Why do teams keep overpaying generic middle relievers?

In 2006, the Orioles “featured” one of the worst bullpens in baseball. As a group, Baltimore’s relievers combined to post a 5.25 ERA, better than only that of Kansas City’s bullpen and more than a full run worse than major-league average.

Spending, or spending wisely?

The Orioles’ solution involved throwing huge wads of cash at the problem the following winter. Baltimore went out and signed several relievers, with most of the club’s investment being funneled into two journeymen, left-hander Jamie Walker (three years, $12 million) and right-hander Danys Baez (three years, $19 million).

Both pitchers have been reasonably effective at various points throughout their career. The trouble is that “reasonably effective at various points” describes most relievers in any given free-agent class, which makes one wonder why Walker and Baez were locked up to long-term deals when cheaper alternatives were available (see, e.g., Colorado and San Diego for examples of how to build a bullpen without spending a lot of money).

The worst part of Baltimore’s shopping spree? It didn’t help. Walker pitched well (61.1 innings, 3.23 ERA), while Baez (50.1 innings, 6.44 ERA) was pretty much a train wreck. And the bullpen as a whole again sported the second-worst ERA in baseball (at 5.71, it rose nearly a half run from the previous season). The Orioles invested in relievers, but because they didn’t invest wisely, they saw essentially no return.

The intent here isn’t to bash the Orioles. Their situation just happens to provide a convenient example with which to illustrate a larger point about the way teams spend their money.

Misallocation of resources is not a new concept, but the extent to which it exists in baseball might not have been evident to the general public before Michael Lewis’ Moneyball. (And judging from the interesting interpretations of that book, it still might not be as evident as it should be, but that’s a whole other diatribe.)

The fact is that in baseball, as in other arenas, people and organizations often make bad investments. Sometimes this is due to a gap between expected and actual outcomes—a guy gets hurt or has an off-year—what we might classify as “luck.” Other times, the problem stems from poor process. The person or organization responsible for making the investment doesn’t understand a) the value of individual assets (players), b) the market, or c) both.

My general assumption, and I’ll let others debate its wisdom, is that people who have money aren’t stupid. If they were, they wouldn’t have money.

I also expect smart people to learn from their mistakes.

And what, pray tell, did we learn?

Well, if the signings of J.C. Romero and Scott Linebrink are any indication, not a lot. The Phillies, you will recall, re-signed Romero to a three-year, $12 million deal. Look familiar? It should: That’s the deal that Walker received from Baltimore the previous winter. Actually, not quite: Romero’s contract also includes a club option for 2011.

Romero turns 32 in June and hasn’t demonstrated the ability to throw strikes with any consistency (4.87 walks per nine innings and a 1.48 strikeout to walk ratio over 512.1 innings) throughout his eight-plus year career. This raises the question of what, exactly, the Phillies are paying for here.

Romero has been durable: he’s made 65 or more appearances in each of the past six seasons; in two of those, he’s posted terrific ERAs (including last year, despite underwhelming peripheral numbers), in two he’s posted above-average ERAs (again with mediocre or worse peripherals), and in two he’s been pretty darned lousy.

In fact, in 2006, Romero was so bad (6.70 ERA) that Boston was able to sign him the following winter for the relatively low price of $1.6 million for one-year. The Red Sox, in turn, were so impressed that they released Romero in June 2007, allowing Philadelphia (or anyone else) to sign him.

At his age, and given his past performance, Romero should be expected to slip from his 2007 showing. He probably won’t be as bad as he was in 2006, although he might drop to 2003 levels (5.00 ERA)—if not this year, then at some point during his contract.

Linebrink’s plummeting peripherals
Year Age H/9 K/9 K/BB
2004 27 6.54 8.89 3.39
2005 28 6.72 8.55 3.04
2006 29 8.33 8.09 3.09
2007 30 8.70 6.40 2.00

Long story somewhat shorter: players with Romero’s skill set aren’t exactly scarce. In any given year, you can pick them up (as the Phillies did in 2007) for almost nothing. Why pay big money for that?

