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March 31, 2003

As Seen In The New York Times Magazine

Marginal Dollars Per Marginal Win Revisited

by Doug Pappas

Last year, I introduced a new measure of a team's efficiency: marginal dollars per marginal win. An article by Michael Lewis in the March 30 New York Times Magazine excerpted from his forthcoming Moneyball: The Art of Winning an Unfair Game, used my analysis to illustrate how Oakland gets so much more performance than other teams out of its low payroll.

Lewis wrote:

"A leading independent authority on baseball finance, a Manhattan lawyer named Doug Pappas, pointed out a quantifiable distinction between Oakland and the rest of baseball. The least you could spend on a 25-man team, if everyone was paid the minimum salary, was $5 million, plus $2 million more for players on the disabled list and the remainder of the 40-man roster. The huge role of luck in any baseball game, and the relatively small difference in ability between most major leaguers and the rookies who might work for the minimum wage, meant that the fewest games a minimum-wage baseball team would win during a 162-game season was something like 49. The Pappas measure of financial efficiency was this: How many dollars over the minimum $7 million does each team pay for each win over its 49th? How many marginal dollars does a team spend for each marginal win? Over the past three years Oakland has paid about half a million dollars per win. The only other team in six figures has been the Minnesota Twins, at $675,000 per win. The most profligate rich franchises--the Baltimore Orioles, for instance, or the Texas Rangers--have paid nearly $3 million for each win, or more than six times what Oakland paid. Oakland seemed to be playing a different game from everyone else."

Here's the data underlying Lewis's conclusions.

In the tables below, the first three columns present each club's record and winning percentage for the 1999-2002 seasons. The fifth column is its Opening Day payroll for these seasons. The remaining columns present the team's performance, spending and efficiency compared to a hypothetical team of replacement-level players earning the major league minimum.

For these purposes, I've set replacement level equal to a .300 winning percentage. That's worse than any actual major league team since the 1962 Mets; it's roughly equal to a 49-113 season. Marginal Wins (MWs for short) are thus computed according to the formula ((Pct - .300) x 162). In 1999 the Atlanta Braves, with MLB's best record, posted 54.4 MWs, while the Minnesota Twins, with the worst record, managed only 15.2 MWs.

Marginal payroll measures the amount of each club's discretionary spending on players. A roster composed entirely of players making the major league minimum would cost about $5,600,000, assuming three players on the DL in addition to the 25-man active roster, so the sixth column, marginal payroll, equals a club's actual Opening Day payroll, minus $5,600,000. The final column, "Marginal $/Marginal Win," simply divides marginal payroll by a club's marginal wins to compute the cost of each marginal win.

Thus in 1999 the Baltimore Orioles and Pittsburgh Pirates finished with almost identical records: 78-84 for the O's, 78-83 for the Bucs. But since Baltimore spent over $56 million more to achieve the same result, each marginal win cost the Orioles almost $2.5 million, compared to just $555,000 for the Pirates. Despite the majors' highest payroll, the world champion Yankees spent less per win than the 74-88 Padres, even without taking into account the money the Yankees earned from the postseason.

(When I performed this analysis for the 2001 season, I adjusted for playoff performance by subtracting each club's reported postseason revenue from its payroll. Since this information isn't available for other seasons, for consistency the figures below ignore the postseason. The 2001 figures suggest that making the World Series is worth about $14 million per team, making the LCS is worth at least $4 million, and losing in the first round is worth about $2 million.)


1999

			      Opening Day                 Marginal $/
Team    W    L   Pct    MWs       Payroll    Marginal $  Marginal Win
BAL    78   84  .481   29.4   $78,902,282   $73,302,282    $2,493,275
BOS    94   68  .580   45.4   $59,553,500   $53,953,500    $1,188,403
NYA    98   64  .605   49.4   $85,034,692   $79,434,692    $1,607,990
TBA    69   93  .426   20.4   $33,952,500   $28,352,500    $1,389,828
TOR    84   78  .519   35.4   $44,509,333   $38,909,333    $1,099,134

CHA    75   86  .466   26.9   $24,560,000   $18,960,000    $  705,729
CLE    97   65  .598   48.4   $68,061,627   $62,461,627    $1,290,529
DET    69   92  .429   20.8   $34,104,666   $28,504,666    $1,368,537
KCA    64   97  .398   15.8   $23,706,000   $18,106,000    $1,146,130
MIN    63   97  .394   15.2   $19,242,500   $13,642,500    $  898,272

