Competitive Balance in Economics

There are 30 MLB teams.  By the rules and nature of baseball, all teams have an equal shot to win.  By the rules and nature of business, some teams are favored more than others.  In today's world, the industry that is professional sports is a business.  As unfortunate as it is, this means every team in MLB has different odds to win.  Since their is no salary cap in baseball, it's all about the revenue.  And a team's success or failure in generating revenue can and most likely will dictate their ability to win.  If you're a serious baseball fan, chances are you've heard of Billy Beane, GM of the Oakland Athletics.  The reason Beane is famous is because of his groundbreaking theories about baseball economics, revolutionary thoughts that have become relevant with the big contracts and free agency dogfights of modern baseball.  If Beane were the GM of the New York Yankees, he would not be characterized as the godfather of modern baseball economics.  Oakland is a tiny city compared to the other jumbo markets of baseball, making Beane's job much harder than a GM in a bigger city.

Small market teams have it tough.  Most small market teams put a strong emphasis on building from within their own system, putting a lot of work in the scouting and development department.  When these teams come up with big prospects they are unable to sign them to extensions and they are lost to the big market teams.  Even if they are able to sign the player to an extension, what happens if the team is losing?  The team has no choice but to rebuild, which means sending the prospect-turned-star to the big market teams.  There are a few ways for it to happen, but in the end, the star ends up with the big market teams more often than they should.

Prime examples of this can be found on the current big market teams.  Remember that super rotation the Phillies will put out on the mound in 2011?  Let's see where those guys came from.  Roy Oswalt was a huge star in Houston, nearly setting the franchise wins record before being traded.  Roy Halladay was a big star in Toronto, a well-publicized one at that.  Halladay took home the 2003 AL Cy Young Award, while Cliff Lee took home the same award in 2008 with Cleveland.  While Lee struggled with injuries during times in Cleveland, it was clear even before 2008 that he had the capability to be an elite pitcher.  Cole Hamels, the fourth man in this super rotation, is the only product of the Phillies system.

Red Sox GM Theo Epstein, clearly in control of a big market team, snagged two of baseball's best players from small markets this offseason.  Acquiring Adrian Gonzalez out of San Diego and Carl Crawford from Tampa Bay, he has now dealt a huge blow to both franchises.  Without Gonzalez, the Padres are no longer a playoff contender and without Crawford, the Rays aren't either.  The word 'disappointment' can't even begin to describe how fans must feel this winter in San Diego and St. Petersburg, respectively.

Let's read down the current Yankee lineup.  At catcher we have Russell Martin, just acquired from the Dodgers.  At first base we have Mark Teixeira, big time power first baseman for the Rangers before being dealt to two pit stops in between.  Teixeira isn't the only name here with an enormous contract.  At second base and shortstop, we have Robinson Cano and Derek Jeter, respectively.  There are two genuine Yankees; good for them.  At third is, and I know its been a while, the most hyped prospect in the history of baseball- with the 1995 Seattle Mariners.  In right field we have Nick Swisher, who got his fame launching bombs out of the Oakland Coliseum.  In center, the five tooled Curtis Granderson came from Detroit.  In left is Brett Gardner, one final genuine Yankee.

The Yankees World Championship team of 2009 featured only two full season homegrown starters, while the top two (C.C. Sabathia and A.J. Burnett) came from Cleveland and Toronto, respectively.  The Yankees, not surprisingly, have been to the World Series more than any other team and have won more than any other team.  From 2001-2010, a ten year stretch, 15 different teams made the World Series, with only the Yankees, Giants, Phillies, Red Sox, and Cardinals having been more than once.  Many baseball experts interpret this to mean that competitive balance in baseball is higher than it ever has been, but I don't think this is exactly the case.  Don't get me wrong- competitive balance is certainly high and we've seen a lot of small market success stories recently, but the problem is sustaining the team that got them there.

