Payroll Efficiency, by Playoff Odds

For the last decade or so, various versions of payroll efficiency estimators have popped up to measure which teams are getting the most bang for their buck in terms of spending. The late Doug Pappas pioneered this research in MLB, using a formula he called Marginal Dollars, Marginal Wins. That is basically the ancestor of the present $/WAR calculation we often cite, looking at the cost a team paid to add wins to their side of the ledger. These kinds of calculations have helped identify which teams have invested their resources wisely, and which teams are simply squandering their wealth while getting little in return.

However, there’s always been a bit of a problem with $/WAR calculations, because we know that the value of each win added is not linear. The value of a win is better described as a curve, with a sharp inflection in the mid-80s when each additional win significantly increases a team’s chance of making the postseason and going on to compete for a World Series title. A team should not be incentivized to pay as much as for their 78th win as they are for their 88th win, and a rational GM would indeed pay more to make a marginal upgrade on a contender than he would if his team was expected to finish out of the running.

$/WAR calculations ignore the marginal differences in the value of a win, and end up putting too much emphasis on teams that manage to be good and cheap while penalizing teams that are great and expensive, even though the wins added that pushed the great team into that next tier are the ones that make the most sense to overpay for. So, today, I thought I’d try a new spin on the team efficiency calculations, using our expected playoff odds instead of a team’s projected WAR to measure the value of team spending.

For 2014 payroll, I took Wendy Thurm’s estimates from last month and made just a few adjustments, adding in recent signings like Nelson Cruz and Ervin Santana to update the totals. I then pulled in our playoff odds data and matched up those estimates against the payroll estimates. Before calculating the totals, however, I also made one extra calculation, because we don’t want to simply divide the playoff odds by the team’s expected payroll.

What we actually care about is the amount that each team spends above and beyond the minimum payroll, since that is the additional cost that teams are spending to in order to increase their playoff odds. Traditionally, this minimum payroll has always been tied to the concept of having an entire team of replacement level players making the league minimum, so with a $500,000 salary floor in effect for 2014, a team’s minimum payroll is $12.5 million. But that’s not actually the league’s payroll floor for each team, and because we’re not using WAR as our win barometer, we’re not tied to replacement level. In reality, MLB enforces a higher level of minimum spending, and if they don’t, the MLBPA files an official complaint until the league directs the franchise to spend more cash on their players. With league revenues pushing over $8 billion, there is a de facto minimum payroll floor in place, and it’s well north of a $12.5 million Opening Day payroll.

The effects of the minimum payroll expectation showed up in free agency this winter, as the non-contending Astros gave $30 million to Scott Feldman and a combined $14 million to Jesse Crain, Chad Qualls, Matt Albers, and Jerome Williams. The Marlins — the team most often threatened for failing to keep their payroll at acceptable levels — spent $21 million on Jarrod Saltalamacchia, and then $14 million combined on Garrett Jones, Rafael Furcal, Carlos Marmol, and Casey McGehee. These are the only two teams in baseball with an expected payroll under $50 million, and realistically, neither is going to contend in 2014, but both bought veteran free agents because MLB and the Players Association would have yelled at them if they didn’t.

The Marlins, realistically, represent something like MLB’s de facto payroll floor. Whatever the least amount they can spend, that’s what they’ll spend, so I think it’s fair to say that their estimated $42.5 million Opening Day payroll is about as low as MLB will tolerate, even for a non-contender. So, if we subtract out that essentially required $42.5 million from every team’s payroll, we get the marginal dollars each team spent trying to win. Those marginal dollars are what we’ll evaluate a team’s playoff odds against to calculate payroll efficiency.

Because we’re using a percentage as the denominator, the easiest way to present the data is to think of it as a World Series valuation. When you buy a fraction of a thing — say, stock in a company — the valuation of that company is based on the assumption that you could continue to purchase all the remaining shares at that same valuation. If you pay $100,000 for 50% of a company, than the company is valued at $200,000. We’ll use the same valuation model here, and so the figure listed is the World Series valuation based on the share of WS Odds that a team bought with their marginal payroll.

