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Wright Thinking
2006-08-06 22:52
by Will Carroll

The signing of David Wright got me thinking ... and please note, these are thoughts I've jotted down in the midst of my work on tomorrow's UTK. They're not deep and certainly not complete.

Wright's signing is nice in and of itself, but

a) do these signings make sense? I call them "Hart Plan" signings based off the first round of these in mid-90's Cleveland. I'm not sure if that name still makes sense, though Hart's disciples seem to still be on the plan.

b) do these signings re-set the market? Pre-arb signings shouldn't have much of an effect, but do they in practice change anything? Can they put pressure on a smaller market team that can't make these signings (Milwaukee, Oakland) or are they no real advantage? (Milwaukee's signing of Sheets was pre-free agency, not pre-arb.)

b2) do these signings affect free agents? Does the signing of Wright make it harder for the 'small market' Nationals to re-sign Alfonso Soriano? Is there any connection between salaries of non-comparable players?

c) can we bury the term 'small market' and move to the more descriptive 'low revenue'? It puts the pressure more on the owner/business than the city/location to use the latter term. Small market implies that things must be done differently to survive in a city (tax breaks, cheap stadiums, etc), whereas low revenue implies that a business better get better and quick.

c2) is there a relationship between revenue and payroll? Doug Pappas' work on marginal win cost showed what relationship there was between payroll and wins.

d) does anyone honestly think they can accurately project out five years? Nate Silver does a pretty good job of it -- the best available publicly - with PECOTA, but a long term, pre-arb contract is going to try and match the true value with the market value and come in with a decreasing differential between those two lines due to the six-year free agency rules. Doing this means accurately assessing the true value in each of the pre- and in-arb years. Missing it, especially with injury risk (which can zero out the expected production quickly), can be devastating.

e) No team -- NO TEAM -- has a better injury risk model than PECOTA. I'm not toeing the company line here. PECOTA's model is nice, but a bit retrospective and median-based for me. Risk may be based on large sample sizes, but injuries are always individual. That difference is what makes my job so difficult. Injury analysis is actuarial at this stage, not predictive.

e2) If no team has a better risk model than PECOTA, then what the bleep are they basing their five year projections on? Answer: scouting and guesswork. That's not necessarily a bad thing. They may have the best information and your team's GM may be good at guessing. Gibson said 'information is the power and currency of the new millenium.' He must be a baseball fan.

I'm curious as to your thoughts.

***

A reader called me a sellout today. That barb has no sting. I would -- and have -- done this for free. I much prefer the paid proposition. Many call for revolution, but few are willing to hide in the belly of the horse.

Comments
2006-08-07 08:18:43
1.   Another Tom
Sellout? In what context? Outside of the occassional ostentatious Powered By... I would argue that your articles are the least likely to be a "sell out" of anyone on BP. Who exactly would you be selling out to? You report the injuries and give your educated and/or informed opinion as to severity, duration, etc. I do remember a couple articles where you had it out with certain people and their pitching methods - you certainly weren't selling out then. Your passion and love for what you do certainly comes out in all of your articles. I think Sell out would be the antonym to describe you.

By the way, hiding in the belly of the beast is a much more desirable scenario if you're speaking of a wooden Trojan horse as opposed to say, Han sticking a frozen Luke in the tan-tan in the second Star Wars. I'm just guessing...

2006-08-07 12:38:32
2.   Tangotiger
c2: yes, definitely. The correlation coefficient between payroll and revenue is over .90! Payroll + 80 million$ = Revenue. Top 5 in Payroll? 120 million. Revenue? 200 million. Bottom 5 in Payroll? Almost 40 million. Revenue? 125 million.
2006-08-07 13:44:42
3.   Derek Smart
a: I was getting ready to make an argument that the signing made perfect sense, but then I made the mistake of finding out what the contract actually looked like. The way it scales ($1.5M, $5M, $7.5M, $10M, $14M, $15M, option for $16M) seems very much like what Wright would be likely to make if he signed one year deals during each of those four years he was under club control, then got those first two free agent years and the option year at market price - or at least not so different as to confer any real advantage to the club beyond making the kid happy (which, I'll admit, if I were a GM and David Wright were on my team, the first thing I'd do when I woke up every morning is think to myself, "What can I do to make David happy today?")

