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May 19

Salary Cap: No Need

I’m one of those guys who thinks an MLB salary cap is a silly, unnecessary, terrible idea. You can complain about the Yanks and Red Sox and spending sprees all you want, but that won’t change the facts.

For example: How many MLB franchises have played in the past ten World Series? 14. How about the NFL’s equivalent, the Superbowl? 14. I won’t even mention that the NFL has two more teams, and thus their percentage of teams to reach the sport’s pinnacle competition is actually smaller. Of the decade’s 14 Superbowl teams, only 7 were crowned champions. As for MLB, nine franchises had their own ticker-tape parades.

Look at the 2010 Playoff teams (Payroll rank): Yankees (1), Phillies(4), Giants(10), Twins(11), Braves(15), Reds(19), Rays(21), Rangers(27). That’s 3 teams from the top third of payrolls, three from the middle third, and two from the bottom third; seems pretty even to me. People scream and cry about the Yankees and Red Sox spending and spending and winning. They forget that the New York Mets’ average payroll rank over the past decade is 3.6, yet they’ve only made the playoffs in one of those ten seasons. The Minnesota Twins have averaged the game’s 21st largest payroll over that timespan, yet they have the same number of playoff appearances as the Red Sox—six.

For years and years, I’ve had this salary cap debate with a wide cast of characters, and time after time the counter-argument is “If you look at it in the long-term, bigger payrolls mean more playoff appearances.” That’s just not true. It’s a classic case of sportsfans making an assumption without running the data or further investigating the issue. So, I actually sat down and input the numbers onto an Excel spreadsheet. I created a scatterplot, with each point’s X-value representing a team’s average payroll rank over the past decade and the point’s Y-value corresponding to that team’s total playoff appearances over said decade.

 

I threw in a linear regression to show the general trend.   That lin-reg’s R-Squared value is about 0.33; for those of you who aren’t all that stat-saavy, that’s a rather unimpressive correlation. This tells us that we can’t use payroll as a predictor of success; it just isn’t all that relevant. A very small portion of a team’s success can be attributed to payroll, but not nearly enough to warrant the idea of instituting a salary cap. Great teams can be built with tiny payrolls, while total flops can be built with nine-figure payrolls.

“But what about the Pirates and Royals?” you ask, “Aren’t they victims of small-markets?” No, they’re not. They’re victims of penny-pinching owners. This past summer, deadspin.com leaked some rather hush-hush financial statements. Guess how much money the Pirates got from MLB revenue sharing in 2008? $39 million. That’s money from shared merchandise sales and teams that went over the current salary threshold, among other things. Yet, the Pirates still only spent $49.37mm on their roster. Forbes magazine had the Pirates’ operating income for 2008 at $15.9mm. Meanwhile, playoff teams like the Los Angeles Angels of Anaheim ($10.3mm), Chicago White Sox ($13.8mm), and Milwaukee Brewers ($11.8mm) made less of a profit on the season. Now, tell me again that the Pirates can’t afford to field a competitive team? They can. They simply are not utilizing the money they’re making and/or receiving from the league to create a winning product. That’s not the Yankees’ fault, it’s not the Red Sox’ fault, it’s not Bud Selig’s fault; it’s the fault of the Pittsburgh Pirates and their owner, Robert Nutting. Just because guys like Nutting and Marlins’ owner Jeffrey Loria are misers, should other teams really be prohibited from putting everything they can into their team? The Pirates wouldn’t have been all that much better if the front office splurged on Matt Holliday or John Lackey, but if Nutting had sacrificed some profit to re-enforce his scouting teams, bring in advisors for his GM Neal Huntington, and maybe invested in some low-risk/high-reward free agents that could’ve brought back prospect-packages in mid-season trades (Matt Capps, Joaquin Benoit, Livan Hernandez, Jim Edmonds), the organization could’ve truly improved. A great example was the Jesse Chavez situation. Pittsburgh dealt Chavez to Tampa Bay in exchange for the washed-up Akinori Iwamura and his $4.85mm salary. The Rays then dealt Chavez to Atlanta for Rafael Soriano, who was one of the game’s best closers while making $7.25mm. Had Pittsburgh waited and coughed up an extra $2.4mm, they could’ve had Soriano, who would have brought back a king’s ransom of prospects in July.