Team Payroll Marginal Payroll WS Odds WS Value
Athletics $79,000,000 $36,500,000 5.2% $701,923,077
Rays $75,500,000 $33,000,000 4.7% $702,127,660
Cardinals $108,500,000 $66,000,000 8.1% $814,814,815
Nationals $130,500,000 $88,000,000 10.6% $830,188,679
Pirates $71,500,000 $29,000,000 3.1% $935,483,871
Tigers $161,000,000 $118,500,000 12.4% $955,645,161
Red Sox $158,000,000 $115,500,000 9.2% $1,255,434,783
Dodgers $223,000,000 $180,500,000 13.0% $1,388,461,538
Indians $80,000,000 $37,500,000 2.6% $1,442,307,692
Mariners $87,500,000 $45,000,000 3.1% $1,451,612,903
Angels $151,000,000 $108,500,000 5.7% $1,903,508,772
Rangers $131,000,000 $88,500,000 4.4% $2,011,363,636
Braves $110,000,000 $67,500,000 2.2% $3,068,181,818
Royals $91,000,000 $48,500,000 1.3% $3,730,769,231
Blue Jays $136,000,000 $93,500,000 2.5% $3,740,000,000
Giants $147,000,000 $104,500,000 2.7% $3,870,370,370
Padres $86,000,000 $43,500,000 1.1% $3,954,545,455
Reds $106,000,000 $63,500,000 1.5% $4,233,333,333
Yankees $197,500,000 $155,000,000 2.8% $5,535,714,286
Rockies $91,000,000 $48,500,000 0.8% $6,062,500,000
Diamondbacks $110,000,000 $67,500,000 0.9% $7,500,000,000
Brewers $100,500,000 $58,000,000 0.7% $8,285,714,286
Orioles $113,000,000 $70,500,000 0.6% $11,750,000,000
Mets $82,000,000 $39,500,000 0.1% $39,500,000,000
White Sox $89,000,000 $46,500,000 0.1% $46,500,000,000
Cubs $89,000,000 $46,500,000 0.1% $46,500,000,000
Phillies $175,500,000 $133,000,000 0.2% $66,500,000,000
Marlins $42,500,000 0.2%
Astros $49,000,000 $6,500,000 0.0%
Twins $82,500,000 $40,000,000 0.0%

(Note that the Astros and Twins are basically considered, by this metric, to have wasted all of their marginal dollars, because we estimate their WS Odds at 0.0%. Of course, winning the World Series isn’t the only goal of spending money, but this measure is only attempting to measure efficiency towards that goal, so they both end up with null valuations. The Marlins are also a null value, even though they are at 0.2% WS Odds, because we used them as the payroll minimum, so they are judged to have spent no marginal dollars. I doubt you care about the payroll efficiency for those three teams anyway, so let’s just move on to the other 27.)

The A’s payroll and chances of WS victory means that they are buying into the World Series at a valuation of around $700 million, and the Rays are just behind them, close enough that it is essentially a tie at the top. They generally dominate lists like this, so seeing Oakland and TB at #1/#2 is no surprise. However, the value of this measure shows up in the next group, where you see real spenders like St. Louis, Washington, Detroit, Boston, and yes, even the Dodgers. LA’s spending spree has been deemed fiscally irresponsible by many — myself included, on deals like the Boston bailout trade — but based on the share of WS Odds they’ve purchased, they’ve actually been one of the most efficient spending teams in MLB. They’ve spent a lot of money but they have a majority share to show for it, and are one of only three teams with WS Odds over 10%. These are the kinds of teams that get shafted by $/WAR measurements, but are actually spending in a reasonable manner when you account for baseball’s win curve.

Not every team could be described as a “reasonable spender”, however. Teams like the Diamondbacks, Rockies, and Orioles have run up significant costs without moving their WS Odds needle very much at all, and while they can use their payroll to defend the idea that they’re trying to win, none of them look likely to succeed at that goal. The Mets, Cubs, and White Sox can somewhat be excused for their high values, since they’re not really trying to win, and are simply running higher minimum payrolls based on being large market teams with access to significant revenues, so their own internal payroll floor is likely higher than that of the Marlins or Astros.

But then there’s the Phillies. They are trying to win. They’re not rebuilding, and this team was constructed with an eye on contending in 2014. And yet, while the median World Series valuation for the other teams ahead of them came in at $3.4 billion, the Phillies share of the WS Odds and the money they’ve spent to get those odds mean that their implied valuation of a World Series title chalks in at an astounding $66.5 billion. That is what it would cost the Phillies, at their current efficiency of spending, to buy a 100% chance of winning the World Series, if such a thing were possible. $66.5 billion.

Now, of course, a World Series championship isn’t actually worth $66.5 billion, or even $700 million. These implied valuations fall apart because no team can actually buy out all of its competition at the prices that they’re constructing their rosters. We’re mixing some apples and oranges here, so don’t take these numbers and say that Dave Cameron thinks that winning the World Series is worth several billion dollars to a franchise. It’s not, obviously. But I think this does a better job of showing us who is spending their money effectively than simply looking at team spending per WAR, since not every win is created equal.

And once you factor in the additional value of higher win totals, the most efficient spenders aren’t always the cheap guys limping their way to a .500 record. The A’s and Rays still are as good at this as we thought, but a lot of the big spenders are putting their money to good use too. Even those crazy Dodgers aren’t quite as crazy as one might think.




Print This Post



Dave is a co-founder of USSMariner.com and contributes to the Wall Street Journal.


71 Responses to “Payroll Efficiency, by Playoff Odds”

You can follow any responses to this entry through the RSS 2.0 feed.
  1. cass says:

    The Nats have a 5x greater chance of winning the World Series than the Braves? That can’t be right. Same division, same teams faced. Relatively even talent. There’s no way the difference can be that big.

    Vote -1 Vote +1

    • Blair says:

      You watch the news lately? Planning on joining the rotation yourself?

      +33 Vote -1 Vote +1

      • Aaron (UK) says:

        The Atlanta Tommy Johns have not just damaged the Braves’ chances, but have also boosted the Nats’ chances considerably, making them look even better in this table. I don’t really think the Nats deserve “credit” for that, though.

