The New Inefficiency?

One of the main uses of value analysis is to try and find market inefficiencies. Ten years ago, on base percentage was undervalued, so teams loaded up on high walk guys that scouts didn’t care for. More recently, defense has been the undervalued asset, so teams have gone after guys who can turn balls in play into outs.

Everything is cyclical, though. As more teams pursue what is currently undervalued, it becomes more fairly valued, and the competitive advantage goes away. At some point soon, defense will probably become fairly valued again, and the teams who are loading up on good defenders will be looking for some other way to spend their money.

What will the next big inefficiency be? It’s impossible to predict, of course, but I have a guess – old players.

We’re currently in the midst of an age where a lot of teams are operating on reduced budgets, and have shifted towards trying to keep costs down by going with more inexperienced talent whose salaries are deflated by their lack of service time. Teams like Tampa Bay and Oakland are continually attempting to replenish their farm systems to ensure a never ending pipeline of cheap, effective major league players that they can pull from.

As more teams have turned to this model, young talent has become increasingly expensive to acquire. The relative value of experienced veterans has taken a hit as teams have turned towards cheaper labor, even accepting downgrades in on field production in order to keep their payrolls in check.

This has led to yet another winter where guys over 35 are having a hard time finding jobs. It’s not just Johnny Damon, though he is a good example of this effect. Over the last few years, we’ve seen numerous productive-yet-old players pushed into retirement against their will, ranging from the likes of Kenny Lofton, Ray Durham, Frank Thomas, and Jim Edmonds.

Edmonds, of course, is now attempting to get back into baseball, and seems like he may be able to convince some team to give him a job. But he had to publicly ask for a minor league contract at the Cardinals FanFest event in order to begin the discussion – no one was beating down his door.

Teams have become cautious with the contracts they give to aging players, not wanting to get burned paying too much to a guy who may end up not having anything left in the tank, but I feel like we’re passing the point of caution and shifting towards a market failure. If a guy is a good player at 35, you should not expect him to be useless at 36. Yes, you regress his projection for aging, but players who go from good-to-terrible in a single season are the exception, not the rule.

Given the contracts that quality older players have been settling for over the last few years, I think we may see teams in the market for value increasingly going for the graybeards.




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


87 Responses to “The New Inefficiency?”

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  1. Keith Hernandez says:

    No pay for Mr. Gray.

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  2. Joe R says:

    Aren’t the A’s the leaders out of the gate for Johnny Damon as well? Obviously Beane is going to be one of the first to pick up on stuff like this.

    Also, look how little the Red Sox have paid Wakefield over the years. Ever since fangraphs tracks approx. FA market value (since 2002), Wakefield has been a bargain basement player, and has often been a 2:1 return performance-wise. I think a lot of good GMs already know that you can get a low-upside, easily projectable commodity for cheap.

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    • Joe says:

      I would suggest Wakefield is a unique situation. Not many players would consider having a perpetual team option.

      The point is well taken, though. Old players may have a lot of offer and be cheap to boot.

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    • JVH says:

      In 2006 Tim Wakefield signed a new contract with the Boston Red Sox. Included in that contract was a perpetual team option for ~$4,000,000. Every time the BoSox exercise the option year on Wakefield, a new one is tacked on. He signed a new contract for this year, I guess, but from ’07 through ’09 there were no negotiations, no arbitration, nothing. I’m not sure he’s necessarily a great example of anything, contract-wise, aside from “Dirt cheap perpetual team options are pretty awesome”. I think Dave Cameron called it the “Most team friendly contract in baseball” at one point.

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      • Brett says:

        > I think Dave Cameron called it the “Most
        > team friendly contract in baseball” at one point.

        (Sorry, not sure how to do block quotes)

        That must have been before Longoria.

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      • JVH says:

        @Brett – I want to say 2007? What can I say, I remember the strangest things. Did you know Evan Longoria is going to make $6M in 2013.

        2013. Think about that. That is insane.

        (And I don’t know how to do block quotes either)

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      • Joe R says:

        Point taken. Still, in the last 5 years of Wakefield on the Red Sox (2007-2011), he will make $1MM less than Barry Zito does a year on average in his contract. Sure you can make Minaya look good comparing a contract he made to Zito’s, but the point still stands.

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    • dan woytek says:

      It seems as though Beane has been on this for a while even going back to the “Moneyball” season with Justice. He’s picked up on base machines who were past their prime. Frank Thomas, originally and from Toronto, comes to mind. He tried it with Giambino last year.

      He always seems to throw some money at a free agent who is aging/beyond peak years but with some value.

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      • dan woytek says:

        I meant to add that the only problem with this theory is that if the old players are good enough they will have made enough money throughout their career that they might not be interested in coming back for a contract that makes it very valuable for the club.

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      • Kevin S. says:

        Sure, some would rather walk away.

        Then there are those like Rickey Henderson, who will keep playing as long as his body lets him, even if it’s in the independent leagues.

