The Yankees are not exempt from opportunity cost

November 15, 2011 | 53 comments | in Featured | by Vizzini

Opportunity cost. It is the concept in which a current action causes an alternative action to be passed up. In a financial context, the term is often used in a discussion about allocation of resources, meaning if money is spent in one area that means that less/no money can be spent on other areas.

According to Dave Cameron of Fangraphs, the Yankees are not subject to the laws of opportunity cost because they have an unlimited supply of funds.

Well, Fangraphs is wrong. We will explain why. However, before we begin, let’s get some things out in the open.

First, Fangraphs is the most influential baseball website we’ve ever come across. The work they’ve done in promoting advanced statistics and making people re-think how baseball players should be evaluated is remarkable. Evidence of its influence can be found on so many different sites, including ours. Much respect not only to that, but the effort they put in a daily basis. It’s always easier to hate than to create, and Fangraphs most definitely creates.

Second, anyone who’s followed NoMaas over the years knows we are not fanboys (perhaps ladyboys, but not fanboys). In fact, we’ve sometimes been accused of having an anti-Yankee bias. Thus, as we refute this Fangraphs’ argument, you should know that this isn’t a fanboy reaction to someone saying the Yankees buy success, which is essentially what Dave Cameron is stating.

We are well-aware and acknowledge that the Yankees’ revenue stream gives them an enormous competitive advantage. Anyone who denies that is delusional — and remember this is about revenue streams. Generally speaking, owners don’t tap their personal net worth to fund their baseball operations. If a club is generating X in revenues, that is the source for funding. Since the Yankees generate incredible revenue, they have a bigger pool of money to spend. However, Cameron is saying that the pool of money is infinite and the Yankees do not need to bother themselves with giving any thought to opportunity cost. This is where we 100% disagree.

And so we commence…

To provide the basis for his “Unlimited Payroll” theory, Dave Cameron starts with a recent quote from Brian Cashman:

“There’s always the target area (for the payroll),” Cashman said. “But obviously we’ve always been in the position thankfully that depending on what becomes available, how it looks, what our current circumstances are, if we’re quote unquote in trouble, we have an ownership that’s receptive to having conversations obviously regarding that. I’ll give you an example.

“Like last year, Russell Martin became available so we stretched to make that work. There wasn’t an intention there. But that was something that he allowed me to do a little bit more on because … we weren’t expecting that. We were going to go with the young catchers. But when he became non-tendered, and if we could get a deal at a certain amount, it took a lot of conversations with Hal Steinbrenner. He allowed that to happen and it was a real big benefit for us and we appreciate that.

“So you have those give and takes that take place. Sometimes it’s no, and sometimes it’s yes, but obviously the flexibility, as you already know, there’s no set number where you can’t exceed it that obviously exists in other environments.”

That’s a very interesting quote, as it sheds light on how things work in the Yankees’ FO. Somehow though, Cameron takes this quote and draws the grand conclusion that the Yankees do not have a payroll limit and they can spend whatever and however they want, without consequence:

“Not that this is any real surprise, but the Yankees don’t have a payroll limit, they have a “target area”. Ownership probably wouldn’t go for a $300 million payroll, but as long as Cashman can make a compelling case that there’s value to be had in spending a bit more money, he has the ability to dip into an essentially unlimited pool of resources.

“Unlimited pool of resources”. They “probably wouldn’t go for a $300mil payroll?!” In other words, Fangraphs is stating the Yankees have an infinite supply of money. Does this make sense though? If the Yankees do have unlimited resources, why wouldn’t the Steinbrenners increase payroll by 50% to the $300 million Cameron references? After all, what is better in life than crushing your enemies, seeing them driven before you, and hearing the lamentation of their women?

As for the ability to go over the targeted cap, Cashman’s Russell Martin example doesn’t say much at all. They Yankees had already lost out on Cliff Lee, so they were well under what they were planning to spend. Apparently ownership was content with their present spending on catching, but Cashman was able to get them to pitch in another $4 mil for a one-year contract that didn’t pin them down in future seasons at all. Furthermore, Cashman explicitly states that other spending requests are rejected. Why would spending requests be rejected if the payroll is unlimited? For Cameron, this isn’t exactly demonstrating that Cash could sign Pujols and Reyes to be the best pinch-hitters in baseball.

