In Major League Baseball the general belief is that the more a team spends on their payroll the more games they will win.With the absence of a salary cap baseball may seam unfair to the smaller market teams who can’t bare the salary costs that the larger market teams can. In Michael Lewis’ Moneyball: The Art of Winning an Unfair Game Lewis depicts just how the Oakland Athletics have been winning in an unfair game for almost a decade.
The A’s are a small market team that doesn’t have nearly the amount of money at their disposal that their competitors in the American League do.However this past season the A’s won their fourth American League West championship in the last seven years while having the lowest payroll in their division.In the 2006 season Oakland had a salary of just over 62 million and still finished with a better record then the Boston Red Sox whose payroll was double that of the A’s.
Based on the economic model developed in our textbook on pages 168-170, the Oakland A’s aren’t supposed to field a competitive team year after year because the author Rodney Fort says that a large market team will always win more then a small market team. Fort argues that with the existence of large and small market teams there is revenue imbalance because the large market team brings in more revenue then the small market team.Revenue imbalance then causes competitive imbalance because the large market team will buy more talent then the small market team and winning percentage is described as a function of talent. As a result of buying more talent, the large market team will have a higher payroll so not only does revenue imbalance cause competitive imbalance but it also causes payroll imbalance. One might say that this explanation is valid when assessing major league baseball because of teams like the New York Yankees and Boston Red Sox who among others are large market teams who win and because of small market teams like The Tampa Bay Devil Rays and the Kansas City Royals who always lose.
However The Oakland A’s and General Manager Billy Beane disprove the theory from our textbook because they are a small market team that accumulates one of the highest winning percentages year after year. This is because author Rodney Fort is half right in his hypothesis.Revenue imbalance does for the most part drive payroll imbalance but revenue imbalance does not entirely drive competitive imbalance. Just because a team has a low payroll as a result of being in a small market does not necessarily mean that they have no chance of competing. In addition to Oakland, teams with small payrolls have still been competitive in the recent past.
In 2003 The Florida Marlins won the World Series with a payroll of 48 million which was one of the lowest in the league and the Minnesota Twins like the Oakland A’s have been consistently competitive in the AL over the last 5 or 6 years despite being in a small market. The A’s recent success is attributed to the innovative approach taken by Billy Beane in assembling a baseball team with a very limited amount of financial resources. Billy Beane has built a successful ball club because he has found an efficient and cost effective way of measuring baseball talent thus essentially creating a loophole in this unfair game because winning percentage is a result of talent not payroll. Every Year there are high priced talented free agents who seek huge contracts that Oakland can’t afford. Under conventional wisdom these players are depicted as being extremely talented and therefore valuable to a team because of statistics such as RBI’s and batting average and the ability of that player to perform in the clutch.
Since Billy Beane can’t afford these players he has gone about acquiring players in a much more different fashion.Beane uses sabermetrics in determining the true value of a player. Sabermetrics is the mathematical and statistical analysis of baseball through objective evidence developed by Bill James. Sabermetrics puts less emphasis on things such as batting average and more emphasis on OBS (on base plus slugging).Saberemtrics is the foundation of Beanes whole organizational philosophy, he tries to get players that take pitches, get on base, walk, and hit for extra base hits.Beane doesn’t believe in steals because it’s too risky or the sacrifice bunt because it’s conceding an out. These beliefs are from Bill James formula “runs created”.
James measures “runs created” as (hits + walks) X Total Bases / (at bats + walks). This formula proved that conventional wisdom about how to measure offense was wrong because there was not enough emphasis on walks and extra base hits and too much value on expensive but not as important statistics such as batting average and stolen bases. (Lewis pg.77-78) Billy Beane has made a livelihood by concentrating on these important but less expensive statistics as a means of competing.