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Rebuilds, the Cold Stove, and the Braves

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Thinking about the cold stove, because there’s not much else to think about.

Baseball commentary, it seems, like nature, abhors a vacuum. In past years, for those so inclined, offseasons were an opportunity to pan the myriad moves made (“Him? For how much? For how long? Are you kidding?), or pan the market, collectively, for letting some savvy Front Office snap someone up on the cheap. As you’re probably aware, the 2017-2018 offseason, meanwhile, feels like the slowest in history; as such, baseball commentary has shifted from panning individual moves to criticizing the state of affairs of baseball as a whole. (Just think, all that agita that would have been directed at an eventual Eric Hosmer contract is currently being directed at baseball’s economic system. Wild.)

I could link you to some of the many blurbs and “think pieces” that have been written about the lack of activity on the free agency and trade markets over the past couple of months (and I will), but I’m sure you get the gist. Various explanations have been proffered, with varying degrees of plausibility:

  • The degree of analytics embedded in Front Offices across the league finally rejecting, mostly outright, the idea of paying for past performance via the free agent market;
  • The proliferation of something akin to a “unifying theory of baseball” via said analytics leading to uniform evaluation across the league, preventing matches occurring where both sides think they have gotten a good deal on a given transaction;
  • Record profitability of MLB franchises creating an environment where there is a greater opportunity cost to inappropriate spending, because it reduces the eventual cashout an owner can get from selling the franchise;
  • A principal-agent problem (ha, literally!) where growing player agent power is restricting deals by setting unreasonable targets and hoping teams will cave, to the direct opposition of the points above;
  • The dreaded c-word: collusion;
  • The lack of interesting free agents in the present market, and the combination of a plethora of them next offseason; and
  • Some others that I will discuss in more detail below, but be mindful that I’m not excluding them as offered explanations and claiming them for my own as I discuss them below.

Here’s my take on it, though -- even though no one asked. To me, this state of affairs is actually the logical progression of baseball’s current competitive and economic system, as I’ll try to elucidate below. But, when doing so, I think it’s important to keep one question in mind, for which I don’t have a good answer: if this is the logical progression, why now? As best I can tell, if my logic is sound, this probably should have happened sooner. Why it didn’t is anyone’s guess, and I don’t have a good hypothesis for it, but I’m curious if anyone else can fill in the blanks. Anyway, on to a bunch of hopefully-not-too-half-baked theories…

***

It’s very easy to draw a super-simplistic model of the functioning of an MLB team by drawing on the motivation of its three primary inputs: the owner, the front office, and the players (and their agents). I think of it as something like this:

Now, I acknowledge that this is super-simplistic. (Why did I even draw it? I don’t know, for the visual learners?) You could say that some owners actually have the goal of winning, and that front offices, in particular, may care more about championships than regular season wins, or they might care about something else entirely (like not getting fired), which are legitimate points.

But, the main reason for arraying the three market actor groups in the triangular fashion above is to indicate that front offices really play a mediating role between two diametrically opposite demands (spend more vs. spend less) by attempting to “spend the right amount” to meet their own goals of winning, under whatever definition is most relevant to a given situation. As a result, you have somewhat of an equilibrium under this theoretical system:

  • Players want all the money, but can’t get all the money, because resources are limited, and because front offices need to judiciously use those resources in a way that helps them win (don’t overpay; don’t be stuck paying large contracts when the team doesn’t need the marginal wins those contracts provide);
  • Owners want to spend as little as possible, but run into constraints that some obligations are already locked in, and that by racing to the bottom, they made be forfeiting revenues and franchise value that comes from having a “good” or “winning” team;
  • Front offices, as indicated above, want to win, so they want to simultaneously garner as many available resources from the owners as possible to achieve that goal, while only giving it to the players to the extent that those players help the team win.

Maybe this didn’t need to be spelled out, but hopefully now that it is, the general idea is out there.

So, given the above, and the “Cold Stove” situation we find ourselves in, the question is: what would need to change in the above diagram to result in it? Given that the players are the ones being “harmed” in this situation, the answer is fairly obvious, I think: the front offices have stopped functioning as a mediator, and are instead essentially aligned with the goals of ownership. I originally wrote that sentence as “carrying water for” or “reflecting the preferences of” ownership, but I actually don’t think that’s accurate, because I don’t think it’s a matter of intentionally siding with ownership’s preferences. Instead, I think the structure of the league is what’s resulted in this realignment.