ANA    70   92  .432   21.4   $51,830,166   $46,230,166    $2,160,288
OAK    87   75  .537   38.4   $23,234,333   $17,634,333    $  459,227
SEA    79   83  .488   30.4   $49,963,503   $44,363,503    $1,459,326
TEX    95   67  .586   46.4   $74,834,931   $69,234,931    $1,492,132

ATL   103   59  .636   54.4   $73,585,000   $67,985,000    $1,249,724
FLO    64   98  .395   15.4   $18,876,000   $13,276,000    $  862,078
MON    68   94  .420   19.4   $16,175,500   $10,575,500    $  545,129
NYN    97   66  .595   47.8   $62,450,427   $56,850,427    $1,189,217
PHI    77   85  .475   28.4   $30,297,500   $24,697,500    $  869,630

CHN    67   95  .414   18.4   $60,191,500   $54,591,500    $2,966,929
CIN    96   67  .589   46.8   $33,162,761   $27,562,761    $  588,809
HOU    97   65  .599   48.4   $51,629,000   $46,029,000    $  951,012
MIL    74   87  .460   25.9   $41,395,762   $35,795,762    $1,384,233
PIT    78   83  .484   29.9   $22,197,666   $16,597,666    $  555,394
SLN    75   86  .466   26.9   $45,698,333   $40,098,333    $1,492,540

ARI   100   62  .617   51.4   $66,078,999   $60,478,999    $1,176,634
COL    72   90  .444   23.4   $55,864,837   $50,264,837    $2,148,070
LAN    77   85  .475   28.4   $79,265,953   $73,665,953    $2,593,872
SDN    74   88  .457   25.4   $47,828,346   $42,228,346    $1,662,533
SFN    86   76  .531   37.4   $44,943,557   $39,343,557    $1,051,967

In 1999, the clubs which spent less than $1 million/win fell into three camps. Oakland and Cincinnati had good, cheap teams; Houston fielded a very good team on a moderate payroll; the White Sox, Twins, Pirates and three-fifths of the NL East were both bad and cheap. None of the five clubs spending more than $2 million/win won more than 78 games, with the last-place Cubs coming close to breaking the $3 million/win barrier.


2000

			      Opening Day                 Marginal $/
Team    W    L   Pct    MWs       Payroll    Marginal $  Marginal Win
BAL    74   88  .457   25.4   $81,447,435   $75,847,435    $2,986,119
BOS    85   77  .525   36.4   $77,940,333   $72,340,333    $1,987,372
NYA    87   74  .540   38.9   $92,538,260   $86,938,260    $2,232,600
TBA    69   92  .429   20.8   $62,765,129   $57,165,129    $2,744,554
TOR    83   79  .512   34.4   $46,238,333   $40,638,333    $1,181,347

CHA    95   67  .586   46.4   $31,133,500   $25,533,500    $  550,291
CLE    90   72  .556   41.4   $75,880,971   $70,280,971    $1,697,608
DET    79   83  .488   30.4   $58,265,167   $52,665,167    $1,732,407
KCA    77   85  .475   28.4   $23,433,000   $17,833,000    $  627,923
MIN    69   93  .426   20.4   $16,519,500   $10,919,500    $  535,270

ANA    82   80  .506   33.4   $51,464,167   $45,864,167    $1,373,179
OAK    91   70  .565   43.0   $31,971,333   $26,371,333    $  613,783
SEA    91   71  .562   42.4   $58,915,000   $53,315,000    $1,257,429
TEX    71   91  .438   22.4   $70,795,921   $65,195,921    $2,910,532

ATL    95   67  .586   46.4   $84,537,836   $78,937,836    $1,701,246
FLO    79   82  .491   30.9   $20,072,000   $14,472,000    $  468,491
MON    67   95  .414   18.4   $34,807,333   $29,207,333    $1,587,355
NYN    94   68  .580   45.4   $79,509,776   $73,909,776    $1,627,969
PHI    65   97  .401   16.4   $47,308,000   $41,708,000    $2,543,171

CHN    65   97  .401   16.4   $60,539,333   $54,939,333    $3,349,959
CIN    85   77  .525   36.4   $46,867,200   $41,267,200    $1,133,714
HOU    72   90  .444   23.4   $51,289,111   $45,689,111    $1,952,526
MIL    73   89  .451   24.4   $36,505,333   $30,905,333    $1,266,612
PIT    69   93  .426   20.4   $28,928,333   $23,328,333    $1,143,546
SLN    95   67  .586   46.4   $61,453,863   $55,853,863    $1,203,747

