Salary Capping

I've never been pro-salary cap. I simply cannot understand the rationale behind enforcing a cap. Yes, the Yankees spend way more money then the lower class citizen's, and yes there is a decent relationship between the playoffs and spending, however it is not a direct relationship.

That is, spending does not invariably get a team into the post-season. It does, ensure the team has a shot at being competitive, but so too does smart management like we have seen in Oakland and Minnesota over the last decade.

Sports fans will point to the other sports leagues as examples of why there should be a salary cap in baseball. As if there isn't competitive imbalance in basketball (Milwaukee anyone?), football (the dynasty-esqe Patriots), or hockey (see Detroit). For the most part, people ignore the fact that the Cincinnati Bengals have been awful for the better part of two decades. That the Los Angeles Kings are not looking to recreate Wayne Gretzky. Or that the Los Angeles Clippers have essentially always been awful.

Let's use a hypothetical cap which Shawn Hoffman of Squawking Baseball suggests in an outstanding article at Baseball Prospectus. Shawn suggests that the cap would sit around $100M and the floor would be over $75M. At a cap of $100M there would only be nine teams that would have to lower their payroll. A floor of $75M would increase the payroll of at least eleven teams. In other words, the rebuilding efforts of the Washington Nationals, Kansas City Royals, etc would be squashed as they would have to dish out money to players without long term value.

Even if those teams could remain on track with their respective building efforts, another issue exists, one which fans ignore, one that is of incredible importance. That is the fact that baseball is simply different then the other sports. In football and basketball there isn't much a team can do with their excess revenue. Sure they can hire better coaches, supply superior medical facilities, but for the most part, teams operate on an even playing field to begin with.

Not so with baseball. In baseball, not every player is involved in the amateur draft. Between professionals from international leagues overseas, or kids from Latin America, the teams with excess cash could simply blow the small market clubs out of the water in those markets.

That is, in basketball a player is drafted, signed, and added to the roster of the pro team. He immediately becomes a contributor, if only marginally. It is very rare for a player to be drafted early and sent to the D-League. For the most part, players are NBA-ready on draft day.

In baseball this could not be further from the case. Even players with three or four years of college experience under their belts will need a year or two (at least) of minor league seasoning before they are ready to be called up. Due to this, a player's salary could not be justifiably added to the Major League payroll.

Adding more confusion to this is in regards to how a player is acquired. Taking a look at the draft we see 'over slot' bonuses handed out all the time. Imagine if the Yankees were spending $100M less on their big league roster? You better believe that they are going to spend it somewhere, the first place being the draft.

Now imagine the Yankees setting aside an extra $40-60M for the first year player draft. Imagine a top-10 player sitting there with Scott Boras as his agent, knowing full well that the Yankees are going to pay whatever the player asks. The $6M+ that Pedro Alvarez received would be half of what the Yankees would have available for the drafts top prospect. Where are the Pirates going to get $10M to sign this kid?

But let's take this a step further. Now we're looking at the top 10 prospects in the first year player draft, each knowing the Yankees have a boat load of cash to spend on draft day. Do you think the teams with lesser financial luxuries will have a leg to negotiate with? No way!

So one will say, 'easy solution, we cap the draft spending'. Well, MLB has tried that, so has the NFL. It simply does not work.

However, let's pretend that this does hypothetically occur. The Yankees still have that additional $100M that they aren't allowed to spend on their big league roster or on the amateur draft. Where does that money go?

How about to the international market, a market which is impossible to cap because of how large of a market we are talking about. Also, what would be capped? Would teams be limited at how many academies they open? Certainly no one is going to argue that the Yankees offer less opportunity (albeit, while being Un-American) to the have-nots of the world.

So now we have the Yankees blowing the lid off the international market. Michel Inoa, here are your pinstripes. Felix Hernandez, welcome to the Bronx. Juan Duran, you never knew the Reds.

The simple fact remains that there are teams that simply have more money then those they are competing against. Is it absolutely fair? I suppose it isn't. But baseball cannot be fair without devastating the sport and it's current player development.


Let's stop this call for a salary cap. Let's remember that the money the Yankees bring in isn't going to stop them from spending, rather, it will cause them to spend money elsewhere. For now, as a fan of a small market club, I don't mind the current financial environment. I don't mind that the Yankees are in a market and a financial position where winning today is everything. That mentality forces the club to spend great sums of cash in order to build the best team possible.

However, that is for today. That is the Yankees building a team of players based on what they have done in the past. Who thinks the CC Sabathia or AJ Burnett deals won't look like atrocities toward the end of their respective contracts?

So I suppose it is unfair that the Indians didn't have a chance to resign Sabathia long term, but in 2013, I'm sure Indians fans coast to coast will be smiling that Sabathia is not 'anchoring' (literally and figuratively) the Tribe's rotation.

Time to re-build.

Wait a Second!