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      • nmh says:

        This is right on. Beane has been all over this the last few few years. Others that come to mind:
        2009-Jason Giambi, Nomar Garciaparra
        2008-Frank Thomas
        2007-Mike Piazza, Shannon Stewart
        2006-Mark Kotsay, Jay Payton

        Not all of these guys were old in the sense that they were aged, but I’d say that they all exhibited elderly decline. The only question is whether it was exploiting the age market or if he was tapping into the injury-prone market.

        My guess is that we see another couple of record breaking contracts with international signings before 2011, when the CBA will be restructured, possibly limiting the market on international players.

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  3. TomG says:

    I used to joke that Brian Sabean was ahead of the curve when it came to the next great market inefficiency – old people.

    However, would you consider a true market inefficiency given the risks inherent with older players? Unlike targeting players with on-base percentage and/or defensive skills, which can be tangibly valued and risked accordingly, isn’t valuing age (relative to production potential) something of a very inexact science? Given the major discussions popping up on other sites about predicting age curves, it seems a bit risky compared to the other two market inefficiencies.

    I always thought speed – in relation to baserunning and defensive range – would be the next big inefficiency. But you do bring up an interesting point about older players.

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    • Chris Miller says:

      If anything the recent discussions show aging curves may be overly agressive for quality players in theit mid thirties.

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      • Derek R-C says:

        @Chris Miller I agree full heartedly. Regression curves are starting to look much less drastic. The biggest risk seems to be of injury. I think alot of this risk can be mitigated with incentive laden contracts.

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    • DrBGiantsfan says:

      LOL! Brian Sabean is the first thing I thought of when I read this article too! Dude has been exploiting the “old guy” market inefficiency for years. Unfortunately, the results have not been quite as good as we would hope for. One problem is that Sabes seems to always sign them for at least 1 year too long. Maybe that is changing as he seems to be only giving out 1 and 2 year contracts the last 2 years.

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      • Deelron says:

        The problem is he’s not using the “old guy” market inefficiency if he’s just signing old guys at full market prices. It’s only an inefficiency if you actually make surplus value back.

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      • DrBGiantsfan says:

        Well, my response was partially tongue-in-cheek, but it all depends on how you define market value. If you define it as cost for the same production, then I think Sabes has actually been able to pick up quite a few decent old guys at below market value: Moises Alou, Marquis Grissom, Omar Vizquel all come immediately to mind. Even RJ was relatively inexpensive considering his record from the year before. Even though he was mediocre at best on the field, he won 3 more games than the Giants #5 starters combined from 2008, and he appeared to have a hugely positive effect on their younger pitchers. The problem is that if you do it for more than 1 year, you run a huge risk of a steep decline in offensive production, injury, steep decline in defense or all of the above.

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    • Dustin says:

      “isn’t valuing age (relative to production potential) something of a very inexact science?”

      Exactly. This is why, when Beane was already clearly sensing the lack of market for older players developing in the coincidence of last year’s economy and baseball free agent trends, he struck out. He signed Jason Giambi, Orlando Cabrera, and Nomar Garciaparra, but all three were, to different degrees, ineffective. Garciaparra succumbed to injury again, and eventually retired. Giambi was traded to be simply a bench player (and performed well in that limited role). Cabrera seemed to help the Twins after being traded, but he’s now still on the market because of declining defense (and not such a hot bat either). So you might strike gold, but as others have said above, it’s different from measurable or observable skills and stats like OBP, walk rate, UZR/other defensive metrics, etc. Age and its effects on ability can’t be uniformly quantified. Of course, we’re not talking about age itself as the inefficiently valued commodity. But I’m not so sure teams really are being overcautious. Surely in some cases, they are, but I think part of it is just the economy and the fact that part of what usually declines with age is defensive ability, which coincides with the move in recent years toward the valuation of defense.

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  4. Jon says:

    Interesting idea, though isn’t there a difference between an inefficient market dynamic (undervaluing certain skills that can be exploited) and the adjustment that’s going on with older players? I would guess that rather than older players being seriously undervalued, maybe they are finally being valued more properly. Sure, we can point to the older FAs who sign as bargains, but there are still (and I would guess there would continue to be) older FAs who are not such bargains. Isn’t an inefficient market about consistently undervaluing (or overvaluing, for that matter) an asset? I’m not sure I see any consistency here. Not yet anyway.

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    • TomG says:

      This is what I was trying to get at, although Jon expressed it much more eloquently than I ever could. In a way this reminds me how the Patriots’ front office targeted talented players with supposed makeup/attitude issues (Dillon, Moss, Harrison, Antowain Smith), often getting them at under-market value for their talent levels. It wasn’t so much an exploitation of a market inefficiency (“Hey! Headcases are being severely undervalued here!”), it was that they measured intangible risk vs. tangible reward. I think that’s what you laid out here, Dave. Maybe risk assessment is the next great inefficiency?

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    • circlechange11 says:

      I agree.

