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September 23, 2013

Baseball Therapy

If One Win is Worth $5 Million...

by Russell A. Carleton

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Lately, there’s been a lot of writing among baseball analysts and thinkers about how teams might leverage small investments to their benefit. You know the ones. They all start with “Well, if a win is worth five million dollars, then spending fifty thousand on this has to net just one hundredth of a win to be worth it.” (I’ve written a few of them myself.) Then they continue with an exasperated tone, wondering why teams don’t seem to do much of this sort of thinking. (Or do they?)

The reason can be summed up in four short words: “It’s not that simple.” It never is.

It’s such a tempting argument to make, because changing one strikeout to a walk is worth something like half a run, and if you can do that a grand total of once each year for each guy in the lineup, the net benefit is half a win. And signing up everyone on the team for the Coffee of the Month club costs only $19.95 a month. All it takes to justify that expense is a quick explanation of how the coffee will give everyone on the team a little extra focus, and that once in a while, it will allow them to be sharp enough to avoid swinging at ball four on a 3-2 pitch.

It’s entirely possible that some of the ideas that have been floated out there really would be cheap ways to make teams better, and substantially enough that they would be worth the cost. But a simple model of anything often ends up being overly simple. As a vehicle for illustration, allow me to review one of the most harebrained proposals of all, which has the added benefit of being one of my own. I wrote about it a few months ago, suggesting that teams should, instead of providing starvation wages (sometimes literally) in the form of per diem to minor leaguers, they should instead invest (i.e., spend a lot more money) on providing full catered meals to their players at all levels of the minors, both at home and on the road. I call it the “Food for Kids” program.

Let’s examine “Food for Kids” with a more critical eye, examining of the issues that have to be overcome after we’ve had the crazy, yet brilliant idea.

That’s a lot of money…
In my original piece, I suggested that the cost of providing catered meals over the course of a year would be something on the order of $1.3 million per year. The exact number isn’t as important as the order of magnitude. It would be something around a million dollars. Believe it or not, even in baseball a million dollars is still a lot of money. Yes, I know that a million dollars buys you a 32-year-old utility infielder who hits .250 with barely passable defense (if you’re lucky) and that even the low-budget teams carry payrolls around 80 million.

I once had a conversation with my brother, who has a master’s degree in finance and put things in a different light. He pointed out that the business model of a baseball team (and a sports franchise in general) is awful. The large majority of your input costs (player salaries) are set in advance and are “hard” costs. You can release a player if he doesn’t perform, but you still owe him his salary until the end of the contract.

On the other hand, a good chunk of your operating income is based on ticket sales, which is variable income. You can estimate how many people will buy tickets, but when you commit to the payroll, those people haven’t shown up yet. And maybe they won’t. Worse, the thing that fans most seem to respond to is a winning team, and we know that there’s lot of luck in baseball. Go on a streak of bad luck, and suddenly, the fans stop showing up. Not only that, but the dollars that you’re chasing are discretionary dollars. The nice thing about running a grocery store is that even when times are bad, people still need to eat. They’ll cut back on taking themselves out to the ballgame instead. There aren’t big fat piles of extra cash sitting around front offices. The profit margin could disappear too quickly for that.

Could money be re-purposed from the MLB payroll into my “Food for Kids” program? Sure. But before you make such a big investment, there are some other factors to consider.

The Second Move Advantage
Imagine for a moment that you are playing the game Rock-Paper-Scissors. The key to a good game of RPS is that both players need to show their hand weapon of choice at the same time. Now imagine that instead of simultaneous movement, your opponent has to go first, then you get to pick which of the three you’d like to use. You’ve just experienced second move advantage.

Let’s first note that the effects of the “Food for Kids” program are a mystery, because no one has yet tried it. We don’t know exactly what would happen. It might make everyone in the system amazing. It might make them all fat. It might have some small, but meaningful effects that are big enough to make the program a success but not enough to shout about it from the housetops. Right now, I could make a reasonable case to expect modest, although meaningful results, but it’s a risk. A risk that costs a lot of money.