Didn't we already acknowledge that the Yankees are 'Un-American'? Who does this 'Peter Gammons' guy think he is?

Well Gammons is right, the Yankees are not 'Un-American', spending, and bullying the competition is, for all intents and purposes, the American way.

Gammons is reflecting on the crying out for a salary cap (something I will touch on later this week) after the Yankees went 'America' all over baseball. But what is more American then buying up the best available assets? What is more American then trying to win at all costs?

Gammons writes,

Feel sorry for the Brewers and the Blue Jays and the Rangers? Yes, because for all the Yankees may pay in luxury tax and revenue-sharing money, for all the fannies they put in opposing teams' seats, for all Bud Selig does to try to level the playing field, the Yankees are back to being a smartly run business. And their business is to turn as much of the baseball business as possible into a game of fattening frogs for snakes, as Sonny Boy Williamson once put it.

But do we really need to feel bad for the Brewers, Jays, and Rangers? While the Yankees have the largest market, they have also done well to ensure their subsequent market stays strong. The same cannot be said for smaller market teams which rely on Major League Baseball to market their sport.

In conclusion, Gammons writes,

Didn't Hal Steinbrenner invest $423.5 million to buy back the we're-the-Yankees-and-you're-not swagger? Look at it this way: The Yankees will still be helping some small-market owners pay down their interest.

For now, it's the American way. Wal-Mart eats up small-family businesses. The Yankees eat up the Brewers and the Indians, and there may not be an owner in any sport who, given the opportunity afforded to Hal Steinbrenner, wouldn't have done the same thing.

So no, baseball does not need a salary cap, and no, people should not feel sorry for the small market teams. If an individual feels opposed to this, I sure hope they do not spend at the big box stores. I hope these individuals do not live a penny beyond what they need.

THE RETURN OF Article of the Week for the Week of June 8 - 14

Squawking Baseball has long been one of my favorite websites to check out. The author does a great job of not overloading the readers through not making several posts a day. This is something I have tried to emulate by keeping my posts to a daily routine, when possible, and trying to keep it at no more then one per day. I personally feel there is a lot of excellent articles to read online, why should I hog up all your time? Also, if I am out writing an article a day, how would I possibly have time to read all the other outstanding stuff out there?

All that being said, Squawking Baseball is self proclaimed as "Wall Street analysis of Major League Baseball's player market". Furthermore, the stated purpose of Squawking Baseball is,

[To]stay in front of the trends, play the cards right, and, hopefully, stay in contention.

That’s where we come in. We are baseball people first and foremost. Despite tender ages (mostly early to mid-20s), everyone on our staff has experience in a Major League front office, as well as outside businesses. Some of us also happen to be Wall Street junkies, consistently beating the stock market by staying ahead of the curve. What we hope to create with this blog is an outlet for us, and others, to look at the market for baseball talent with the same kind of thoughtful, diligent outlook.

This is precisely what drew me to Squawking Baseball and has continued to draw me in. That is, the discovery of baseball through an economic perspective. There are plenty of rumor websites, plenty of team blogs, plenty of sabermetric websites, but very few that are dedicated to understanding how and why managers exploit the market-although, isn't the 'why' obvious?

This week's article of the week is a look back on Major League Baseball's Rule IV draft. Shawn of Squawking Baseball asks, 'Is the Draft Efficient?'

In this post, the author (Shawn) discusses the merits of baseball's current draft system. Shawn acknowledges the system which allows the players to make up their salary demands, which in some cases results in inferior players being selected due to signability. However, this is only a partial flaw, as for the most part, the best players in the draft are going with the top picks.

Shawn writes,

But there’s another facet to this that I think is pretty interesting: the draft inherently changes the sport’s incentive-structure, as it rewards the league’s worst teams. In other words, if you’re not going to be good, you may as well try to be awful. Does this lower the quality of play, and therefore hurt the product? It’s very tough to say.

While a valid point, the baseball draft is unlike any other of the professional sports. That is, most even the very best draft picks, take several years before they make it to the majors, and even longer before they are truly impact players. Furthermore, when one considers that there is a 2 in 50 chance of selecting a meaningful player in the draft, those best players become even more of a rare breed. While 2 in 50 might be somewhat of an exaggeration, consider that many of the players on a MLB roster were not selected in the draft as they were considered international.

However, the author concludes,

But overall, I think the draft accomplishes its goals. Top-tier amateur talent is distributed to the teams that need it (or value it) the most, in effect allowing bad teams to shorten their success cycles. As we’ve learned from the expanded playoff system, any mechanism that allows more teams to be competitive without shaving significant dollars off of big market teams’ top lines is generally good for the sport.

It is tough to argue with this sentiment. While the poor teams will struggle to be annual threats, if they play their cards correctly and make intelligent and timely moves, it is tough to imagine the teams are without hope.

Aha!