In Chicago, the story is similar. The White Sox gave Linebrink, a once-dominant setup man who has been in steady decline over the past couple seasons (and who, like Romero, isn’t a great candidate to improve at his age), a four-year contract worth $19 million. Uh, okay.

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How about those assumptions?

The management and ownership groups in Philadelphia and Chicago have plenty of money, ergo they must be smart. If they are smart, then surely they won’t repeat the mistakes made in Baltimore.

And yet, the Phillies and White Sox are doing exactly what the Orioles did. Presumably they expect better results, but why?

Do the Phillies and White Sox believe that they have done a better job of identifying relievers at which to throw their money? Do they believe that Baltimore’s strategy was sound but that the outcome couldn’t have been predicted given the available information (i.e., the Orioles were unlucky)? Do they even know or care what the Orioles did?

Throw out that last possibility. If you’re not studying the forces that create the market, then you’re not studying the market. No way that’s happening, right? Not with the money at stake.

How about the “unlucky” theory? Somehow the idea that the outcome in Baltimore couldn’t have been predicted seems naive to me. People who are charged with evaluating such things should be able to recognize a priori that guys like Walker and Baez aren’t going to save anyone’s team. Then again, the Orioles evidently reached that very conclusion, so maybe I’m the one being naive.

Honestly, the belief that one’s own staff has done a better job of identifying talent strikes me as most reasonable. I’m not sure how anyone could reach the conclusion that Romero and Linebrink are appreciably better than Walker and Baez, but I can understand the logic. The thinking is that the flaw wasn’t in strategy but rather in execution. Even if that thinking is flawed, at least it’s somewhat defensible.

Is the punch line in sight?

You’ve noticed that we’re not getting any closer to answering our original question. In case you’ve forgotten, that question is: “Why do teams keep overpaying generic middle relievers?” I have some ideas:

  1. Momentum/peer pressure. Other teams are content to blow money on relievers of little distinction, so why shouldn’t we? When something becomes standard practice, the question of how it came to be that way becomes more difficult to answer. Worse, it becomes more difficult to ask.

    Look at how the closer’s role has evolved, or the five-man rotation. Both took time to develop, but now that they’re entrenched in our collective consciousness, good luck getting anyone to consider other possibilities.

    So it may be with middle relievers now. Teams, recognizing the importance of pitchers who bridge the gap between starter and closer, have decided to spend more money to procure such talent. The actual need may not have changed, but the perception has, which could be enough to disrupt (or at least help disrupt) the market.

  2. Accountability to stakehholders. Related to our first point, this possibility frames the issue a little differently. When interested parties (media, fans, whomever) ask management and ownership, “What are you doing to improve the bullpen,” a response of, “We’re spending money” still carries more weight in some circles than, “We’re evaluating the situation with the intent of implementing the most cost-effective plan possible.”

    This isn’t how all organizations (in baseball or in other business sectors) operate, of course, but there may be a certain “cover your posterior” element at work here. If the plan fails, at least nobody can accuse the person who implemented it of being cheap. (They can accuse him or her of being stupid or lazy, but again, some folks seem to mind that less.)

My suspicion is that both factors influence the dynamics involved in resolving these types of questions. There may be others as well, but for the most part, I think we can distill the answer to our original question as follows:

In general, teams are content to spend available resources in a manner consistent with the way others in the industry have spent those same resources.

Like I said, I don’t believe that folks who run big-league ballclubs are stupid. They may make poorly informed decisions at times, but these are people who have been successful in life. Unless we attribute their success to pure, unadulterated luck (in which case, why ever put forth an honest effort at anything?), I’m inclined to point to it as a measure of intelligence.

There’s a lot at stake when millions of dollars are involved. It’s simple for us, as fans, to make judgments when we’re not flipping the bill. In many cases our judgments may be correct, but that’s a separate issue that doesn’t help us discover teams’ motivations for investing heavily in generic middle relievers: risk aversion, slowness to adapt, etc. Others can explain why doing what everyone else does isn’t the optimal strategy; for now we’ll just be content to note that this is what is happening.

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