      Old players wouldn’t be a market inefficiency, it’ll just be that teams aren’t willing to pay them the 10M/y money they’re looking for. So, if they do want to play, then they have to be a bargain. I see it as more of a changing market for them, not a market inefficiency, because there’ll always be old players, and their ability to perform will often be gauged against other players and not primarily age.

      Market inefficiencies, to me, would be more along the lines of skills that are undervalued. Age is not a skill. The changing market for old players seem to be just as much due to the realization that young players can often put up similar value, but for much less money.

      Here’s what I see as the next possible market inefficiencies —

      [1] Utility players / roster flexibility guys. The that can, and are willing, to provide decent bat and glove at multiple positions. Jose Oquendo could become cool again.
      [2] Speed and Base-stealing — with PED use on the decline and overall power numbers normalizing a tad, a guy that can get himself into scoring position via steals and extra bases will be valuable.
      [3] Ambidextrous pitchers (Just kidding).

      The thing working against speed and defense is that is seems to be abundant in the Latin America, and those players can often be had for cheap … so essentially everey team has access to that.

      What baseball lacks is [1] more elite talents, [2] more highly skilled guys (plate discipline, walks, fielding, smart base-stealing). So, the guys with mega-talent and/or mega-skill are always going to be in the most demand, so I wouldn’t refer to them as a market inefficiency, because they will always be one.

      Things that are currently under-valued, that could be had by the willing, would be utility players and speed/basestealing, in the near future. IMO. Pitching and mega-talent/skill are always going to be valued.

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      • Dirty Water says:

        Absolutely agree with your first paragraph; old players having a hard time being signed is not a market inefficiency, it’s just that younger ones can be had cheaper. And with cost being paramount nowadays with many teams, old dudes just aren’t worth it. I do believe experience is a translatable skill – it’s just not worth $5+ mil per.

        That will change once the economy turns or, even sooner, when experienced players lower their demands.

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      • pounded clown says:

        one of these days when baseball embraces the principles of modern sports training and by this I mean not doing what baseball does now which is simply cherrypicking new exercises and conditioning techiques to add to age old, defective training methodologies. It’s like putting a fresh coat of paint on something without fixing the points of failure of the old paint. Anyway, if this happens and teams understand how everday play of a speed/technical sport like baseball effects the central nervous system they would ideally rest their players more frequently. That said the utility man would be in high demand. Things in baseball however change at a more geological rate relative to other sports, so I might not see the change in my lifetime.

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    • MikeS says:

      I agree with this. I think teams are finally realizing that if a player is going to hit 280/350/400 (or whatever) it doesn’t matter if he is 35 or 25 that year. The older player may sell a few tickets if he has had a great career, but will he sell a few million dollars worth? Even worse, the younger guys age 26-28 are likely to be better than the older guys 36-38 year old seasons, even if they aren’t cheaper – which they probably are.

      Teams started realizing this when free agent when utility players started to cost seven figures. they realized they could get the same services from a guy at MLB minimum. That attitude is spreading.

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  5. aweb says:

    This inefficiency clashes with the “we’re rebuilding so let youngsters play” philosophy pretty strongly. I think right now a franchise could put together a good team just on the free agents no one has signed yet, but they can’t make the playoffs that way. It comes down to whether or not it’s better to pick up an older player who might give you, say 2-3 WAR for a few years, or play a prospect who might manage far better if he develops.

    Defense is bound to become overvalued, because it’s still only the third most important thing (using hitting, pitching, defense as big three, with baserunning and other skills falling further down) to making a team good. Taking fangraphs leaderboards, there were 103 hitters who managed a +10 RAR or better, but only 35 fielders (some overlap between the groups of course). There were about 10 pitchers who managed +10 RAR. It will remain relatively easy to outscore opponents through hitting and pitching.

    A problem for baseball as a whole is that as players become more and more “properly valued”, the advantage swings to the big spenders even further. As each market ineffciency is exploited and becomes, assumably, properly valued in the long run, the next market inefficiency will tend to be a smaller one, with less to be gained from being ahead of the crowd. How far can a defense-first philosophy take a team? We know a team can bludgeon their way to the playoffs (Yankees most of last decade), but can they field their way there?

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    • aweb says:

      There were 160, not 10, pitchers above 10 RAR in 2009…self-edit

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      • giantsfansince1981 says:

        I agree that as teams recognize market inefficiencies the bigger market teams will be able to take more advantage. However, this assumes that the inefficiency will never return. With smart teams, I think this is true. As long as a team stays on top of statistical analysis, it will continue to value players and spend wisely. However, as a list of good vs. bad gms shows (as a Giants fan I have personal experience about this) not all teams even recognize the established market inefficiencies (see: re-signing Molina) or understand player value. Recognizing that some baseball personnel just are not smart/aware, I don’t think it’s a given that a market inefficiency will not return in the future, such as obp or defense. When they do return, smart small-market teams can capitalize.

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    • PhD Brian says:

      But hitting is also much easier to find that defense. A team can use great defense and some hitting to get to the playoffs. Not just defense alone.