ARI    85   77  .525   36.4   $81,027,333   $75,427,333    $2,072,179
COL    82   80  .506   33.4   $61,111,190   $55,511,190    $1,662,012
LAN    86   76  .531   37.4   $88,124,286   $82,524,286    $2,206,532
SDN    76   86  .469   27.4   $54,821,000   $49,221,000    $1,796,387
SFN    97   65  .599   48.4   $53,737,826   $48,137,826    $  994,583

The 2000 Cubs achieved what their predecessor could not, shattering the $3 million/win mark with a season that saw them finish with the NL's worst record but seventh-highest payroll. Baltimore, Tampa Bay and Texas weren't far behind. Two of the AL's three most cost-effective teams, the White Sox and Athletics, qualified for the playoffs, while Minnesota and Florida showed that even a bad team can be efficient if it just cuts payroll far enough. The 2000 Yankees, who lost 15 of their last 18 games before awaking in time for the playoffs, became the first playoff qualifier to spend more than $2 million/win. Notwithstanding the Commissioner's laments about competitive balance, MLB was as balanced as it's ever been: No club finished with a winning percentage above .599 or below .401.


2001

			      Opening Day                 Marginal $/
Team    W    L   Pct    MWs       Payroll    Marginal $  Marginal Win
BAL    63   98  .391   14.8  $ 72,426,328  $ 66,826,328    $4,517,947
BOS    82   79  .509   33.9  $109,558,908  $103,958,908    $3,065,792
NYA    95   65  .594   47.6  $109,791,893  $104,191,893    $2,189,480
TBA    62  100  .383   13.4  $ 54,951,602  $ 49,351,602    $3,682,955
TOR    80   82  .494   31.4  $ 75,798,500  $ 70,198,500    $2,235,621

CHA    83   79  .512   34.4  $ 62,363,000  $ 56,763,000    $1,650,087
CLE    91   71  .562   42.4  $ 91,974,979  $ 86,374,979    $2,037,146
DET    66   96  .407   17.4  $ 49,831,167  $ 44,231,167    $2,542,021
KCA    65   97  .401   16.4  $ 35,643,000  $ 30,043,000    $1,831,890
MIN    85   77  .525   36.4  $ 24,350,000  $ 18,750,000    $  515,110

ANA    75   87  .463   26.4  $ 46,568,180  $ 40,968,180    $1,551,825
OAK   102   60  .630   53.4  $ 33,810,750  $ 28,210,750    $  528,291
SEA   116   46  .716   67.4  $ 75,652,500  $ 70,052,500    $1,039,355
TEX    73   89  .451   24.4  $ 88,504,421  $ 82,904,421    $3,397,722

ATL    88   74  .543   39.4  $ 91,851,587  $ 86,251,587    $2,189,127
FLO    76   86  .469   27.4  $ 35,504,167  $ 29,904,167    $1,091,393
MON    68   94  .420   19.4  $ 34,774,500  $ 29,174,500    $1,503,840
NYN    82   80  .506   33.4  $ 93,174,428  $ 87,574,428    $2,621,989
PHI    86   76  .531   37.4  $ 41,664,167  $ 36,064,167    $  964,283

CHN    88   74  .543   39.4  $ 64,015,833  $ 58,415,833    $1,482,635
CIN    66   96  .407   17.4  $ 45,227,882  $ 39,627,882    $2,277,464
HOU    93   69  .574   44.4  $ 60,382,667  $ 54,782,667    $1,233,844
MIL    68   94  .420   19.4  $ 43,089,333  $ 37,489,333    $1,932,440
PIT    62  100  .383   13.4  $ 52,698,333  $ 47,098,333    $3,514,801
SLN    93   69  .574   44.4  $ 77,270,855  $ 71,670,855    $1,614,208

ARI    92   70  .568   43.4  $ 81,206,513  $ 75,606,513    $1,742,086
COL    73   89  .451   24.4  $ 71,068,000  $ 65,468,000    $2,683,115
LAN    86   76  .531   37.4  $108,980,952  $103,380,952    $2,764,197
SDN    79   83  .488   30.4  $ 38,333,117  $ 32,733,117    $1,076,747
SFN    90   72  .556   41.4  $ 63,332,667  $ 57,732,667    $1,394,509

As salaries continued to rise, 2001's most efficient teams stand out like sore thumbs. Oakland won 102 games with the majors' second-lowest payroll; Minnesota contended all season with the lowest. Seattle won 116 games with a payroll lower than Toronto's. Bad spending by Tampa Bay and Pittsburgh pushed them over $3.5 million/win, while the old, overpaid Orioles staggered home at $4.5 million/win. In the NL, the big-spending Mets and Dodgers missed the playoffs, while the Phillies contended all season despite spending less than half as much.


