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.          

2010-2011 Free Agency Predictions

The following players are the best of the best out there this offseason, the top free agents of the 2010-2011 Hot Stove.  Here are my predictions on where they go with a short explanation.  These predictions are very tough because when it comes right down to it any team with budget room has a shot to sign a guy, as I have learned from past experience (see: Matt Holliday, Athletics 2009 and Adam Dunn, Nationals 2009).  Well, these are my 'educated guesses'.  Free agents are ranked based off the list from mlbtraderumors.com's top 50 free agents, but the predictions and explanations are original Cubs Insider material.

1. Cliff Lee - Yankees.  It will be a serious upset if anyone but the Yankees gets one of the best starters in baseball in Lee.  Lee beat the Yankees twice in the ALCS in eliminating the Yankees on his way to the World Series, and if the Yankees get beat by a top player they are double as likely to get him the next offseason.

2. Carl Crawford - Tigers.  With a bunch of huge contracts (Magglio Ordonez, Nate Robertson, Jeremy Bonderman, etc.) coming off the books, the Tigers are revved up to spend big time dough.  Crawford is a great fit for the spacious gaps of Comerica Park making a great duo between him and Austin Jackson.  A Detroit team that appeared lifeless at times last year could use this spark plug.

3. Adrian Beltre - Angels.  The Angels are also looking to spend and will be in the Crawford sweepstakes, but this should be their top guy.  Beltre is coming off a tremendous season with the Red Sox and the Angels want a definite power bat in the middle of the order more than a bunch of aging but somewhat effective veterans (Bobby Abreu, Hideki Matsui, Torii Hunter).

4. Jayson Werth - Red Sox.  The Red Sox have to make their annual splash, and the fan base craves a sturdy left fielder after a season with a revolving door in front of the Green Monster.  Nine players played in left field for Boston in 2010, and the Red Sox also love his power bat.

5. Adam Dunn - Cubs.  An admitted lover of hitting at Wrigley Field, the Cubs will need a power hitting lefty first baseman to contend in 2011.  The Tigers and White Sox will also be in competition for the veteran, but Dunn will end up with the Cubs for the first reason and also because of his past relationship with GM Jim Hendry, whom Dunn knows from their days in Cincinnati.

6. Victor Martinez - Tigers.  Detroit won't get Dunn, but still have a first baseman in Martinez.  This signing gives them lots of flexibility as they can use Martinez at either position or even rotate him, allowing the Tigers to start bench players and rookies and play the hot bat.  With Crawford, the Tigers will have impressively signed a power bat and leadoff guy, memo to the rest of the AL Central.

7. Rafael Soriano - White Sox.  The Angels are the favorite in this race, but the White Sox have lost almost all trust in Bobby Jenks are unlikely to want to have him as closer again.  GM Ken Williams always pulls off a few eye openers in the offseason, this being probably his biggest.  Williams, more often than not, gets his man.

8. Mariano Rivera - Yankees.  Tight race between the Yankees and Diamonbacks.  Yeah right.

9. Paul Konerko - White Sox.  The odds of him leaving are palpable and feasible, but he probably extended his Chicago career with his terrific comeback 2010 season.  Ripping 38 homers is enough to keep the great (owner) Jerry Reinsdorf-Konerko friendship alive.  If not the Sox, possibly the Angels or Diamondbacks.  Not joking this time.

10. Derek Jeter - Yankees.  See: Rivera, Mariano.  The Yankees are going to severely overpay for Jeter who is no longer an above average defender and earned another Gold Glove he doesn't deserve.  As the face of the Yankees franchise, there's pretty much no chance he will be playing anywhere but The House That Jeter Built (New Yankee Stadium) in 2011.

11. Hiroki Kuroda - Dodgers.  Kuroda could be an under the radar signing somewhere else, but the Dodgers like his durability and reliability.  For a team lacking in a true ace, Kuroda should be a solid middle rotation starter.

12. Jorge De La Rosa - Rockies.  A lefty middle rotation guy, he has some caution flags stuck on his shoulder, that being his control problems that have plagued him when has been ineffective.  Even when playing to his potential, he walks too many batters.  The kind of player rebuilding teams target, the Nationals, Royals, and Pirates have been linked to him as well.

13. Carl Pavano - Twins.  While the Twins still lack an ace since the departure of Johan Santana, Pavano, after pitching only 145.2 innings over 2005-2008 with the Yankees, has now pitched 420.1 innings over the past two seasons and is a workhorse.  The Twins need him as a key cog in that staff of mediocre to above average starters.

14. Jake Westbrook - Cardinals.  A low drama deal, the Cardinals will pay the man his money because they still need depth behind Adam Wainwright and Chris Carpenter.  Westbrook probably isn't the best they can do, but he's willing to come back and will take some innings.