        Vote -1 Vote +1

        • Anon21 says:

          Depends on what you mean by “considerably.” Ervin Santana is a pretty close replacement for Medlen, and Beachy is slated to be replaced by four to six weeks of Freddy Garcia plus several months of Gavin Floyd. Projections also didn’t see Beachy as a major contributor anyway.

          The Braves have definitely gotten worse with the injuries, but keeping in mind that a) one player rarely makes a difference of more than a couple wins over the course of a season b) Medlen is no Mike Trout and c) the Braves have partially patched the hole left by these injuries, the doom and gloom being forecast is overblown. I think the Braves will beat the Nationals and take the division again, but even if you don’t agree, projecting the Nationals to run away with the division because of the pitching injuries the Braves have suffered is not sound.

          Vote -1 Vote +1

        • The Foils says:

          The above analysis, besides being a bit cavalier IMO, ignores the hit to depth.

          While the loss of one player, on its own, is rarely a big problem, the domino effect sure could be. I know I wouldn’t want to gamble on Gavin Floyd staying healthy and productive enough to prevent Freddy Garcia, #3* starter.

          *chosen for hyperbole and a desire to not go look at a depth chart

          Vote -1 Vote +1

        • Anon21 says:

          Freddy Garcia is not an unacceptable sixth starter for a contender. He looks generally comparable to Tanner Roark, the Nationals’ probable sixth starter, and the Nationals will also be in some serious trouble if Roark ends up sliding up to #3.

          I agree that the Braves are not particularly deep on starting pitching, but they’re in about the same position as the Nationals in terms of 6-7-8 depth, and the Nationals will be hurt more than the Braves by additional starting pitching injuries because they have a greater proportion of team WAR and salary tied up in the rotation than the Braves do.

          Vote -1 Vote +1

        • troybell23 says:

          Very surprising that Anon21 thinks the Braves will win the NL East! I didn’t even know he was a braves fan!

          +9 Vote -1 Vote +1

        • Rob says:

          Pretty sure Anon21 also thought the Braves would win the division last year…how did that one turn out?

          Vote -1 Vote +1

        • troybell23 says:

          He was convinced they would in 2012 as well. I think he’s generally ALWAYS convinced the Braves are going to win the division. I don’t think I have seen an article on here without Anon21 bitching about how much FG underrates/is WRONG about the Braves. I love my team too, but I also don’t write 5 paragraph impassioned defenses any time they are “slighted” by FG.

          Vote -1 Vote +1

        • Anon21 says:

          Actually, I think I expected the Phillies to win in 2012, like a lot of people. So no points for me on that prediction.

          Anyway, Dave didn’t slight the Braves, but I took issue with some things that commenters had to say about the relative strength of the Braves and Nationals. I do realize that commenting in a comment section is an unpardonable offense in some people’s eyes, and I guess they are technically entitled to their opinions. Some people like discussing baseball, and some people like discussing the way other people discuss baseball. De gustibus non est disputandum and all that.

          Vote -1 Vote +1

        • AK7007 says:

          Anon21, it’s not disagreement or discussion that people are taking issue with – it’s that your disagreement is perceived as irrational due to your fandom. It’s one thing to say that “I disagree with the difference in WS odds between the Nationals and Braves due to reason X,” but you phrase it as “no way the difference can be that great” without really delving into why you think they are evenly matched.

          Meanwhile, non-NL East fans see a 6 WAR gap between the two teams. This says that the one with a higher projected WAR is more likely to go all the way. If things don’t go as the projections predict, we recognize that the runs we predict each team to score are actually on a distribution, instead of as proof that projections hate the Braves.

          I don’t know what FG has to gain by purposefully making false projections about the Braves. If there is a legitimate discrepancy, meaningful discussion would center around “we can improve projections by…” Not “Fangraphs is WRONG, how dare they slight my precious Braves!”

          Vote -1 Vote +1

        • Anon21 says:

          I didn’t say “There’s no way the difference can be that big.” My handle doesn’t even look like the handle of the person who said that. And I didn’t say anything about Fangraphs hating the Braves or any of that other nonsense—that’s just a lazy strawman. I think the Braves will win, and I’ve given specific reasons why. Again, the meta-discussion is pretty boring. If you want to actually talk about which team is stronger, that could be interesting, but talking about the way we talk about is a waste of time.

          Vote -1 Vote +1

        • cass says:

          For what it’s worth, I made the original comment on this thread and I’m a Nats fan. But I really am uncomfortable with these predictions after what happened last year. I know I’m biased, but earlier in the offseason (and based only on Steamer), the Braves had a slight advantage in expected WAR. I was really surprised losing two pitchers and adding in ZiPS changed things that much.

          Vote -1 Vote +1

        • David says:

          “projecting the Nationals to run away with the division because of the pitching injuries the Braves have suffered is not sound”… because your analysis is sound, doesn’t agree, and leaves no possible alternatives?

