Tom Verducci recently ran an “efficiency” study to determine which MLB teams get the biggest bang for their buck. Essentially, he figured out cost per win (Opening Day payroll divided by wins) and used that number as his starting point. From there, it got a bit more complicated:
Cost Per Win is good, but it’s only a start. CPW doesn’t consider what a team achieved, and because the gap in payrolls is far greater than the gap in wins, CPW skews toward small-market teams who don’t spend and don’t contend often. The goal in pro sports is to win titles, not just games.
That brings us to Step 2: what did the team achieve in the past decade? There are five levels of achievement in baseball:
1. Give your fans a pennant race (defined here are finishing within five games of a playoff spot).
2. Make the postseason.
3. Win a postseason series.
4. Win the pennant.
5. Win the World Series.
Now comes the fun part. I assigned teams what I call Achievement Points for every level reached, with graduating values the more they advanced through the five levels: one point for being in a pennant race, two points for making the playoffs, three for winning each postseason series, four for winning a pennant, and five for winning a World Series. A team could accrue a maximum of 21 points for a world championship season.
Verducci finds that by his measure, the Yankees are the 23rd most efficient club in the sport. I have had a general discussion on this issue in the past with Maury Brown, reprinted here. While the broader issues are the same, Verducci’s study has much greater flaws and will be widely disseminated, to the point where Yankee fans will probably be forced to spend time parrying with people citing these results. As such, I wanted to address a number of flaws with the study.
1) The most obvious problem with the study is that it creates a false relationship between efficiency and winning, suggesting that efficiency is based directly on the fortunes of the club. However, this simply ignores the fact that baseball is a business. As such, the goal is not simply to win, but rather to make money, with winning being the easiest way to achieve those ends. The most efficient clubs are not those that win on the cheap, but are those that maximize profits.
2) Building off the previous point, clubs may make decisions that are not considered efficient by Verducci’s standards but help make them more profitable. For example, the Yankees may bring in big names rather than depend on prospects because it is better for their bottom line in terms of merchandising and their TV network. Signing superstars helps extend the brand, and has helped the Yankees turn from a powerful team into an international conglomerate, despite the fact that the club stopped winning championships as this transition was taking place. Even if the spending is not entirely “baseball” efficient, big time free agents bring people to the ballpark and makes them turn on their TV sets. I would guess that if you compared payroll to increase in total profits since the mid 90’s, you might find that the Yankees as an enterprise do better than everyone else. Quite simply, some of the things that they do that may be inefficient from a baseball perspective are profitable, and are therefore efficient in terms of their overall business.
3) The study ignores the fact that some clubs have a lot more money than others, and therefore are acting more efficiently by signing a sure thing to a big money deal rather than depending on cheaper players who generally have a lesser track record. Revenues need to be included in the equation.
4) It also glosses over the fact that not every situation is created equal, in that it ignores the competitiveness of the team’s division. Clubs in the NL West know that they do not need to spend to build a 100 win club, as they can win the division at 92 or so. Those in the AL East are not quite as lucky. Context is extremely important, and this study ignores it until the very end of the article, at which point it references this issue but makes no suggestions as to how to properly adjust the data.
5) The scaling of how much a playoff run is worth v. a series win v a WS win, etc is asinine, and does not reflect that the primary goal is to make money. The numbers are arbitrary and have no relation to reality, and then are arbitrarily subtracted from cost per win. Basically, the math in the study makes absolutely no sense, and renders the results meaningless.
I am not trying to suggest that the Yankees have been run perfectly, because there have certainly been some inefficient decisions. However, the Yankees have become a billion dollar conglomerate over the last 10 years, and have parlayed their method of operation into constant contention, a handful of championships, and more money than any franchise in the sport. Baseball is a business, and the bottom line is what matters to those running the club. By that measure, the Yankees are far from inefficient.
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5 Responses to Verducci Study Shows Yankees Are Inefficient
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TIQ IQ
Consider the difference between efficient and effective and then consider which you would rather be. The Yanks make a ton of money and contend every year. What could be better? This is a sport as well as a business and the Yanks excel at both ends. I’m sure Billy Beane is way more efficient than Cashman but who the hell cares?
I agree, I especially think you laid out points 1, 2, & 5 well.
The efficency standard should have something to do with return on investment to the franchise. That needs to focus on cash brought back to the club. You could figure out approximately how much a WS win is worth by calculating the added gate, the TV revenue, the merchandise sales, etc. not by basing it off an arbitrary point scale.
Exactly. The clubs have an estimate of how much they earn by making the playoffs, winning it all, etc. A proper study would make that analysis rather than arbitrarily assign values.
Very well said. It shouldn’t be “cost per win” even if that is adjusted to an arbitrary success scale. It should be “cost per profit dollar”. Baseball is a business after all. The organization is built to withstand financial risk because it is so good at pulling in cash that a questionable investment made out of desperation, like the AJ Burnett signing, for example, becomes a perfectly reasonable and agreeable scenario for the organization. Not the fans, perhaps, but certainly for the organization. And the financial risk of signing big-name guys who are more of a sure thing to produce at high levels (tex, CC, A-rod) is hugely diminished because where other teams have to worry that even if the player they signed helps them win they still may not bring fans to the games and the investment may be a bad one in spite of good on-field results, the yankees do not. For the yankees, success is DIRECTLY related to revenue, and the floor (i.e. how poorly the yankees would have to play not to make money) is so low that there is almost never significant financial risk for the club. This allows it to invest all of its revenue back into its own success, which, as we’ve said, leads to more money. THAT is efficiency. The business runs itself.
Great analysis Moshe…
pete good post also…
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The Yankees are the right team for its fans; winning history, HOF players, money making machine, good ownership (now), good management (Cash and crew). Remember, the fans are the most spoiled, demanding and knowledgeable in all of sports!