A bigger payroll doesn’t necessarily make a team better, but it helps signify an owner’s commitment. For example, the whole week/month/year of memorials for the late George Steinbrenner happened because year after year he did everything he could to please his fans. He was an impulsive man who always meant to make the team better. Those impulses didn’t always pay-off, like with the signings of Kenny Rogers, Carl Pavano, and Steve Karsay, along with trades for guys like Randy Johnson. Moves like that took up payroll space, along with roster spots, and actually hurt the team. Astros’ Owner Drayton McLane similarly never gives up on his team, and while I think he’s one of the worst owners in the game, you can’t say the guy doesn’t want to win. Year after year he tries to get his front-office to pull something off mid-season and push his team as close to the playoffs as possible. Arte Moreno of the Angels was the same way, although the past two off-seasons haven’t featured the boisterous win-now moves that we came to expect from him in his first couple of years as the team’s owner. The urge to win of these owners doesn’t necessarily correlate to actual victories.

People argue that no salary cap means you can just patch any wound with money, but that’s an ignorant and—frankly—incorrect stance. Look at the Cubs: they have Alfonso Soriano in left field, entering the fifth year of an eight-year, $136mm contract. Because of that contract, the Cubs couldn’t go after the likes of Carl Crawford this winter, even though he would’ve been an upgrade in left. The Cubs are stuck with Soriano and his .326 career OBP.

The Astros also have a payroll hazard in left; their problem is Carlos Lee. Lee will make $18.5mm in the 5th year of his 6-yr/$100mm pact, but posted a negative WAR in 2010, showing that he’s not even a replacement-level player at this point. The ‘stros aren’t likely to contend in 2011, and would benefit in the long-term from seeing what a young guy like Brian Bugsevic, Freddy Parejo, or J.D. Martinez could do everyday at the major league level, but fans (and Lee) would wreak havoc if the $100mm-man was delegated to bench duties so that some kid can get struggle against big league pitching to prepare for the future. So, poor investments with a big budget can actually hurt the team in the long-run.

There are two examples of teams whose big budgets actually hurt the squad. Now, look at a team like the Rays who have won two of the past three AL East titles with a small payroll. Smart drafting (Evan Longoria, David Price, Wade Davis, Jeff Niemann), shrewd trades (Matt Garza, Jason Bartlett), and high-upside minor-league signings (Carlos Pena) brought them success. The Minnesota Twins are playoff regulars, even with their payroll typically being in the bottom third of the league thanks to a brilliant manager (Ron Gardenhire), one of the all-time best rule V picks(Johan Santana), homegrown talents (Joe Mauer, Justin Morneau, Kevin Slowey), and well-calculated trades (Francisco Liriano, Joe Nathan).

The more you look at the facts, the more apparent it becomes that there just isn’t any evidence that the league’s competitive balance is significantly affected by it’s lack of a salary cap. On a pure entertainment level (that’s what the game really is all about, no?), I actually think the lack of a cap makes the game more fun. People love to root for an underdog, and even if the stats show that a higher payroll doesn’t mean that a team will be better, fan-bases are brought together by the common enemy of their high-payroll opponent. How much more fun is it for the Rays to beat the Red Sox when they’re payroll is a half, or a third, of the boys’ from Beantown? Don’t Twins fans love seeing their team beat out the Tigers and White Sox despite their opponents’ big-name acquisitions of guys like Miguel Cabrera and Alex Rios? Weren’t the A’s AL West Crowns of ’06, ’03, and ’02 all the more exciting because the Angels outspent them by over $20mm in each of those years (over $30mm in ’06)? Fans love underdog stories, and the variation in payrolls lets fans latch onto something besides talent that they can use to categorize who the Davids and Goliaths are.

If payroll isn’t an indicator of success, and the lack of a salary cap actually helps pull together the fan-bases of small-market clubs in an “all for the underdog” spirit, why would the league bother putting in a salary cap? If it ain’t broke, don’t fix it. Lay the salary cap talks to rest; the league is just fine as it is.

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