Archive for Moneyball
I’m a big fan of Mauer—who isn’t?—but I worry that the Twins may have stretched a bit here with this long-term commitment. I have Mauer’s value ranging from $157 million to $182 million over the term of the extension. Certainly, that’s in the ballpark of the contract he’s agreed to, but Mauer didn’t sacrifice much income for the sake of security. He might be worth more than my projection given that the Twins have been an above-average team; however, assuming the team will be as good as they have been for the duration of the contract requires some optimism.
Hats off to Mauer’s agent Ron Shapiro for getting all that he could out of the Twins. But the Twins are one of the best-managed organizations in baseball, so I think they deserve the benefit of the doubt.
It seems that I have upset a few people with one of my interview answers at Chop-n-Change, involving a paper by Jahn Hakes and Skip Sauer. Here’s a brief response that covers the criticism the paper has received (cross-posted in the comments).
1) The goal of Hakes and Sauer was to test the Moneyball hypothesis that OBP was undervalued relative to SLG; hence, the title of the paper.
2) This test must include OBP and SLG in the model. The concept can be broken down and testing further, which they did, but what is interesting is if this central tenet of Moneyball is true. The exercise is not about designing the perfect model for predicting salaries. I vividly recall discussing this fact with the authors at the time the paper was written when I asked them about alternate specifications of the model. They responded that they had done this and this analysis would be a part of another paper, which it was, but were focused on Moneyball itself for this exercise. This then creates the problem of adjusting for playing time. This could be controlled for in ways other than plate appearances (e.g., interaction terms), but the authors ultimately decided the parsimony of their specification made it the right choice. Adding in the impact of all sectors of the labor market is another tough issue. Ideally, you would like to separate the labor classifications, but they are trying to estimate the market price for the entire labor market—reserved and arbitration-eligible players are a part of that market. So, they include dummies to act as a control. Again, interaction terms or some other correction could have been used, but they felt that their final specification was best. And they were able to convince many other economists (colleagues, editors, and referees) at different levels of review that what they produced was the best choice.
3) The goal of the study was to identify if the market was out of whack at the time the book was written. The findings indicate the pre-Moneyball models don’t predict as well as the post-Moneyball sample based on what we would expect them to be. That is a point in favor of the paper, not an objection. Furthermore, in 2001 the labor market was especially out of whack, and I find it odd that it was the specification chosen for close examination. The regression equation was designed to pick up information from real-world data, the values are not something presupposed by the authors. The coefficient on OBP is negative—higher OBP lowers your salary. You don’t need to plug in any values to see that this is counter-intuitive. Part of the reason why the salaries remain so stable when Tangotiger adjusts the inputs is that the higher value for OBP cuts into the impact of SLG. As Hakes and Sauer acknowledge in the text, the coefficients on OBP are not even statistically significant—the market appeared to be ignoring the relevance of OBP at the time. That’s their argument.
4) So, the Hakes and Sauer papers may be imperfect, joining the ranks of every other empirical study ever written. If you think you can do better, here is a solution. Take the freely available data and run alternate specifications. As it stands, the critique is that the perfect is the enemy of the good. If further testing reveals the labor market was not out of whack, then we have an argument.
The long-awaited announcement of Tim Hudson‘s new contract with the Braves has finally come. The terms guarantee Hudson $9 million a year over the next three seasons, plus a $1 million buyout of a team option for a fourth year. The fourth-year option also pays out $9 million, so the total value that could be paid out is $36 million over four years. The contract voids a $12 million option for 2010, that the Braves were likely going to buy out for $1 million.
Hudson is an interesting player. He’s ranged from good to dominant. He was really pitching some of his best baseball as a Brave right before his injury. The good news is that he pitched well in his return through 42 innings. With a full offseason to recover, I think there is good reason to believe that he will be back to normal; however, the injury risk may have reduced his value somewhat. I proceed to my valuation with this caveat.
If Hudson pitches as he did in 2007 and 2008 over the course of a full season, then he’ll be worth about $12.5 million per year over the next three seasons. Thus, it appears that Hudson is giving the hometown discount that he promised—smart move by Frank Wren and the Braves. This allows the Braves to trade one of its other starters (who will it be?) and still have pitching stability going into the future.
If you see Hudson out and about in the Atlanta area, be sure to say “thanks”—but, please, don’t pester him. Or, maybe throw a little support to the Hudson Family Foundation. He wants to be in Atlanta, and he has strengthened his club by doing so. It’s nice to have you on board for the long haul, Tim.
Pizza Cutter posts an interesting bit of analysis on shifts in the labor market chronicled in Moneyball at The Hardball Times.