Now, let’s say that some other team tried it. It wouldn’t take much effort to figure out that they were doing it. (Every time we play one of their affiliates, a big catering truck shows up.) Plus, people talk. And if they’re getting good results, then we can simply copy them next year. They took the risk to find out if it works and since no good deed goes un-punished, they don’t get to reap the benefits from it for more than a couple of years or so. This is the difference between getting an absolute vs. getting a relative advantage. “Food for Kids” might make everyone in the system a better baseball player, but if everyone else can get that advantage once they know about it, then the team that started it returns to being no better off. Most arguments starting with “If a win is worth $5 million…” focus on the absolute advantage to be gained. To win in baseball you have to be better than (i.e., have a relative advantage over) the other teams.

If the program fails, then the other team is out the money, and everyone else gets to find out that it doesn’t work—for free.

So, everyone is stuck. It doesn’t make sense to be the first person to risk a lot of money on something that might not work unless you believe that in that short window where it’s just your little secret, you can reap benefits that make it worth it. Then there’s the fact that if it works, you know that other teams will copy it and will negate your advantage, but you still need to spend that million per year, just to keep up with the Doug Joneses. For a low-budget team, you’re down a million dollars on a payroll of 80 million while other teams are down a million on 200. Maybe it’s best not to start that arms race. For big-budget teams, why help the low-budget guys identify a cheap source of improving team-controlled talent, the kind of resource that they’ll need to compete with you, when you can just out-spend them?

Someone has to run that program
It often surprises people to learn that MLB front offices are actually rather small places. Not just physically, but when we speak about “the front office,” it’s actually a very small cabal of people making the big decisions. Sure, like any place of business, there’s the accounting department and the marketing department, but the baseball operations department isn’t usually teeming with people. It’s usually a small inner circle of mostly men. Some of that is probably by design. Too many cooks spoil the broth and some teams may feel there is more value in keeping the inner circle closed. But more than that, it’s not like teams can create new positions at will.

If a team were to actually implement my “Food for Kids” program and commit a million dollars to it, ownership would want to make sure that someone was watching that money. Plus, someone has to be in charge of making sure that the catering truck makes it to the park in Albuquerque. That won’t be the farm director. He’s got other things to do. So, you might hire a director of culinary logistics with the skillset to know about catering, negotiations with food service companies, and sports nutrition. But that comes with a cost in salary, benefits, and overhead. It might be worth it, but there’s always the tendency to see costs like that as top line expenses rather than investments.

For some other programs (“teach everyone the knuckleball!”), it might make sense for the farm director to oversee such a program, because it directly relates to what he’s doing anyway. However, it’s one thing to say that and another to sit down and write a program manual about the gory details of how it’s going to work, then implement the program. Going from crazy idea to actual practice means building an entire structure within a culture to support that idea, and that’s harder than you might think, whether we’re talking about baseball or real life. Front office personnel aren’t generally selected on their ability to design and implement systemic interventions. Some guys probably have that in their back pocket and maybe teams should pay more attention to that sort of thing, but it’s not usually in the job description.

I expected it to be… bigger
Let’s say that our team decided to green light the “Food for Kids” program. The next question would be “Is it working?” It’s a simple question, but it takes some doing to answer it. It might be easy to select some criteria for whether players are getting better. Does the team have the data infrastructure to measure those things and an analyst who knows how to operationalize that?

Past that, there’s another problem. About the best research framework you’re going to get in this case is a simple pre/post design. This is the amount of development that we saw last year before the program went into effect. This is what kind of improvement we saw this year with the new program. Was the improvement due to better nutrition? Was it random variance? Was it the new hitting instructor who makes all the hitters recite the Gettysburg Address as they walk to the plate? A baseball team is not the place to run nice, neat randomized controlled studies. Even a really good researcher is going to have to say “Yeah, I can’t be totally sure…” when evaluating these programs.