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      • Will says:

        I’m not sure hitting is easier to find than defense. Pretty much every team’s minor league system is stocked with guys who can field well to great but can’t hit at all. I’m guessing you could build an all Endy Chavez team more easily than an all Jason Giambi one.

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      • Joe R says:

        The 1992 Atlanta Braves scored 682 runs, and posted a +56.3 TZ.

        …JUST SAYING.

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    • William says:

      You’re right, the answer is clearly “NO, they can’t field their way to the playoffs.” Just check the six best ’09 team UZRs, and you’ll find six whose seasons who ended before eight others…

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      • Joe R says:

        That’s a cherry pick and a half.

        My turn now, here were the top 4 teams in UZR in 2008:

        Rays
        Phillies
        A’s
        Red Sox

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  6. OremLK says:

    I’d revise this prediction a little and adjust it to “older minor league players”. I have a strong suspicion that rule 5 draftees, minor league free agents, and waiver claims are heavily undervalued in the current MLB climate.

    Turning 25 and still being in the minor leagues generally seems to be considered some kind of magic point of no return where a player’s value as anything but minor league depth all but disappears, unless he performs far, far beyond younger players. Even then, he better get off to a hot start when he’s called up, because he’ll be given the shortest of possible leashes before getting sent back down if he doesn’t produce.

    I suspect a lot of the better “quad-A” minor league players could be average or above average major league players if given the same chance that a young prospect would be given.

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    • giantsfansince1981 says:

      Definitely. Again, as a Giants fan, I see this personally when John Bowker posts a monstrous 1.000+ AAA ops and the Giants apparently do not even consider him as a left field option (nah, let’s sign Mark Derosa, I’m sure his wrist is fine). Fans (and I assume a lot of baseball personnel) think a 25+ minor leaguer is done, but I see no reason to believe that’s the case. Shorter major league career sure, but no value at all?

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    • Jimbo says:

      The All Garret Jones Team…I like it.

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    • delv says:

      Excellent point. See: Shelley Duncan’s Interntional League MVP award.

      On the other hand, I think that pitcher-portion of that market is already being tapped in the form of AAAA pitchers from the AL turned into #4/#5 starters in the NL.

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    • jfpbookworm says:

      This is what I was thinking as well.

      You’ve got a lot of decent players that may only be able to play in the majors for a couple years at their peak, but it’s worth it to have them around then. (Just don’t get too attached and keep them around when they’ve declined.)

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  7. Tyler Dillon says:

    The great difficutly with old players is that they fall under the belief that the longer they play, the more valuable they become. Older players often do not recognize that their skills have diminished and that they have lost value and that their contracts will reflect this.

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    • William says:

      Couldn’t agree more … the players “pushed to retirement” mentioned in the article weren’t hurled off the stage, for the most part, but just wouldn’t take less than they got before so THEY quit. I love Henderson for what he did. In another sport, I love Chelios for playing indy-league hockey … and hate commentators saying it’s embarrasing for a future HOFer to do so. Embarrasing to love the game enough to play wherever????? Those who quit rather than get paid less clearly love their egos more than the game.

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  8. Jimbo says:

    The “problem” with older players seems to be the assumed premium on their services. But the more you see guys like Damon passed over @$8M per year for Winn @$2M…it becomes clear that any incremental gain in Damon isn’t worth 4x the money of his replacement.

    In the boom years I think veterans were partially paid for past, not future, performance. Will be interesting to see how many guys retire vs lower their expectations.

    Seriously, I’d love to play baseball for a living at league minimum…as long as someone would pay it. Retire, because you are offered a couple million dollars less then you want??? Crazy.

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    • circlechange11 says:

      Don’t look at it from that perspective. Look at it through the perspective of your OWN career.

      If at your current job you …
      [1] Have earned far enough money to retire comfortably.
      [2] Would prefer to continue working.
      [3] Were only receiving offers to keep working at 1/2 of your previous yearly salary, and likely with a less successful/prominent company.

      Would you elect to retire?

      You’re assuming that MLB baseball players feel the same about playing a long season that a fan does. One group has done it year-round for years and years), the other group has only dreamed of doing it.

      “Draining” (mentally and physically) would be the word I would think describes it the most.

      It’s analogous, IMO, to fans that say “If I were a player, I’d sign every autograph for free”. That’s easy to say when fans DO NOT show up at our work and expect us to sign authoraphs for hour after hour, day after day, with seemingly it never being enough.

      Anytime someone says “If I were a player …”, just stop them and say “you aren’t, so it doesn’t matter”, and move on to the next topic. FWIW, I feel the same way when I hear people talk of being “in war” or “in poverty”, etc … people have no idea what they would do or feel, they only know what they think they’d do or feel, which is not useful at all.

      Playing for the MLB league minimum for US is likely [1] a serious pay raise, [2] a dream come true. For a pro athlete, it’s likely [1] a lot less pay for the same work, and [2] an insult.

      Apples – 2 – Oranges.

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      • Dustin says:

        Thats why I tell people not to vote. If you’ve never BEEN the president, your opinion isn’t useful at all.