Did Moneyball really have an effect outside of Oakland and the handful of teams that embraced Sabermetrics in the following years? Were the lessons of Moneyball taken to heart league-wide? The surprising answer is “Yes, and in a much more powerful way than you might expect.” The way to tell whether a man believes something is if he’s willing to “put his money where his mouth is.” In baseball, that’s rather literal. Teams buy the service of players in a (mostly) open market. How much money they are willing to commit to a player tells a lot about what they think of him. And what drives those salaries tells a lot about what the market as a whole thinks about what makes a player valuable.
Cutter then examines the correlations of OBP, home runs, and RBI with player salaries for five years before and five years after Moneyball‘s publication. He finds that the OBP correlation increases around the time the book was released, and the correlations decline for home runs and RBI.
Cutter’s findings fit with the findings of two studies by Jahn Hakes and Skip Sauer (The Sports Economist), both excellent economists and fans of baseball and sabermetrics. Their first paper (working version), published in Journal of Economic Perspectives looks at the baseball market from 1999 — 2004. They used multiple-regression analysis to examine the valuation of on-base percentage relative to slugging average and found OBP was undervalued but the “undervaluation of a batter’s ability to get on base, appears to have been substantially if not completely eroded by the time the book was published.”
In a follow-up study (working version) published in International Journal of Sport Finance, Hakes and Sauer expand the sample before and after Moneyball from 1986 — 2006 and examine specific skills (i.e., walking and power) to see how they were valued over time. Again, the findings mirror Cutter’s results: “we find that the pricing anomaly extends well before the period described in Moneyball, and that with some important caveats, the market correction in the post-Moneyball period persists.” That the inefficiency extends well into the past is an interesting finding.
It’s been said that the plural of anecdote is data. Well, Michael Lewis gave us an enjoyable anecdote, and there appears to be strong evidence in data that the anomaly discussed in the book was real. On-base ability was undervalued, but the market quickly adjusted to correct for the inefficiency.
Yesterday, the Tampa Bay Rays traded Akinori Iwamura to the Pittsburgh Pirates for relief pitcher Jesse Chavez. The Rays were motivated by the fact that they would have to pay a $650,000 buyout if they did not pick up Iwamura’s $4.25 million option.
Iwamura missed much of last season with an injury, but returned to form at the end of the year. Based on his 2007 and 2008 performances, I anticipate him being worth a little more than $7 million in 2009. Thus, even if the injury offers some risk, Iwamura appears to be worth a bit more than his salary. Why would the Rays trade him? They have Ben Zobrist at second and Evan Longoria at third, so there isn’t any room. It’s better to capture some of the value the team would be giving up by having him ride the bench.
In return, the Rays get Jesse Chavez, a young and decent-but-not-spectacular reliever. He’s difficult to value because he doesn’t have a long record of performance, and as a reliever his career sample size is small. As an average reliever who pitches 80ish innings, he’s worth around $2 million/year. He’s got two more years before he hits arbitration when he’ll be making a little over $400K a season. Thus, he provides about $3 million in total surplus (marginal revenue product — salary) over the next two years. This doesn’t even take into account his arbitration years, when he’ll make a little less than half of what he’s generating in revenue (He’ll also be improving and league revenues will be growing). Though, I’m reluctant to put much value on this time period given the difficulty in predicting what he’ll become from his short career. There is a lot of uncertainty here.
In summary, it looks like a pretty even deal; but, definitely mutually beneficial.
The Phillies have received a fair amount of criticism for their reluctance to promote Chase Utley and Ryan Howard until they were older. The end result is that the team has two quite valuable players locked in through their peak years (29-30). It’s difficult to discuss this topic without selective anecdotes—and maybe the Phillies would have been better in the past with earlier promotions—but, it appears that everything has worked out just fine. Score this one as a win in the “leave ‘em in the oven” school of development camp.
So, when I read that the Baltimore Orioles were not going to pick up Melvin Mora‘s $8 million option I thought I’d check out whether or not this was a good decision. I didn’t even have to run the calculations to see that he’s not worth his option. And given his age, he may be done. But, it was his age that caught me off guard. I haven’t followed his career closely, and I had not realized how old he is.
He didn’t make it to the majors until age 27; and once he made it, he wasn’t all that spectacular. But, at 31, he batted .317/.418/.503—his first season with an OPS over .750. From 31–33 he averaged .312/.391/.513. Since then, he’s been a 750 OPS player. It’s an odd career shape—I wouldn’t advise projecting such a large mid-career bump—but it’s not unexpected that someone has a career like this.