Then there’s the matter of effect size. Most of these proposals are framed as, “Well, all you need is a really small movement in strikeout rates and the program pays for itself.” Here’s the problem. I suggested that if each regular hitter replaced one strikeout with one walk, it would be worth half a win. The problem is that over 600 PA, one extra walk would represent a tick upward of 0.16 percent. Yes, walk rates are quick to stabilize, but that doesn’t mean that they are free from noise. Maybe the player’s true talent level really did improve, but answering that question with that small a change is going to require a really big data set (for maximum power) that might not be available. If you don’t have that, you’ll need bigger effect size. Things have to be going so well that it’s just plainly obvious that it’s working. “That could just be randomness” is such a damning critique because it’s true.

Maybe the “Food for Kids” program really would make a positive, if small, difference. But it’s going to be hard to show that it’s working and it might be a few million dollars spent on a big bust. Yes, teams do spend millions of dollars on ideas that don’t work (they’re called failed draft picks). But then front office folks are in the business of knowing about baseball. If they can mess up on something like a draft pick in their ostensible area of expertise, how much less willing will they be to take a risk on something that isn’t in their domain of expertise?

What kind of idea would work?
All told, these factors probably make baseball teams more conservative than they should be with trying new ideas, but also not as foolishly stubborn as they generally get blamed for. There are real structural obstacles to starting some new plan. (And we haven’t even talked about getting “buy in” from the coaches and staff if they’re the ones who are going to have to actually implement the ideas.)

Maybe part of the critique is that with all of these obstacles in place, teams are missing out on some killer ideas. But for now, let’s focus on what ideas will have a better chance of making it as things stand right now.

  • It should be cheap (or better, free) to implement. The idea of the infield shift has become common, and more teams are starting to adopt it. The early adopters are starting to lose the advantage that it gave them relative to everyone else, but the costs associated with it are the costs of gathering a good spray chart for each hitter and telling the shortstop to stand over there. But let’s remember that cost is not the only thing in the way of getting teams to adopt an idea.

  • It should be supported by some sort of previous data, whether that’s from baseball or not. The case for my “Food for Kids” program is based on plenty of research on sports nutrition generally as well as work on eating behavior more generally. But with that said, there’s little data from a baseball-specific context from which to draw. That makes it a bigger risk, because you have to start making assumptions. If you want to pitch an idea, assume that the burden of proof is on you.

  • It should be hard to copy. That can be done through near-paranoid levels of secrecy (or just a plain old non-disclosure agreement). Alternately, if the idea involves a very particular set of skills that are relatively rare, then a team could simply corner the market on people who know how to do that. Ever wonder where most of the really good PITCHf/x analysts went?

  • Most importantly, it should have the potential (perhaps “very strong likelihood” would be better) of producing a large effect in a short period of time so that whatever benefits are gained before everyone else catches on can justify the cost.

The idea doesn’t have to meet all of these criteria, but it had better meet a few of them. So, before you come up with a grand idea and are tempted to start a sentence with “Well, if a win costs $5 million…” be prepared to talk about some of the other issues that might pop up along the way to making it a reality.

Russell A. Carleton is an author of Baseball Prospectus. 
Click here to see Russell's other articles. You can contact Russell by clicking here

Related Content:  Inefficiencies

18 comments have been left for this article. (Click to hide comments)

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harderj

Russell, really nice article...thanks! First-mover disadvantages, even if the teams don't think along those lines, are huge.

On the nutrition point, Pablo Sandoval reportedly hired his older brother (a CIA graduate, if I recall correctly) to become his personal chef after the Panda's latest D.L. stint and it seems to be working out well. But I don't know if the Giants are subsidizing that or whether it's out of the Panda's rather substantial pockets. And even though it's only one case I'd argue it's decidedly a large sample size ;-).

Sep 23, 2013 07:02 AM
rating: 5
 
Agent007

The food program is for minor leaguers obviously... the major leaguers get lotsa dough and can eat anywhere. A gain in wins in the minors is nothing -- winning isn't why the minors exists. It is in each individual player's best interest to eat property and get enough exercise to burn off all those Big Macs. I suspect some nutrition counselling is already provided... and fitness is encouraged. Each player stands to reap a rather significant financial return by following a good nutrition / fitness program.

