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Wednesday, June 19, 2013

Cost versus Value

The Nobel laureate in physics, Val Fitch, once said, "Excellence cannot be bought, but it must be paid for."

The statistics have shown, particularly in MLB, that if your team is not among the top quarter in payrolls, you will not be a playoff team.  It also tells you that spending into the top quarter doesn't guarantee you that spot, as there are examples of big spenders who have failed.

The statistics also are showing, with some troubling regularity, the decline in performance of stars who get long-term deals, such as Alex Rodriguez, Albert Pujols, Vernon Wells, Barry Zito, Aaron Rowand, Ryan Howard, to name just a few.  Translated, if you're a betting person, don't bet on the teams with the long-term contracts, bet on the teams with the players who are about to get them.  Case in point:  The 2008 Philadelphia Phillies.

Ben Cherington, the Red Sox's GM, probably ruined it for all overpaying GMs when he pulled the coup of the century on the overeager Dodgers by not only unloading some very expensive contracts, but also by getting some top prospects in return.  According to one GM, Cherington would have done a great job yielding those contracts (Carl Crawford, Adrian Gonzalez) for nothing, but he should have been named GM of the year for getting good prospects in return.  Because of that deal, it will become increasingly hard for GMs to unload big contracts without including prospects and eating much of their salaries.  At some point, the teams might as well keep the players or eat the contracts.

A recent article in ESPN the Magazine should have made Philadelphia fans cringe.  Each Philadelphia team ranked in the bottom tenth on the spending for wins proposition.  The Eagles overspent on never wases and has beens two years ago.  The Flyers consistently have spent big bucks errantly in their quest to have their first Stanley Cup Champion in 40 years (once they changed the rules on the hard-nosed Mr. Snider, he has been unable to lead his team back to the title).  The Sixers are the anti-Spurs, in that they have spent big bucks but have failed to be creative in locating the good overseas player -- ever.  And then there are the Phillies, who might as well be the free space on the bingo card for these purposes.  After 2008, they opened up the checkbook but failed to achieve another world championship. 

They overpaid for Ryan Howard.  They signed Chase Utley 7 years ago to a 7-year deal which expires after this season.  At the time, it looked like a bargain for the club ($84 million); now it looks like a fair deal if not a disappointment for the club given that Utley will not have the Hall of Fame career that 2007 portended.  They inked Roy Halladay, Cliff Lee and Cole Hamels to big deals, huge deals, only to now to have to deal with the irony that in 2008, when they won the World Series, their rotation consisted of Hamels, Jamie Moyer, Brett Myers, Joe Blanton and Kyle Kendrick (their bullpen was oh so much better, though).  Carlos Ruiz has been a bargain; Howard a disaster.  They inked SS Jimmy Rollins to a three-year deal last season, but he's a shadow of the guy who won the MVP award about six years back and the effort, sadly, isn't always there (he remains, though, one of my favorite Phillies).  Brad Lidge got a 3-year, roughly $33 million deal in the midst of 2008, only to pitch terribly, really horribly in 2009 and not that well in 2010.  He couldn't have left town soon enough.  Jonathan Papelbon, a good closer, got $48 million for four years a year ago, and he's been closing for a pretender.  For all the money that they have spent, the Phillies thought that they both bought and paid for excellence.  In fact, they did not.

They forget demography and the need to keep re-seeding the farm system with position players and pitchers.  They forget dollar-cost-averaging, in that it's not wise to have most of your good players be the same age.  While GM Ruben Amaro gets credit for the Raul Ibanez signing as one of his best moves, it was one of his worst.  The reason -- the team got very much older at a time when it needed to get younger.  The signing of an aging, injury-prone Placido Polanco the next off-season compounded the aging problem.  Instead, they figured that brute force -- spending for veteran players -- would solve all ills.  Instead, it forged a team that was somewhat complacent, that lacked the spark that up-and-coming players and role-playing aged veterans provided, and the team didn't win another World Series.

All because the GM knew what everything cost.

He just didn't know, really, who was worth it and who wasn't.

And now the team is stuck, facing a big decline, with many starts with big contracts, many on the downside of their careers, with few prospects coming up.

It used to be that fans could sell tickets on StubHub for significantly over face value; today, they have significant trouble recouping their purchase price.

Which goes to show you that if the front office can't figure it out about value, the fans can teach you in a hurry.


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