More from Fangraphs:

“[For most every other team] every dollar they spend on one player is money they cannot spend on another player, and every player’s salary represents an opportunity cost. The Yankees simply don’t have that constraint. Their only opportunity cost is roster spots.”

We call big-time bullsh*t on this. Can Dave Cameron please explain to everybody how Cliff Lee, an unquestionably elite player who fit into a roster spot, managed to go to another team? If the Yankees have no budgetary constraints and they don’t have to worry about opportunity costs, then why didn’t Cashman just up his offer by $5 mil a year? He would have blown the Phillies out of the water and surely landed Lee with that extra $30 mil. Dave, you’re a smart dude. Don’t you think it was possible that the Steinbrenners told Cashman that there was a limit to how much they could pay Lee? If there was infinite dollars available, Cliff Lee would be in the Boogie Down Bronx.

Cashman’s quote indicates that he can get Hal to go over the cap a bit in a given year if he can convince him that it means the Yankees’ playoff odds go up x%. It decidedly does NOT mean that Hal will let Cashman spend as much as he wants in perpetuity. Cashman knew he could only spend so much each year, so at a certain point, he could not offer Lee more money lest it impact his ability to sign other players in the future.

And another excerpt from Cameron’s article:

“They can’t have Prince Fielder or Albert Pujols because they already have Mark Teixeira playing first base, not because the salaries are a deterrent.”

Unfortunately, as you dive deeper into the article, it sounds more like an emotional rant from a disgruntled fan, because the facts simply don’t add up. The Yankees could accommodate either Fielder or Pujols at DH. They’d certainly get more wins with Fielder taking all the DH at bats against right-handed pitchers. They’d get more wins by putting Albert Pujols, an elite defender and best hitter of the last decade, just about anywhere and shuffling the rest of the lineup to have him on the field every day. Heck, if they have unlimited resources, why not just sign Pujols as a nice righty bat off the bench? Two hundred million would be a high price to pick up that extra win Pujols would give you as a bench player, but since there is no such thing as opportunity cost in the Yankees world, then why not? Warning to Dave though…$200 milion for +1 WAR might throw off the going free agent rate of $5 million per 1 WAR.

You can really see how Cameron’s argument erodes with each passing paragraph. But, there’s more:

“We saw this last year with Rafael Soriano, in fact – ownership overruled Cashman and gave Soriano a monster contract to serve as a setup man because it made the team better and the cash spent on Soriano would not prevent the Yankees from doing anything else they wanted to do.”

This is ridiculous. The Yankees ownership overruled Cashman because they were already spending less than they had intended due to the Cliff Lee fiasco. The combination of Soriano and Martin adds up to much less than they would have spent on Lee.

More importantly, why do you think Cashman tried to put the kibosh on the signing? Cashman outright said Soriano’s talent makes their bullpen better. Why would he be so upset that he’d take the rare step of publicly airing his grievances at Soriano’s own press conference? Here’s an idea: Cashman knew that at least part of the $11 million they were spending on Soriano in 2012 and $14 million in 2013 was money that he would have to put towards more productive players.

Cashman was also upset at losing a first-round draft pick since Soriano was a Type A free agent. If the probability of a first round pick developing into an elite player is so small and Cashman could significantly increase his odds of getting an elite player simply by signing one who was already established as such, then why would he care about losing a pick?

It’s because when draft picks turn into productive players, it gives you payroll flexibility. A player like Brett Gardner allows Cashman to spend the money that he is allotted to make vast improvements elsewhere on the roster. If Cashman wasn’t constrained by the budget, he could have much more easily signed Matt Holliday and have been virtually guaranteed more wins. Yet, the Yankees didn’t come close to doing so.

The Yankees spend within their means. Granted, their means are higher than everybody else, but they still spend within them. Cameron’s argument that the Yankees possess an infinite amount is simply not reality.

Dave Cameron’s bedroom reveals the disgruntled fan behind his Yankees’ payroll theories.

It’s a good thing the Yankees don’t view stats like most sportswriters do

November 14, 2011 | 30 comments | in Quick Analytical Blurbs | by Vizzini

Very interesting article from this past Friday afternoon….