Sep 23, 2013 07:31 AM
rating: 0
 
BP staff member Russell A. Carleton
BP staff

There is nutrition counseling provided, but the reality is that players get per diem (and not much of it) and have to eat wherever the bus stops. The original idea behind "Food for Kids" is that it's hard to learn things (which is what the minors are about) on a poor diet. The effects of the program wouldn't be felt for a few years at the MLB level.

Sep 23, 2013 08:29 AM
 
Behemoth

If it improves a marginal player to the point that you can get a decent utility guy or a set up man at league minimum, then it has quite a substantial benefit for the club.

Sep 23, 2013 14:11 PM
rating: 0
 
jroegele

I work for a company who talks a lot about being a "close second" to the market for the very reasons you describe here Russell.

Enjoyed this, thanks.

Sep 23, 2013 08:50 AM
rating: 1
 
Nathan Aderhold

Absolutely love the "Food for Kids" idea. Somehow missed it the first time around.

While feeding an entire farm system daily is bound to be expensive, I could see a team working out a discounted deal with a company in exchange for advertising with the parent club. Something like that could make the cost much more manageable.

So far as hiring a "director of culinary logistics," it seems much more prudent (to me) to have that person be an employee of the catering company, not the team. The contract with the MLB club would likely to be a huge boon for the catering company, so it makes sense (again, to me) that the company would put at least one person on that account full-time.

Sep 23, 2013 11:02 AM
rating: 1
 
Llarry

In the abstract, your point about cost, risk and likely gain in the standings is a good one.

In the specific of "Food for Kids", though, why necessarily judge it by wins? Think of it in terms of trying to reduce the likelihood of high draft picks (and prospects picked up in trade) flaming out. Sure, it'd be devilishly hard to objectively measure, but keep a couple of bonuses from being wasted (and the need to then pay another body to man the spot, even just in the high minors) and the program does in fact pay for itself (especially with the suggestion above that the caterer provides some/all of the organization and oversight).

Sep 23, 2013 14:58 PM
rating: 2
 
edwinblume

I'm no expert on all minor league stadiums, but here in Colorado Springs, at the Sky Sox Stadium, okay, Security Service Field, has an in-house catering operation. I don't know whether they use it to feed players, but it seems like at some venues, the caterer is already in house.

Sep 23, 2013 15:08 PM
rating: 0
 
R.A.Wagman

Russell, if I am reading you correctly, the best way to get your team to start a "Food for Kids" type of program is to convince them that it is already working wonders for their division rivals.

Sep 23, 2013 17:23 PM
rating: 2
 
R.A.Wagman

In other words, a win for them will take $5 million out of our pockets.

Sep 23, 2013 17:24 PM
rating: 1
 
BP staff member Russell A. Carleton
BP staff

That's a low-risk approach. You only copy things that have been shown to work, but in the process, never expose yourself to the benefit that you might either gain an advantage or the downside of spending money on a failed idea. I can imagine that when it comes to "non-baseball" interventions, front office people correctly identify that they don't know enough to be right more than they are wrong, so they pursue a low-risk strategy.

Sep 23, 2013 19:24 PM
 
tballgame

It seems interesting that it is easy for outside organizations to determine the program is producing wins, but difficult internally. I would think, at the outset, it would be much harder for outside organizations to separate regular improvement from noise.

I like the idea generally. Sport commentators regularly dismiss motivational factors in a game because if you needed guy X on team Y to say that to get you motivated, you aren't professional enough to play at this level. The impact of motivation is not what players do during the game, it is what they do between games. Learning, harnessing talent, planning for the next game, etc. Giving players a meal at a designated time helps get them to the field on time and ready to work.

Sep 24, 2013 06:46 AM
rating: 0
 
jdeich

Do you think it would be sufficient to show a component-level difference that is easier to measure than "learning"?