          Vote -1 Vote +1

    • Kevin says:

      The Nats on paper are a MUCH better team than Atlanta. The Braves are fooling themselves thinking that they re even close to a playoff lock.

      Vote -1 Vote +1

      • MrMan says:

        Isn’t this EXACTLY what we heard prior to the 2013 season?

        Those World Series odds are little better than shots in the dark.

        Vote -1 Vote +1

        • Kevin says:

          That’s more a fault of variance in baseball than anything else. Things are too random to control. IIRC the Standard Deviation of a teams Pythagorean Expectation is 6.5 wins so to cover 95% of cases you need to add plus minus 13 wins to a teams record.

          If you ran a simulation enough times the Nats would win 5x more WS than Atlanta but it’s not like we play the same season 10,00 times.

          Vote -1 Vote +1

        • Garrett's Mom says:

          Didn’t the Braves have a full rotation heading into the 2013 season, though? They were fortunate that year in terms of the health of their best pitchers. This year… not so much. Right now, they can’t reasonably expect 3/5 of the rotation to be out there after the 5th or 6th. That is not an issue that contending teams have.

          Vote -1 Vote +1

        • Rob says:

          You do realize the Braves returned just 2 members of their opening day rotation in 2013, right? Medlen had never spent a full season as a SP, Maholm had a career ERA well north of 4, and Teheran was coming off a terrible year in AAA. Throw in the loss of 2 of the best LH setup men in the game and Braves pitching staff was far from settled at this point last year.

          Vote -1 Vote +1

      • RMD says:

        No they’re not.

        The Braves had LITRALLy black holes in 25% of their everyday lineup but still thrived. FanGraphs and Baseball Prospectus both had their underlying stats back up their success. Their rotation will be worse, sure. But look for production from CF and 2B to rise. I also don’t think Jason Heyward will be hit in the face and need another appendectomy this year again. I’ll still take the Nationals, but the Braves are close.

        Vote -1 Vote +1

        • Eminor3rd says:

          Literally? Black holes?

          +20 Vote -1 Vote +1

        • bdhudson says:

          No, Eminor3rd, LITRALLy

          +18 Vote -1 Vote +1

        • Plucky says:

          If the Braves black holes are LITERAL then I really hope you’re over the event horizon by now so we never hear from or see you again

          +8 Vote -1 Vote +1

        • Kevin says:

          Compare the Nats and Braves by position.

          Rotation: Clearly in the Nats favor and it’s not even close.
          Bullpen: Advantage Braves.
          1B: Braves
          2B: Push or Nats
          3B: Nats by 1000 miles
          SS: Closer but I’d still take Nats.
          LF: Nats once again
          CF: Hard to say with Upton being such a wildcard
          RF: I’d take a healthy Hayward over a healthy Worth but it’s close.
          Bench: I don’t know enough to make a solid case for either.

          But that’s 3 for Atlanta 6 Washington or so.

          -5 Vote -1 Vote +1

        • Anon21 says:

          ZiPS projects R. Zimmerman for 3.4 WAR and C. Johnson for 1.3 WAR, while A. LaRoche checks in at 1.1 and F. Freeman at 3.6. So if the Nats are ahead by 1,000 miles at 3B, the Braves are ahead by about 1,200 at first. And that’s on the assumption that C. Johnson’s defensive projection measures the damage done to the Braves; I don’t think it does, due to A. Simmons’ range on the left, and I have a full season of batted-ball results to back that up.

          At short, you can take Desmond over Simmons, but no projection system does. The closest would be ZiPS (4 to 3.5 WAR advantage for Simmons), but Steamer sees Simmons as nearly twice as valuable. So “on paper,” try again there.

          In right, you also need to take into account that a healthy Heyward is much more likely than a healthy Werth.

          At catcher, Gattis has a lot of volatility connected to his plate approach, but Ramos has had serious, chronic injuries dog him throughout his career, and I don’t think you can reasonably project him to spend a full season behind the plate. 80% Gattis and 20% Laird vs. half Ramos/half Lobaton, I’d take Gattis/Laird.

          There’s a lot of uncertainty. The Braves were the third best-hitting team in the NL last year. They lost McCann, but aren’t likely to see the extremes of terrible performance at second base and centerfield that they endured last season. Moreover, they have a good chance of age-related offensive gains from the Heyward/Freeman/Simmons core. The Nationals had a disappointing lineup that they tinkered with around the margins. (Lobaton is actually a pretty important addition given Ramos’s health, but he’s not an impact bat.) Harper can be expected to contribute more if he’s healthy, but the rest of their squad should be projected to remain about the same (Desmond, Zimmerman, Ramos, Span) or decline (LaRoche, Werth). If they get the Rendon breakout everyone’s so fond of forecasting, that’s a shot in the arm, but overall it’s not an intimidating lineup compared to what the Braves are rolling out.

          Vote -1 Vote +1

        • Kevin says:

          Both teams have fairly uninteresting lineups. That’s kinda a given. I’d still take Desmond over Simmons any day of the week. Defense has way too much variance to rely on predictions. We could easily see Simmons drop dramatically just based on simple variation. Desmond’s bat over Simmons glove.
          1B is the least important position in the game and if the Nats need to they could make an upgrade mid-season.