15. Aubrey Huff - Giants.  2010's best bargain deal was Huff who hit 26 homers and led the Giants to the championship for only $3 million.  The Giants certainly won't want him to guy, they will get him back.

16. Juan Uribe - Mariners.  The historically terrible offense of the 2010 Seattle Mariners was an embarrassment to the franchise and GM Jack Zduriencik will make some moves.  Uribe seems like a logical pickup as current shortstop Josh Wilson doesn't hit well enough to start.  Uribe's 20 projected homers would be very welcome to Mariners fans.

17. Carlos Pena - Nationals.  A player to watch right here.  Pena couldn't even bat .200 in 2010 but still hit 28 homers.  With his stock taking a big hit with the low average, Pena could easily regain his status as one of the American League's best first basemen as he plays the field well and led the AL in homers with 39 in 2009.

18. Jim Thome - Twins.  For all Thome did for the Twins, he should be given one more year as the DH.  Worst case scenario, Thome ends up being traded at the deadline.

19. Vladimir Guerrero - Rangers.  Although the Rangers declined their $9 million option on Guerrero, they want him back.  Guerrero will likely have to take a pay cut if he stays with the Rangers, but he is inclined to stay while Texas is a winner.

20. Manny Ramirez - Athletics.  This may seem surprising, but it shouldn't be considering the man at the controls of the A's.  GM Billy Beane, known for his uncommon baseball wits and surprising signings, will bring in the bat.  Manny has more left in that bat than he showed with the White Sox, and a fresh start in his first small market since Cleveland should do him well.

21. Magglio Ordonez - Blue Jays.  As evidenced by their signing of Frank Thomas in 2007, the Jays are willing to roll the dice on veterans past their prime.  Playing half the season of 2010, he surprised many with the return of his power that escaped him in 2009.  His 37 year old bat seems to have plenty in it as he still hit .300 in 2010 for the 10th time in the last 12 seasons.  Expect a one or two year deal.

22. Orlando Hudson - Padres.  A free agent again, the O-Dog will end up in San Diego because of his positive attitude and veteran status among a very young team.  Hudson is very consistent and the Padres need to improve on their team batting average, something he can help the team with.

23. Derrek Lee - Brewers.  With Prince Fielder very likely to be traded, this trade would give Milwaukee an able bat to replace some of Fielder's production.  Lee can be picked up with a discount as his stock fell after a disappointing 2010.  The Orioles and Diamondbacks have also been mentioned.

24. Lance Berkman - Mariners.  It's no secret the Big Puma's bat has faded significantly.  He could provide a little value, though, as whatever he'll hit is most definitely better than whoever else the Mariners could start.  With Berkman, though, there are lots of teams that have a little interest; no front runners.

25. Andy Pettitte - Yankees.  Right now, he's playing the whole 'I need to be with my family' card but the truth is this guy is a true ballplayer and loves the game.  The Yankees would love to have him because amazingly he keeps returning and pitching well.  If he's not out there on a roster by Opening Day, I will be shocked.

26. Jon Garland - Orioles.  The front office might finally get something right and improve the effort to find talent outside of the organization while they have the opportunity.  Baltimore is a team that holds momentum this offseason with their strong finish under Buck Showalter, and this signing would go a long way towards taming the kids on the staff and transforming them into pitchers.  

27. A.J. Pierzynski - Red Sox.  Pierzynski was the favorite to join the Florida Marlins, but they picked the Red Sox's top option in John Buck.  The Red Sox will take Pierzynski instead, providing great insurance for Jason Varitek.  Pierzynski was quoted as saying the Red Sox, among a few other teams, "would all be good fits."

28. Miguel Olivo - Dodgers.  Whatever happened to Russell Martin, it sounds like the Dodgers have had with him.  Olivo is one of the best offensive catchers in baseball and plays in small, usually losing markets which is why he flies under the radar so much.  What a treat, now he gets to play for a contender.

29. John Buck - Marlins.  Speaking of early birds, the Marlins and Buck beat me to this post and agreed to a three year deal already earlier this week.  Buck was the huge favorite to land the Red Sox job, but instead takes Florida where he's the best catcher they have seen since Ivan Rodriguez.

30. Javier Vazquez - Nationals.  Vazquez would enjoy going back to the National League after another unsuccessful year with the Yankees.  He also expressed interest in the Nationals, so they have to be considered the favorite.  If they could get him, he would become the best pitcher in the history of the Nationals portion of the franchise.

31. Scott Downs - Yankees.  Playing for the Blue Jays, the Yankees have seen Downs a lot.  Thus increasing his chances of becoming one.  The race for Downs will go between the Red Sox and Yankees, but remember which team has seemingly unlimited resources.  Hint, not the Red Sox.