For example, eliminating the food choices 21-year-olds will make independently (spoiler alert: cheeseburgers) and replacing them with a team-wide fitness diet (*) might show up in things as simple as:

- Home to first times (replacing fat with muscle)
- Days missed due to illness
- Swings taken in the cages (endurance, morale)
- Minutes watching video (energy level, attentiveness)
- Total hours at the park (morale, energy level, focus)

Some of these might be detectable in a month. Do you think that would be compelling enough to spur a full-year investment?

(*): I'd also require FitBits or their more advanced equivalents on all players. Very small investment for a very rich data source.

Sep 24, 2013 09:52 AM
rating: 1
 
BP staff member Russell A. Carleton
BP staff

Absolutely, if I were in charge of an evaluation of such a program, I'd check on a few of these things. The problem is that you still have to make the second level case that all of those effects lead to wins at the MLB level. It's not an impossible case to make, but you still have to draw the line. Obviously, it's a lot easier to convince an owner/team president/GM that that it's a worthwhile program if you can say "Well, they are doing more of the things that we know lead to growth and development (watching more video, staying healthy)"

Sep 24, 2013 13:09 PM
 
Schere

there are also unmeasurable side-effects, like when Petey Prospect takes to Twitter to bitch about his steamed vegetables This causes Sergio Superprospect, who was a year behind at the same HS, to take a harder line in his bonus negotiations.

Now the program costs $3 million!

:)

Sep 24, 2013 14:21 PM
rating: 0
 
Jack Sprat

For a low-budget team, you’re down a million dollars on a payroll of 80 million while other teams are down a million on 200. Maybe it’s best not to start that arms race. For big-budget teams, why help the low-budget guys identify a cheap source of improving team-controlled talent, the kind of resource that they’ll need to compete with you, when you can just out-spend them?

Great article but both ends of this can't be true.

This is actually an interesting idea for big market teams - if the luxury tax functions as a cap on major league salaries you can still leverage your superior funds by trying out lots of pilot programs in the vein of "a win is worth $5 million". Some of them will succeed and your rivals will either be forced to copy them or will fall behind. Either outcome is good for you because you just leveraged your financial edge. Either you taxed your rivals where they can't afford it or you have an actual edge.

Everyone get working on those ideas - the Yankees need your help!

Sep 24, 2013 21:41 PM
rating: 2
 
BP staff member Russell A. Carleton
BP staff

Funny enough, when I wrote that, my first thought was similar. They are two very disjointed thoughts. The thing is that even though there is an inherent contradiction, both statements are actually true.

The fear that you have to live with as a small market team when you find a hidden advantage is that it will be easily copied by anyone willing to sink some money into it and that the breakthrough is all in the brilliant idea rather than the execution. Then, it becomes something that is common knowledge, and everyone else has more money than you do to implement it.

With a big market team, you have to worry that some other team (especially a small market team who has incentive to put a lot of resources into identifying these sorts of things) will copy you and do it better. In that case, it's an idea that requires not only a flash of inspiration but a lot of technical skill in implementing it. You might be doing the pilot testing for a small market team who was afraid of committing to the initial expense. But once they know that it works, they might be able to implement it better, and you've just shot yourself in the foot twice!

Sep 25, 2013 08:58 AM
 
Plucky

I would add 2 more items to the "pitchbook" for implementing an idea:

1) Is there a halfway solution that's easier and cheaper to implement, which could later be expanded to the full-blown proposal if it looks promising? In your "food for kids" example, the halfway solution would be catering only during home games / off days the team is at home. The logistics would be vastly simpler, and there still ought to be partial benefit on improved nutrition

2) If it doesn't work, how easily could you drop the idea? As with any proposal, "what could go wrong?" is never exactly a selling point, but establishing "The Worst Case Scenario is Pretty Benign" can and does go a long way towards getting a new idea to be tried.

Sep 26, 2013 08:42 AM
rating: 0
 
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