          I agree with you on the RF part of the equation, the Braves likely have a better chance of getting at least 3 WAR from the position.

          But in reality even if the Braves beat the Nats in the majority of batting positions their rotation is so above and beyond the Braves can throw out isn’t not even close. Without the injury’s Atlanta had the what 20th best Rotation vs Washington’s 4 overall. Seriously the Braves best SP left is worth less than the Nats 4th.

          Vote -1 Vote +1

        • Anon21 says:

          “That’s kinda a given. I’d still take Desmond over Simmons any day of the week. Defense has way too much variance to rely on predictions. We could easily see Simmons drop dramatically just based on simple variation.”

          I don’t know what you mean here. There’s a lot of variance in measuring defense, but all quantitative and qualitative evaluations seem to agree that Simmons is a generational defensive talent. And in terms of the raw results, he helped the Braves to a top-5 finish in groundball BABIP while fielding beside Chris Johnson. It doesn’t seem like he’s any more like to suddenly get bad at fielding than Desmond is to suddenly lose his bat.

          “1B is the least important position in the game and if the Nats need to they could make an upgrade mid-season.”

          1B is just as important as every other position, no more and no less. And no, I assure you, the Nats are not going to have an easy time hauling in a 4-5 WAR first baseman at the deadline. They are few and far between, and the teams that have them aren’t parting with them.

          “Seriously the Braves best SP left is worth less than the Nats 4th.”

          Not really. Strasburg and Fister are head and shoulders over everyone else in both rotations, no question. But then you have a group of six pitchers who are all good in different ways, without a lot to differentiate them from an overall production standpoint: Minor, Zimmermann, Wood, Gonzalez, Santana, and Teheran. The Nationals have the advantage in starting pitchers, but that’s not the safest place to build your advantage, since pitchers break.

          Vote -1 Vote +1

        • John C. says:

          Anon21, I realize that you’re looking at lineups through Barves-colored glasses, but I’ll just note that of the Nats positions they are likely to get significant gains from:

          -LF. You failed to mention Harper completely in your writeup, probably because you couldn’t figure out how to award “age related gains” around the diamond for the Braves without doing that for Harper. And that’s putting aside the fact that Harper is likely to play more games, and healthier games, than last year.

          -1b. LaRoche isn’t likely to rebound to his career average numbers due to age, but he is quite likely to regress positively to some number between last season and his career averages. Last season was the worst full season of his entire career.

          -2b. Rendon doesn’t have to break out to provide a significant bump over the black hole that was Danny Espinosa and Steve Lombardozzi at second last year. If he does break out (and his batted ball and pitch recognition profiles were very last year, that’s just icing on the cake.

          -C. Ramos played less than half a season last year. A healthy season from Ramos is a huge bonus, and even Lobaton is a bump from the (lack of) production they got out of Kurt Suzuki and Jhonatan Solano last year. Your point about which catcher tandem, Braves vs. Nats, that you’d prefer is not relevant to the question of whether the Nats will get more offense than last season.

          3b. Ryan Zimmerman is only 29 years old and from the middle of the season onwards and into this Spring he has finally been looking like himself again.

          So around the diamond that’s five positions that are likely to step up, two (SS, CF) that are likely to stay the same, and one (RF – I’ll allow Werth is unlikely to match his numbers last year). That’s an increase to a “disappointing” lineup last year that finished 6th in runs and 3rd in HRs in the NL.

          Vote -1 Vote +1

        • John C. says:

          Oh, for an edit function.
          Rendon’s batted ball and pitch recognition profiles were very impressive last year.

          And to be clear, I think LaRoche’s regression is most likely a dead cat bounce. But there should be a bounce, and after this season he isn’t going to be the Nats’ problem.

          Vote -1 Vote +1

        • David says:

          Theoretically, a team would only need a literal black hole at one position to have perfect team defense. You’d have to figure out a way to get the ball to cross the plate on the pitch though… and for all the players and fans not to get eaten.

          Vote -1 Vote +1

    • Bubber Jonnard says:

      Current Bovada odds have Washington at 11-1 to win the World Serious, and Atlanta at 16-1. To win the N.L East, Washington is favored at -140 and the Braves are 2nd choice at +150.

      So I guess the gambling public is yet to abandon the Bravos for the Nats.

      Make of all that what you will.

      Vote -1 Vote +1

  2. Chris says:

    Interesting. But, if any team with any chance to win the WS spent a single dollar more than the Marlins, that team would be at the top of this chart–and it wouldn’t be close. …and no team has no chance.

    I guess I mean: So much imprecision! It’s like you don’t know the future, and cannot guess ahead of time who is spending their money well.

    Vote -1 Vote +1

    • Anon21 says:

      Agreed. I would think you’d want to use Playoff Odds rather than World Series odds, too, since World Series odds basically just take the assumptions driving the Playoff Odds and layer them.