***

While this section could be an inundation of charts, I think I’ll just stick to a few of them.

This chart is very simple. It reflects the preseason projected win total for all 30 teams prior to the 2017 season, and the corresponding playoff odds. Despite the fact that the function is a natural sigmoid (S-shape), rather than a line, you can see that except for teams with very low and very high win totals, the relationship is pretty linear. Which, of course, makes sense: more projected wins generally means more talent on the roster, which equals a higher probability of making the playoffs.

Specifically, the slope of the line being mentioned suggests around an increase of four percent in playoff odds for each additional projected win. Thinking about that a bit more, it suggests that a team upgrading a black hole position (0 WAR) with a free agent that’s an average regular (2 WAR) essentially buys themselves about eight percent in playoff odds. Is eight percent meaningful? I think that’s for individual fans and front offices to decide; I can’t tell you how to feel about eight percent. But, I can tell you that those two wins are going to cost somewhere around $16 million to $20 million in annual salary at this point in time. Last year, the team with the tenth-highest payroll featured player obligations of $162 million, while the median team had a $137 million payroll, and the 20th-highest payroll was $110 million. (Note that which source you use here matters, but the general ranges are pretty much spot on.)

Rather than words, here’s another chart:

Basically, unless you’re the Padres (and who knows what they’re doing), the calculus is: spend between 10 and 20 percent of your current payroll, buy eight percent of playoff odds on the free agent market. Fun.

Of course, this is a vacuum, and it really gets even dicier when you think about the actual on-the-ground situation heading into the 2018 season. Here’s that same plot of estimated wins to estimated playoff percentage, based on the league following the two Pirates sell-off trades. The data reflect the 2018 win totals as currently estimated by Fangraphs (which are fine in aggregate but have some teams as particularly low, in my opinion, given my usual bones to pick with Steamer’s evaluation; I imagine these will be much more sensible when ZiPS is integrated into them), and the playoff odds are simply calculated by taking the slope of the line from the chart above and mapping it to each estimated win total.

Some of the teams clump together, so it’s a bit hard to tell bubbles apart, but essentially, there are:

  • Seven teams with playoff odds above 70 percent and 90 or more projected wins, representing the six division winners and one contested division where the two top teams are both estimated to finish with 91 wins apiece (Red Sox and Yankees). These teams have marginal incentive to spend at present, mostly just to stave off an aspirant below them, or in the Red Sox/Yankees case, to secure better division odds relative to the other and avoid the Lightning Round.
  • 15 teams with playoff odds below 30 percent and 80 or fewer projected wins. These teams also have marginal incentive to spend at present, because the tenth playoff spot, at present, is estimated to require 84 wins. These teams would need to spend at least enough to secure four wins ($32 million to $40 million), or around 20 to 40 percent extra relative to their 2017 payrolls. Even when doing so, that would bump their playoff odds by 16 percent, meaning that at best, the 80-win teams are going from 30 percent to about 46 percent in playoff odds, while the median team in this range is going from a Hail Mary seven percent to a slightly-less-dire Hail Mary 23 percent.
  • That leaves the remaining eight teams, estimated at between 81 and 88 wins, as teams that really need upgrades. Some of these teams need upgrades to improve their own none-too-solid playoff odds and possibly challenge for the division, while for others, upgrades are simply a way to try to climb into vying for that last playoff spot.

There are 30 teams. Vying intensely for upgrades, especially near-term upgrades signed to long-term deals, only really makes sense for about eight of them. There’s your Cold Stove.