32. J.J. Putz - Dodgers.  After having a mid career crisis with the Mets that included injuries, Putz has gotten his stuff back.  The Dodgers use their bullpen more than almost every team in the league and those cannot go to George Sherrill again, whose 6.69 ERA was surprising and just terrible.  Putz should replace him behind Jonathan Broxton, or replace him in the event of another period of struggle for Broxton.

33. Brian Fuentes - Braves.  Atlanta already has a great bullpen, but they could use a veteran to close games and need a closer after the retirement of Billy Wagner.  Fuentes blows more than a few saves, but thankfully they have the depth to cover the void.

34. Adam LaRoche - Orioles.  Much like Olivo, LaRoche usually is playing on losing and/or small market teams and isn't talked about much.  His value is real, however, and he is drawing interest from Orioles, Brewers, Cubs, Giants, and Diamondbacks just to name a few.

35. Hisanori Takahashi - Phillies.  Another under the radar pitcher, Takahashi could start for the Phillies if they want him to.  The Phillies like his flexibility, but so do the Nationals, Orioles, and Mariners.

36. Pat Burrell - Braves.  The Giants, unlike the Rays, saw that Burrell can still hit.  They also saw he still can't run or field.  The Braves outfield was a weakness last season but the addition of Burrell, along with the move of Martin Prado, could make it better.  The Padres need a slugger though, and so do the Mariners.

37. Joaquin Benoit - Rays.  The Rays are in serious trouble as their top six relievers are free agents.  If the Rays could bring back one of them, however, it probably would be Benoit who was unhittable in 2010.  Interest is not lacking by any means, the Tigers, Red Sox, and Yankees all want him and the Rays will need a great offer to compete with the bigger market teams.

38. Kevin Millwood - Brewers.  The Brewers are constantly on the hunt for pitching and the signing of Randy Wolf last offseason didn't go as well as planned.  Millwood is just the kind of pitcher the Brewers would sign, a veteran whose price tag is cut because of his struggles in Baltimore and a bad contract in Texas.  The Royals, Mariners, Pirates, and Padres are four teams that also want him, but only one is a contender and with all these offers Millwood can probably choose where he wants to go.

39. Kevin Correia - Pirates.  Pittsburgh has no pitching pretty much, and although Correia's 4.57 career ERA hardly makes him a dependable veteran, he's better than nothing.  Correia could be a good #5 starter on a good team, although the odds of a good team spending money in free agency on a #5 starter is unlikely.  The Pirates need anyone to help Paul Maholm in the rotation.

40. Arthur Rhodes - Reds.  As long as he is pitching well, there's no reason for the Reds to deny the 41 year old reliever.  The Reds need the bullpen stacked with guys who can pitch around Aroldis Chapman, their top reliever who threw the fastest pitch in history in 2010.  Many teams could use the lefty, the Phillies being one, but the Reds are the most likely to keep him.


        

Cubs Hot Stove Buzz

The Cubs have plenty of needs on their wishlist for this offseason.  One of the biggest is the left handed first baseman, preferably with power.  Aramis Ramirez and Alfonso Soriano said earlier in the season that the Cubs should focus on pitching needs this offseason and that they can handle the offense, but they haven't proved that at all over the last two seasons.  In 2009, Derrek Lee led the offense by far.  In 2010, the offense sucked for the most part.  In the first baseman market for the Cubs so far is, above all, Adam Dunn, then Victor Martinez or Aubrey Huff, then Lance Berkman.  I really do see Dunn coming to Chicago the only question is if the Cubs are willing to pay that much for a guy probably looking for $10 million.

Before the Cubs can get too excited about spending money, they need to trade Kosuke Fukudome.  Fukudome is owed $13.5 million in 2011, so it will be tough considering Fukudome's awful value relative to salary.  Jim Hendry has a lot of critics, but everyone can agree that the one thing he has done best is dump bad contracts (see: Milton Bradley).  He only has one year left on his contract and has been a huge bust offensively but great defensively.  He will never sniff that kind of money for the rest of his baseball career.  On the pitching side, the Cubs are interested in Jon Garland who expressed interest in the Cubs last offseason.  Other mid-level starters are what the Cubs are looking for, and could find that in a guy like Carl Pavano or Javier Vazquez.  Cliff Lee is out of the Cubs price range.  Kerry Wood, who would like to return to Chicago, will have to take a pay cut if he is to do so because there is no way the Cubs will pay him $10 million that he was making last year.  I don't see the Cubs wanting to pay him more than $2 million.  The hunt for a veteran middle reliever continues.