      Vote -1 Vote +1

      • Eric R says:

        Using PO Odds:
        Pirates $62M
        Rays $73M
        A’s $74M
        Cards $92M
        Nats $106M
        Indians $113M
        Mariners $129M

        Yankees $490M
        Mets $637M
        Orioles $742M
        White Sox $1011M
        Phillies $1243M
        Cubs $1409M
        Astros $6500M
        Twins $6667M

        Marlins still not applicable…

        Vote -1 Vote +1

      • Eric R says:

        Division series Odds [ie get to the series with >1 game and hope for the best]:

        Pirates $81M
        A’s $94M
        Rays $95M
        Cards $104M
        Nats $112M
        Indians $145M
        Tigers $165M
        Mariners $174M

        Yankees $670M
        Mets $988M
        Orioles $1137M
        White Sox $1453M
        Phillies $1900M
        Cubs $2448M
        Astros $6500M
        Twins $10000M

        It didn’t make much difference; 0.98 correlation between POFF and DOFF variations…

        Vote -1 Vote +1

    • olethros says:

      Why do anything? The sun is just going to explode eventually anyway!

      +12 Vote -1 Vote +1

  3. crd says:

    Very interesting, except it’s pretty clear that the actual payroll floor looks like it’s around the 70-80M range, with two teams in very particular situations well below that. In any case, if you base marginal payroll off that baseline, you get a much better estimate of how teams value winning a WS. If you take the Pirates payroll min, the Rays would value a WS championship at +/- 150M, which strikes me as reasonable.

    Vote -1 Vote +1

  4. Loren says:

    One thing this analysis leaves out is the nature of long term contracts. A big contract looks like a bargain in year 1 and dreadful by the end so a team that signed a couple of superstars at the same time might rate as very efficient spenders early on and wasteful spenders later, all for the same contracts.

    Vote -1 Vote +1

    • Biesterfield says:

      Yes, and the World Series odds (or playoff odds) are just for 2014 when every franchise has a lot of current salaried players that are meant to win in the future as well.

      Vote -1 Vote +1

  5. Jack says:

    This methodology is inevitably going to be tough on teams in the AL East. In a perennially tough division your WS odds are never going to be good. Does that mean that it’s not worth spending money to improve your team? The Orioles have invested in very few risky or inefficient contracts (from a $/WAR standpoint) and find themselves in the best position they have been since the mid-90′s. It doesn’t make sense for them to spend more to improve their team because they’re in a hard division? I don’t buy it.

    Vote -1 Vote +1

    • Jack says:

      I guess I’m just bristling at the grouping of the Orioles with the Rockies and Diamondbacks. The Rockies are doing stuff like sign Boone Logan for 15 million and trade Dexter Fowler for Jordan Lyles and the Diamondbacks are building a team based on Kevin Towers’ perception of grittiness and culture. Meanwhile the only really bad contracts that the Orioles have invested in since Andy MacPhail took over have been to Brian Roberts and Nick Markakis, which were hardly ill-advised at the time they were signed. And the past two years under Duquette have been very well managed on the whole. If the Orioles aren’t supposed to be spending money to support the cast of very good high-end talent on their ML roster now, what are they supposed to be doing? They can’t just perpetually be in a rebuilding mode because they play in a hard division.

      Vote -1 Vote +1

    • asdf says:

      This argument would make a lot more sense if the rays were not also in your division.

      Vote -1 Vote +1

      • Kevin says:

        Well to be fair not every team can be magic.

        Vote -1 Vote +1

      • Jack says:

        Yeah, you can’t just say “they should be like the Rays.” They’re an exception. They can’t just sit around waiting for Longoria and Zobrist type players on outrageously team friendly contracts, or drafting/developing an insta-ace like David Price.

        The Orioles also have more resources then the Rays so they can afford to spend money to supplement the team. Just because the Rays are amazing doesn’t mean the Orioles shouldn’t be doing that.

        You could also argue that this methodology actually underrates how good the Rays are at spending money. Their payroll is the same as the A’s, their team is better, and their WS odds are worse.

        I understand this methodology if you think the strength of schedule for every team is going to change year to year but the AL East will constantly have the Red Sox and the Yankees. The Rays, Orioles, and Jays are never going to have a time to really “go for it.”

        Vote -1 Vote +1

    • O's Fan says:

      Beat me to posting the same thing. With the Red Sox and Yankees in the division and the Rays doing their thing as well, the Orioles are not going to have a great WS% at any time in the near future – is the solution to not bother to field a team? Go all Miami on the problem?

      Vote -1 Vote +1

  6. tz says:

    Dave – for calculation of marginal $/WAR, does the de facto minimum team salary imply that the salary for a “replacement” level player should be more like $1.7 million ($42.5M divided by 25) instead of $500,000 per player?

    I’m thinking myself in circles on this one….

    Vote -1 Vote +1

    • EthanB says:

      No, because the Marlins/Astros don’t field only replacement level players. Essentially, they are force by the league to buy above replacement level players.

      Vote -1 Vote +1

  7. We all know Amaro should be rebuilding. And should have been a year ago, trying to get all the value he can for Cliffy Lee, eating half of Howard’s contract to move him to the AL, etc. And he didn’t.