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      • Jimbo says:

        If I liked my job? I’d keep at it as long as someone wants me. I’d be an employee-coach to younger employees. If I’m set for retirement, I’d donate my salary…be it large or small.

        No way would I hang it up because of salary issues. How would you answer the 3-part retirement scenario? Key seems to be how much one loves what they do.

        “Playing for the MLB league minimum for US is likely [1] a serious pay raise, [2] a dream come true. For a pro athlete, it’s likely [1] a lot less pay for the same work, and [2] an insult.”

        There’s the rub. I work at a less-than-dream-job specifically FOR the paycheck. I don’t enjoy what I do (as in I’d keep doing it after winning the lottery). The fact baseball players PLAY BASEBALL makes it difficult to feel much empathy for the draining aspect.

        In my worldview, if you saves lives, or educate, or make the world a better place…that should get a greater financial reward. If you play baseball and it happens to set you up for life, that’s great…but that is a blessing few get in life. To be insulted that your market value is $2M instead of $10M is like complaining you “only” won a small lottery and not a really big one.

        You’re STILL set for life thanks to giftedness at sport.
        You’re STILL welcome to play the game–at the right price.
        You’re STILL fit enough to have more enjoyment than exhaustion.

        Just strikes me as some combination of pride and greed. If someone says “the season wears on me, I have more pain than health, and the only way I’d do it some more is for $10M”…I’d kinda sorta understand. But then is that person REALLY set for life?

        This is all just my viewpoint. Not trying to convince anyone.

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      • circlechange11 says:

        I get it, believe me, I understand. I’m a junior high principal, whether I’d retire or not depends on what type of day I had just before you asked me the question. *grin*

        Baseball players don’t view their 15th year of professional baseball (after years of college, HS, travel ball, etc) as “play”. They view it as year-round, difficult, draining, work. Sure, they feel fortunate for the talent and opportunity, but they also experience the drain of the job … just like we do. We cannot even wrap our minds around the idea that playing ML baseball wouldn’t be the “best thing ever” for every single day of a 20-year career.

        But, I do understand the idea of “You’re a pro baseball playing millionaire … get over it”. It’s hard to stomach someone saying $2M is an insult when to everyone else it’s the “Little Lotto”.

        To Dustin …

        Voting and saying what you would do or feel if you were the President are two VERY different things. Please don’t intentionally mix or confuse issues to make my statements represent something they do not.

        I am not telling non-athletes to NOT attend or particpate in baseball events. I am NOT telling people NOT to vote because they’ve never been President. What I AM saying si that epople should run their mouth speaking from perspectives they have NO experience in and have no basis other than pure speculation for their opinion.

        To put it even more simply and as our dad might say to us “Don’t run your mouth about things you have no idea about.” People don’t know what they would do or feel, they only know what they HOPE they would do or feel. That is not applicable in a reality-based discussion.

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      • Jimbo says:

        “Baseball players don’t view their 15th year of professional baseball (after years of college, HS, travel ball, etc) as “play”. They view it as year-round, difficult, draining, work.”

        I don’t disagree, and realize I’ve been glamorizing it a bit in my comments. The issue is if they love what they do (your question ponit #2 of would I prefer to continue working).

        A. The player WOULD like to keep playing, even with the work aspect–which is bound to get harder with age. They’ll do it for $10M but not $2M? If they’d like to keep playing, keep playing. $2M for something you WANT to do isn’t bad pay.

        B. The player doesn’t really see enough benefit offsetting the grind, but they “would” keep at it for $10M…just not $2M? If Damon wants to go out with a ring, doesn’t want to play for KC, and is fine with the idea of not playing through the dog days again…I wouldn’t blame him for turning down a couple million. It’s just the notion that he’s being “pushed into retirement against his will” that I don’t agree with.

        Other than that one comment from the original article, I think we agree more than not. ;-)

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      • William says:

        I hear you that baseball = work-that-isn’t-just-play when you’re a pro who has been at it for one’s childhood and full adult life.

        What rubs me is this: if, even then, you WOULD do it if you got a big enough paycheck, even though you’re set for life, than it is just ego.

        If you’re done, you’re done. Fine. But if you want to still play, play. You have more money than some nation’s GDP, so however many multiples I’ll make as a career teacher you’ll get in one year shouldn’t concern you, unless you are guided simply by vanity.

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  9. JayCee says:

    I think you are going to be proven right, Dave.

    I’d like to surmise that the next inefficiency after the next one may be HRs. HRs, and the ability to hit one, are an important outcome/threat in terms of winning games. It’s conceivable to me that one HR and one out may well be more valuable than 2 doubles, despite the fact OPS likes the 2 doubles.

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    • joser says:

      You know, we could figure out how important an “outcome/threat in terms of winning games” an HR is relative to a double by looking at every possible game state and the relative value of each of those to the final outcome. Fortunately, somebody already did that. The result is the weighting of the various kinds of at-bat outcomes that is used in the wOBA calculation used here at Fangraphs. Looking at the raw weightings (rather than the values used to adjust wOBA to scale with league average OBP) we see that a HR has a run value of 1.7 (above an out), whereas a double is worth 1.08. So, yes, two doubles are worth considerably more than a single HR, despite the fact chicks dig the long ball more than doubles.

