Throwin' it Out There…

From Alison Brie to Zach Randolph, and everything in between.

MLB Cost Per Win: Which Front Offices Save the Most Money?

Insert your own caption.

According to Bud Selig, capitalism rules all. Major League Baseball spits on other professional sports and their salary caps. Sure, the league instituted a revenue sharing agreement back in 1996, but as the previously discussed Moneyball  so hyperbolically pointed out (really, vending machines?), there’s still a huge gap between rich and poor teams. As hinted at in last week’s article on roster construction, the genesis of sabermetrics was to help financially strapped teams to get the biggest bang for their buck in acquisitions. Luckily, there’s a way to measure this – by adding up the salaries of all 30 MLB teams and dividing this number by the number of wins available (30 teams x 162 games = 2,430 games in a season) and you get the league’s Cost Per Win – in 2012, this number was a measly $1,210,147. I realized after I already researched the data this that this guy does this already- oh well, good work over there. The question at hand after gathering this data: do sabermetric teams indeed spend their money more wisely than old school teams?

Using the same sabermetric/old school list from last week, plus a few more added in from the Fangraphs list to increase sample size, the actual vs expected cost was compared for each group. Take the Mets for example: their 2012 payroll was approximately $92M, and they only won 74 games, missing the postseason by a mile. Based on the above league average Cost Per Win, their payroll should have been only $89M, meaning they spent $3M too much on their roster that year. Their Return on Investment (ROI) for the entire roster was -4%, not a very encouraging use of resources by Sandy Alderson, but would you expect anything less from the Wilpons? Of course, this doesn’t factor in ticket sales, tv deals, licensing, etc. but it’s a decent measure of a front office’s ability to properly utilize their on-field resources.

When doing this calculation for the entire group of extreme sabermetric and extreme old school teams, the results are striking. The sabermetric side consists of the A’s, Mets, Blue Jays, Mariners, Rays, Cubs, Astros, Diamondbacks, Indians, Padres, Red Sox and Yankees. The old school side features the Twins, Giants, Rockies, Tigers, Dodgers, Royals, Angels, Braves, Orioles and Nationals. Playoff wins are included for those teams lucky enough to get there. Interestingly enough, only two of the saber-friendly teams made the playoffs (A’s & Yankees) while the old school side features three, including both World Series teams (Giants, Tigers, Nationals). Buzz Bissinger just high fived himself.

Payrolls chart

aggregate payroll

What a surprise, the Athletics made the best use of their tiny payroll last year, saving over $60M with a whopping 110% ROI- real original, Billy Beane. Meanwhile, the Red Sox and Yankees spent their seemingly unlimited bankrolls less wisely than Curt Schilling. They combined to waste almost $170M more than their wins indicated on an all-star class of underachievers like Carl Crawford, Adrian Gonzalez, Josh Beckett, John Lackey, A-Rod and Mark Teixeira. Even with a huge payroll, it hurts a squad to keep an aging third baseman for $30M a year when that money could be better spent on a few much-needed arms. The Tigers rode their $114M payroll to a World Series appearance, but they wasted $17M – mostly due to about $12M locked up in Victor Martinez, who missed the entire season. The Cubs, Mets, Sox and Yankees all lost money on the saber side, while the Twins, Rockies, Tigers and Angels were all in the red on the old school side. Excluding the Sox and Yankees and the two least thrifty old school teams (Tigers & Angels) as freewheeling outliers, here’s how the two groups compare:

aggregate payroll excl

Sabermetric-friendly teams had an 8% Return on Investment advantage over old school teams, thanks to a $14M lower average payroll. The A’s massive $60M savings swings the whole study, but it’s interesting to see the Nationals $39M savings factor in as well. The Nats’ young, cheap talent (Harper, Strasburg, Desmond, Espinosa, Morse) helped carry Jayson Werth’s $126 million dollar corpse to the playoffs in 2012 and bodes well for their future.

All in all, despite saving more money, old school teams averaged ten full wins more than saber teams (86 to 76), and both the Giants and Tigers shunned statistics all the way to the World Series. One season is a small sample and certainly not a confident predictor of future performance, but it appears that even though saber teams extracted a lot out of less, old school teams had the last laugh in 2012.

In Billy we trust?

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This entry was posted on May 3, 2013 by in MLB, Uncategorized and tagged , , , , , , , .
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