June 19, 2017
Arbitrage Artists on Each Coast
We talk a lot about the fundamental challenges faced by low-payroll or small-market teams trying to compete with the big boys. This goes back to the times of Branch Rickey and Ed Barrow, but it became a fashionable conversation once Moneyball turned baseball inside-out. The A’s might have been the first team to realize that speed was overvalued and that on-base percentage was undervalued, but the Red Sox and Yankees were among the first five, and that closed Oakland’s margin for error fast.
Ever since, MLB has been reenacting the fable of the lion, the fox, the jackal, and the wolf. See, all four animals went hunting together, and they killed a stag. The lion took his place, and he told the others to quarter the kill. They did, cut it up nice and evenly, and then the lion said, “I get one quarter because I’m king, and another because I’m the arbiter, and another because I took part in the chase. Now, who wants to lay a paw on the last quarter?”
The other three slink away, and the lion gets the whole stag. The moral of the story: you can share in the labors of the great, but you won’t get to share in the spoil. Spend a bunch of money in the draft? Manipulate the free agent compensation rules? Discover the value and the teachability of pitch framing? Reinvent defense by shifting radically more often? All of that is well and good, but if you’re not the Yankees, the Red Sox, or a similar behemoth, they’re going to learn to do what you do pretty quickly—and then they’re going to do it better than you, because they have more resources with which to do it.
One of the things the Rays did exceptionally well, at their best, seems to be the latest hock of stag to be gobbled up by the league’s lions. Maybe it’s not really the latest, but in 2017, it’s the most visible. The principle is arbitrage, something so foundational to the operations of small-market general managers and fantasy team owners that it must seem terribly cliche to mention here, but it’s becoming the cudgel with which the Yankees are beating the rest of the league over the head.
Consider Brian Cashman’s new-age Bronx Bombers. They’re on a bit of an ugly jag right now, but they’re still at the top of the American League's non-Astros heap, at least for the moment. That’s surprising, and not only because we didn’t completely see Aaron Judge coming. This team was supposed to be a year or two away, and if Judge were the only guy outperforming his projections, they still would be. However, the Yankees have three other players making huge daily contributions, and the prices Cashman paid for each are lower than the prices he paid for Judge himself. Let’s review the transactions we’re talking about:
That’s a whole lot of slop thrown at teams who clearly felt a need to jettison a distressed asset. Neither the Gregorius deal nor the Castro deal were cast in just that light at the time, but the Diamondbacks (as they always seem to) had a logjam of iffy shortstop prospects and seemed eager to move on from Gregorius, and the Cubs proactively chose to move on from Castro, sinking more money over the same number of years into Ben Zobrist, and retaining Javier Baez. (Castro’s contract put the Cubs in a tough spot, which is part of the reason why they had to make that move. They signed him to that extension, on those terms, mostly because Jim Hendry pressed a panic button in May of 2010 and called up Castro before the Super Two cutoff date. That will be relevant shortly.)
That the Yankees use their money as a buffer and take chances on other teams’ lost causes is neither new nor noteworthy, but given the way Castro, Hicks, and Gregorius have fueled the team’s strong start, this is eye-popping stuff. Add in Chapman, whose presence on the team this year and into the future is but a small, ancillary benefit compared to the fact that he brought back top prospect Gleyber Torres from the Cubs last summer, and it becomes a coup. Castro, Hicks, and Gregorius have combined for 4.8 WARP already. It’s the difference between the Yankees being a top AL East contender and being one of the league’s bottom-feeders, and it’s all come from turning other teams’ trash into treasure.
It’s clear that Cashman and his front office have a concrete and extremely efficient process through which they target players who represent arbitrage opportunities. If the examples above aren’t enough to convince you, consider the recent moves made by former Cashman assistant Billy Eppler in his new job with the Angels. Eppler targeted Danny Espinosa over the winter, when the Nationals’ house was not quite enough in order to quell rumors that Espinosa was miffed to have lost his job in the Adam Eaton arrival/Trea Turner position change sequence that took place in December.
A month earlier, he gobbled up Cameron Maybin from the Tigers, who were ready to decline Maybin’s option just to save money if they needed to do so. Eppler found Martin Maldonado more available than expected, and swapped catchers with the Brewers, shoring up the position at which his team most direly needed help. That was last winter. The winter before, Eppler got Yunel Escobar from Washington under almost identical circumstances to the ones that netted him Espinosa, and last summer, he made a clever swap with the Twins that got him the still-untapped upside of Alex Meyer.
This year, Meyer has been a revelation (albeit in a limited sample), and the others have done just what they were brought in to do—form a non-catastrophic supporting cast for Mike Trout, without costing the club much in terms of dollars (made scarce by Arte Moreno’s skittishness about the luxury tax) or talent (made scarce by years of Moreno’s interference with the efforts of his front office to create a sustainable foundation for winning). Despite the team’s nightmare scenario (a serious Trout injury) coming to fruition, they’ve stayed afloat.
It’s impossible to identify a singular commonality in all these moves, and without an impossible amount of inside access, it’s impossible to say exactly how the Yankees or Angels have chosen their recent targets so well. It seems likely, though, that both the process itself (the statistical tools and the organizational paradigm that help each club focus its search for value) and the inputs to that process (scouting staffers) are above average. To that end, I circle back to Hendry. The former Cubs general manager has been on Cashman’s staff as a special assignment scout since the winter after his firing from the Chicago job.
He’s both an excellent raw talent evaluator (if anything, his crime in the Cubs organization was being too well-liked and too available when the team needed a GM in the early 2000s, and so being promoted past his ideal station—scouting and player development director) and an exceptionally connected baseball man, the kind who can quickly recite (or go find) extremely detailed information about a player very quickly. One can’t help but wonder whether it was Hendry (or a person on his level; this story is not meant as speculative praise for Hendry himself) who nudged Cashman toward a deal for Castro, or who got the reassurance the team needed to take the risk and trade for Chapman.
Hendry is having a very good 2017, really. Guys whose first entry into professional baseball happened under Hendry’s command are having perhaps their best composite season since 2008. Castro is hitting better than he’s ever hit before. Marwin Gonzalez is a semi-regular on baseball’s best team. Baez and Willson Contreras are starters for the defending champions. Justin Bour, when healthy, is a real masher at first base. That’s not to mention DJ LeMahieu, Welington Castillo, Ryan Flaherty, Marco Hernandez, Jeff Samardzija, Robinson Chirinos, Matt Szczur, Josh Donaldson, Josh Harrison, Darwin Barney, Rich Hill, or Chris Rusin.
Many of those players have had rough stretches this season, but some have been shockingly good. More importantly, they’re all still hanging around in the big leagues, six full years after Hendry’s ouster. That says something about Hendry’s eye (and ear, and heart) for makeup, and good makeup is a key to turning around frustrating career arcs like the ones Castro, Hicks, and Gregorius had traced before coming to New York.
From beginning to end, the Yankees have a well-run machine for the production of surplus value right now. Cashman deserves a world of credit, but there are probably four or five people within the front office who also should share in it. Whatever the case, what that team—and its miniaturized Disney replica—is doing is deeply impressive. In the long run, Clint Frazier and Torres could displace a couple of these breakout transplant types, but if they do it will only complete the cycle of arbitrage for Cashman: buy low and with leverage, choose the right investments, then sell when the stock price spikes.
The Yankees aren’t going away, even if 2017 doesn’t stay rosy for them, and the Angels (if Eppler can convince Moreno to keep his wallet open just a moment longer) have a better chance than most people are giving them of turning their tough circumstances around quickly.