SABR-Toothed Triber: Pay that Man his Money?

Guess who’s back.  Back again.  Baseball math.  Tell a friend…

Last week we introduced the concept of Wins Above Replacement (WAR). I encourage you to read the piece in its entirety if you need a reminder, but basically WAR is a counting stat that measures how many wins—by way of runs—a player contributes to his team. Pretty nifty.

You may remember that we had to do some heavy lifting to establish the “replacement level player,” but once we had that set, we had a salary ($400,000) and a WAR baseline (zero) against which we could compare any major leaguer’s performance. This week, I want to spend some time figuring out how much money teams are willing to pay for wins on the open market (i.e. free agency), and where that leaves the Indians front office, considering their Dolan-overlords budgetary constraints.

Let’s start by looking at some of the free agent contracts handed out this past year, along with those players’ projected WAR for 2010 season (courtesy CHONE):

Name	Annual Salary	Projected WAR	$/WAR
Matt Holliday	$17.10	4.9	$3.50
Jason Bay	$16.50	3.7	$4.50
John Lackey	$16.50	3.7	$4.50
Adrian Beltre	$10.00	2.3	$4.30
Chone Figgins	$9.00	3.2	$2.80
Hideki Matsui	$6.50	1.1	$5.90
Mark DeRosa	$6.00	1.3	$4.60
Rick Ankiel	$3.30	1.0	$3.30
Omar Vizquel	$1.40	0.3	$4.60
Mike Cameron	$7.80	1.9	$4.10
Coco Crisp	$5.30	2.0	$2.60
Vladimir Guerrero	$5.00	1.7	$2.90
Orlando Hudson	$5.00	1.6	$3.10
Jason Kendall	$3.00	0.2	$15.00
AVERAGE			$4.69

As you can see, on average, teams paid about $4.5 million per win on the free agent market this past year.  Some teams paid more—don’t ask about Jason Kendall, people from Kansas City are still reeling from the Jose Guillen contract from a few years back—but on the whole, the market value for a win has been consistently between $4 and $5 million dollars for the last several years.

I’m sure you’ll also remember that if you only fielded replacement players, your team payroll would be $10 million ($400,000 for 25 players) and you’d win about 43 games in the American League.  Therefore, every dollar a team spends over that $10 million baseline should add a certain number of wins.  According to the work we did above, we could assume you’d have to spend approximately $4.5 million dollars for every win over 43.  Let’s see if that works:

Team	2009 Payroll	“Expected” Wins	Actual Wins
REPLACEMENT	$10.00	43	NA
Yankees	$201.40	86	103
Angels	$113.70	66	97
Red Sox	$121.70	68	95
Rangers	$68.20	56	87
Twins	$65.30	55	87
Tigers	$115.10	66	86
Mariners	$98.90	63	85
Rays	$63.30	55	84
White Sox	$96.10	62	79
Blue Jays	$80.50	59	75
A’s	$62.30	55	75
Indians	$81.60	59	65
Royals	$70.50	56	65
Orioles	$67.10	56	64

So why don’t “expected” wins line up with actual wins?   Look at the Yankees as an example.  In 2009 the Steinbrenners paid $191 million more than they had to, and at $4.5 million per win (over replacement) they should have won only 86 games, but they actually won 103.  In fact, if they wanted to put together a 103 game winner solely on the free agent market, they would have had to spend $270 million!  But, if we know teams are paying about $4.5 million per win above replacement, why don’t the dollars spent correlate well to actual wins?  What gives?

What gives is, of course, that teams only pay $4.5 million per win in free agency.  Most players aren’t free agents, so they’re compensated according to different rules.  Consider someone like Shin-Soo Choo.  He was the most valuable member of the Indians last season, worth about 5 wins over a replacement player.  However, he was paid only about $420,000 for his efforts.  On top of that, he’s not eligible for free agency until 2014, so he’ll likely give the Indians more wins for the next several years than they’ll actually be paying for.  In short, players like Choo allow teams to stockpile wins at a relatively cheap rate, so that when they do have to spend in free agency, they can “afford” the going rate of $4.5 million per win.

To explore this further, let’s look at some members of the Indians 2009 roster to see where we found bargains (like Choo) and where we shot ourselves in the foot (like Hafner).  We’ll add a column here that estimates how much each player would make in the free agent market based on the going rate per free agency win ($4.5 million):

	WAR	Value	Salary
Shin-Soo Choo	5.0	$22.60	$0.42
Asdrubal Cabrera	3.1	$13.80	$0.42
Grady Sizemore	2.1	$9.60	$4.60
Aaron Laffey	1.4	$6.20	$0.40
Travis Hafner	1.3	$5.70	$11.50
Jhonny Peralta	1.1	$5.10	$3.40
Fausto Carmona	0.4	$2.00	$2.75
Kerry Wood	0.4	$1.90	$10.00
Masa Kobayashi	-0.1	($0.60)	$3.00
David Dellucci	-0.1	($0.60)	$4.00

Now remember, the “value” column estimates how much money these players would expect to receive per year if they were free agents. The “salary” column is how much they actually made last season. Obviously, the goal is to have the value column significantly higher than the salary column, so that we aren’t wasting money on duds.