2002

			      Opening Day                 Marginal $/
Team    W    L   Pct    MWs       Payroll    Marginal $  Marginal Win
BAL    67   95  .414   18.4  $ 60,493,487  $ 54,893,487    $2,983,342
BOS    93   69  .574   44.4  $108,366,060  $102,766,060    $2,314,551
NYA   103   58  .640   55.0  $125,928,583  $120,328,583    $2,186,212
TBA    55  106  .342    6.7  $ 34,380,000  $ 28,780,000    $4,269,007
TOR    78   84  .481   29.4  $ 76,864,333  $ 71,264,333    $2,423,957

CHA    81   81  .500   32.4  $ 57,052,833  $ 51,452,833    $1,588,050
CLE    74   88  .457   25.4  $ 78,909,448  $ 73,309,448    $2,886,199
DET    55  106  .342    6.7  $ 55,048,000  $ 49,448,000    $7,334,741
KCA    62  100  .383   13.4  $ 47,257,000  $ 41,657,000    $3,108,731
MIN    94   67  .584   46.0  $ 40,225,000  $ 34,625,000    $  752,982

ANA    99   93  .516   34.9  $ 61,721,667  $ 56,121,667    $1,606,632
OAK   103   59  .636   54.4  $ 39,679,746  $ 34,079,746    $  626,466
SEA    93   69  .574   44.4  $ 80,282,668  $ 74,682,668    $1,682,042
TEX    72   90  .444   23.4  $105,302,124  $ 99,702,124    $4,260,775

ATL   101   59  .631   53.7  $ 93,470,367  $ 87,870,367    $1,637,463
FLO    79   83  .488   30.4  $ 41,979,917  $ 36,379,917    $1,196,708
MON    83   79  .512   34.4  $ 38,670,500  $ 33,070,500    $  961,352
NYN    75   86  .466   26.9  $ 94,633,593  $ 89,033,593    $3,314,008
PHI    80   81  .497   31.9  $ 57,955,000  $ 52,355,000    $1,641,382

CHN    67   95  .414   18.4  $ 75,690,833  $ 70,090,833    $3,809,284
CIN    78   84  .481   29.4  $ 45,050,390  $ 39,450,390    $1,341,850
HOU    84   78  .519   35.4  $ 63,448,417  $ 57,848,417    $1,634,136
MIL    56  106  .346    7.4  $ 50,287,333  $ 44,687,333    $6,038,829
PIT    72   89  .447   23.8  $ 42,323,598  $ 36,723,598    $1,539,954
SLN    97   65  .599   48.4  $ 74,098,267  $ 68,498,267    $1,415,253

ARI    98   64  .605   49.4  $102,820,000  $ 97,220,000    $1,968,016
COL    73   89  .451   24.4  $ 56,851,043  $ 51,251,043    $2,100,453
LAN    92   70  .568   43.4  $ 94,850,952  $ 89,250,952    $2,056,474
SDN    66   96  .407   17.4  $ 41,425,000  $ 35,825,000    $2,058,908
SFN    95   66  .590   47.0  $ 78,299,835  $ 72,699,835    $1,547,132

In 2002, the Athletics and Twins continued to lead the majors in efficient spending. Not coincidentally, both clubs were built around a nucleus of young, low-salaried players produced by their own farm systems, with free agents and expensive veterans brought in only to fill specific needs. At the other end of the spectrum, the mismanaged Tigers and Brewers competed to see who could do less with more. The Tigers "won" this competition by spending an incredible $7.3 million per marginal win. Detroit finished 39 games behind Minnesota in the AL Central despite outspending the Twins by almost $15 million, while for the second year in a row the Yankees were the most efficient spenders in the AL East. The Mets and Rangers proved that money couldn't buy victories.