What amazes me most is that he was allowed to stick around long enough to have his excellent years from 31–33. In most cases, teams give up on players in their late 20s who are past the development stage. But, for whatever reason, the O’s stuck by him and it paid off. His career path reminds me a little of Matt Diaz, who arrived later than most prospects, but has had a nice career since.
I believe that these types of players are underused by teams. Rather than waiting for a guy to bloom, teams (and players) just give up. But peak age for players is in the 29–30 range—not 27, as is often claimed—so many player leave the game before their time is up. Why not keep a few veterans at Triple-A, maybe even pay them a little more just to hang around? If one does blossom, he’s reserved and cheap through his peak.
I found this anecdote from Derrick Goold at the St. Louis Post-Dispatch to be curious.
What age is too aged to be a prospect?
There is no real answer.
The St. Louis Cardinals, as described by farm director Jeff Luhnow, have studied how high-end players — the top-notch, elite, standout prospects — reach the majors in their early 20s, and how they excel because of that. Colby Rasmus, who was 22 for most of this last season (his rookie season), fits that model. That trend, Luhnow has said before, is part of the reason why the organization adopted a more aggressive promotion approach a few seasons ago, and why young players Eduardo Sanchez, Richard Castillo, Daryl Jones and a few others were pushed up a level. Even some of the Cardinals’ international signings have been hastened into a short-season club to see how well they adjust a more demanding level.
So, the Cardinals have noticed that elite players tend to reach the majors in their early twenties; thus, they are promoting prospects quickly in order to increase their chances of becoming elite players? I cannot believe that Jeff Luhnow actually believes this, at least not for the reason listed above. Of course, better players hit the majors at an age younger than most players. This is because their inherent talent allows them to be good enough to play at the major-league level earlier in their development than most other players. Simply moving a player along to the next level doesn’t make him better; in fact, I suspect it stunts growth when players struggle after being promoted too early.
I have nothing against promoting players who are ready to move up to the next level—and I hope that the Cardinals believe that promotions should only occur after meeting predetermined benchmarks—but I think it is highly unlikely that moving up causes a player to be better.
Looking at the performances of the prospects mentioned above, I don’t see much evidence of success from pushing prospects.
Eduardo Sanchez was promoted to double-A after blowing away high-A for only 25 innings. While this may seem quick, he did follow up on a nice 2008 season in low-A ball, so the promotion is not a total shock.
After playing in the Venezuela Summer League at 17, Richard Castillo started at high-A in 2008. But after 16 innings of decent, but not fantastic play—it’s hard to tell in so few innings—he was sent to low-A to finish out the season. He spent all of 2009 in high-A, pitching decent but not spectacular ball.
Daryl Jones was promoted to high-A in 2008 after a good season in low-A. He played well in high-A for the remainder of the year. He repeated high-A in 2009, and his performance wasn’t so hot.
And then there is Colby Rasmus, who followed up poor showing in triple-A with a stinker of a rookie season.
The fact that elite players hit the majors sooner than other players doesn’t mean their quick ascensions caused this. Ryan Howard and Wade Boggs were not worse for being held back. After watching the Braves push Kyle Davies and Jeff Francoeur, I believe it is best to wait too long. These guys are professional athletes who must have big egos to succeed. When things don’t go well, development may be damaged by taking short-cuts. I could be wrong. I can’t prove that Davies and Francoeur would be much better players if they had been held back any more than I can prove that Boggs and Howard excelled because they stayed in the minors longer. But, what damage does it do to let these guys play their way to the next level?
So, in answer to the question “What age is too aged to be a prospect?” It depends. The younger the player for his level, and the better the performance, the more likely it is that he will succeed. Bumping a player up to make him better is not a strategy that I advocate.
That’s the question that Mets blogger James Kannengieser asks. Not too long ago it’s a question that the Braves were facing, but now it’s the Mets problem (boy, it feels good to write that). At the time, I generated some estimates of Francoeur’s worth that projected he was worth around $12 million, and should expect around $3 million in an arbitration award. Understandably, this upset some people (including me) for the sake of the sheer size of the number. Now that the question of Francoeur’s worth is relevant again, I want to revisit the question.
Let me first begin by stating that my initial estimate was too high—way too high. I was giving credit for non-marginal revenue contributions and over-weighting defense. I’ve spent much of the past year tearing down and rebuilding my system for valuing players for a book project on valuing players. Though I have corrected the model, the foundation of the model is still the same. I use team revenues to estimate the value of winning, estimate player contributions to winning, and then impute player marginal revenue products (MRPs) from these estimates.