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      • Joe R says:

        The -0.3 runs per out number is for approximating RAA, at least I thought it was.

        Because every regression I’ve done in the ever of my life says an out is worth -0.1 runs relative to team production.

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  10. joser says:

    Defense isn’t truly going to be over- or even fairly-valued until it starts getting weighed appropriately in arbitration hearings. Right now the Franklin Gutierrez’s of the world won’t get anything close to a fair shake in arbitration because so much of it is built around offensive numbers, and smart GMs will take advantage of that (as Zduriencik just did with Gutierrez’ extension).

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    • Taken to an extreme, you have …. Rey Ordonez.

      As long as Gutierreiz produces in the relevent fantasy categories, he’ll be rewarded for his defensive prowess.

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      • joser says:

        Well, until more fantasy leagues start incorporating defensive numbers as a category, defense is going to be undervalued among fantasy players and (as long as fantasy retains its influence) the fanbase at large.

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  11. Isn’t the old player inefficiency the result of teams realizing paying peak value salaries for old players is ineffic…. sub-optimal?

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  12. Ben says:

    I would add Thome to this discussion. Based on his contract and the projections for PA and production, he would be paid $2.25 million for $5.3-$6.9 million of value.

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  13. Dan says:

    I disagree. The next ineffeciency is… wait for it… Free Agents!!!

    Generally, high price free agents are not worth their contract because several teams will bid for them, and the winner’s curse will predict that they will underperform the highest bidder’s expectations. However with the current economy, there are and will continue to be few teams with the kind of money to sign high priced FAs. When you also consider that some of those teams might not be in the market for the position that player is at, you get fewer and fewer teams bidding for the best FAs.

    Consider: You have the NYY at $200MM, then about 8 teams above $100MM. That’s realistically 9 teams who can talk about contracts for $10-$15MM or more for just one player. So, in 2009:

    Nick Johnson – age 31, worth $11MM in 08 (all stats according to FanGraph’s player’s pages), projected to be worth $10MM in 09 – contract 1 stinkin year with Yankees for $5.5MM!!! Why? Not too many high dollar teams need first basemen.

    Marco Scutaro – age 34, worth $20MM last year, projected to be worth $14MM next year – signs 2 year deal with Red Sox for $11MM!!!

    Chone Figgins – age 32, worth $27MM last year! projected to be worth $14MM next year, signs with Mariners for 4 years at $36MM ($9MM per year).

    I could go on, but let’s just say I didn’t find a single FA contract where you can say the FA was really overpaid, as you easily could in years’ past. Even Jason Bay, age 31, worth $15MM last year and projected to be worth $18MM in 09 signed a big contract, but only for 4 years $66MM ($16.5/year) and has an excellent chance to outperform his contract, and he’s the most overpaid, but general perception, of all the FAs this year. He’s an example of being a guinine quality superstar, but just not having enough suitors to cash in as he might have in other years.

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    • joser says:

      Brandon Lyon. Jason Kendall. Ivan Rodriguez.

      Heck, even Matt Holliday. Matt Klassen calculated that his contract was “almost exactly in line with his market value” — but that was assuming the market this winter was valuing marginal wins at $4.4 million per, which seems high.

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      • Dan says:

        I’ll give you Lyon, relievers might be cancelling out the general rule by continuing to be overpriced, but
        Kendall: worth $5.4MM last year, projected at $2.8, signed a 2 year deal for $6MM, which may be a shade high, but isn’t ridiculous.
        Rodriguez: worth $3.8 last year, projected at $5.6, signed 2 years, $6MM, could outperform his salary in just one year. I don’t see your point overall with these 2 players.

        Now as to your other point about Klassen’s calculation method, you may have something there, but it is more of a symptom of what I’m talking about. There is less interest in free agents, therefore their price goes down (from $4.4 to $3.5 per win, I believe). Thus, they are a cheaper alternative to growing your own talent. Thus, they are a potential market inefficiency.

        The very trend to award lower FA $$s per WAR this year only serves to prove my point.

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  14. ZachS says:

    The first thought that came to my mind when I read this article is that older players will be less valuable in this decade than they were in the last two because they don’t have steroids to keep them healthy… I think we are going to see older players breakdown significantly faster than they have over the last 20 years, when many power hitters didn’t peak until well after the “magic 27″ year.

    See: Carlos Lee, Lance Berkman, Magglio Ordonez, Alfonso Soriano, David Ortiz, Carlos Delgado, Melvin Mora just to name a handful.

    If I were a GM, particularly of a smaller market team, I’d be more afraid of investing dollars in an older player than I would have been 5 years ago.

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  15. Vinnie says:

    If I can add a prediction:

    I think the next big inefficiency will be derive from improved methods of determining how pitch movements induce poor contact. That is, which John Lannans are legit, and which are lucky. I still think there’s a lot of mystery hiding behind GB and FB rates that, if quantified, could be used to value high-contact pitchers more accurately.