The surprising but lovable 2003 Marlins team that upset the Yankees to win the World Series was an example of how these teams can win, but can't be sustained in a market like Southeast Florida.  The 2003 heroes of ace Josh Beckett, center fielder Juan Pierre, second baseman Luis Castillo, starter Brad Penny, starter Carl Pavano, first baseman Derrek Lee, and third baseman Mike Lowell were all off the Marlins by 2006, signing with or being traded to the Red Sox, Cubs, Twins, Dodgers, Yankees, Cubs, and Red Sox respectively.  Franchise faces from 2003 third baseman Miguel Cabrera and ace Dontrelle Willis would both be gone just a season later in a trade to Detroit.  In fact, Cabrera and Willis were the only players on the 2006 Opening Day roster remaining from the 2003 team.

The Marlins have become known for frequently executing a relatively modern tactic known as the firesale.  The firesale is an instant rebuilding strategy, seen in small markets who have an excellent young core of winning players with low salaries who have yet to cash in a big contract.  The small market team must commit to a firesale because, with lower revenue the market generates than big market teams like the Yankees, the team is not in a financial position to keep the players long term once they become free agents and demand large contracts.  If the players are traded before they hit free agency, then the team can rebuild using the prospect returns from those trades instead of getting nothing back.  The disassembling of the 2003 squad was the second most famous such firesale, the most famous being after the 1997 World Champion Marlins were disassembled to become an 108-loss team just the very next season, setting a record for the most losses in a season following a championship.

No team can execute a firesale better than the Florida Marlins, but this raises a question.  How many other teams would need to execute a firesale?  The answer is not many.  The 1997 Marlins won the World Series with the 5th highest payroll in the league, a very rare figure for them, and fell to 27th the very next year.  The Marlins started new players at all eight position player spots!  Meanwhile, the 1996 Yankees won the World Series with some of the key players being shortstop Derek Jeter, closer Mariano Rivera, and ace Andy Pettitte.  The Yankees next won the World Series in 1998, and by then power hitting catcher Jorge Posada had joined the key players.  In 2009, eleven years and around $488 million later, Jeter, Rivera, Pettitte, and Posada all remained despite Pettitte's three year trip to Houston.  That's alarmingly close to the $581 million the Marlins have spent on players in the entire 18-year history of the franchise!  The Marlins clearly can't compete with that.

An overarching point here is that while many teams have made the World Series in recent years, the small to medium market teams aren't able to sustain the success.  Dynasties are not a thing that can be built by teams like the Marlins.  So it should be not surprise that the team that won six out of eight American League pennants from 1996-2003 was the New York Yankees.  Imagine if the Marlins had signed Moises Alou to a big contract extension after he helped them win the 1997 World Series, and the Marlins were able to take advantage of Alou's 225 career homers after 1997.  Who knows what the Marlins could have done with him as the center foundation for all of their young talent?  Unfortunately, we will never know.

The Florida (soon-to-be Miami) Marlins have hope.  In 2012, the gleaming new retractable roof stadium in Miami's Little Havana neighborhood will open, reinventing the entire franchise.  The new stadium will the kind of revenue the Marlins have never seen, and they will finally be able to sign at least one franchise player for a long time.  For other teams, like the other Florida team in the Tampa Bay Rays, such hope is not so easy to come by.  So for the other financially struggling small to medium market teams out there (the Pirates, Reds, Padres, Royals, Brewers, Diamondbacks, Mariners, Blue Jays, Athletics), I have some advice.  Don't trust the system; you can't just lay back, play a bunch of rookies and expect a turnaround.  Especially for the Royals and Pirates, a big change is needed if the young players are all duds.  A reinvented scouting and development department is in order, and the team should not be satisfied with the prospects until they are making a difference at the major league level.  For some teams, like the A's, a lack of revenue is hurting the franchise's potential.  In this case, every effort must be done to make the team relevant in the community.  This means having unique promotions to get the fans in the current ballpark and get the fans excited about the team's future.  Also, an increased focus on community outreach from the players should be involved; the community needs to know this isn't an organization utilizing the city, it's an organization representing the city.  Eventually, enough attention should be focused so that the government will help fund a new stadium.

To all small market teams out there, good luck.  Because although winning out of a small market may not be a huge challenge, sustaining it sure as hell is.  And although the Marlins have made the playoffs only twice and have never won their division but won the World Series twice since 1993, I hold more respect towards those accomplishments than I do for the Yankees' 17 playoff appearances and five championships during the same time frame.  After reading all this, I hope you do too.