***

There’s another aspect to this, and it’s been said by others far more erudite and ensconced in the world of major league baseball than myself. Consider:

and the willingness of teams to treat competitiveness as an option, not a priority (Jeff Passan, Yahoo! Sports, January 16, 2018)

Rosenthal is hitting on a topic that drives some people in baseball mad, but is increasingly becoming reality given the sophistication of analysis that fans and even the owners regularly read online: the risk-averse, performative rebuild. “Trust the process” is increasingly no longer just a plea for patience to see a sound long-term plan through; it’s a vehicle for job security and for the public to defer judgment. (Kiley McDaniel, Fangraphs, January 9, 2018)

This is the part that seems almost inevitable to me if I step back and think about it, though it’s very sad. Think about it from the perspective of a front office and an owner driven heavily by their own incentives and constraints. The owner doesn’t want to spend much. The front office does not want to rub the owner the wrong way through higher payroll demands, and unless it is one of a handful of front offices with nearly-inexhaustible resources (incidentally, these are your teams with 70 percent or higher playoff odds, for the most part, fun, right?), it realizes that an infinite, sustainable winning streak is potentially impossible just due to sheer economic constraints.

The front office realizes that perhaps its best strategy is to move all of its existing assets for higher variance future assets that will be considerably cheaper. This is great for the owner, because the owner gets to spend less. But, it’s also great for the front office, as far as job security goes (as noted by Kiley McDaniel above): the rebuild guarantees a latency period before results occur, and prospect development failures can be handwaved away as a “look, we always knew we were going to try and acquire high variance assets, sometimes you just run aground on the rocks of random variation, let’s try again?” mea-culpa-that-isn’t-really-an-apology-or-an-admission-of-defeat. So, there’s your collusion: not necessary between different teams, but between the front office and the ownership of the same teams, an agreement to only push the chips in sometimes, rather than all the time.

The fans have bought it too, to some extent. “We can’t compete with the rich teams” is an easy justification that’s hard to argue with. Even better for the owners is the direct absolution of tanking, which was a bit of a hot button issue last offseason: if you spend money to avoid the total tank, you’re probably not making a meaningful dent in playoff odds (remember, about 15 percent of your payroll only buys you about another ten percent chance of making the playoffs), and you’re getting yourself a worse draft position, to boot. Then, when it comes down to lacking star players in your farm system, you can see the darkly-reflected opportunity cost: if only you had really tanked, you could have gotten that high-ceilinged, generational talent type at the forefront of the draft, instead of a higher-floor pick. (Or, you could have at least done what the Braves did, leveraging the additional pool money from that higher pick to get a relative haul. Either way, why not tank?) Playing high variance young players is also more exciting than playing boring, average-or-below veterans. Everyone wins. Well, almost everyone. And by “wins,” I don’t actually mean “wins baseball games.” That’s reserved just for the teams with sufficient resources, the teams experiencing fortuitous random variation via a baseball-specific sprinkling, and the San Francisco Giants, except when it isn’t.

One thing left unsaid here is that the projections and playoff odds aren’t actually deterministic predictors of team success. While they are very useful guidelines that do a fantastic job of predicting outcomes, on average, and are pretty accurate even in individual cases, teams will break the mold. In 2017, the projections were spot on for the division winners (the lowest had playoff odds of 78 percent), but the four projected Wild Card teams (playoff odds between 33 and 67 percent) all finished under .500, while the four actual Wild Card teams had an average pre-season playoff odds figure of just nine percent. (Even crazier is that the Yankees, who were just one game away from a World Series appearance, were actually projected to finish last in their division with 79 wins and were saddled with playoff odds as low as 15 percent as the result.) To that end, it’s not that teams projected to be poor can’t and won’t surprise their fans and other teams in their league or division. But, saying that the excitement of baseball boils down to the Twins having an out-of-nowhere, Cinderella season that culminates in them trading away a stretch run addition to the team that would beat them in the Lightning Round and finishing with 85 wins seems just a bit underwhelming, no? And it’s not like said Twins, or said Yankees, Rockies, or Diamondbacks really floored the gas pedal in the previous year’s free agent and trade markets, either. If the lesson is that spending is prohibitively expensive, and “random baseball stuff” will happen anyway as an animatronic array of baseball commissioners laughs celestially at the best-laid plans of General Managers and Presidents of Baseball Operations, why spend at all?