Financial Times:

There are two silly objections often made to Lewis’s book. The first is that if Moneyball works so well, then why haven’t the A’s had a winning season since 2006? We meet on a sunny October morning, mid-playoffs, a perfect day for baseball, but the team’s season has long since ended.

However, the people who make this objection don’t seem to grasp the basic principles of imitation and catch-up. Once all teams are playing Moneyball, then playing Moneyball no longer gives you an edge. Indeed, the richer clubs have the means to play it smarter. The New York Yankees recently hired 21 statisticians, Beane marvels.

Somehow we don’t think these 21 statisticians will be studying batting average and wins.

If you thought Arod did weird photoshoots, meet Yu Darvish

November 12, 2011 | 30 comments | in Quick Analytical Blurbs | by SJK

This link is not suitable for work unless you want everyone to think you eat corn the long way.

Yu Darvish – In some magazine

Time for us to talk about Yu

November 12, 2011 | 54 comments | in Featured | by Vizzini

Sato: So coward, you return…
Mr. Miyagi: To settle affairs with father.
Sato: And with me.
Mr. Miyagi: Sato, I won’t fight you.
Sato: Then you die as you have lived: a coward. You see your father. THEN YOU SEE ME.

Like Sato patiently waited for Miyagi to return to Okinawa, we have lurked in the shadows as many pundits offered their opinions on Japan’s Yu Darvish. The time has now come for us to emerge from the darkness and offer our official position on the 25-year old pitcher who David Ortiz would have a hard time telling apart from other Japanese people.

Let us begin by saying that when it comes to Japanese baseball, we are novices at best. We barely follow it. So, we are not going to come out and say that Darvish will boil up MLB hitters like white rice. We don’t know that. However, what we will do is draft a bidding and contract structure based on what we do know about him — and here’s what we know.

1. The Nippon Ham Fighters haven’t announced his posting yet, so this could all be for nothing.
2. He’s put up better numbers than Dice-K and is significantly bigger physically (6’5″).
3. He’s set to make approximately 10 million USD in Japan for the upcoming season
4. Scouting reports are extremely positive. Bobby Valentine once said Darvish could be the best pitcher he’s ever seen.
5. He’s never pitched an inning in Major League Baseball.
6. The Photoshop opportunities would be endless.

NoMaas Offseason Idea #4: The Yu Darvish Bidding/Contract Process

Taking everything we know into account, we firmly believe Yu Darvish should not be paid like an MLB ace. First, no matter how good internet scouts think he is, he’s done all his damage in Japan, not the good ol’ US of A. Second, if you win the posting bid for him, the winning team has all the leverage, not Yu. If he doesn’t like the contract offer, he goes back to Japan and the winning team gets its bid money back. So again, no reason to go financially nuts on this guy.

The template for our bid + contract offer would be a top #2 starter. And we’ll use the AJ Burnett contract as the baseline, which was a 5-year, $82.5 million contract. We obviously know Burnett was not worth his deal, but that’s not the point. When bidding on Burnett, Yankees naively thought they were paying for a #2 and made their offer accordingly.

So let’s say we have $83 million to work with. The small market Red Sox won the Dice-K posting with a $51 million bid (they must have shaken the couch cushions for spare change). While Dice-BB wasn’t at all worth the total $100 million+ Boston sunk into him, you might have to beat the crazy Matsuzaka bid to land him. NoMaas bids $53 million.

Not only does this beat the Dice-BB bid, but it likely maximizes the Yankees chances of winning the bid. Will there be other teams willing to drop $50 mil+ simply to talk to this guy? Probably not, but if they do, then so be it.

That leaves us with $30 million. Remember, the goal is to create a financial structure that recognizes Darvish as no more than a top #2 starter, because it’s foolish to invest #1 ace money into this guy. He’s never pitched in MLB!

NoMaas offers 5 years for $30 million. That may seem like a lowball offer, considering Darvish will reportedly make about $10 million if he stays in Japan for 2012. But, that’s $20 million more in guaranteed money and we see young MLB players give up potential salary upside in exchange for guaranteed money on a regular basis (see Robinson Cano). If Darvish suffers a career-ending bird flu infection, that extra $20 mil would look pretty nice. Plus, if Darvish lives up to the hype, he’d be 30-years old at the end of this deal and be in line for another big paycheck.