In 2009—including his awful time with the Braves, and his good stint with the Mets—I estimate that he was worth $6.8 million. Arbitration-eligible position players tend to earn approximately 74% less than their MRP estimates; thus, in arbitration Francoeur might expect to receive around
$1.8 million. That’s $1.6 million less that his 2009 salary. Even if the Mets are able to successfully convince an arbitrator that Francoeur is worth $1.8 million, the Collective Bargaining Agreement limits the salary reduction to 20%: $2.7 million. But, that’s not relevant to the Mets. Sure, they wish he hadn’t been signed to a bigger deal. The question is: is he worth $2.7 million?
The $6.8 million estimate says he’s worth well more than that, but the estimate is misleading. The MRP estimates give credit for the playing time, and Francoeur’s managers have played him far too much. A lot has been made of Francoeur’s dismal 2008 and 2009 with the Braves. Just as he was never as good as his 2005 rookie campaign nor his 2009 stint with the Mets, I don’t believe Francouer was that bad. For his career, Francoeur has an OPS of .743, his career OPS+ of 92 is equal to his overall 2009 performance. He’s no Natural, but he is a useful player who can serve in a platoon/reserve role. But, that’s not how the Braves or the Mets used him. Since his first full season in the majors he’s averaged 666 plate appearance a year. While this number may be appropriate for the anti-Christ, it’s not the number of PAs that any manager should be giving Jeff Francoeur. Jeff Francoeur should probably play 50% of what he has played, cutting his MRP estimate in half. With that in mind, Jeff Francouer is really a $3–$4 million player, depending on how good he really is. The good news for my estimates is that managers have strong incentives not to make such mistakes when filling out their line-up cards; but because they do, it’s important to interpret the raw estimates with care.
If the Mets non-tender Francoeur, they will likely end up having to spend about what they are paying him to replace him on the free agent market. Given that he seems to be popular with fans, media, and players; it’s probably worth keeping him around at that price, even if he ends up winning an arbitration award similar to this season’s salary. If he has a bad year, you cut him loose. If he has a good year, then you can take him to arbitration one more year, maybe even sign him to a long-run deal. Non-tendering him wouldn’t be the worst thing in the world, and given the hold he seems to have on his managers, it might be best to not give his skipper the opportunity to put him in the line-up. The one thing that I would not recommend is signing him to a long-run deal now. What’s the rush? The worst thing that happens by not going long-term is that he has a good season and he gets a deserved raise in arbitration. And if Francoeur is desperate to sign a long-run deal—as he was hinting at the end of the season—then that is probably an indication that he doesn’t think he’s going to get much better either.
Ken Rosenthal reports that Tim Hudson will likely turn down his mutual option with the Braves.
Barring a last-minute, knockout offer from the Braves, right-hander Tim Hudson plans to become a free agent, according to major-league sources.
Hudson’s contract with the Braves includes a $12 million mutual option for 2010. If Hudson declined his end of the deal, he would be free to negotiate with any team.
Other than Angels right-hander John Lackey, the upcoming free-agent class is largely devoid of top-of-the-rotation starters.
Hudson, 34, fits that description when healthy, and he proved that he is recovered from Tommy John surgery by going 2-1 with a 3.61 ERA in seven starts after rejoining the Braves on Sept. 1.
The Braves are likely to exercise their option on Hudson, a decision that must be made within five days of the completion of the World Series.
Last month, I estimated Hudson’s market value, assuming that he is healthy.
Valuing Hudson is a bit difficult, because of his recent past performance. He pitched well in 2007, but his 2006 and 2008 seasons weren’t as good—the latter season was marred by injury. Let’s just assume that 2007 was Hudson’s true-talent level. Given aging and league salary growth, I project Hudson will be worth $11.25 million in 2010. The Braves having an above-average team pushes this value upward a bit, but slower-than-normal revenue growth would lower the value. In addition, injury recovery isn’t guaranteed, which makes him riskier than I have assumed in this analysis.
By the rosiest of scenarios, Hudson will be worth the option. Given the dearth of pitching already owned by the Braves, and the possibility of a weak free-agent market (Update: by weak, I mean talent will be cheaper than usual, not weak in talent), I suspect that the Braves will pass on Hudson’s option.
In summary, I don’t think Hudson can get more than $12 million/year on the free agent market. Maybe, this is posturing: leaked position by Hudson’s agent as a negotiating ploy. Or, if you’re going to be fired, quit first to save face. Most likely, I think Hudson would prefer a long-term deal with another team for less that $12 million a year, and the Braves aren’t willing to offer a favorable long-term deal. Therefore, he’s willing to trade a one-shot above-market deal for a long-run market-equivalent deal.
One thing that I do not think affects Hudson’s value is the available number of starting pitchers on the free agent market. While there are fewer players for teams to choose from (decreased supply), this also means there are fewer teams seeking starters (decreased demand).