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    • circlechange11 says:

      I think that’s already heavily reflected in scouting, and IMO, leads to the WOW factor, which can overshadow the fact that a pitcher may not perform as well as his “stuff” indicates.

      I think everyone in baseball has known that movement makes a pitch harder to hit. Lots of people are overly enamored with a big, breaking curveball, while not realizing that a late breaking hard slider is actually harder to strike well.

      The splitter, slider, cutter, etc have shown everyone what scouting has known for decades …. faster, late breaking pitches are harder to hit.

      What advanced scouting and/or pitch data may indicate is what we term “command”. Command means being able to throw what you want, where you want it. So, a hanging deuce down the middle (even with a big break) is not viewed as a “good pitch” by pitch data just because [1] there was a lot of movement and [2] it was in the strike zone.

      I think we may get to where we can measure the “break over the last 20 feet” type of thing and combine that with “final location”, and be able to combine the two to reward big points for pitchers that throw late moving two-seamers and sliders on on the corners and down in the zone. There’s a BIG difference between “throwing strikes” and “having a lot of movement”, and then being able to “have command with good stuff”.

      Lots of guys have velocity and lots of guys have movement, which people generally get really excited about and can look really good in spreadsheets and in highlights. But, “command of good stuff” is where it’s at and I’m not sure that’s displayed anywhere (reliably) outside of advanced scouting reports.

      I don’t think there’s ANY mystery behind GB/FB rates … pitchers that throw pitches down in the zone and especially those with late breaking (down) movement give up A LOT of ground balls. Not only is it common sense or observational history, it’s basic physics. Wanna give up a lot of fly balls? Be a curveball or “up in the zone” fastball-based pitcher pitcher.

      I would be interested in pitch data that could give “command valuation” (location + movement). But, really, we’re just going to get the same names as those that lead the leagues in WHIP, ERA, FIP, k/9, etc. The best of the best aren’t that way because they have low ERAs, low FIPs, low WHIPs, high Wins, etc …. they get those things because they throw pitches where they want them and the pitches are high quality. Very simple, actually.

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    • Joe R says:

      I don’t think you mean high contact as much as consistent bad contact.

      Wakefield, yet another perfect example. Since 2002, has the highest IFFB% by far among MLB pitchers, and the 2nd lowest line drive rate.

      When you cause a lot of pop ups and don’t give up line drives, odds are, you’re going to be successful.

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  16. philosofool says:

    I’m not sure there will be a new major inefficiency. Smart economies tend to be very efficient, so as our knowledge about baseball grows, the number of inefficiencies should shrink.

    The inefficiency in OBP was brought about because most clubs didn’t know how runs in baseball are scored.

    The inefficiency in fielding defense was brought about because clubs didn’t know how to measure runs prevented for individual players.

    Both of those are gone. Our models for both might improve, but we’re doing pretty well at both, and we’re reaching the point where the effect of random variation is greater than the effect of unknown talent.

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  17. neuter_your_dogma says:

    Another option is the Amaro route, to overpay someone like Ibanez and look like a genius (for now) when he outperforms the overpay.

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  18. Dan says:

    Oh, and of course the other market inefficiency is clearly keeping your players, particularly your pitchers, healthy. Strict pitch counts are out. Advances measurements, coupled with advanced study through MRIs, etc., of biomechanics are in. Those on the cutting edge will acheive huge advantages.

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  19. John Q says:

    It’s not that teams are against signing older players, it’s just that teams are much smarter now and know the value of older players and are less willing to overpay for them.

    Ego is also a factor. Johnny Damon will end up signing for LESS money than what the Yankees guaranteed him two months ago. Some players have earned so much money that they would rather quit than play for what they perceive to be less than their market value.

    Also, with steroid testing I think you’re more likely to see more normal ageing patterns. I think the days of a guy like Steve Finley setting his single season career mark of 36HR at the age of 39 are gone.

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    • John Q says:

      I should add that Finley hit the Third highest HR total for a player 39 years old. I think those days are gone.

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      • Kevin S. says:

        Yeah, it’s not like Hank Aaron set his career high in HRs in his late 30s or anything.


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      • CircleChange11 says:

        Can we please not use one of the all-time greats who enjoyed a unique career as if they represented the typical pattern of a major league player? I mean seriously, would anyone mention Nolan Ryan as the counter to the statement that pitchers tend to lose velocity and become less durable as they age?

        Hank Aaron also did not have the “typical peak” as few, if any of his individual seasons are in the “top 100″, yet through sustained consistent high level play, he had an amazing career … and well, he was a 5-tool player for much of it. Aaron also went from a pitcher’s era to a hitter’s era and then to a hitter’s park as he aged. Not many will get that type of distribution from here going forward.

        I think the poster is pretty much right that the days of guys setting HR personal best in their upper 30s are over, as a general statement. Sure, there may be a 1 in 15,000 (or whatever) player every 3 decades that does it … but that doesn’t negate the context of the general statement.