If Darvish doesn’t like the offer, he goes back to Japan, the Yankees get their bid money returned, and they acted like a big co*kblock. Fine with us.

Combining the bid and actual contract, the Yankees would pay Darvish $16.6 million a year over 5 years. That’s not ace-money in today’s day and age, but it’s certainly realistic terms for a top #2.

That’s how we’d roll for Yu.

And another one leaves us…

November 12, 2011 | 51 comments | in Featured | by SJK

When I’m out there pitching, it’s not Jonathan Papelbon pitching, it’s Cinco Ocho pitching. I get a little revved up some times, and Cinco Ocho doesn’t know how to control himself when he’s out there.

“I don’t know if he’s trying to stir things up or not,” the Bosox closer said. “I sure as hell don’t care, because he sure as hell hasn’t stepped on a baseball field. He needs to just stick to pencil-pushing, I guess.”

Hank’s response issued yesterday: “Being insulted by Papelbon is like being attacked by a mouse,” Steinbrenner told The Post.

Thanks for the memories, Anus Mouth.

Too soon?

November 9, 2011 | 69 comments | in Quick Analytical Blurbs | by SJK

Pop quiz: Who was MLB’s 13th-most valuable position player over the past 2 years?

November 8, 2011 | 53 comments | in Quick Analytical Blurbs | by Vizzini

If you guessed Brett Gardner, you are………..CORRECT.

According to Fangraphs WAR, Brett Gardner accumulated 11.3 wins above replacement level over the 2010 & 2011 seasons. That is the 13th-highest total for a position player in that time period, and more than players such as Curtis Granderson, Justin Upton, Matt Kemp, Jose Reyes, and Prince Fielder.

So for anyone who thinks the Yankees need an upgrade over Gardner, you are insane.

Seriously, you’re insane.

Fun with CJ Wilson’s wikipedia page

November 7, 2011 | 14 comments | in Quick Analytical Blurbs | by Louis Winthorpe III

When we posted our “We’d pass on CJ Wilson” article, we noted that someone was having fun with his wikipedia page. Well, since our post, it looks the fun continued.

Sunday night:

Monday, 12pm:

As of this post, it looks like everything is back to normal, but we’ll post any screenshots if things change (hint, hint, send them to us).

NoMaas Live Chat, Thursday, 9pm ET

November 7, 2011 | 4 comments | in Announcements | by SJK

Both Sensei John Kreese and Vizzini haven’t had a date in years. This is as close as they’ll get. Let’s talk free agents, trades, and whatever else you want to disagree with us about.

We’d pass on CJ Wilson

November 6, 2011 | 59 comments | in Featured | by SJK

Over at Fangraphs, readers estimated CJ Wilson would get a 5-year deal for $15.5 mil per ($77.5 million total). Others suggest he could get $90 million+.

Here’s why at NoMaas we’d pass on those dollar amounts:

1. CJ Wilson has only been a starter for 2 years. He basically did the opposite of what most converted pitchers do…he went from relieving to starting, as opposed to going from starting to relieving. Not only did he make this unusual switch, but he went from being a decent reliever (3.91 FIP / 3.81 xFIP) to a dominant starter. That’s weird.

2. He’s had enormous luck on his batting average on balls in play (BABIP). Over the last 2 seasons, his BABIP was a very low .277. Do you think Texas’ infield defense had anything to do with that?. Kinsler, Andrus, and Beltre are all excellent defenders, and it’s clear Wilson greatly benefited.

3. Despite pitching in Arlington, flyballs turned into home runs only 6.7% of the time. That’s why xFIP has him as a 3.72 ERA-type pitcher, as opposed to 3.14 ERA he’s posted over the last 2 seasons. This is important, because it can mean the difference between ace-money or #2-#3-money.

4. He would cost the Yankees their first round draft pick.

5. He has this website dedicated to him.

Someone’s been messing around with CJ Wilson’s wiki page – 11/6/11, 10:09 ET

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