This won't be filed under 'Article of the Week' as it really isn't an article. It is just something that made me laugh out loud over a bowl of Cookie Crisp.

Courtesy Geoff Young of Baseball Digest Daily

I don't really have any words to accompany this...

Miguel Cabrera: .278/.354/.461, 9 HR, $11.3 million
Jorge Cantu: .291/.341/.524, 14 HR, $0.5 million

Let's not even talk about Dontrelle Willis...

But let's take a look at it from a more neutral standpoint. From the statistical reference that accounts for league and ballpark adjustments as well as a little bit of clutch, The Hardball Times' Win Shares.

According to the Win Shares measure, which also takes into account defensive play, Cabrera has 6 WS and Cantu has 5.

In other words, for $10.8M you too can earn an extra win. That sounds about right.

A Kind of Moneyball Perspective

After reading John Beamer's article over at The Hardball Times I felt compelled to write a piece on MLB salaries and team spending. Beamer comes to the following conclusion:

So, if we were to throw revenue sharing and CBA out of the window what would happen to baseball? Wouldn’t it become a predictable snooze fest?
It might do. For a start we’d see fewer teams having a shot of World Series glory and although that may be a bad thing for some franchises it may not be to the detriment of the game as the postseason is more likely to contain the best teams in the parts of the country with the most money. However, the bald facts are that would leave 20 or so teams with nothing to play for and unlike, say European soccer, or golf (where Tiger Woods doesn’t win every week), there are few other mechanisms to retain excitement.

The magic formula is to make the playing field level enough to ensure that fan interest is retained, brilliance can be pursued and the best, richest and most storied franchises have the best odds of success. I believe that it is in the interests of the sport for a healthy number of super-franchises to slug it out in the postseason.
Baseball mostly has it spot on. Teams, these days are making reasonable money. The power resides with the larger ballclubs, as it should, and these teams have greater odds of success. Also it is possible for smaller market teams to diligently build competitive ballclubs that can challenge the bloated mega-clubs. Moneyball has made it apparent that small teams can innovate to win and teams such as the Twins and Athletics do just that.

Invariably in life we are going to have the haves and the have nots, this may be unfair to those of us who are fans of small market clubs whom have to rely on a form of intelligent design, however no one team is doomed to failure.

The Cleveland Indians, for example, were recently called, "the poster child for building from within" by MinorLeagueBaseball.com.

Although, the news isn't always positive. Al Doyle at TheBaseballAnalysts.com questions whether teams that are rebuilding should spend extra to go from being average to slightly above average.

I have to agree, but at the Bleacher Report an author suggests that not only should a limit be set at how much a club can spend, but also at how little a club can spend. He then goes on to state that the poor teams, if they do not reach the minimums should be docked money from their revenue sharing income. But why? Do we really want a league of average teams? If I am a fan of a team that is not going to win in 2008, what is the difference if they are 4 games out or 14? Or even 24 for that matter? So let the owners pocket the cash, it is, after all, their investment. Maybe the owner is saving it for when they.

However, if the owner is doing as Jeffrey Loria is being accused of doing by John Brattain at The Hardball Times, then I do see an issue. But for a second, as a fan, think about which club you would have preferred to follow the past decade, the Florida Marlins and their 2 championships or the Atlanta Braves and their annual playoff failures? While following a team that wins is always exciting, following your team to the championship game, when everyone is watching is that much more exciting.


This is something that Oakland A's general manager Billy Beane seems to have taken note of. The club he put on the field in 2007 finished 3rd in the division. Not much was going to improve within the organization and there was little hope of bringing in an impact free agent. The minor league system had been run dry and the once highly touted top prospects they did have, were not panning out at the major league level.

What to do? Beane could have easily held onto Haren and Swisher, he could have still pieced together veterans such as Brown, Sweeney and Foulke possibly catching lightning in a bottle in all three players. Maybe the team squeaks into the playoffs with a great deal of luck. No way the team has enough luck to go to the World Series and win it all, and chances are the team doesn't make the playoffs at all.

So what Beane did was the most intelligent thing possible. He moved highly valued commodities like Haren and Swisher, players whom are still young and have excellent contracts for younger players with better contracts and whom he can control for longer. For 2008, 2009 and even 2010 the A's will probably regret the trades they made, but much like the Mulder and Hudson deals, the value received will begin to outweigh the value given up.

Billy Beane, again took advantage of market inefficiencies. This time adding extremely high ceiling players while taking a poor farm system and making it one of the best.

Again, I pose the question, what team would you prefer to follow for the time period of 2008 to 2012? A team like the Oakland Athletics, who may struggle this season but should still be entertaining and will allow one to watch the development of minor league players. OR a team like the Seattle Mariners, whom should be strong in 2008, maybe even 2009, but who have little to nothing in the system and will struggle to compete beyond 2010?

I'm a big picture guy...