Point being, from a financial perspective, I don't think the Mets really gained anything, and in fact, wound up assuming some sizeable risk should Wright's performance fall off precipitously due to injury or some other unforeseen factor, which seems to be, at least in part, what you're getting at in a, d, and the e's. It might make sense in that it shows Wright how much the team is committed to him, but I'm not sure the payoff on that is worth the potential cost.

2006-08-07 14:04:51
4.   Jake Luft
I hate these kinds of deals. Normally they hurt both sides: the team doesn't get the benefit of a bargain-basement player for 3-4 years while the player gives up the right to make potentially more money by having outstanding seasons. The Hart Plan worked in Cleveland but was a dismal failure in Detroit and Pittsburgh. Of course, it won't hurt the Mets much if these deals don't work out because they have money to burn.

Still, the point of developing your own talent is to have cheap production for a set number of years. Let the players play for their next contract. Leave it to a NY team to look that gift horse in the mounth.

2006-08-07 14:16:06
5.   glassman
Imagine the effect this signing has on 16-year-olds in Latin America and elsewhere: Signing with the Mets is the fast track to fame and especially fortune.
2006-08-07 14:25:48
6.   Tangotiger
Derek, I disagree. The numbers scale based on present value of the money. But salaries increase at 7-10% every year. So, those 14 and 15 million$, which make sense in present-value sense, are going to pale in comparison to the 20 - 22 million$ that will be the norm for the stud hitter.

However, there is no guarantee that Wright will keep his performance to that level. You can reasonably discount his future performance by 5 to 10% (i.e., by the same amount rate that the salary would appreciate), so that it all works out fine.

In the end, both sides got what they wanted.

2006-08-07 17:39:37
7.   Derek Smart
Ah, good point Tango. I always forget to make that adjustment. Needless to say, anyone trusting their financial future to me would be sorely disappointed. ;)
2006-08-07 19:58:24
8.   Voxter
These deals can work, but like Derek said, these yearly salaries look very much like what Wright might make signing a series of one-year deals or winning a series of arbitrations, even, I suspect, when one factors in salary inflation (keeping in mind that he would not have been on the open market for the first several years of this deal) -- which is, essentially, a losing proposition for the Mets, because they lose flexibility: to wit: If Wright gets hurt, or (god forbid) pulls an early Dale Murphy, the Mets have to pay the promised salary. Heck, if Wright is hitting an early peak and his defense proves to be enough of a liability that he has to shift to first base in the future, the Mets end up getting less than a steal without any kind of real catastrophe taking place -- just a series of moderately predictable events.

I guess what I'm saying is that this contract isn't exactly a win for the Mets -- though I don't think it's a loss, either. So this was a rather long-winded way of agreeing with Tango, which is usually a good bet anyway.

As far as point C Prime ("can we bury the term 'small market'?") the answer is going to be an unqualified "no", because the term is essentially a propaganda tool that the owners use for exactly the reasons you & I think it's crap: To imply that a city is somehow defficient, as opposed to a business model. It's going to take a tectonic shift in ownership or the economics of baseball for these two words to completely lose their utility, and as much as we in what Joe Sheehan might call the "informed outsider" community might be gaining influence (possibly to the degree that we might devalue the words somewhat), I'll always feel that the ultimate axiom here is that Money Will Out, ie, those who use the term "small market" not only own the product about which we're all speaking, they also have broad means to disseminate their information which will likely never disappear.

The real difficulty is that there is some measure of truth to the phrase "small market", at least when used to mean "a media market of significantly less than average size, with few ancillary markets at its fingertips". The Kansas Cities and Cincinnatis of the world are always going to have more difficulty generating revenue than the Dodgers or Red Sox. And because it's convenient, and plays into people's established biases against the New York and Los Angeles and New England, it's going to be used as a coded excuse for ineptitude for the forseeable future. Irritating as that may be.

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