    Vote -1 Vote +1

    • Kevin says:

      If no one wanted Price or a fair deal, no one would take Lee either. You make assumptions that there’s more value in dumping assets rather than just riding out the current set of contracts. The Phillies since the 2011 offseason really haven’t done anything to compromise their long term stability, and do you really want to go back to having CBP being like the Vet was in the late 90s? There’s nothing wrong with stop-gaps at all.

      Vote -1 Vote +1

      • Plucky says:

        Plenty of teams want Price for a fair deal. It’s just that Fair Deal != Wil Myers trade repeat. Rays want to win now and reload for the future, and the rest of MLB has gotten wise enough that they’re going to have to choose one or the other.

        Vote -1 Vote +1

      • bjsworld says:

        Yeah … those are some pretty wild assumptions.

        I’m sure teams would line up to add an arm like Lee. The question is always what the return would be and how many dollars would the Phillies throw in. I can state, without question, that virtually any Lee deal 2 years ago would have been better than holding him. I’d also argue that ANY Lee deal this year would be better than riding out his contract.

        Vote -1 Vote +1

  8. walt526 says:

    I really like this approach, although I think that we need to be careful about how to interpret these data as it relates to evaluating front offices. Specifically, I don’t think we necessarily want to interpret this metric as some sort of ordinal ranking of a front office’s competency or even whether a team should make a particular transaction or not.

    Many payroll commitments (particularly the largest ones) are made well before the current season. “Exogenous shocks” (player injuries, unforeseen breakouts or collapses by a team’s own player or rivals, etc) can alter the calculus well after the payroll commitment has been made. And many times those bad contracts will have been signed under a previous GM.

    Consider Baltimore for example. About 20% of their 2014 marginal payroll is going to Nick Markakis ($15M), who only projects to be about a 1 win player, a contract that was signed in January 2009 when MacPhail was still in charge. Now if you deduct that contract, Baltimore’s WS Value drops dramatically to $925M (assuming that they replaced his expected production for a negligible amount). So all of the sudden Baltimore goes from having one of the worst WS Values to one of the best. Obviously you can’t disregard bad contracts and it’s a constraint under which Duquette has to operate even if he’s not responsible for it, but the sensitivity to just one bad contract can have suggests that WS Value may be problematic if we’re interested in evaluating the decision-making of front offices.

    That is, if we’re evaluating the performance of a front office, then I think that what we really want to compare the marginal change in WS odds and the marginal change in payroll either per transaction or at most per offseason. Using Baltimore as an example, if we are judging by overall WS Value, then signing Cruz to $8M/1yr just seems like a waste money. But from any other perspective, it was solid move that provided good value, as would Santana have been had he taken the Orioles offer.

    Should Baltimore have signed Cruz? To simplify the analysis, assume for the moment that there’s no chance that either they can trade him for a prospect midseason or offer him a QO; that is, Baltimore’s return on the $8M comes exclusively from what he does on the field in 2014. By WS Value, then his signing was really just a waste of money and cost them a draft pick (even if 55th and appropriately discounted, it still has some non-zero value). But if we were interested in evaluating the off-seasons of the front offices, I still think that we should recognize that Duquette made a good signing by getting Cruz for just $8M and the 55th pick.

    I’m not exactly sure what Baltimore’s WS Odds were before Cruz and it is very difficult to construct a valid counterfactual, so I will try to approximate. For sake of simplicity, assume that he’s a true 2 win upgrade (i.e., Orioles next-best alternative would be a replacement-level player for his playing time). So Orioles project to be a 78 win team with Cruz and a 76 win team without him. That probably overstates his expected marginal value a bit (by maybe half a win), but it provides a reasonable upper-bound to suffice for purposes of illustration. Extrapolating from the relationship between Expected Wins and WS Odds for other teams, a 76 win Orioles team has WS Odds of somewhere around 0.2%. Without Cruz, the Orioles have a $62.5M marginal payroll and 0.2% WS Odds—so a WS value of $31.25B. With Cruz, the Orioles have a WS value of “only” $11.75B. And if you believe that Cruz is something less than a 2 win upgrade, then the WS Value counterfactual will be somewhere between $11.75B and $31.25B.

    In other words, the Cruz reduces the Orioles’ WS Value and from this perspective, the Cruz signing is a tremendous value even if the Orioles’ chances at winning the World Series are only 0.6%.

    Vote -1 Vote +1

  9. Dane says:

    Good concept. I’d hope you consider one change for the next rendition of this:

    Market/Marketability value. Similar to how a ex-US/CAN/Japan(/Korea?) free agent dollar is worth many multiples of a draft pick dollar, I think it’s fair to say that largely marketable teams would have inflated dollar values relative to lower marketability teams. Mind you, this doesn’t merely account for viewership markets but actual marketability.

    Teams that generate more revenue per dollar spent should have that somehow be accounted for. Maybe, in lieu of a marketability value, it could be a revenue ratio type of valuation, similar to P:E ratio or net valuation like velocity of assets. I think that would be a wonderful basis for valuing team dollars.

