The Failings In The Incremental Improvement Idea

It seems we have a little bit of a fun blog debate going on here. First the was my initial post and then Harrison’s reply, both touch on the cost per win of players on the free agent market. Harrison is correct about my basic premise:

"his point was the importance of building up the farm system as younger players contribute value beyond their cost."

But that wasn’t the only point I’d hoped to make. It was the main one, but buried in there amongst my ramblings was another salient point that apparently got lost.

The other point is that the idea of incremental improvement through free agency is impossible within this current financial system, unless you’re one of the teams within the top 5 in payroll. That’s a pretty big claim, I know. But I hope that I can lay it out for you just how silly the idea that you have to be “good enough” before you can sign an elite free agent really is.

Now, I’m not specifically talking about Prince Fielder. I’m actually not a proponent of signing him. Too many years, to much unknown. But I’m ok with him as the “example” in this conversation simply because he’s the guy who available now and the one who everyone’s talking about. I just wanted to make sure all that was clear.

Ok, back to incremental improvement. The basic Idea that that 70-75 win teams like the Mariners need to sign league average to slightly above league average players, since they’re cheaper, to get to around 85 wins. Then, and only then, should they sign an elite player or 2 that would put them over the top and into the category of contending.

In principle is sounds like a good idea. An elite player like Fielder is a luxury that a bad team doesn’t need to be paying for. Alex Rodriguez‘s time in Texas comes to mind, and I can’t argue with that sentiment. It just doesn’t work that way in practice the way the free agent market is structured right now.

By this philosophy, the M’s should sign guys like Michael Cuddyer, who recently signed a 3 year/$31 million deal with Colorado. Cuddyer projects out to be a 2 to 2.3 WAR player, so the deal was right about the market value of $5 mil per win. Cuddyer would be an upgrade in LF for the M’s, and help push them from current projections of 75-78 wins up to about being a .500 team. The M’s would then sign a pair of similar players the following year when some additional money was freed up, and get to 85-ish wins. See, incremental improvement.

At that point the M’s would finally be “ready” to make the big splash required to finally contend, right? Too bad all their payroll is tied up in average players and they don’t have the ability to sign such an elite player. They’re trapped, and they are so because they overpaid for the wins that got into the so-called “ready position.”

The problem with this entire scenario is that the cost per win is upside down right now. It actually cost more per win for an average player than it does and elite player. Cuddyer cost right at about $5 mil per win, whereas Albert Pujols, who projects be about an 8 win player in 2012, will cost only $3.125 mil per win.

I like graphs. Most of you like graphs. Lets look at a graph:

If you look at the red and the green lines, you’ll see the problem. We tend to believe that the $5 mil/win price tag holds no matter the WAR, but it doesn’t. Because of the years involved in the deals for elite players, they tend to take less per contribution made in order to secure more guaranteed money. A 2 win player get s 3 year deal, an 8 win player gets a 10 year deal.  The problem then is that it makes the incremental improvement model inefficient to the point that it’s impossible to build a team that way.

Ideally for the incremental improvement model to work, the purple line in the above graph would apply. It would cost little for teams to sign league average players and get to 80-85 wins, but getting up to contending level would cost a ton. That is what Harrison described in his response to my original post:

"I like what Dave says here and I agree with it. Purchasing and valuing team wins that take your team from let’s say 85-90 wins and even beyond is considerably different than purchasing wins 65-70. Prince Fielder is a 85-90 win type signing in my opinion. Because the cost to acquire a talent, such as his, is so great while your most likely only upgrading your team marginally compared to a team that is a below average. If you are paying for Prince Fielder while in the 70-80 wins bracket"

The market the way it is now, that model simply isn’t true. While it might be “easier” to get to the 80-85 win bracket, and the deals will will have less total dollars, their cost per win will be much higher and thus tie up too much budget room to allow for the necessary later additions.

People confuse total dollars in a deal with how teams operate. $31 million for Cuddyer and $250 million for Pujols seem like massive extremes from each other. But teams don’t operate on a total dollars budget, they operate on yearly budget. Yearly it’s Cuddyer for $10 mil and Pujols and $25 mil. And from that perspective, and considering that Pujols is worth 4 times as many wins but only costs 2.5 as much, Pujols is actually a bargain compared to Cuddyer.

(Note that this is only true for the first couple years of the Pujols deal. The rest of it sucks. 10 years for a player his age was just stupid!)

That argument could have been formulated around Fielder instead of Pujols. As long as Fielder’s yearly salary comes in under about $27.5 mil/yr, ($5 mil/year * 5.5 projected WAR) he’ll actually be making less than market value in terms of cost per win. At $20 mil/year he’s giving you a 27% discount per win from what Cuddyer is making.

Remember that at $5 mil/win, a borderline playoff team would cost $240 mil/year. Teams with a budget under that, which is almost everyone, must find ways to get wins at a fraction of that cost. Young players are the best way, but unless you’re the Rays have endured a decade of 90+ loss seasons in order build up a sufficient crop of young talent in your farm system, at least some of the wins will have to come from free agents.

Any wins that can be acquired for under market value should be considered, and right now because the FA market is in such a weird state, that means going after elite players like Fielder, or waiting until next year and going after Joey Votto.