What do we see? Well, Choo would have been worth nearly $23 million dollars on the free agent market based on his performance last season. Do you think Scott Boras isn’t licking his chops as I type this? Cabrera, also making close to league minimum was worth nearly $14 million. Even in a down year, Sizemore was still worth more than his contract, though his typical season has been far more valuable. In fact, I’d say that Sizemore’s contract is arguably the best move made by Shapiro since he’s been GM.

But remember, even though these bargains are great, all teams need to find bargains to compete. No team can afford to pay $4.5 million for every win—not even the Yankees. So the worst case scenario should be that the value column sometimes equals the salary column; it should never be less. But out of the 10 players I list above, five were “worth” less than they were paid. Hafner would only make half his contract on the FA market; Wood would have made about one-tenth of his contract.

Which brings me to the bane of my baseball writing existence: one David Michael Dellucci. Last season, the Indians paid him $4 million to play left field like me in a beer-league softball game. Scratch that. I have a better throwing arm than Dellucci. According to the numbers, Dellucci should have paid the Indians $600,000 for how many wins he cost them! Same with Masa Kobayashi. Teams that pay free agents millions of dollars take the significant risk that those players will not only underperform their contracts (like Kerry Wood), but actually underperform compared to replacement level players who are essentially free (like Dellucci and Kobayashi)! And to be honest, Mark Shapiro has made far too many of these sorts of mistakes to still be lauded as a great GM.

Before we leave, I’d be remiss if I didn’t address the Hafner contract in a bit more detail—it was, after all, the richest contract ever handed out by the Indians, worth at least $57 million through 2012. I’ve discussed before how incredibly valuable Hafner was in 2006: he was the best offensive player in baseball, posting 6.4 WAR, worth about $29 million per year if he were to sustain that pace. We signed him to a contract well below that cost, for only four years. So was the signing a mistake? If so, why?

When Hafner signed in July of 2007, he had just turned 30 years old. For all intents and purposes, he had entered the decline phase of his career (offensive players typically peak in their 27-28 year old seasons and steadily decline from there out). At that point, Hafner was already without defensive value, and though he had never suffered a serious injury, it was a balky elbow that kept him from throwing (and therefore, fielding). The signs were on the wall that Hafner was already beginning to struggle, as he had posted an OPS of .849 in May of 2007, significantly down from his 1.097 in 2006.

But those aren’t the reasons that the Hafner contract was a problem for the Indians. The real problem was that in 2007 we had four players we could potentially lock up long-term. One was a 26 year old pitcher who had averaged 4.5 WAR per season. One was a 29 year old pitcher who had averaged 3.0 WAR per season. Another was a 28 year old catcher who averaged 5.0 WAR per season. And the last was a 30 year old DH named Travis Hafner, who had struggled to break into the Majors until he was 27, but had posted three terrific offensive seasons since. You know the rest: we signed Hafner for $12 million per year, and Westbrook for $11 million per year, and kept Victor and CC on their deals, basically guaranteeing that we wouldn’t be able to keep them once they hit free agency. In 2008 and 2009, Hafner produced 0.5 WAR for which he was paid $22 million. In those same two seasons, Westbrook produced 0.4 WAR for $21 million. That’s less than one win added over replacement in two seasons for $43 million. Divide those contracts by 10, and they’d be about market value.

No matter how you cut it, the choice to spread the risk of $23 million per year on two older players who had entered the decline phase of their careers rather than locking up the younger players for (almost certainly) more cash and (probably) more years didn’t work out. Was the choice between CC on one hand and Travis and Jake on the other? I don’t know, but if so, which way should they have gone? Pretty obvious, right? Lock up whatever young talent you can and let your 30 year olds test the market elsewhere (read: New York).

It’s hard to blame Shapiro too much considering we have the benefit of all this hindsight, but it’s also important to realize that the Hafner contract hamstrung this club for years. We are over-paying significantly for his value, which means we can’t compete for talent on the free-agent market (enter: Branyan, Russell the Love Muscle). The fact is that our money is locked up in an aging DH with a section of right field seats named after him that he so rarely frequents these days.

But hope springs eternal this time of year: I’ll be at the corner of Carnegie and Ontario on opening day, Pronk jersey on, believing, against all logic, in a rebound.

Next time we’ll take a look at two current Indians, Asdrubal Cabrera and Shin-Soo Choo, and how the team might begin to think about approaching their impending free agencies considering their respective values and age.

I’m off to Vegas for the next few days, but, as always, feel free to comment or ask questions below and when I’m back on the North Shore, I’ll do my best to point you toward an answer.

See you next week!

-Jon

Thanks to the guys at WFNY for picking me up as an occasional contributor.  Much of the research in this series is built on ideas from The Book: Playing the Percentages in Baseball, the ongoing work at FanGraphs, StatCorner, The Hardball Times, and Tom Tango’s blog, and the countless other blogs and books that refuse to stop thinking and arguing about baseball.