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      • John Q says:

        Hank Aaron would have set his single season Home Run Record between 1962-1968 if he had played in a normal hitting environment.

        Hank Aaron had 366 Home Runs before the age of 31
        Steve Finley had 47 Home Runs before the age of 31

        From the ages of 24-30 Finley hit 47HR/3364AB for a rate of 1.39HR per 100AB

        From the ages of 31-42 Finley hit 257HR/6033AB for a rate of 4.25 HR per 100AB

        The Days of players like Finley Tripling their Home Run rates overnight at age 30 are likely gone now that there is steroid testing.

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      • CircleChange11 says:

        Not to “pile on” with facts or anything ….

        But Aaron also hit 44 HRs at the age of 23, and hit 40 HRs 6 times, including 47 at age 36 at the “launching Pad” (ATL Fulton Co Stadium).

        With 15 seasons at 30+ HRs, Aaron is a poor example of someone hitting their “power stride” at the upper 30s.

        Personally, it’d be interesting to see how his 44 HR seasons in ’63 and ’66 would translate in a more hitter friendly era. His amazing performances throughout the 60s, when pitchers flourished, is just amazing. People probably look at his career season by season and see “nothing dramatic”, but they likely look at the numbers in a void.

        Interestingly enough, when Aaron hit 44 HRs (thrice) he led the league all 3 times. When he hit 47, he did not. Different eras of offensive performance.

        Amazingly, he won 1 MVP award … as a 23yo.

        Aaron was also noted for not hitting “mammoth shots”, but consistently hitting them just far enough to go over the wall. So, even if his power did wain a little in his mid/late 30′s, the park effects at ATL likely negated that and helped him remain consistent (as did his great skills/swing).

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  20. TLB says:

    Apparently Doug Melvin likes what Dave Cameron is cooking:

    http://www.jsonline.com/blogs/sports/82957147.html

    Edmonds signed to a MiLB deal w/ST invite. If he’s not on the 25-man roster by 3/25, he can request & secure his release

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  21. Nick says:

    And as old players become the new market inefficiency, the Mets will stop signing them.

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  22. Brandon says:

    Thome was an excellent example of this, and one I wondered why more teams were not interested in as certainly there are a couple teams without a quality DH. Even as a part time player, logging 300 or so plate appearances, he’s got to be worth the $2M or so it would take to sign him, and he has a chance, at that salary, to be trade material at any point in the season – increasing his value.

    This certainly is a market inefficiency that teams are avoiding because they are trying to hard to catch up to the “don’t spend” philosophy.

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  23. Rally says:

    Things sure have changed. In 1993, Andre Dawson signed a 2 year deal that paid him 9.2 million. At the time, that had to be one of the bigger contracts in the game, probably equivalent to a 15-20 million dollar deal today.

    He was 38, coming off two years near a 115 OPS+, and no longer had much value in the field. In fact, the Red Sox signed him to be a DH. He was worse than anticipated, stick a fork in him, but that’s beside the point. A projection looking at his age and decent 1991-1992 stats would peg him as slightly above average, maybe a +5 hitter, and with no defensive value he’d be about a 1 WAR player.

    Jermaine Dye probably has similar value today, and he can’t get a contract. Johnny Damon is a much better player than either, and he’d probably jump if offered what Dawson made 17 years ago.

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  24. Let’s put it in perspective. People were blown away when Ted Williams was paid $100,000 per year. Has anybody done the math? What would that translate to today?

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  25. Alan says:

    Just a minor fact correction: Edmonds announced his desire to return at Tony’s Animal Rescue Foundation concert at Chaifetz Arena; not at the Cardinals Winter Warm-Up or FanFest.

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  26. Tony says:

    I think teams are willing to pay older play who can produce, but are wising up to the fact that they have been paying older players more than they are worth for years based on their “name”. When they look at the production and overall value to the organization, I think they are finding average to above average “name” players do not put many more fans in the seats, and hence are not worth the premium they must pay in order to sign them. A good example is Bobby Abreau..Good player, productive, but not many people are going to buy a ticket to see the Angels so they can watch Bobby Abreau swing the bat.

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  27. Moseph says:

    It’s about time an article on this obvious subject was written. I was thinking about this last offseason.

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  28. Circlechange11 says:

    Sorry William I hit thumbs down on my iPhone instead of thumbs up.

    The media has this bad habit of building guys up and then tearing them down got the very same behavior.

    They’ll praise a player for saying they’ll play until they pull the unifo off of them … And then rip em for when they carry out that promise.

    They also will say that a guy should retire when they can “finish on top” and then say they should keep playing as long as they can produce, sometimes even saying they “owe it to the fans”.

    It must be fun to play God in other peoples’ lives … Another habit the media/fans seem to have.

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  29. Brian says:

    I think we need a new metric. WAG (Wins Above Graybeard). Because it seems like the free agent veterans are going for $1M-$2M for the first win, then $4M-$5M for each additional win.

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