1999-2002 COMBINED

                              Opening Day                 Marginal $/
Team    W    L   Pct    MWs       Payroll    Marginal $  Marginal Win
BAL   282  365  .436   88.0  $293,269,532  $270,869,532    $3,076,809
BOS   354  293  .547  160.1  $355,418,801  $333,018,801    $2,079,455
NYA   383  261  .595  191.0  $413,293,428  $390,893,428    $2,046,789
TBA   255  391  .395   61.4  $186,049,231  $163,649,231    $2,665,754
TOR   325  323  .502  130.6  $243,410,499  $221,010,499    $1,692,270

CHA   334  313  .516  140.1  $175,109,333  $152,709,333    $1,089,876
CLE   352  296  .543  157.6  $314,827,025  $292,427,025    $1,855,501
DET   269  377  .416   75.4  $197,249,000  $174,849,000    $2,317,943
KCA   268  379  .414   74.0  $130,039,000  $107,639,000    $1,454,302
MIN   311  334  .482  118.0  $100,337,000  $ 77,937,000    $  660,223

ANA   326  352  .481  117.2  $211,584,180  $189,184,180    $1,614,541
OAK   383  264  .592  189.2  $128,696,162  $106,296,162    $  561,843
SEA   379  269  .585  184.6  $264,813,671  $242,413,671    $1,313,183
TEX   311  337  .480  116.6  $339,437,397  $317,037,397    $2,719,017

ATL   387  259  .599  193.8  $343,444,790  $321,044,790    $1,656,594
FLO   298  349  .461  104.1  $116,432,084  $ 94,032,084    $  903,628
MON   286  362  .441   91.6  $124,427,833  $102,027,833    $1,113,841
NYN   348  300  .537  153.6  $329,768,224  $307,368,224    $2,001,095
PHI   308  339  .476  130.6  $177,224,667  $154,824,667    $1,185,487

CHN   287  361  .443   92.6  $260,437,499  $238,037,499    $2,570,599
CIN   325  324  .501  130.1  $170,308,233  $147,908,233    $1,136,888
HOU   346  302  .534  151.6  $226,749,195  $204,349,195    $1,347,950
MIL   271  376  .419   77.0  $171,277,761  $148,877,761    $1,933,004
PIT   281  365  .435   87.5  $146,147,930  $123,747,930    $1,414,748
SLN   360  287  .556  130.6  $258,521,318  $236,121,318    $1,807,973

ARI   375  273  .579  180.6  $331,132,845  $308,732,845    $1,709,484
COL   300  348  .463  105.6  $244,895,070  $222,495,070    $2,106,961
LAN   341  307  .526  146.6  $371,222,143  $348,822,143    $2,379,414
SDN   295  353  .455  100.6  $182,407,463  $160,007,463    $1,590,531
SFN   368  279  .569  130.6  $240,313,885  $217,913,885    $1,668,560

No surprise: Over the past four years, the combination of the third-highest winning percentage and fourth-lowest payroll has made the Oakland Athletics MLB's most efficient club, posting 189 marginal wins at a cost of just $562,000 per win. Put another way, Oakland won as many games as the New York Yankees, with a marginal payroll 27% of the Yankees'. The Minnesota Twins, the only club to approach Oakland in efficiency, did so by slashing payroll to the bone and fielding dismal teams during owner Carl Pohlad's "Contract Me!" phase.

Even at their worst, though, Pohlad's Twins were no worse than other clubs which spent far more to achieve just as little. Marginal dollar per marginal win analysis distinguishes between inexpensive bad teams--the only ones which could properly support a claim that some teams "can't afford to compete"--and those whose on-field failures are attributable to poor management. The Baltimore Orioles could be called the anti-Oakland: Over the four years of this study, they spent 2 1/2 times as much to win 101 fewer games, at a cost of more than $3 million per marginal win.

Runners-up in this category include the Texas Rangers, who outspent the Mets and Diamondbacks; the Chicago Cubs, who outspent the Cardinals and Giants; and even the hapless Devil Rays, who won less than 40% of their games despite outspending the over-.500 Reds and White Sox. The Tigers and Brewers, who squandered the revenue from their new parks, aren't far behind. Only Kansas City, Florida and Montreal have been consistently bad and consistently cheap, and all three have serious stadium and/or ownership issues. But even fans of these clubs can look to the Twins for hope. When the promise of a good young team--and of the attendance boost such a team can provide--can induce Carl Pohlad to brush the cobwebs off his wallet to re-sign the nucleus of the Twins, no one can truly lose all "hope and faith."

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