year run of success, the 1999-2001 Athletics represent an exception, not the rule.
Since 1995, guessing which teams made the playoffs simply by looking at their payrolls — in other words, taking the top eight teams in payroll and assuming they reached the postseason — would be correct 59 percent of the time. Over the last seven seasons, 33 of 56 teams in the top eight in payroll made the playoffs, compared to 23 of 148 teams outside the top eight in payroll.
While this indicates better odds for teams in the high tier, it also reveals that spending does not guarantee winning. Indeed, 12 teams in the high tier finished below .500, including the Orioles and Blue Jays three times each and the Rangers twice. From 1998 to 2001 the Dodgers annually ranked in the top five in payroll while failing to finish better than 10th in winning percentage.
Meanwhile, among teams outside the top tier, the Astros and Giants finished in the top 10 in winning percentage four times apiece and the Athletics three times. Before the Dodgers entered the high tier, they twice made the playoffs and finished in the top 10 in winning percentage. Spending more money for poorer results has apparently become the new Dodger Way.
Another way to measure the relationship between payroll and winning percentage is correlation. Correlation tracks the extent to which two variables move together. Does winning percentage rise as payroll rises, does winning percentage rise as payroll falls or is there no discernable relationship? Measured on a scale of -1 to 1, the closer to 1, the stronger the positive correlation.
From 1985 to 2001, the correlation between payroll and winning percentage was .43, a moderate positive relationship. The correlation was even stronger, .58, for the shorter period 1995 to 2001. In other words, payroll and winning percentage do rise together, although this does not prove that higher payroll expenditures cause winning percentage to rise.
In addition to looking at the correlation between one season of payroll and winning percentage, it is also useful to observe the relationship over a span of years. The tables below illustrate the correlation for periods of one, two, three, four and five seasons:
Correlation Between Winning Percentage and Payroll, 1985-2001 Span Correlation -------------------- 1 Year .43 2 Years .50 3 Years .54 4 Years .57 5 Years .59
Correlation Between Winning Percentage and Payroll, 1995-2001 Span Correlation -------------------- 1 Year .58 2 Years .66 3 Years .70 4 Years .69 5 Years .67
This data suggests that in a greater number of years, the association between payroll and winning percentage grows stronger. One reason for this might be that luck plays a smaller role over a longer period. In a single season, a weak team might catch breaks and produce a decent record, while a strong team might struggle and post poor results. Over time, this is less likely to occur.
Perhaps another reason is the cumulative effect of success. Assuming increased payroll does help a club, that club will by winning put itself in a better financial position, thereby expanding its spending power. Moreover, as the club improves, the perceived value of its players grows, resulting in higher salaries. In other words, the relationship between payroll and winning percentage might be a two-way street.
It is undeniable that a noticeable correlation exists between investment and results. Brains are surely an important part of a club’s achievement, and spending is neither a promise of nor a prerequisite for victory. Tight purse strings leave the likes of Beane with little margin for error, however, and having the resources to retain Jeter, Williams, Pettitte, Rivera and Posada, and to acquire Roger Clemens, Mike Mussina or Jason Giambi, sure makes life easier for a GM.
Platoon
One of the focal points of spring training is the battle at third base between Chris Truby and Morgan Ensberg. Given Truby’s performance with the Astros last season (.206/.276/.441) and Ensberg’s play his last two years at AAA New Orleans (.310/.397/.592) and AA Round Rock (.300/.416/.545), a measly month of exhibition plate appearances shouldn’t be permitted to obscure the obvious: Ensberg, assuming he hasn’t totally gone to pieces, should start.
Despite his dismal showing in the big leagues to date (.241/.288/.464 in 431 plate appearances), there is still a good reason to keep Truby with the Astros: lefthanders. In the minors and the majors, Truby has shown an extreme platoon differential:
---vs.L--- ---vs.R--- Truby Avg HR% Avg HR% ------------------------------ Majors .327 7.27 .208 3.87 Minors .331 6.75 .269 2.93 ------------------------------ Total .330 6.85 .254 3.16
Granted, Ensberg is also roughly as good against lefties (.325/6.13) as against righties (.299/6.38), but if he starts he’ll need a day off now and then, and Truby would also provide a decent option off the bench against lefthanders. This notion struck most people as anathema when Truby faced Tom Glavine in game two of last year’s Division Series. Nonetheless, the numbers illustrate that when Truby encounters lefties, he’s a productive hitter for average and power.