Comments on: Payroll and Wins

By: Bruce Regal

Bruce Regal — Tue, 28 Nov 2006 17:13:02 +0000

I wonder if efficacy of payroll spending would be found to be higher if instead of using “wins” as the desired outcome one used “successfully qualifying for the post-season” as the desired outcome. It is not clear to me that large payroll increases to get a team from say a .450 winning percentage to a .490 winning percentage are likely to be an efficient way for teams to spend money, and much of the payroll/wins relationship for teams unlikely to compete seriously for post-season spots may be noise. As a hypothesis I would suggest that perhaps a significant portion of additional payroll spending is spent to acheive additional percentages of probability of making the post-season rather than simply wins. Or to put it another way, not all wins are of equal value to a team and part of the reason behind a finding of a relatively low payroll efficacy in achieving wins might be that it is not really wins that are being sought but high-value wins (i.e., wins that achieve the highest increase in probability of making the post-season).

By: Marc

Marc — Mon, 13 Nov 2006 15:39:05 +0000

I look at it a little differently. It seems to me if you have one element that accounts for 18% of the variance, that means something. High payroll, by itself, doesn’t guarantee wins if you piss it away, but it makes it a lot easier and gives you more leeway for mistakes. In the case of the Braves, it means the difference between keeping Andruw Jones and losing him. Clearly, the teams with more resources to spend, all other things being equal, have an advantage over those that don’t. Of course, I guess the question is, are there gradations; ie, obviously, a $200 mm payroll will give you an advantage over an $80 mm payroll, but is there the same difference between $80 mm and, say, $95 mm?

By: JC

JC — Sun, 12 Nov 2006 12:41:57 +0000

Cyril Morong writes: "Is there some kind of divisional effect? The Yankees and Red Sox both pay very high salaries, yet they play each other alot (19 times each year? when beofe it was 11-12). Before 2000 or 2001, teams played a balanced schedule. You played every other team in the league about the same number of times. Now you play almost half your games against your own division. What if the top 4-5 teams in salaries were all in one division? If they play each other alot, they can't all win. This would hold down their pct. And teams with low payrolls in other divisions will see increases in their pct. So I wonder if somehow this analysis could be done divsion by division. Maybe have some kind of variable in there for what division you play in. I don't know what that would be, though."

By: tangotiger

tangotiger — Fri, 10 Nov 2006 20:26:56 +0000

I did a study here of 1999-2005, that basically corresponds to what JC is saying, that every 10% of payroll is 1 win:

http://www.insidethebook.com/ee/index.php/site/comments/competing_on_payroll/#9

Posts #6 and #7 give you the equation of how to convert payroll into wins.

The key point that you’ll find there is that the structure of baseball makes it so that it’s not an efficient market, and therefore, looking at payroll in isolation will tell you only a little about what is happening.

By: Kevin

Kevin — Fri, 10 Nov 2006 19:38:08 +0000

I think what you can take from this, and I have always felt spending doesnt neccessarily equal wins, that to have winning club you need a good mix of very good young/cheap talent, mixed with more expensive pieces to fill those holes. In other words, being efficent, for example this years mets team. This is why the Yankees have to spend so much money, they have no good cheap players on their squad, and have to overspend dearly to get any kind of value. All in all, you should aim to have a payroll around the average, this chart also shows how the Cubs are screwed for the next few years. They have no farm system, so the cubs would need to spend about 140-150 million just to have an ample chance to post 82-84 wins, and that isnt guaranteed.

By: JC

JC — Fri, 10 Nov 2006 14:48:59 +0000

I agree that the reserve rules are one of the reasons the correlation is so low. The reserve clause is one of the big equalizers for small-market teams. Instead of going after big-name free agents, the Marlins (who really don’t play in a small market, but pretend to) concentrate on finding young talent that is cheap. It also means that teams who spend a lot don’t necessarily win. The rule contributes to dampening financial determinism.

By: Ron24

Ron24 — Fri, 10 Nov 2006 14:34:33 +0000

Having a high payroll gives you a better chance to land the best free agents and to keep your own young stars. But of course it’s also possible to spend $200 million on players like Carl Pavano and Jaret Wright and then not make it to the World Series.

By: studes

studes — Fri, 10 Nov 2006 14:31:50 +0000

I haven’t read the book, but the problem I have with this sort of argument is that it ignores the basic structure of baseball. When you have almost 40% of your total value coming from players who are, by “law”, paid the minimum or close to, of course your correlation between salary and wins will be significantly less than one.

Depending on how the authors interpreted their finding, it can be misleading.

By: JC

JC — Fri, 10 Nov 2006 11:57:59 +0000

I don’t know, but I suspect it would predict much worse, since it doesn’t weight for the quality of the player.

By: Andrew

Andrew — Fri, 10 Nov 2006 04:27:45 +0000

JC,
What would we see (or what would you predict we would see) if the study was based on something slightly different like number of players paid above the league average, or something of that sort. This is where I think the Braves’ winning can be explained: great expensive talent and then good cheap pieces added on. Any thoughts?