    Vote -1 Vote +1

  10. Nick says:

    Using WS% is very misleading. The only reason the Tigers are clearly above the other top AL teams is because their division is pathetic. That’s not due to their efficient spending.

    Vote -1 Vote +1

    • Professor Ross Eforp says:

      Great point.

      Building a 90 win team in the AL East is more impressive than building a 90 win team in the AL Central, yet this credits the team doing it in the AL Central a lot more.

      The goal is obviously to win the World Series, but why would a place like Fangraphs be more interested in the results than the process? I am far more interested in the team’s projected $/WAR to determine how they are doing.

      Vote -1 Vote +1

  11. Ivan Grushenko says:

    We keep seeing people try to measure payroll efficiency, and I’m not sure of the relevance. Fans only care about winning, not winning relative to spending. Owners only care about growth in franchise value, except insofar as they’re also fans. What is the audience for payroll efficiency rankings?

    Vote -1 Vote +1

    • Chris from Bothell says:

      The audience is a lot of the armchair GMs who hang out at places like Fangraphs. A variety of sabrmetrics fans really enjoy trying to find and marvel at the teams who get maximum value for their payroll. A parallel might be fans who really dig that one player who comes out of nowhere to be a postseason hero, or who follow a pitcher who gets great results out of unusual pitches / seemingly ordinary velocity, or who perk up at certain players’ mention because those players are particularly ‘clutch’. It’s appreciating a combination of basic skills, some unusual application of said skills, and some smarts to maximize what they have.

      I’ve grown less interested in that $/WAR sort of aspect of the game myself over the years, wanting only to see my favorite club get quality players and not really being interested or impressed by bargains to be had. But that’s just me. Armchair GMing is a perfectly valid way to enjoy being a baseball fan, so long as it doesn’t get into bloody-minded religious arguments that ignore other aspects of the game and other aspects of enjoying the game.

      So, judging from the articles here at Fangraphs and on various SBN blogs, I don’t think one can say that “Fans only care about winning, not winning relative to spending” as a blanket statement.

      Vote -1 Vote +1

      • Ivan Grushenko says:

        I suppose there may be some people who care about “winning relative to spending” but it’s not apparent in the revenues for the Rays or A’s who continue to lag in attendance and broadcast deals. If there’s a market for this information, it’s pretty small.

        Vote -1 Vote +1

        • Professor Ross Eforp says:

          What fans, exactly? Who are these people that are just longing to go watch Oakland and Tampa if they would only win a World Series?

          Vote -1 Vote +1

    • RC says:

      Payroll efficiency makes you more likely to win. It does a good job of how well you’re managing your talent.

      Vote -1 Vote +1

  12. Baltar says:

    This is a great article, Dave, the most interesting I have seen anywhere for a while.
    I was shocked to see the Dodgers and others of their type in the top third, but it makes sense and changed my entire perspective.

    Vote -1 Vote +1

    • Professor Ross Eforp says:

      It shouldn’t. The bottom 11 teams are the 11 teams with a less than 1% chance of winning. As somebody else pointed out, if somebody spent $1 more than the Marlins and had even a 0.1% chance of winning they would run away with this metric.

      Similarly, the Dodgers are given extra credit for having the best odds of winning. What isn’t clear is whether that is because they are so good or because their division is not very good.

      The teams to marvel at are correctly at the top (Oakland, Tampa, St. Louis, and Pittsburgh really) and the teams at the bottom are generally terrible. This doesn’t nail what happens in between, however, if you ask me.

      Vote -1 Vote +1

      • Ivan Grushenko says:

        Why marvel at the A’s or Rays when they could spend more and increase their chances to win the World Series, but choose not to? How does this benefit their fans? Their owners? Anyone?

        Vote -1 Vote +1

        • Professor Ross Eforp says:

          Because this isn’t the NFL. The A’s and Rays are under market constraints that made it difficult to just “spend”. Do you think that spending is going to make those non-existent fans of both teams come out? Are all the people on the other side of the bay going to switch from the Giants? And are all of the Northern retirees going to extend bedtime past 7 PM to go out and see the Rays?

          Vote -1 Vote +1

  13. chuckb says:

    My initial reaction is:

    Geez, $175 million FOR THAT?????

    Vote -1 Vote +1

  14. Tim A says:

    The high spending teams being good means the A’s and Rays have a smaller share of the WS% then they would if the high spenders were less efficient. I think it’s a testament to these franchises that they remain on top even with spenders being smarter then in the past.

    Vote -1 Vote +1

  15. Zubin says:

    I think your math & logic is a bit off about the Marlins. If their marginal payroll is zero, than the marginal cost per expected WS win (your WS value) is zero. They should rank first.

    What this is telling you is that your assumption about the payroll floor is off. If you just set the floor to ~$40M the best clubs will spend under $1 billion marginal dollars to win a WS while most clubs will be in the $1-10B range. The Marlins would be around $1.25B.

    Vote -1 Vote +1

  16. blowry12 says:

    Angels have better odds than the A’s, Rays and Rangers? Mike Trout an 18 win player this year?

    Vote -1 Vote +1

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>