Time for another Friday Fun post, this time a little sports fun!
It’s the best time of year. Time to put down the video games, start getting back in shape, and enjoying the outdoors. Winter is slowly melting away, the days are getting longer and best of all….it’s baseball season! Baseball fans rejoice. Hits, homers, strikeouts, stolen bases, arguing about who has the better pitching staff, it’s all back and I love it. With spring training in full swing, I know I’m ready to start getting to the real action. Hopefully, I’ll even be able to make it to the ballpark this year.
Being the frugal-minded guy I am, I got to thinking which teams could be considered the best at using their money. MLB does its best to create a level playing field for all teams, but let’s face it, small market teams or teams with owners not willing to part with their money **cough cough, Wilpons, cough cough** are at a disadvantage.
Now my beloved, soon the be NL East champs, New York Mets are finally out from the Bernie Madoff shadow, but they still have some work to do. What about teams in small markets? No matter who the owner, they just won’t have the ability to have the same size payroll as some of the big boys . But does a big payroll mean big success? The answer is, not always. I went back a looked at each team’s opening day payroll from 2016-2020 (yes, last season was weird, but every team was in the same boat) and then added up all their wins to get to their Price Per Win (PPW). Turns out a lot of the teams that were spending lots of money, just weren’t getting a lot of bang for their buck.
You might not have hundreds of millions to spend, but what we can apply to our own lives is that success isn’t always determined by how much you can spend, but by what you spend your money on. It’s all about getting good value for your spending and good returns on any investments.
Right of the bat here, you’ll find the teams paying the highest PPW in all of Major League Baseball, with a mixed back of success. Each team is in the top 10 for overall payroll for the past 5 years, but half are below average team in terms of number of wins, not exactly getting a good value on their spending. For the Giants, this is likely due to the back end of some big contracts for players part of their run of three championships in 5 years in the early 2010’s. For the Tigers and Angels, it’s mostly large contracts that didn’t see the production needed to see success. When Albert Pujols hit the free agent market, the Angels gave him a HUGE contract, I believe at the time one of the largest contracts in baseball history (he’s since been passed by his teammate Mike Trout). Pujols hasn’t been the same player since leaving St. Louis and his contract alone is destroying LAA’s rankings here.
The Dodgers, Yankees (boooo), and Red Sox are perpetual big market big spenders that are historically used to success and that trend is true recently as well. They are the top three in payroll and the Red Sox are the lowest in wins, but still ranked 6th. Here you can say that although they are spending a lot of money, they are spending it somewhat wisely and seeing good returns on their investments.
For our next group, each team is still above average in spending. The interesting part here is that none of the teams’ win rank is better than their payroll rank. The Mariners, Rangers have the biggest gap between the money spent and the results in the standings, so they are definitely not getting good value\returns on their spending. The biggest offender being the Mariners, likely due to Robbie Cano (who would want THAT contract…oh wait….thanks a lot Brodie). Lucky for the Mets Cano’s contract is actually off the books this year, never has any fan base been so happy to have a star player nabbed for PEDs.
The Mets (LFGM!) and Jays aren’t too bad but should be looking to improve their spending. The Nationals and Cubs are actually doing pretty well. The Cubs are right on the mark actually and the Nats are very close. Overall, this group is good but not great.
Getting on Base
Similar to the last group, there are teams here that are pretty close to where they should be, others not so much. Again, no team’s win rank is better than their payroll telling me they can all be looking to get better returns on their spending. Only the Cards rank in the top 10 in spending, but they are also the only team in this group that seems to be getting decent returns as their win rank is a match.
The Phillies have ramped up their spending in recent years, but have drastically underperformed (that’s clown spending bro). The other teams just haven’t been very good. Each as a star player or two, but not enough of a core group of cheap young talent (this is where you find value in MLB) to really become a contender.
Extra Base Hits
Ok, here we go. This is the group where we finally start seeing the power of finding value instead of just flat out spending. Only the Astros are above average, barely, in spending, and all except for the Padres, who are still close, own a better win rank than payroll rank. Simply being smart with your money doesn’t automatically translate to success as the Padres and ChiSox still rank very low in wins, but it mostly correlates with their spending, meaning they are still getting about what you want from their players.
The big one to notice here is the Astros. Now, they didn’t happen to get lucky with a ton of good contracts. The ‘stros spent years losing 100+ games and accumulating high draft picks. Once many of these players made it to the big leagues, they were studs and were making next to nothing, at least in baseball terms. Add a few high priced vets, like Justin Verlander and you have a recipe for success. With a mix of good player value (young studs) and big investments in free agency (Verlander and others), the Astros have found the perfect mix for success.
Knocking it out of the Park
Now we have my favorite group, the most frugal of them all. We see here again teams that are able to construct a good roster without breaking the bank, that’s a home run to me. None rank higher than 21st on payroll, but there are three in the top 10 of wins with the Brewers knocking on the door. The Marlins and Pirates have been stripped down in recent years making it tough to win, but let’s look at the others.
The Indians, A’s, and Rays all have HUGE returns here. Each is a small market team and has been able to perfect the art of grooming homegrown talent and finding value in many players that other teams threw to the scrap heap. The A’s even had a movie with Brad Pitt in it made about their frugalness (that’s the dream baby!).
Each has a much higher win rank than payroll showing that even the little guy can succeed by using what’s at their disposal. They don’t go chasing big FA or hand out giant contracts just because they can. Each has done it in their own way, but they have all found great success in finding value instead of spending.
There you have it. I think the big takeaway here is that there are different paths to success. Big market teams can see success by throwing enough money at it, but that doesn’t mean the teams with less money get left in the dust. By finding value and investing in the right players, MLB teams of all market sizes can build rosters filled with all-stars and be successful.
We can apply this to our own lives as well. There will always be the wealthy ones out there that can just throw a ton of money into an investment to big returns or spend seeming at will. For the rest of us, we need to find value. You can find value in everything from big purchases (House, car, etc. ) to everyday spending. Investing is no different, find the right opportunities for your income and you’ll be just fine.
I know what you’re thinking. Hey wait, these rankings only accounted for REGULAR SEASON success, but the goal is to win championships. How do all these big spenders and small-market teams fair when everything is on the line in the playoffs or the World Series? Well, come back in two weeks and you’ll find out.
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As always, all comments are welcome!
Jeff is a fan of all things finance. When he’s not out there changing the world with his blog, you can find him on a run, a Mets game, playing video games, or just playing around with his kids.