***

I don’t know how to fix these issues. I do know that they have been brewing for a while, and the Braves’ own rebuild may have exacerbated them. The Braves tore apart one of those middle-of-the-pack, prohibitively-expensive-to-add-upgrades-but-might-luck-into-a-playoff-spot teams, proceeding with an (aimless is too harsh a word, but structured is too inaccurate) attempt at a rebuild that did not result in the ground roiling and parting to swallow up either Turner Field or SunTrust Park. If you’re a General Manager of a team with similar constraints, why not do the same? The Braves got blasted by many (me included) for making pointless, halfway gestures like signing Nick Markakis or saddling one terrible decision’s fallout (Hector Olivera) with a second, costlier bad decision (Matt Kemp). Why do any of that? Just shrug, sell your assets for prospects, and if it doesn’t work out, who’s to say you didn’t try to your best and have good intentions the entire time? After all, you can’t possibly compete with those other teams, the ones projected to win the division, right?

I think what I’m saying is that this is a parity issue. Or, at least, in my mind, if parity were addressed, these things would be addressed as well. My proposal, also half-baked, includes the following. This will never happen; the owners will not agree to it. But where parity means “equality of opportunity” rather than “equality of outcome,” I think these measures would be great for the game, and ensure a kicking Hot Stove. More importantly, I think they’d ensure that the majority of fans each year are interested in their teams through the summer and into the fall, rather than only fans of the anointed “good teams” in each year, and fans of the marginal handful of teams making a miracle trek to 85 wins and a Lightning Round spot each year.

  • A salary floor that set at some proportion of the median team’s payroll in the prior year (or a rolling average of multiple prior years, etc.). Pretty self-explanatory as to how this addresses the parity issue, by preventing hope-sucking black hole teams like the future Marlins or the 2017 Padres.
  • A change to the ownership structure that currently requires unanimous approval of new ownership by existing owners. Instead, only a fraction (25 percent? 40 percent? 50 percent?) of existing owner approval should be required. This would hopefully allow for factionalism among owners of small market and big market teams, which would interact with the other provisions here to ensure a more dynamic, competitive structure. Also, ownership should be subject to approval of the MLBPA, within reason, to bar bad-for-baseball situations from festering.
  • A lowering of the luxury tax threshold, such that it applies to more teams. Similar to how the salary floor would be set at some proportion of the median payroll, perhaps the luxury tax threshold could be as well. However, the use of the luxury tax funds would be different.
  • In acknowledgment that current free agency is a thing of the past and teams are not interested in paying for past performance with the same verve and vivacity as previously, a change to compensation for team-controlled players, as follows:
  • The general structure would be a league minimum salary up through one year of service time, arbitration eligibility for the next three years, and restricted free agency for the following three years. (Credit where credit is due: I had not even considered restricted free agency until Travis Sawchik mentioned it on Fangraphs last week.)
  • Restricted free agency would give a player’s former team a right-of-first-refusal on any contract with a total value within a certain threshold. In other words, if a player hit restricted free agency, any team could offer him any type of one-year deal. However, if his current team offered him a one-year contract within, say, $1 million of that offered by any other team, the player would be obligated to remain with his current team. (The system would probably require that these players only receive offers for one-year deals; multiyear extensions prior to restricted free agency would either not be allowed to cover these years, or would need to be agreed to well in advance, though the existence of restricted free agency would severely hamper the desire of players to sign these extensions.)
  • Luxury tax earnings would be used to subsidize the cost of smaller-payroll teams signing restricted free agents. The exact numbers would need to be worked out based on the luxury tax threshold, the salary floor, and change over time as these figures evolved. But, the general idea would be that a team paying a restricted free agent would only need to kick in some proportion of the money owed to him, with the remainder coming from the luxury tax earnings. Teams with larger payrolls and/or signing away restricted free agents from teams with smaller payrolls would receive much smaller, or zero, subsidies; teams with smaller payrolls would receive larger subsidies. To balance the escalation of salaries, I could also see a Super Two-esque system giving teams additional years of restricted free agency control over certain players, such as those meeting certain contract value thresholds.

***

To anyone reading any of the above and saying, “I don’t buy it,” you’re well within your rights. I’m not sure I fully buy it either. I still don’t have an answer to why this is suddenly such a big problem now, when it wasn’t quite so prevalent in past years. But, if this offseason is a sign of where baseball is heading, the powers that be would be best served to start brainstorming solutions sooner, rather than later, or else baseball will get progressively less fun for all but fans of a few teams every year.